BILL ANALYSIS                                                                                                                                                                                                    



                                                                      AB 1335


                                                                      Page  1





          ASSEMBLY THIRD READING


          AB  
          1335 (Atkins)


          As Amended  June 3, 2015


          2/3 vote. Urgency


           ----------------------------------------------------------------- 
          |Committee       |Votes |Ayes                |Noes                |
          |                |      |                    |                    |
          |                |      |                    |                    |
          |----------------+------+--------------------+--------------------|
          |Housing         |5-1   |Chau, Burke, Chiu,  |Beth Gaines         |
          |                |      |Lopez, Mullin       |                    |
          |                |      |                    |                    |
          |----------------+------+--------------------+--------------------|
          |Appropriations  |12-4  |Gomez, Bonta,       |Chang, Gallagher,   |
          |                |      |Calderon, Daly,     |Jones, Wagner       |
          |                |      |Eggman, Eduardo     |                    |
          |                |      |Garcia, Gordon,     |                    |
          |                |      |Holden, Quirk,      |                    |
          |                |      |Rendon, Weber, Wood |                    |
          |                |      |                    |                    |
          |                |      |                    |                    |
           ----------------------------------------------------------------- 


          SUMMARY:  Establishes the Building Homes and Jobs Act of 2015 (the  
          Act) to provide funding for affordable housing.  Specifically,  
          this bill:  


          1)Includes legislative findings.








                                                                      AB 1335


                                                                      Page  2







          2)Defines "Department" to mean the Department of Housing and  
            Community Development (HCD).


          3)Defines "Governing Board" to mean the Building Homes and Jobs  
            Trust Fund Governing Board.


          4)Establishes the Building Homes and Jobs Trust Fund (the Trust  
            Fund) within the State Treasury.


          5)Beginning January 1, 2016, imposes a $75 fee on every real  
            estate instrument, paper, or notice that is required or  
            permitted by law per each single transaction per parcel of real  
            property, excluding real estate instruments, papers, or notices  
            recorded in connection with a transfer subject to a documentary  
            transfer tax.  


          6)Defines real estate instrument, paper, or notice as a document  
            relating to real property, including but not limited to the  
            following:  deed, grant deed, trustee's deed, deed of trust,  
            conveyance, quit claim deed, fictitious deed of trust,  
            assignment of deed of trust, request for notice of default,  
            abstract of judgment, subordination agreement, declaration of  
            homestead, abandonment of homestead, notice of default, release  
            or discharge, easement, notice of trustee sale, notice of  
            completion, Uniform Commerical Code financing statement,  
            mechanic's lien maps, and covenants, conditions, and  
            restrictions. 


          7)Requires the fee, minus any administrative cost to the county  
            recorder for collection, to be transferred quarterly to HCD and  
            deposited into the Trust Fund.









                                                                      AB 1335


                                                                      Page  3






          8)Requires any moneys appropriated by the Legislature to be  
            deposited into the Trust Fund as well as any other moneys made  
            available to HCD for the purposes of the Trust Fund from any  
            other sources.  


          9)Requires a county to pay HCD any interest, at the legal rate, on  
            any funds that are not transferred within 30 days of the end of  
            a quarter.


          10)Requires any interest or other increment resulting from the  
            investment of money in the Trust Fund to be deposited into the  
            Trust Fund. 


          11)Prohibits the transfer of any money in the Fund to any other  
            fund except for the Surplus Money Investment Fund. 


          12)Requires 20% of the money deposited into the Trust Fund to be  
            used for affordable owner-occupied workforce housing.   


          13)Requires 10% of the money deposited into the Trust Fund to be  
            used to address affordable homeownership and rental housing  
            opportunities for agricultural workers and their families. 


          14)Allows the remaining 80% of money in the Trust Fund, upon  
            appropriation by the Legislature, to be expended for the  
            following purposes:


             a)   Development, acquisition, rehabilitation, and preservation  
               of housing affordable to extremely low-, very low-, low- and  
               moderate-income households including necessary operating  
               subsidies;








                                                                      AB 1335


                                                                      Page  4





             b)   Affordable rental and ownership housing that meets the  
               needs of a growing workforce up to 120% of area median income  
               (AMI);


             c)   Matching portions of funds placed into local or regional  
               housing trust funds;


             d)   Matching portions of funds in the Low- and Moderate-Income  
               Housing Asset Funds of former redevelopment agencies retained  
               by successor agencies; 


             e)   Capitalized reserves for services connected to the  
               creation of new permanent supportive housing, including, but  
               not limited to, developments funded through the Veterans  
               Housing and Homelessness Prevention Program; 


             f)   Emergency shelters, transitional housing, and rapid  
               re-housing services;


             g)   Accessibility modifications; 


             h)   Efforts to acquire and rehabilitate foreclosed, vacant, or  
               blighted homes;


             i)   Homeownership opportunities, including but not limited to  
               down payment assistance; and


          1) Allows a state or local entity that receives an appropriation  
            from the Trust Fund to use up to 5% for administrative costs. 
          2)Provides that if a local government does not expend the moneys  
            allocated to it within five years of the allocation than those  








                                                                      AB 1335


                                                                      Page  5





            moneys shall revert back to the Trust Fund.  


          3)Establishes the Governing Board made up of the following  
            members: 


             a)   A representative from California Housing Finance Agency  
               (CalHFA); 
             b)   A representative from HCD; 


             c)   A representative from the Treasurer's Office;  


             d)   No fewer than two real estate licensees one from northern  
               California and one from southern California with not less  
               than 10 years of real estate experience and membership in a  
               real estate trade organization with not less than 20,000  
               licensees;


             e)   A local government representative from northern  
               California, appointed by the Governor;


             f)   A local government representative from southern  
               California, appointed by the Governor;


             g)   A representative from the home building industry from  
               northern California, appointed by the Governor;


             h)   A representative from the home building industry from  
               southern California, appointed by the Governor;


             i)   Six public members including: 








                                                                      AB 1335


                                                                      Page  6







               i)     One nonprofit affordable housing developer, appointed  
                 by the Speaker of the Assembly; 
               ii)    One nonprofit affordable housing developer, appointed  
                 by the President Pro Tempore of the Senate; 


               iii)   One for-profit affordable housing developer, appointed  
                 by the Speaker of the Assembly;


               iv)    One for-profit affordable housing developer, appointed  
                 by the President Pro Tempore of the Senate;


               v)     Two additional members, one appointed by the Speaker  
                 of the Assembly and the other by the President Pro Tempore  
                 of the Senate, that represent or has experience in one or  
                 more of the following areas: 


                  (1)       Private sector lending;
                  (2)       For-profit affordable housing development;


                  (3)       Nonprofit affordable housing development;


                  (4)       Working with special needs populations,  
                    including persons experiencing homelessness;


                  (5)       Architecture;


                  (6)       Housing development consultation; and 










                                                                      AB 1335


                                                                      Page  7





                  (7)       Housing issues related academia.  


          4)Requires the overall public membership of the Governing Board to  
            contribute to a balance among geographic areas and between rural  
            and urban interests. 
          5)Gives the Governing Board the authority to review and approve  
            recommendations from HCD for all funds distributed from the  
            Trust Fund.
          6)Requires HCD, in consultation with the CalHFA, the California  
            Tax Credit Allocation Committee, and the California Debt Limit  
            Allocation Committee, to develop a Building Homes and Jobs  
            Investment Strategy (investment strategy).
          7)Requires HCD to submit the first investment strategy to the  
            Legislature as part of the Governor's May Revise of the Budget  
            Act in 2015-16 and every five years thereafter as part of the  
            Budget Act beginning in 2020-21.


          8)Requires the investment strategy to do all of the following:


             a)   Identify the statewide needs, goals, objectives, and  
               outcomes for housing for a five-year time period;
             b)   Requires the goals to include targets of the total number  
               of affordable homes created and preserved with the funds;


             c)   Provides for a geographically balanced distribution of  
               funds including that 50% of monies in the Trust Fund must be  
               allocated directly to local governments; 


             d)   Emphasize investments that serve households that are at or  
               below 60% of AMI; and


             e)   Meet the following minimum objectives: 
               i)     Encourage economic development and job creation by  








                                                                      AB 1335


                                                                      Page  8





                 meeting the housing needs of a growing workforce up to 120%  
                 of AMI;
               ii)    Identify opportunities to coordinate among state  
                 departments and agencies to achieve greater efficiencies;  
                 increase the amount of federal investment in housing  
                 production, services, and operating costs; and promote  
                 energy efficiency in housing produced; 


               iii)   Incentivize the use and coordination of nontraditional  
                 funding sources, including philanthropic funds, local  
                 realignment funds, non-housing tax increment, the federal  
                 Patient Protection and Affordable Care Act funds, and other  
                 resources; and 


               iv)Incentivize innovative approaches that produce savings to  
                 local and state services by reducing the instability of  
                 housing for frequent high-cost users of institutions such  
                 as hospitals, jails, detoxification facilities, psychiatric  
                 hospitals, and emergency shelters. 
          1)Requires local governments to comply with the following in order  
            to receive a direct allocation from the Trust fund:


             a)   Submit a plan to HCD detailing how the local government  
               will allocate funding consistent with the allowable uses  
               listed in the bill; and 


             b)   Have a compliant housing element with the state, submit  
               the annual housing element report required by Government Code  
               Section 65400, and submit an annual report to HCD detailing  
               the use of the allocated funds.    


          1)Requires HCD to hold at least four public workshops in different  
            regions of the state to inform development of the investment  
            strategy.








                                                                      AB 1335


                                                                      Page  9





          2)Requires the Governing Board to review and advise HCD regarding  
            the investment strategy prior to its submission to the  
            Legislature.


          3)Requires expenditure requests contained in the Governor's  
            proposed budget to be consistent with the investment strategy. 


          4)Requires moneys in the Trust Fund to be appropriated through the  
            annual budget act. 


          5)Requires the State Auditor to conduct periodic audits to  
            determine if HCD is awarding the annual allocation to individual  
            programs in a timely manner and consistent with the Act.


          6)Requires HCD to provide the following information in its annual  
            report to the Legislature:
             a)   How funds were allocated in the prior year;
             b)   Efforts to promote geographic balance when distributing  
               the funds;


             c)   An assessment of the impact of the Trust Fund on job  
               creation and the economy; 


             d)   The effectiveness of programs directed toward persons who  
               are homeless or at risk of homelessness at keeping those  
               persons housed; and 


             e)   A determination as to whether any moneys derived from the  
               recording fee are being allocated by the state for any  
               purpose not authorized by the Act and this information must  
               be provided to the county recorders. 









                                                                      AB 1335


                                                                      Page  10






          1)Provides that if HCD determines that any moneys collected from  
            the recording fee are being allocated by the state for any  
            purpose not authorized by the Act, the county recorders will  
            immediately cease collection of the fees and only resume  
            collection of the recording fee after receiving notice that the  
            fees are being allocated by the state for the purposes of the  
            Act. 
          2)Declares the Legislature's intent to enact legislation to create  
            a Secretary of Housing to oversee all activities related to  
            housing and that all professional entities that play a role in  
            the housing market would be authorized to be incorporated in  
            order to have a clearer and more unified approach to housing in  
            the state. 
          3)Includes an urgency clause. 


          FISCAL EFFECT:  According to the Assembly Appropriations Committee  



          1)On-going recording fee revenues in the range of $300 and $500  
            million annually (Building Homes and Jobs Trust Fund). 


          2)Onetime costs to HCD of approximately $230,000 (General Fund  
            (GF)), for three positions for six months, to develop the  
            investment strategy, including holding public workshops, forming  
            an advisory committee, and establishing the Governing Board. 


          3)On-going, intermittent costs of approximately $200,000 (GF) for  
            consultations necessary for the required five-year updates to  
            the investment strategy. 


          COMMENTS:  










                                                                      AB 1335


                                                                      Page  11





          Background:  California is facing a housing affordability crisis  
          on many fronts.  According to the Public Policy Institute of  
          California (PPIC), as of February 2015, roughly 36% of mortgaged  
          homeowners and approximately 48% of all renters are spending more  
          than one-third of their household incomes on housing.  California  
          continues to have the second lowest homeownership rate in the  
          nation and the Los Angeles metropolitan area is now a majority  
          renter region.  In fact, five of the eight lowest homeownership  
          rates in the nation are in California metropolitan areas.


          California has 12% of the United States population, but 20% of its  
          homeless population - 63% of these homeless Californians are  
          unsheltered (the highest rate in the nation).  At any given time,  
          134,000 Californians are homeless.  California has 24% of the  
          nation's homeless veterans and one-third of the nation's  
          chronically homeless.  The state also has the largest numbers of  
          unaccompanied homeless children and youth, with 30% of the  
          national total. 


          Purpose of this bill:  According to the author, "increased and  
          ongoing funding for affordable housing is critical to stabilize  
          the state's housing development and construction marketplace.  If  
          developers know that there is a sustainable source of funding  
          available, they will take on the risk that comes with development  
          - and create a reliable pipeline of well-paying construction jobs  
          in the process.  The Building Homes and Jobs Act will utilize a  
          pay as you go approach and generate hundreds of millions of  
          dollars annually for affordable housing through a $75 fee on real  
          estate recorded documents, excluding those documents associated  
          with home sales.  Funds generated will leverage an additional $2  
          to $3 billion in federal, local, and bank investment." 


          Previous state funding for housing:  Historically, the state has  
          invested in low- and moderate-income housing primarily by  
          providing funding for construction.  Because of the high cost of  
          land and construction and the subsidy needed to keep housing  








                                                                      AB 1335


                                                                      Page  12





          affordable to residents, affordable housing is expensive to build.  
           Developers typically use multiple sources of financing, including  
          voter-approved housing bonds, state and federal low-income housing  
          tax credits, private bank financing, and local matching dollars. 


          Voter-approved bonds have been an important source of funding to  
          support the construction of affordable housing.  Proposition 46 of  
          2002 and Proposition 1C of 2006 together provided $4.95 billion  
          for affordable housing.  These funds financed the construction,  
          rehabilitation, and preservation of 57,220 affordable apartments,  
          including 2,500 supportive homes for people experiencing  
          homelessness, and over 11,600 shelter spaces.  In addition, these  
          funds have helped 57,290 families become or remain homeowners.   
          Nearly all of these funds have been awarded. 


          Until 2011, the Community Redevelopment Law required redevelopment  
          agencies to set aside 20% of all tax increment revenue to  
          increase, improve, and preserve the community's supply of low- and  
          moderate-income housing.  In fiscal year 2009-10, redevelopment  
          agencies collectively deposited $1.075 billion of property tax  
          increment revenues into their low- and moderate-income housing  
          funds.  With the elimination of redevelopment agencies, this  
          source of funding for affordable housing is no longer available. 


          California has reduced its funding for the development and  
          preservation of affordable homes by 79% - from approximately $1.7  
          billion a year to nearly nothing.  According to the California  
          Housing Partnership, California has a shortfall of 1,465,884  
          affordable units for extremely low- and very-low income  
          households.


          Funding mechanism:  Although an important source of funding in the  
          past for affordable housing, voter-approved bonds are not a  
          permanent or reliable source.  To provide for a stable and  
          permanent source of funding for affordable housing, several states  








                                                                      AB 1335


                                                                      Page  13





          have set up state housing trust funds funded by a document  
          recording fee.  This bill would establish the Building Homes and  
          Jobs Act, to be funded by a $75 fee on recorded real estate  
          documents, excluding those recorded in connection with the sale of  
          a property.  Estimates suggest that the recording fee would  
          generate an average between $300 and $500 million a year for  
          affordable housing.  This bill caps the amount of fees that could  
          be charged per single transaction to $225.  This means that an  
          individual will only be charged on three documents recorded in a  
          transaction.  The fee would be charged on a "real estate  
          instrument, paper, or notice."  This bill includes a list of  
          possible documents on which the fee could be charged, however,  
          this is not an exhaustive list and there may be others.  


          How the Trust Fund can be used:  This bill authorizes funds in the  
          Trust Fund to be appropriated for a variety of uses.  Twenty  
          percent of the Trust Fund is set aside for affordable  
          homeownership activities.  The remaining 80% can be used for the  
          development, acquisition, rehabilitation, and preservation of low-  
          and moderate-income housing; affordable rental and ownership  
          housing that meets the needs of a growing workforce up to 120% of  
          AMI, match funds in local housing trust funds and funds in the Low  
          and Moderate-Income Housing Asset funds of former redevelopment  
          agencies; capitalize the reserves for services for new permanent  
          supportive housing including developments funded through  the  
          Veterans Housing and Homeless Prevention Program; emergency  
          shelters, transitional housing, and rapid rehousing; accessibility  
          modifications; efforts to acquire and rehabilitate foreclosed and  
          vacant homes, and for homeownership opportunities including down  
          payment assistance.  Unlike voter-approved bond funds, the Trust  
          Fund could be used to support services and operating expenses for  
          supportive and transitional housing.   


          Investment strategy:  This bill gives the Legislature the  
          authority to appropriate funds that are deposited into the Trust  
          Fund.  In order to direct that investment through an informed and  
          strategic process, the bill requires HCD, in consultation with  








                                                                      AB 1335


                                                                      Page  14





          other relevant state housing agencies and committees, to develop  
          an investment strategy for the Trust Fund.  HCD would be required  
          to submit the first investment strategy to the Legislature as part  
          of the May revision to the Governor's proposed budget in 2015-16.   
          Every five years after, beginning in 2020-21, HCD would be  
          required to revise the investment strategy.  To inform the  
          investment strategy, HCD must hold four public hearings throughout  
          the state.  HCD is already required to develop a Statewide Housing  
          Plan every four years to identify the statewide needs, goals,  
          objectives, and outcomes for housing, which would inform the  
          investment strategy. 


          In preparing the investment strategy, HCD would be required to  
          identify the statewide needs and goals for housing for the next  
          five years and to attach targets of the total number of affordable  
          homes created and preserved with the funds.  HCD would also be  
                                required to promote a geographically balanced distribution of the  
          funds, including some consideration of providing funds directly to  
          local governments.  In addition, the investment strategy would  
          have to emphasize investments in housing affordable to households  
          at or below 60% of AMI, generally referred to as low-, very low-  
          and extremely low-income households.  This bill also sets out  
          minimum objectives that must be met in the investment strategy.  


           Local funding allocation:  This bill would require a  
          geographically balanced distribution of 50% of the Trust Fund  
          directly to local governments.  In order to qualify, local  
          governments would need to provide HCD with a plan detailing how  
          they would spend the funds consistent with the allowable uses  
          provided for in the bill.  Local governments would have to have a  
          compliant housing element and have submitted an annual report on  
          their progress in meeting their regional housing needs to qualify  
          for funding.  They would also be required to provide HCD with  
          ongoing tracking of the use of the funds.  If a local government  
          does not spend their allocation within five years then those funds  
          would revert back to the Trust Fund. 









                                                                      AB 1335


                                                                      Page  15






          Related Legislation:  Last session, SB 391 (DeSaulnier) of the  
          2013-14 Regular Session, would have imposed a $75 fee on every  
          real estate instrument, paper, or notice that is required or  
          permitted by law, excluding real estate instruments, papers, or  
          notices recorded in connection with a transfer subject to a  
          documentary transfer tax.  The bill was held in Assembly  
          Appropriations Committee. 


          This bill differs from SB 391 in the following ways:


          1)Sets a cap of $225 on fees charged on a per parcel per  
            transaction basis;


          2)Creates a 20% set aside of funding for homeownership programs;


          3)Creates a 10% set aside for affordable homeownership and rental  
            housing for agricultural workers and their families.  


          4)Requires 50% of funding go directly to local governments  
            provided that the local government provide HCD with a plan for  
            how they will spend the funds consistent with the uses allowed  
            in the bill and meet other reporting requirements. 


          5)Requires the creation of a Governing Board to review and approve  
            recommendations from HCD for all funds distributed from the  
            Trust Fund and to advise and approve the Investment Strategy  
            that HCD must develop for the Trust Fund.


          6)Directs the county recorders to stop collecting the fee if HCD  
            determines that the funds are not being used to support the  
            purposes authorized by the Building Homes and Jobs Act; and








                                                                      AB 1335


                                                                      Page  16







          7)Declares the intent of the Legislature to create a Secretary of  
            Housing to oversee all of the housing activities related to the  
            state and to have a clearer and more unified approach to housing  
            in the state.  




          Analysis Prepared by:                                               
                          Lisa Engel / H. & C.D. / (916) 319-2085  FN:  
          0000894