BILL ANALYSIS                                                                                                                                                                                                    

                                                                    AB 1969

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          Date of Hearing:  April 20, 2016


                                  David Chiu, Chair

          AB 1969  
          (Steinorth) - As Amended April 13, 2016

          SUBJECT:  Affordable housing:  home purchase assistance

          SUMMARY:  Creates a program administered by the California  
          Housing Financing Agency (CalHFA) to provide downpayment  
          assistance to homeowners in newly constructed developments in  
          jurisdictions that provide incentives and waive local fees.    
          Specifically, this bill:  

          1)Requires the California Housing Finance Agency (CalHFA) to  
            provide downpayment assistance to first-time homebuyers in  
            development projects located in a city, county, or city and  
            county that provides incentives, reduces developer or impact  
            fees, or reduces or removes regulatory barriers to  
            constructing the development projects. 

          2)Requires CalHFA to identify and objectively measure the types  
            of local agency actions or incentives that it determines  
            appropriately reduce developer or impact fees or reduce or  
            remove regulatory barriers to housing construction. 

          3)Provides these incentives may include but are limited to  
            modifications to any of the following:


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             a)   Local design review requirements;

             b)   Building code enforcement;

             c)   Onsite or offsite improvement requirements;

             d)   Project design; 

             e)   Permit processing; or

             f)   A 30%  reduction in the schedule of local fees, charges,  
               and other exactions on local developers within the local  
               agency's jurisdiction within 12 months or more prior to the  
               submission of the application. Requires the local agency to  
               provide verification of the reduction with supporting  
               documents showing successive annual fee schedules to the  

          1)Defines "local fees, charges and other exactions" to include:

             a)   planning and zoning fees;

             b)   environmental documentation fees;

             c)   plan check fees;

             d)   school fees;


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             e)   school mitigation fees;

             f)   highway road, traffic, and transit fees;

             g)   water, wastewater, sewer, and drainage fees;

             h)   utility or water connection fees;

             i)   public safety fees;

             j)   capital facilities fees;

             aa)  affordable housing fees and assessments;

             bb)  parks and recreation fees; and

             cc)  any other fee that may substitute for the requirements  
               of onsite or offsite improvement requirements. 

          1)Appropriates an unspecified amount from the General Fund to  
            CHDAP to fund this program.

          2)Provides that after 4 years, if CalHFA determines that the  
            funding for this program is no longer needed then the funding  
            shall revert to the general California Homebuyer Downpayment  
            Assistance Program (CHDAP) except that the funding can still  
            be used for this program. 


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          EXISTING LAW:  

          1)Requires the California Housing Finance Agency (CalHFA) to  
            administer a down payment assistance program.

          2)Creates CHDAP, a deferred-payment, low interest, junior  
            mortgage loan to reduce principal and interest payments and  
            make financing affordable to first-time low- and  
            moderate-income home buyers. 

          FISCAL EFFECT:  Unknown.



           CalHFA operates the CHDAP and provides homebuyers between 3% and  
          6% in downpayment assistance secured as a second mortgage on the  
          home. The program operates as a revolving loan and when a home  
          is sold CalHFA is repaid allowing the funds to go to another  
          homebuyer.  There is approximately $150 million available in  
          CHDAP at this time. The program can provide down payments to  
          individuals that make up to 120% of the area median income (AMI)  
          and just recently raised its income limits to 140% of AMI in  
          high cost areas.  CalHFA operates independently of the state  
          General Fund and derives the funding for its down payment  
          assistance program from the sale of bonds. 

          The Building Equity and Growth in Neighborhoods Program (BEGIN),  
          administered by HCD, provided grants to local governments that  


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          provided incentives or reduced regulatory barriers to  
          construction of new for-sale affordable housing (a BEGIN  
          project).  The grants could be used by local governments to  
          provide downpayment assistance to qualifying first-time  
          homebuyers of low- and moderate-income purchasing newly  
          constructed homes in a BEGIN project. Homebuyers were required  
          to occupy the home as their principal residence for at least  
          five years. Downpayment assistance was secured as a second  
          mortgage loan and the amount of the loan could not exceed 20% of  
          the purchase price.   HCD established the types of objective and  
          measurable incentives and reductions in regulatory barriers to  
          new construction of for-sale, affordable housing units including  
          but limited to standards relating to housing density, project  
          design, parking requirements, permit processing, and fee  
          reductions.  There is currenlty no money available in the BEGIN  

          Similar to the BEGIN program, this bill would reward local  
          governments that provide incentives and or remove or reduce  
          local barriers to construction with down payment assistance.  
          Unlike the BEGIN program, the downpayment assistance would be  
          provided directly by CalHFA through the CHDAP program rather  
          than administered by local governments.

           Purpose of this bill  : According to the author, "California is in  
          the midst of a housing crisis. There is a substantial lack of  
          new home construction: according to the California Homebuilding  
          Foundation, the number of annual housing permits in 2015 was  
          similar to the slowest years in the 1980s and 1990s. This  
          shortage is hitting the affordable and middle-class housing  
          markets alike.

          The cost of housing in California is significant. According to  
          the nonpartisan Legislative Analyst's Office, California has the  
          second-highest median home price in the nation and residents'  
          housing costs, as a share of income, remain far above the  


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          national average. In fact, more than half of middle-class  
          California families spend more than 30 percent of their income  
          on housing. Increased housing costs lead to significant  
          trade-offs for the middle class California family including:  
          postponing or foregoing homeownership, living in more crowded  
          housing, commuting farther to work each day, or choosing to work  
          and live elsewhere.  AB 1969 will make a one-time appropriation  
          for the California Homebuyer's Downpayment Assistance Program  
          (CHDAP). Those new funds may be loaned only to homebuyers in  
          cities and counties who have reduced regulatory and fiscal  
          impediments to new home construction.  The California Housing  
          Finance Agency will be tasked with determining what local  
          actions would qualify, including changes to land use controls,  
          permit processing, and a 30% reduction in developer fees. Any  
          unused funds would revert to CHDAP for its general use."  

          Staff comments  :

          The BEGIN program awarded local governments that encouraged  
          construction of new affordable housing for low- and moderate-  
          income families.  Because this bill would require CalHFA to  
          provide downpayment assistance directly to a borrower in a newly  
          constructed unit through CHDAP and CalHFA is limited to  
          providing downpayment assistance to low- and moderate-income  
          buyers then the result would be the same.  The committee may  
          wish to clarify with the author that his intent is to encourage  
          the production of housing affordable to low- and moderate-income  
          homebuyers. The committee may wish to amend the bill to require  
          any newly constructed units that are subject to this bill are  
          affordable to low- and moderate- income buyers. 

          This bill would include as one of the fees that can be waived on  
          the development and "affordable housing fee or assessment" the  
          committee may wish to consider deleting that option. 


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          After four years of operation this bill would allow the funding  
          for this program to be redirected to the general CHDAP program  
          for downpayment assistance statewide.  However, it would also  
          allow this program to continue to be available. The committee  
          may wish to consider if that would create administrative  
          challenges for CalHFA and if it would not be better to shut down  
          the program after four years if it is not in demand. The  
          committee may also wish to consider shortening this time to two  

          The committee may wish to consider aligning the funding in this  
          program with other funding sources and state land use policies  
          by requiring all or a portion of the funding to go to projects  
          that are in a designated infill site and are close to public  

           Committee amendments: 

           1)Amend the bill to require any newly constructed units to be  
            affordable to low- and moderate- income buyers. 

          2)Delete "affordable housing fee or assessment" on the list of  
            fees that can be waived/reduced.  

          3)Delete the language that allows the program to continue to  
            operate after the funding has been transferred to the larger  
            CHDAP program. 

          4)Require the fund to revert back to the larger CHDAP program in  
            two years rather than four. 

          5)Require developments to also be in a designated infill site  


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            and are close to public transit. 



          California Association of Realtors

          League of California Cities


          None on File

          Analysis Prepared by:Lisa Engel / H. & C.D. / (961) 319-2085,   
          Lisa Engel / H. & C.D. / (916) 319-2085


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