BILL ANALYSIS Ó SB 879 Page 1 SENATE THIRD READING SB 879 (Beall) As Amended August 15, 2016 2/3 vote. Urgency SENATE VOTE: 28-9 ------------------------------------------------------------------ |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+----------------------+--------------------| |Housing |4-2 |Chiu, Burke, Chau, |Steinorth, Beth | | | |Lopez |Gaines | | | | | | |----------------+-----+----------------------+--------------------| |Appropriations |14-4 |Gonzalez, Bloom, |Gallagher, Jones, | | | |Bonilla, Bonta, |Obernolte, Wagner | | | |Calderon, Daly, | | | | |Eggman, Eduardo | | | | |Garcia, Holden, | | | | |Quirk, Santiago, | | | | |Weber, Wood, McCarty | | | | | | | | | | | | ------------------------------------------------------------------ SUMMARY: Authorizes the issuance of $3 billion in general SB 879 Page 2 obligation (GO) bonds for affordable housing construction, subject to approval by the voters, in the November 2018 election. Specifically, this bill: 1)Includes legislative findings and declarations. 2)Authorizes the issuance of $3 billion in GO bonds, subject to approval by voters for the following affordable housing purposes: a) $1.5 billion to the existing Multifamily Housing Program (MHP) to assist in the construction, rehabilitation, and preservation of permanent and transitional rental housing for persons with incomes of up to 60% of the area median income; b) $300 million for transit-oriented development, upon appropriation by the Legislature, pursuant to the existing Transit-Oriented Development Implementation Program; c) $300 million for infill infrastructure financing grants, upon appropriation by the Legislature, for new construction and rehabilitation of infrastructure that supports high-density affordable and mixed-income housing in locations designated as infill; d) $300 million, continuously appropriated, for farmworker housing pursuant to the existing Joe Serna, Jr. Farmworker Housing Grant Fund; e) $300 million for matching grants to the Local Housing Trust Matching Grant Program, upon appropriation by the SB 879 Page 3 Legislature; and f) $300 million continuously appropriated for the existing CalHome Program to provide direct, forgivable loans for mortgage assistance. 1)Authorizes the Legislature to amend the programs to which funds are or have been allocated by this bond act, to improve the efficiency and effectiveness or to further the goals of the programs. 2)Includes the following definitions: a) "Board" means the Department of Housing and Community Development for programs administered by the department and the California Housing Finance Agency for programs administered by the agency; b) "Committee" means the Housing Finance Committee; and c) "Fund" means the Affordable Housing Bond Act Trust Fund of 2018. 1)Authorizes the committee to determine whether or not it is necessary and desirable to issue bonds, upon a request by the board, and if so the bonds will be issued and sold. 2)Authorizes the board to request the Pooled Money Investment Board to make a loan from the Pooled Money Investment Account to support the bond. SB 879 Page 4 FISCAL EFFECT: According to the Assembly Appropriations Committee, this bill would have the following fiscal impact: 1)Bond costs. Total principal and interest costs of approximately $4.89 billion to pay off the bonds ($3 billion in principal and $1.89 billion in interest), with average annual debt service payments of $163 million (General Fund (GF)), when all bonds are sold, and assuming a 30-year maturity and an interest rate of 3.5%. If interest rates increase to 5% in the near future, annual debt service would be approximately $195 million (GF) and total principal and interest costs over the repayment period would be approximately $5.86 billion. 2)Administrative costs. The Department of Housing and Community Development (HCD) and the California Housing Finance Agency (CHFA) would incur increased staffing costs, likely in the range of $100 to $150 million in total over multiple fiscal years, to administer the various housing programs funded by this Bond Act. These funds would represent a portion of the bond funds allocated to HCD and CHFA to fund the specified programs (up to 5% of bond proceeds). 3)Ballot costs. One-time costs in the range of $414,000 to $552,000 to the Secretary of State (SOS) for printing and mailing costs to place the measure on the ballot in the November, 2016 statewide election. (GF). SOS indicates that printing and mailing costs associated with placing a measure on the statewide ballot are approximately $69,000 per page, depending on the length of the ballot. The fiscal estimates noted above reflect the addition of 6-8 pages in the Voter Information Guide. Actual costs would depend upon the length of the title and summary, analysis by the Legislative Analyst's Office, proponent and opponent arguments, and text of the proposal. Staff notes that Proposition 1C took up 8 SB 879 Page 5 pages in the 2006 Voter Information Guide. COMMENTS: 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. 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 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 SB 879 Page 6 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. Programs funded by the proposed bond: According to the author, the proposed $3 billion bond will have many economic benefits resulting from the building of housing, including $11.7 million in local income, $2.2 million in taxes and other revenue for local governments, and 161 local jobs. These figures come from an April 2015 analysis by the National Association of Home Builders and are based on national averages. This bill proposes $3 billion in GO bonds to provide new funding for several existing programs, which are described below along SB 879 Page 7 with the funding proposed in this bill. 1)Multifamily Housing Program: The Multifamily Housing Program assists the new construction, rehabilitation, and preservation of permanent and transitional rental housing for lower income households through loans to local governments and non- and for-profit developers. Funds are for incomes up to 60% of area median income. 2)Transit-Oriented Development Implementation Program: Under the program, low-interest loans are available as gap financing for rental housing developments that include affordable units, and as mortgage assistance for homeownership developments. Grants to cities, counties, and transit agencies are for the provision of the infrastructure necessary for the development of higher density uses within close proximity to a transit station and loans for the planning and development of affordable housing within one-quarter mile of a transit station. 3)Infill Infrastructure Financing Grants: This program assists in the new construction and rehabilitation of infrastructure that supports higher density affordable and mixed-income housing in locations designated as infill, such as water and sewer extensions. 4)Joe Serna, Jr. Farmworker Housing Grant Program: This program finances the new construction, rehabilitation, and acquisition of owner-occupied and rental units for agricultural workers, with a priority for lower income households. 5)Local Housing Trust Matching Grant Program: This provides matching grants to local governments and non-profits that raise money for affordable housing. SB 879 Page 8 6)CalHome: This program provides grants to local public agencies and nonprofit developers to assist individual households through deferred-payment loans. The funds would provide direct, forgivable loans to assist development projects involving multiple ownership units, including single-family subdivisions. This money would also be available to self-help mortgage assistance programs and manufactured homes. Two of the programs funded by the proposed bond, the Transit-Oriented Development Implementation Program and Infill Infrastructure Financing Grants, were created prior to the creation of the Affordable Housing Sustainable Communities (AHSC) program which funds affordable housing in transit-oriented developments to support the state's goals of greenhouse gas reduction. These programs should be reviewed to determine if they need to be revised to avoid overlap with the AHSC program. Analysis Prepared by: Lisa Engel / H. & C.D. / (961) 319-2085 FN: 0004235 SB 879 Page 9