BILL ANALYSIS
SB 477
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Date of Hearing: July 8, 2009
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Norma Torres, Chair
SB 477 (Florez) - As Introduced: February 26, 2009
SENATE VOTE : 23-13
SUBJECT : Low- and moderate- income housing agency powers
SUMMARY : Permits a redevelopment agency to loan, grant,
contribute or pledge funds to an authorized purchaser for
low-income housing tax credits for the construction of
low-income housing located within the community. Specifically,
this bill :
1)Clarifies that a redevelopment agency may loan, grant,
contribute or pledge funds to an authorized purchaser for
low-income housing tax credits for the construction of
low-income housing located within the community.
2)Defines an "authorized purchaser" as a joint power entity that
consists of no less than 100 local agencies.
EXISTING LAW
1)Declares that "blighted areas" are physical and economic
liabilities that require redevelopment in the interest of the
health, safety, and general welfare of community and state
residents (Health & Safety Code Section 33030).
2)Requires 20% of all tax increment funds allocated to an agency
must be used for the purpose of increasing, improving and
preserving the community's supply of extremely low-, very
low-, low- and moderate-income housing unless the agency makes
findings that the housing is not needed (Health & Safety Code
Section 33334.2).
3)Allows agencies to exercise any or all of its powers to
construct, rehabilitate or preserve affordable housing for
low- and moderate-income persons including: donate real
property, finance insurance premiums, construct buildings or
structures, acquire buildings or structures, rehabilitate
buildings or structures, provide subsidies to low- and
moderate-income persons, and maintain the communities supply
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of mobilehomes (Health & Safety Code Section 33334.2).
4)Requires an agency to spend the moneys in the Low and Moderate
Income Housing Fund (L&M Fund) over a 10-year implementation
period for low- and very low-income persons and families in at
least the same proportion as the number of units each of those
two groups bears to the total units needed for moderate, low
and very-low income persons and families as determined within
the communities housing element (Health & Safety Code
33334.4).
5)Prohibits the use of L&M funds if other reasonable means of
private or commercial financing at the same level of
affordability and quantity are reasonably available to the
agency or owner of the units (Health & Safety Code Section
33334.3).
6)Requires 15% of all new and substantially rehabilitated units
developed within a project area must be available and occupied
by persons and families of low and moderate income. Not less
than 40% of these units must be available and occupied by very
low income persons and families (Health & Safety Code Section
33413).
7)Declares that "blighted areas" are physical and economic
liabilities that require redevelopment in the interest of the
health, safety, and general welfare of community and state
residents (Health & Safety Code Section 33030).
FISCAL EFFECT : Unknown
COMMENTS :
The California Tax Credit Committee (TCAC) issues low-income
housing tax credits to individual developers to support he
development, rehabilitation, and preservation of affordable
rental housing for very-low and extremely-low income households.
Last year, TCAC issued over $1 billion tax credit reservations.
The tax credits reservations are a source of equity to
developers who sell them to equity investors who can use them as
credit against their tax liability over 10 years. Because of
the downturn in the economy the market for tax credits among
investors has shrunk. The author reports that 50% of projects
that received an award cannot secure equity investors for the
tax credits and thus cannot go forward with construction of the
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units and the jobs. Due to the lack of tax credit investors and
the state freeze on the sale of general obligation bonds the
affordable housing construction industry which is a source of
not only affordable housing but also jobs has stalled.
The Community Redevelopment Law gives local governments the
authority to establish redevelopment project areas, freeze the
property taxes and collect all of the increase in property
taxes, known as tax increment, generated within the area, to
eradicate blight. Twenty percent of the tax increment must be
used to construct, rehabilitate or preserve affordable housing
for low- and moderate-income persons. Redevelopment agencies
have broad authority to use the 20% set aside in the L&M Fund
for the development of affordable housing including donate real
property, finance insurance premiums, construct buildings or
structures, acquire buildings or structures, rehabilitate
buildings or structures, provide subsidies to low- and
moderate-income persons, and maintain the communities supply of
mobilehomes.
The purpose of this bill :
According to the author, this bill seeks to provide a source of
financing to serve as a substitute for the lack of tax credit
equity investors throughout California and to stimulate the
economy. Redevelopment agencies would not be authorized to
purchase the tax credits themselves, but could loan or grant the
funds to an authorized purchaser. An authorized purchaser is
defined as a joint powers entity that consists of at least 100
local agencies. According to the author there are only two
joint powers authorized purchasers that would qualify the
California Statewide Communities Development Authority and the
Association of Bay Area Governments. These two entities already
provide financing to redevelopment agencies by issuing bonds on
behalf of local agencies for affordable housing projects. Bonds
are often used in conjunction with low income housing tax
credits to finance affordable housing projects.
Neither redevelopment agencies nor the joint powers authorities
(JPA) have tax liability. If the JPA purchased the tax credits
they would essentially have to wait until the market rebounds
and equity investors return to purchasing tax credits.
Arguments in opposition :
The Non-Profit Housing Association of Northern California (NPH),
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which represents affordable housing developers, opposes SB 477,
unless it is amended to specifically narrow the new authority to
apply only under limited circumstances to solve problems for
affordable housing developments within redevelopment areas. NPH
is concerned that funds available for direct investment in
affordable housing projects would be reallocated to indirect
support through the purchase of tax credits and the result could
be fewer dollars available for affordable housing development.
Committee amendments:
Affordable housing construction has been stymied by the
recession and the floundering bond market. The state's housing
programs, one of the main engines of affordable housing
production, have been slowed because the state has been unable
to sell bonds sufficient to fully fund these programs.
Redevelopment agencies L&M funds are one of the sources of
funding are still available for investment in affordable housing
projects. In order to ensure that these dollars are used to
their most productive result, the committee may wish to consider
the following amendments to narrow the scope of the bill and the
authority of redevelopment agencies to use the L&M funds in this
way:
? Allow this authority to be used only to assist housing
developments that already have commitments of redevelopment
association funds.
? Require the project sponsor to demonstrate a solid and
sustained effort to secure private investors before seeking
use of the redevelopment association funds to purchase
low-income housing tax credits.
? Places a two-year sunset on the use of redevelopment agencies
funds for this purpose.
REGISTERED SUPPORT / OPPOSITION :
Support
California Redevelopment Association
Opposition
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Non-Profit Housing Association of Northern California
Analysis Prepared by : Lisa Engel / H. & C.D. / (916) 319-2085