BILL ANALYSIS
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THIRD READING
Bill No: SB 450
Author: Lowenthal (D)
Amended: As introduced
Vote: 21
SENATE TRANS. & HOUSING COMMITTEE : 11-0, 3/31/09
AYES: Lowenthal, Huff, Ashburn, DeSaulnier, Harman,
Hollingsworth, Kehoe, Oropeza, Pavley, Simitian, Wolk
NO VOTE RECORDED: Vacancy, Vacancy
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Federal Housing Trust Fund
SOURCE : Author
DIGEST : This bill dedicates funds that California
receives from the federal Housing Trust Fund primarily to
the Department of Housing and Community Developments
Multifamily Housing Program, except that the Legislature
may appropriate up to 10 percent of the funds to the
CalHome Program.
ANALYSIS : On July 30, 2008, President Bush signed into
law House Resolution (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
CONTINUED
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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 percent 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 percent of
area median income or less), and at least 75 percent of
these funds must benefit extremely low-income households
(those earning 30 percent of area median income or less) or
households with incomes below the federal poverty line. Up
to 10 percent 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.
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.
Existing 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
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households, including extremely low-income households.
Housing units assisted through MHP remain affordable for 55
years.
Existing 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 percent 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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 4/21/09)
California Rural Legal Assistance Foundation
Century Housing
Nonprofit Housing Association of Northern California
Western Center on Law and Poverty
ARGUMENTS IN SUPPORT : According to the author's office,
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.
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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.
JJA:do 4/21/2009 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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