BILL ANALYSIS Ó AB 2734 Page 1 Date of Hearing: May 4, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair AB 2734 (Atkins) - As Amended April 5, 2016 ----------------------------------------------------------------- |Policy |Housing and Community |Vote:|6 - 1 | |Committee: |Development | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | |Local Government | |7 - 1 | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill enacts the Local Control Affordable Housing Act to redirect state savings realized from the dissolution of redevelopment agencies (RDAs). Requires the Department of Finance (DOF) to determine, each year, the amount of General Fund savings as a result of the dissolution of RDAs, and requires that 50% of those savings or $1 billion, whichever is less, be redirected to the Department of Housing and Community Development (HCD) for distribution to both state-level programs AB 2734 Page 2 and local agencies for housing purposes. FISCAL EFFECT: Cost of $500 million GF to redirect money to HCD for housing purposes, including approximately $5 million for the startup costs, including 34 positions, at HCD in the first year assuming the bill would allocate 50 percent of $1 billion to HCD. Ongoing costs of $3.8 million to staff the program in the out years. COMMENTS: 1)Purpose. According to the author: "Increasing the construction and availability of affordable housing is good for our economy, the state budget, job creation, and families. Affordable housing saves money - on average, a single homeless Californian incurs $2,897 per month in county costs for emergency room visits and in-patient hospital stays as well as the costs of arrests and incarceration. Roughly 79% of these costs are cut when that person has an affordable home. Development creates jobs - an estimated 29,000 jobs are created for every $500 million spent on affordable housing. Affordable housing alleviates poverty - California households with the lowest 25% of incomes spend 67% of their income on housing, leaving little left over for other essential needs." 2)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 affordable to residents, affordable housing is expensive to build. Developers typically use multiple sources of financing, AB 2734 Page 3 including voter-approved housing bonds, state and federal low-income housing tax credits, private bank financing, and local matching dollars. Voter-approved bonds to support the construction of affordable housing include Proposition 46 of 2002 and Proposition 1C of 2006, which 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. California's affordable housing funding has declined 66.5% since 2008, a loss of over $1.7 billion per year. More than $1 billion of this total comes from the loss of redevelopment funds that were directed to affordable housing purposes. According to the California Housing Consortium, California has a shortfall of 1.5 million affordable units for extremely low- and very-low income renter households. The Public Policy Institute of California reports that 31.5% of mortgaged homeowners and 47.4% of renters spend more than one-third of their total household income on housing and, that while California has 12% of the nation's population, it has 20% of the nation's homeless. 3)Recent Legislation. a) AB 1335 (Atkins), 2015, sought funding for affordable housing through the increase of a document recording fee for real estate related transactions (excluding home sales). That bill died on the Assembly Floor. AB 2734 Page 4 b) AB 2 (Alejo), Chapter 319, Statutes of 2015, allows for the creation of Community Revitalization Authorities which allow for a more limited use of tax increment financing for infrastructure that includes affordable housing. c) SB 628 (Beall), Chapter 785, Statutes of 2014, established enhanced infrastructure finance districts which allowed the financing of infrastructure projects (that could include affordable housing) by establishing a process to use tax increment financing in a more limited way than existed in redevelopment. Analysis Prepared by:Jennifer Swenson / APPR. / (916) 319-2081