BILL ANALYSIS
SB 454
Page 1
Date of Hearing: June 16, 2010
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
SB 454 (Lowenthal) - As Amended: May 27, 2010
SENATE VOTE : 34-0
SUBJECT : Land use: zoning regulations.
SUMMARY : Makes permanent three sections of law pertaining to
notification requirements
for owners of affordable housing by repealing sunset dates,
revises the contents of what the owner of an assisted housing
development must include in the statement giving notice of the
opportunity to purchase, and creates an exemption from
notification requirements in specific instances. Specifically,
this bill :
1)Repeals the January 1, 2011, sunset date in current law that:
a) Requires affordable housing owners to provide notice to
tenants and governmental entities before converting a
property to market-rate apartments;
b) Requires affordable housing owners to first provide
general notice to tenants, local and state governments, and
potential preservation purchasers at least 12 months prior
to conversion; and,
c) Contains an exemption from noticing requirements if
specified conditions are contained in a regulatory
agreement recorded against the property.
2)Revises the contents of the initial notice of a bona fide
opportunity to submit an offer to purchase to include a
statement that addresses all of the following:
a) Whether the owner intends to maintain the current number
of affordable units and level of affordability;
b) Whether the owner has an interest in selling the
property; and,
c) Whether the owner has executed a contract or agreement
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of at least five years' duration with a public entity to
continue or replace subsidies to the property and to
maintain an equal or greater number of units at an equal or
deeper level of affordability, and, if so, the length of
the contract or agreement.
3)Exempts, from specified financial disclosure requirements,
those developments with 25% or less of the units on the
property subject to affordability restrictions or a rent or
mortgage subsidy contract.
4)Allows a corporation or a public entity to share information
obtained on the financial disclosure statement with other
prospective purchasers.
5)Provides that a corporation or public entity that shares
information shall not be required to sign a confidentiality
agreement as a condition of receiving or sharing this
information, providing that the information is used for the
purpose of attempting to preserve the affordability of the
property.
EXISTING LAW :
1)Contains specific requirements for owners of affordable
housing to provide notification to tenants, governmental
entities and potential purchasers before converting a property
to market-rate housing.
2)Provides for a list of entities that must be notified by an
owner of an assisted housing development of an opportunity to
purchase including the tenant association of the development,
local nonprofit organizations and public agencies, regional or
national nonprofit organizations and regional or national
public agencies, profit-motivated organizations or
individuals.
3)Provides that the initial notice of a bona fide opportunity to
submit an offer to purchase shall contain all of the
following:
a) A statement that the owner will make available to each
of the types of entities listed above, within 15 business
days of receiving a request therefore, the terms of
assumable financing, if any, the terms of the subsidy
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contract, if any; and proposed improvements to the property
to be made by the owner in connection with the sale, if
any;
b) A statement that each of the types of entities listed
above has the right to purchase the development;
c) A statement that the owner will make available to each
of the types of entities listed above, within 15 business
days of receiving a request therefore, itemized lists of
monthly operating expenses, capital improvements as
determined by the owner made within each of the two
preceding calendar years, the amount of project reserves,
and copies of the two most recent financial and physical
inspection reports on the development, if any, filed with
federal, state, or local agencies; and,
d) A statement that the owner will make available to each
of the entities listed above, within 15 business days of a
request therefore, the most recent rent roll listing the
rent paid for each unit and the subsidy, if any, paid by a
governmental agency as of the date the notice of intent,
and a statement of the vacancy rate at the development for
each of the two preceding calendar years.
FISCAL EFFECT : According to the Senate Appropriations
Committee, SB 454 contains absorbable costs for the Department
of Housing and Community Development on a prospective basis to
approve notice forms, and compile and maintain lists of
preservation purchasers.
COMMENTS :
1)Since the 1960s, developers have constructed at least 425,000
units of affordable rental housing in California with the
assistance of federal, state, and local subsidies that require
owners to maintain rents at affordable levels for specific
periods of time. The affordability restrictions on these
units typically last 30 to 55 years, depending on the program.
Once affordability obligations expire, an owner may preserve
the affordability of the units by renewing assistance or by
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refinancing with new public subsidies, or the owner may
convert the units to market rate housing.
2)In order to facilitate the preservation of at-risk affordable
housing, current law requires that owners first provide
general notice to tenants, local and state governments, and
potential preservation purchases (potential purchasers that
may want to purchase the development in order to preserve the
affordability restrictions) at least 12 months prior to
conversion. During the one-year notice period, current law
also provides preservation purchasers with limited priority to
purchase the property if the owner is inclined to sell.
During the first six months, the owner is not required to
accept any offer to sell, but may only accept offers from
preservation purchasers. If the owner rejects an offer during
this time, the owner must give the preservation purchaser who
made the offer an opportunity to match and pre-empt any offer
from a non-preservation purchaser accepted during the second
six-month time period.
3)SB 454 deletes the January 1, 2011, sunset date contained in
three sections of law dealing with notification requirements
for owners of affordable housing. One section of law,
Government Code Section 65863.11, which specifies the
requirements of affordable housing owners to notify tenants,
local and state governments, and potential preservation
purchasers at least 12 months prior to conversion, has been in
existence since 1990 and has had the sunset date extended
several times over the last 20 years. The other two sections
of law contained in this bill, Government Code Sections
65863.10 and 65863.13, were added to the Government Code in
1998 and 2001, respectively.
Amendments to the bill taken on May 27, 2010, also restructure
the section of law that lists what an owner must include on
the statement of "initial notice of a bona fide opportunity to
submit on offer to purchase" and exempts developments with 25%
or less affordable units from this financial disclosure
requirement. The recent amendments also allow a corporation
or a public entity to share information that is compiled from
these financial disclosure requirements with prospective
purchases without the requirement to sign a confidentiality
agreement as long as the information is used for the purpose
of attempting to preserve the affordability of the property.
The amendments address concerns raised by the California
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Apartment Association.
4)The preservation of existing affordable units is important to
cities and counties. Under current law, the Department of
Housing and Community Development (HCD) is required to
allocate the region's share of the statewide housing need to
Councils of Governments (COGs) based on Department of Finance
population projections and regional population forecasts used
in preparing regional transportation plans. The COG develops
a Regional Housing Need Plan which allocates the region's
share of the statewide housing need to cities and counties
within the region. The Regional Housing Need Allocation
(RHNA) is a minimum
projection of additional housing units needed by a jurisdiction
- a city or county - to
accommodate projected household growth of all income levels by
the end of the housing element's statutory planning period.
While cities and counties are required to plan for the
additional housing units needed, including those units that
are affordable to very low- and low-income levels, local
governments also have a vested interest in maintaining the
existing stock of affordable units, and the provisions of SB
454 assist local governments in doing this.
5)Support Arguments : Supporters argue that eliminating the
sunsets will ensure that the state and local governments and
affordable housing developers have both the information and
the opportunity to preserve current and future projects when
they become eligible to convert to market-rate housing. Also,
the noticing requirements ensure that tenants are informed of
how they will be affected if the property does convert to
market rate.
According to the City of Los Angeles, the "State Notification
Law" has been an effective and critical tool in ensuring the
preservation of hundreds of rental assisted housing units in
Los Angeles, and implementation of this law has "enabled the
City to develop a preservation strategy that utilizes this law
to enforce the notification requirements and helps to bring
willing sellers and preservation buyers together to facilitate
the preservation of the existing affordable housing stock."
Opposition Arguments : Staff notes that there is no registered
opposition to SB 454; however, property rights advocates may
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have concerns about the existing notification requirements for
owners contained in current law. The Committee may wish to
consider the policy of whether an owner should have the option
to convert to market-rate units as long as the owner has
fulfilled all contractual obligations.
Additionally, the Committee may wish to consider the policy of
deleting sunset dates and thereby creating permanent statutes.
On one hand, needing to introduce legislation every few years
to extend a sunset date may not be an efficient use of
legislative resources, but on the other hand, statutes with
sunset dates allow for periodic oversight by legislators and
staff on the implementation and effectiveness of those
statutes.
6)This bill is double-referred to the Committee on Housing and
Community Development.
REGISTERED SUPPORT / OPPOSITION :
Support
California Coalition for Rural Housing [CO-SPONSOR]
California Rural Legal Assistance Foundation [CO-SPONSOR]
California Apartment Association
California Housing Partnership Corporation
City of Los Angeles
Western Center on Law and Poverty
Opposition
None on file
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958