BILL ANALYSIS
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: SB 450
SENATOR ALAN LOWENTHAL, CHAIRMAN AUTHOR: lowenthal
VERSION: 2/26/09
Analysis by: Mark Stivers FISCAL: yes
Hearing date: March 31, 2009
SUBJECT:
Federal housing trust fund
DESCRIPTION:
This bill dedicates funds that California receives from the
federal Housing Trust Fund primarily to the Department of
Housing and Community Development's Multifamily Housing Program,
except that the Legislature may appropriate up to 10% of the
funds to the CalHome Program.
ANALYSIS:
On July 30, 2008, President Bush signed into law HR 3221, the
Housing and Economic Recovery Act of 2008. Among the bill's
numerous provisions is the establishment of a federal Housing
Trust Fund (HTF).
The federal government will distribute HTF funds to the states
in the form of block grants with the amounts for each state to
be determined by formula. The purposes of the HTF are to
increase and preserve the supply of rental housing for extremely
low- and very low-income households, including homeless
individuals and families, and to increase homeownership for
extremely low- and very low-income households. At least 90% of
the funds must be used for the production, preservation,
rehabilitation, or operation of rental housing affordable to
very low-income households (those earning 50% of area median
income or less), and at least 75% of these funds must benefit
extremely low-income households (those earning 30% of area
median income or less) or households with incomes below the
federal poverty line. Up to 10% of HTF funds can be used to
assist very low-income, first-time homebuyers through the
production, preservation, and rehabilitation of affordable homes
or through down payment, closing cost, and mortgage assistance.
SB 450 (LOWENTHAL) Page 2
The HTF is envisioned as a permanent program with dedicated
sources of funding not subject to annual Congressional
appropriations. HR 3221 requires Freddie Mac and Fannie Mae,
the federal government-sponsored entities that purchase and
securitize mortgages, to contribute a portion of the value of
their new loan purchases to the fund. While this requirement
will ultimately create revenue for the fund, the new federal
administrator of Freddie Mac and Fannie Mae, the Federal Housing
Finance Administration, has indefinitely suspended contributions
to HTF as of December 2008 in order to restore Freddie and
Fannie to fiscal health, and it is unlikely that this suspension
will be lifted before fiscal year 2010. Nonetheless, President
Obama has proposed a $1 billion appropriation for the HTF as
part of his fiscal year 2009 budget.
Current state law establishes the Multifamily Housing Program
(MHP), administered by the Department of Housing and Community
Development (HCD), as California's omnibus rental housing
finance program. MHP provides long-term deferred loans to the
developers of affordable rental housing to cover the gap between
development costs and the amount of debt that can be supported
by affordable rents. One of the goals of MHP is to target the
lowest-income households, including extremely low-income
households. Housing units assisted through MHP remain
affordable for 55 years.
Current state law also establishes the CalHome Program,
administered by HCD, as the state's omnibus homeownership
program. CalHome provides grants to local governments and
non-profit organizations to help low-income families become or
remain homeowners. Recipients may use funds to provide
home-buyer counseling, home rehabilitation loans, downpayment
assistance, self-help mortgage assistance, and technical
assistance for self-help and shared housing.
This bill designates HCD as the state agency responsible for
administering HTF funds and requires HCD to award the funds
through the MHP Program, except that the Legislature may
appropriate up to 10% of HTF funds for HCD to award under the
CalHome Program. The bill further requires HCD to amend its
regulations as needed to comply with federal law relating to HTF
funds.
COMMENTS:
SB 450 (LOWENTHAL) Page 3
Purpose of the bill . According to the author, HTF funds should
start flowing to California in 2010. Therefore, it is necessary
to designate a state entity to receive the funds and to begin
planning for how to expend these funds. Ultimately, HTF funds
will serve the same purpose as MHP funds: providing long-term,
deferred loans to developers of highly-targeted affordable
housing to fill gaps between project costs and borrowing
capacity. As a result, it makes sense to use the existing
omnibus framework of MHP to distribute HTF funds. This will
simplify administration, expedite awards, and ensure ease of use
for developers.
Because of the omnibus nature of the MHP Program, HCD will
maintain the flexibility to tailor its regulations to meet
federal requirements and to direct federal and state funds to
different forms of affordable rental housing or for different
special needs if so desired.
Consistent with the federal law that allows states to spend up
to 10% of their HTF grants to achieve homeownership for
extremely low- and very low income-families, this bill also
allows the Legislature to appropriate up to 10% of its funds to
the state's omnibus homeownership program, the CalHome Program,
also administered by HCD.
POSITIONS: (Communicated to the Committee before noon on
Wednesday,
March 25, 2009)
SUPPORT: California Rural Legal Assistance Foundation
Western Center on Law and Poverty
OPPOSED: None received.