BILL ANALYSIS
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: sb 500
SENATOR ALAN LOWENTHAL, CHAIRMAN AUTHOR: steinberg
VERSION: 1/5/10
Analysis by: Mark Stivers FISCAL: YES
Hearing date: January 12, 2010
SUBJECT:
Housing Market Stabilization Fund
DESCRIPTION:
This bill establishes the Housing Market Stabilization Fund for
the purpose of financing the construction, rehabilitation, and
preservation of affordable homes.
ANALYSIS:
Current law establishes a number programs administered by the
Department of Housing and Community Development (HCD) and other
state housing agencies to support the development of affordable
homes. These programs serve a wide range of housing needs,
including helping first-time homebuyers achieve homeownership,
providing affordable apartments to working families, providing
transitional and permanent supportive housing to those with
special needs, and developing emergency shelters for the
homeless.
Historically, the state has primarily funded these programs with
the proceeds of general obligation bonds. Recently, the voters
approved Proposition 46 in 2002 and Proposition 1C in 2006,
which together provided $4.95 billion for a variety of
affordable housing programs. HCD has awarded most of the funds
available under these bond acts and expects to award almost all
of the remaining Proposition 1C funds by the end of 2010.
This bill establishes the Housing Market Stabilization Fund for
the purpose of financing the construction, rehabilitation, and
preservation of homes affordable to the state's workforce and
those with special housing needs, to increase and preserve
homeownership, and to assist and provide incentives for
increasing the supply of safe, affordable, and sustainable
homes.
SB 500 (STEINBERG) Page 2
COMMENTS:
1.Purpose of the bill . According to the author, California's
housing market is broken. Even before the current wave of
foreclosures, the state's housing production had not kept pace
with the state's growth in population, making most major
California housing markets the most expensive in the nation.
Moreover, during this economic crisis, the high costs of
housing are hitting families hard. Some families find that
paying rent or a mortgage to stay in their homes leaves little
discretionary income available. Other families are not able
to pay their rents and mortgages and are, therefore, at risk
for homelessness. They may join the tens of thousands of
Californians already homeless that can be found sleeping on
sidewalks and bus stops on any given night. In order to meet
these short-term housing needs and fix the state's long-term
shortage of affordable homes, California needs a continued and
sustained investment in housing production. This bill creates
the Housing Market Stabilization Fund to invest funds from a
permanent source or sources of revenue into affordable housing
production.
2.Revenue sources and expenditure framework to come . This bill
in its current form represents the first step in an effort to
establish a permanent source of revenues for state housing
programs. At some later date, it is likely that this bill
will contain proposed sources of revenue to support the fund
and a framework for expenditure of the funds.
3.Ending the boom and bust cycle . While general obligation
housing bonds have allowed tens of thousands of California
families to afford their homes, bonds create a boom and bust
development cycle that is difficult for the state and the
private development community to manage. When bond funds are
available, HCD and private developers add staff to issue loans
and build housing, but ultimately the bond funds are exhausted
and that added staff must be laid off unless another bond
issue is enacted by the Legislature and approved by voters in
advance of the funds running out. This ramping up and ramping
down of capacity has costs and leads to inefficiencies as
critical staff experience is lost. Moreover, because it is
difficult to predict precisely how long bonds funds will be
available, it is difficult for developers to plan ahead, which
is critical given the multi-year development process.
By providing a steady stream of funding for the state's
SB 500 (STEINBERG) Page 3
housing programs, a permanent source will end this boom and
bust cycle and bring much-needed certainty to the financing
process for affordable housing. Developers will know that
there will be a relatively consistent amount of funding
available year in and year out and therefore will be able to
hire staff and plan projects accordingly. Likewise, HCD will
be able to maintain a consistent staffing level and retain
experienced employees.
4.Pay as you go . Creating a dedicated revenue source to support
affordable housing programs will reduce the pressure to issue
general obligation housing bonds. Treasurer Bill Lockyer
recently stated that California's debt service on
already-authorized general obligation bonds will likely hit an
unprecedented ten percent of annual expenditures by 2014.
This bill presents an alternative pay-as-you-go method to fund
the state's affordable housing programs.
POSITIONS: (Communicated to the Committee before noon on
Wednesday,
January 6, 2010)
SUPPORT: Affordable Homes Collaborative
California Building Industry Association
California Coalition for Rural Housing
California Rural Legal Assistance Foundation
Coachella Valley Housing Coalition
Housing California
Mammoth Lakes Housing, Inc.
Self-Help Enterprises
Visionary Home Builders of California, Inc.
Western Center on Law and Poverty
OPPOSED: None received.