BILL ANALYSIS
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: SB 958
SENATOR ALAN LOWENTHAL, CHAIRMAN AUTHOR: lowenthal
VERSION: 2/5/10
Analysis by: Mark Stivers FISCAL: yes
Hearing date: March 23, 2010
SUBJECT:
Federal housing trust fund
DESCRIPTION:
This bill dedicates funds that California receives from the
National 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 the National Housing
Trust Fund (NHTF).
The federal government will distribute NHTF 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 NHTF 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 NHTF funds can be used to
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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 NHTF 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 NHTF as of December 2008 in order to restore Freddie and
Fannie to fiscal health, and it is unknown at this time when the
administrator will lift this suspension. Nonetheless, it is
possible that the federal jobs bill currently pending in
Congress will include $1 billion for the NHTF. In addition,
President Obama has proposed a $1 billion appropriation for the
NHTF as part of his fiscal year 2010 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 NHTF funds and requires HCD to award the funds
through the MHP Program, except that the Legislature may
appropriate up to 10% of NHTF funds for HCD to award under the
CalHome Program. The bill further requires HCD to amend its
SB 958 (LOWENTHAL) Page 3
regulations as needed to comply with federal law relating to
NHTF funds and to provide the following reports to the
Legislature:
A report describing HCD's plan for distributing NHTF funds,
including a schedule for the release of all funds, no later
than 30 days after receipt of the federal funds.
A report detailing the cumulative amounts of funds awarded and
expended, no later than 180 days after receipt of the federal
funds and on or before December 31 of each year thereafter.
COMMENTS:
1.Purpose of the bill . According to the author, NHTF 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,
NHTF funds will serve the same purpose as MHP funds: to
provide 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 NHTF 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
needs if so desired.
Consistent with the federal law that allows states to spend up
to 10% of their NHTF 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.
2.Formula pending . The federal Department of Housing and Urban
Development (HUD) has released draft regulations to establish
the formula for distributing NHTF funds among the states.
Assuming $1 billion is available nationally in 2010,
California would receive roughly $193 million under the
current draft formula. The public comment period has closed
on the draft regulations, and HUD is expected to release final
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regulations shortly. Thereafter, HUD is expected to release
draft program regulations governing how it will implement the
program.
3.Similar to other bills . Except for the addition of the
reporting requirements, this bill is identical to SB 450
(Lowenthal), which was approved unanimously by the Senate in
April 2009. SB 450 was later amended to address a different
subject matter. This bill is also identical to a special
session bill recently approved by this committee, SB 8X 27
(Lowenthal).
4.Technical amendments .
On page 2, line 22 strike "report" and insert
"notification"
On page 2, line 25 strike "report" and insert
"notification"
POSITIONS: (Communicated to the Committee before noon on
Wednesday,
March 17, 2010)
SUPPORT: California Rural Legal Assistance Foundation
Western Center on Law and Poverty
OPPOSED: None received.