BILL ANALYSIS                                                                                                                                                                                                    Ó



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          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  








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          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  








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               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. 









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          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  








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            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  








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          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  








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          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.








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          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



















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