BILL ANALYSIS �
AB 1216
Page 1
Date of Hearing: April 27, 2011
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Norma Torres, Chair
AB 1216 (Fuentes) - As Introduced: February 18, 2011
SUBJECT : Land use: notice of proposed change: assisted housing
developments.
SUMMARY : Gives tenants and affected public entities the
ability to enforce the provisions of law requiring owners of
assisted housing developments to give affordable housing
developers and others the right to make an offer to purchase the
development in order to preserve its affordability when the
owner does not intend to extend or renew participation in a
subsidy program. Specifically, this bill :
1)Gives tenants and affected public entities the ability to
enforce the provisions of law requiring owners of assisted
housing developments to give affordable housing developers and
others the right to make an offer to purchase the development
in order to preserve its affordability when the owner does not
intend to renew participation in a subsidy program.
2)Specifies that the failure of an owner to record the required
certification that all notice and other procedural
requirements have been met prior to a sale to a purchaser who
is not a qualified entity does not affect the rights of a
purchaser or encumbrancer for value who acts in good faith and
without notice of a failure to comply with the certification
requirement.
EXISTING LAW
1)Requires owners of assisted housing development who intend not
to extend or renew participation in a federal subsidy program
to notify every affected tenant currently residing in the
development and any affected public entities of the proposed
change at least 12 months prior, and again six months prior,
to the termination of the subsidy contract or expiration of
rental restrictions (Government Code Section 65863.10).
2)Allows any affected tenant or affected public entity to seek
injunctive relief should the owner fail to comply with the
notice requirements (Government Code Section 65863.10).
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3)Requires owners of assisted housing development who intend not
to extend or renew participation in a federal subsidy program
to provide an opportunity to submit an offer to purchase the
development to various entities, including the tenant
association of the development and affordable housing
developers (Government Code Section 65863.11).
4)Requires the notice of opportunity to offer to purchase to be
provided prior to or concurrent with the notice to tenants and
affected public agencies (Government Code Section 65863.11).
5)Requires the notice of opportunity to offer to purchase to be
posted in a conspicuous place in the common area of the
development (Government Code Section 65863.11).
6)Specifies that during the first 180 days from the date the
owner files the notice of opportunity to submit an offer to
purchase, the owner can only accept offers from qualified
entities (Government Code Section 65863.11).
7)Defines a qualified entity as one that agrees to maintain the
affordability of the development for 30 years or for the
remaining term of the existing federal assistance, whichever
is longer, and that is capable of managing the housing and
related facilities for its remaining useful life, either by
itself or through a management agent (Government Code Section
65863.11).
8)Allows the owner, after the initial 180-day period, to accept
offers from any person or entity for the next 180 days, so
long as the owner first gives any qualified entity that
submitted an offer to purchase an opportunity to match the
pending offer at the same terms and conditions (Government
Code Section 65863.11).
9)Specifies that the provisions of the opportunity-to-purchase
provisions can be enforced by any qualified entity entitled to
exercise the opportunity to purchase should the owner fail to
comply (Government Code Section 65863.11).
10)Requires an owner selling, leasing, or otherwise disposing of
an assisted housing development to a purchaser who is not a
qualified entity to certify under penalty of perjury that the
owner has complied with all notification requirements and
other procedural requirements. The certification must be
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recorded and may be relied upon by good faith purchasers and
encumbrances for value and without notice of a failure to
comply with the provisions of the law. (Government Code
Section 65863.11)
FISCAL EFFECT : None
COMMENTS :
Under state law, owners of assisted housing developments who
intend not to extend or renew participation in a federal subsidy
program must fulfill certain requirements. At least 12 months
prior, and again six months prior, to the termination of the
subsidy contract or expiration of rental restrictions, the owner
must provide notice of the proposed change to every affected
tenant currently residing in the assisted housing development.
The owner must also provide notice at the same times to any
affected public entities, such as the city or county in which
the development is located, the local public housing authority,
and the Department of Housing and Community Development (HCD).
If the owner fails to comply, any affected tenant or affected
public entity can seek injunctive relief.
The law also requires the owner to provide an opportunity to
submit an offer to purchase the development to various entities,
including the tenant association and affordable housing
developers and operators. The owner must provide notice of the
opportunity to offer to purchase prior to or concurrent with the
required notice to tenants and affected public agencies, and
must also post a copy of the notice in a conspicuous place in
the common area of the development.
During the first 180 days from the date the owner files the
notice of opportunity to submit an offer to purchase, the owner
can only accept offers from qualified entities. To qualify as a
purchaser of an assisted housing development, the entity must
agree to maintain the affordability of the development for 30
years or for the remaining term of the existing federal
assistance, whichever is longer. After the initial 180-day
period, the owner can accept offers from any person or entity
for the next 180 days, so long as the owner first gives any
qualified entity that submitted an offer to purchase an
opportunity to match the pending offer. The law is intended to
provide every opportunity to keep the development affordable.
Only those entities to which the owner is required to provide
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notice of the opportunity to offer to purchase have standing to
enforce the offer-to-purchase provisions should the owner fail
to comply. AB 1216 extends standing to enforce these provisions
to tenants of the assisted housing development and any affected
public agency.
According to the sponsor, the California Rural Legal Assistance
Foundation, "HCD estimates that there are 149,000 units of
privately owned, federally subsidized rental housing in
California. Each year, hundreds of these units are at risk of
being lost because agreements that have kept these units
affordable are due to expire. As those agreements expire,
owners have the option of converting the units to market-rate
housing, thereby increasing rents and displacing low-income
families. As a result, even as the state invests in the
creation of new affordable housing for working Californians, a
significant number of affordable units are disappearing through
these expiring restrictions."
State law aims to prevent the loss of these affordable units by
requiring owners to provide notice to entities that would
maintain the development as affordable housing that they have a
right to make an offer to purchase the property. Absent this
notice, there is little chance to prevent these units from
converting to market rate. If an owner fails to provide the
required notice, the entities who should have received the
notice can sue. However, the tenants who live in the assisted
development, who have the greatest interest in insuring that the
units remain affordable, cannot.
The sponsor reports that the law works when followed and that
there are numerous examples of successful preservation purchases
that came about because of the notice provisions. However, when
the law is ignored, legal enforcement may be necessary.
Unfortunately, the entities that currently have the right to
enforce the provisions, primarily affordable housing developers,
have little way of knowing that they had an option to purchase a
development if they never received notice from the owner. Even
if they become aware that an owner has failed to provide notice,
they may be reluctant to sue because they may still want to try
to purchase the property and do not want to enter into a legal
battle with the owner. Expanding enforcement authority to
include affected tenants as well as affected public agencies is
a way to ensure that there is greater compliance, thus providing
more opportunities to preserve housing affordability.
AB 1216
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Double referred : The Assembly Committee on Rules referred AB
1216 to the Committee on Housing and Community Development and
Local Government. If AB 1216 passes this committee, the bill
must be referred to the Committee on Local Government.
REGISTERED SUPPORT / OPPOSITION :
Support
California Rural Legal Assistance Foundation (sponsor)
City of Santa Monica
Western Center on Law and Poverty
Opposition
None on file
Analysis Prepared by : Anya Lawler / H. & C.D. / (916)
319-2085