BILL ANALYSIS
SENATE HOUSING & COMMUNITY DEVELOPMENT COMMITTEE
Senator Denise Moreno Ducheny, Chair
Bill No: AB 304 Hearing: June
16, 2003
Author: MullinFiscal: Yes
Version: April 22,
2003Consultant: Mark Stivers
HOMEOWNERSHIP IN REVITALIZATION AREAS PROGRAM
Background and Existing Law :
Created in 1975, the California Housing Finance Agency
(CalHFA) serves as the State's mortgage bank to provide
below market rate mortgage financing to meet the housing
needs of low to moderate income families.
In addition to providing below market rate mortgage loans,
the agency also provides deferred "silent second" loans for
up to three percent of the home purchase price to
income-eligible first-time homebuyers under the California
Homebuyer Downpayment Assistance Program (CHDAP).
Proposition 46, the Housing and Emergency Shelter Trust
Fund Act of 2002, provided $130 million for this program
and reserved $12.5 million of these funds for low-income
first-time homebuyers who have received homeownership
counseling from a non-profit organization that is funded
and certified by a federally-funded national non-profit
(generally a Neighborworks organization) and are purchasing
a residence in a community revitalization area targeted by
the nonprofit. This setaside is available for 30 months
and is marketed by the agency through the Homeownership in
Revitalization Areas Program (HIRAP). Any money left over
after 30 months reverts to the standard CHDAP program.
Proposed Law :
Assembly Bill 304 allows CalHFA to make downpayment
assistance loans of up to 6% of the home sale price, as
opposed to 3%, to low-income first-time homebuyers in
identified neighborhood revitalization areas under the
HIRAP Program.
AB 304
Page 2
Comments :
1. Purpose of the bill . According to the author and
sponsor, AB 304 makes the HIRAP program more responsive to
today's housing prices. In many high-cost areas,
low-income families require up to $20,000 in deferred
financing just to purchase the most affordable homes in the
community. With the current assistance limits, it often
requires combining four or more subsidy sources, not all of
which are available at the same time. By increasing the
amount of assistance available under the HIRAP program, it
will be much easier to assemble the necessary financing to
make a low-income household into homeowners.
2. More assistance vs. more families . Given that the
resources of the HIRAP program are capped at $12.5 million
under the housing bond, the fundamental question posed by
this bill is whether it is better to provide more
assistance to fewer families or less assistance to more
families. By doubling the amount of assistance that can be
provided to each family, the bill could potentially cut the
number of assisted families in half. That said, the
parameters of the current program may make it difficult to
use the full $12.5 million within the allotted 30 months.
Only homebuyers who have worked with certified non-profits
can access the HIRAP program, and to date, no non-profit
has been certified for the program and only four
applications are pending. While more non-profits will
surely become certified over time, it may be difficult for
the small number of organizations to generate enough
business to use the full allocation. In addition, in many
areas of the state 3% down payment assistance loans are
simply insufficient to cover the gap between home prices
and what a low-income family can afford to pay for a new
home. Increasing the amount of downpayment assistance will
allow lower-income families to make the jump to
homeownership.
3. Altering the use of bond funds . The housing bond
specifically allows the Legislature, from time to time, to
amend bond programs "for the purpose of improving the
efficiency and effectiveness of the program, or for the
purpose of furthering the goals of the program." The goal
of the HIRAP program is to facilitate homeownership by
lower-income families in neighborhood revitalization areas.
Increasing assistance levels will make it easier for
AB 304
Page 3
low-income families to qualify and achieve homeownership,
thereby meeting the criteria to amend a bond program.
4. Technical amendment . Because the HIRAP Program is a
setaside of and administered under the statutes of the
larger CHDAP Program, it may be helpful to clarify that the
new authority to offer 6% loans is notwithstanding the 3%
limit of the CHDAP statute.
On page 2, line 4 strike "The" and insert
"Notwithstanding Section 51504, the"
Previous Actions :
Assembly Floor: 46-27
Assembly Appropriations: 17-7
Assembly Housing and Community Development: 6-3
Support and Opposition : (6/11/03)
Support : The California Neighborworks Network (sponsor)
Neighborhood Housing Services of Orange County
Opposition : None received