BILL ANALYSIS                                                                                                                                                                                                    

                                                                    AB 1969

                                                                    Page  1

          Date of Hearing:  May 18, 2016


                               Lorena Gonzalez, Chair

          1969 (Steinorth) - As Amended May 10, 2016

          |Policy       |Housing and Community          |Vote:|6 - 1        |
          |Committee:   |Development                    |     |             |
          |             |                               |     |             |
          |             |                               |     |             |

          Urgency:  No  State Mandated Local Program:  YesReimbursable:   

          SUMMARY:  This bill appropriates $10 million from the State  
          General Fund to the California Homebuyer's Downpayment  
          Assistance Program (CHDAP) 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. 


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          2)Requires local agencies to provide verification of the  
            required reduction in local fees, charges, and other exactions  
            to CalHFA.

          3)Provides that after 4 years, if CalHFA determines that the  
            funding for this program will not be utilized for the purposes  
            set forth in this bill, then the funding shall be available  
            for the general purposes of the CHDAP.

          FISCAL EFFECT:

          1)This bill contains a $10 million appropriation from the State  
            General Fund to the CHDAP. Existing law provides that 5% of  
            this amount ($500,000) can be used to fund CalHFAs  
            administrative costs.

          2)Unknown, but likely minor, potentially reimbursable state  
            mandate costs to local agencies, to the extent affected  
            agencies choose to submit a claim to the Commission on State  
            Mandates and the Commission determines that costs associated  
            with this bill are a reimbursable mandate.


          1)Purpose. 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  


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            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 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."

          2)CHDAP.  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. 
          3)The Building Equity and Growth in Neighborhoods Program  
            (BEGIN).  Administered by HCD, BEGIN provided grants to local  
            governments that 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%  


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            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  
            currently no money available in the BEGIN program. 

            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 will be  
            provided directly by CalHFA through the CHDAP program rather  
            than be administered by local governments.



          Analysis Prepared by:Jennifer Swenson / APPR. / (916)