BILL ANALYSIS Ó AB 1969 Page 1 Date of Hearing: May 18, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair AB 1969 (Steinorth) - As Amended May 10, 2016 ----------------------------------------------------------------- |Policy |Housing and Community |Vote:|6 - 1 | |Committee: |Development | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: YesReimbursable: Yes 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. AB 1969 Page 2 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. COMMENTS: 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 AB 1969 Page 3 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% AB 1969 Page 4 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) 319-2081