BILL ANALYSIS �
AB 1216
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Date of Hearing: May 11, 2011
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, 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)Defines "assisted housing development" to mean a multifamily
rental housing development that receives governmental
assistance under specified programs.
2)Defines "affected public entities" to mean the mayor of the
city in which the assisted housing development is located, or,
if located in an unincorporated area, the chair of the board
of supervisors of the county; the appropriate local public
housing authority, if any; and the Department of Housing and
Community Development.
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3)Defines "affected tenant" to mean a tenant household residing
in an assisted housing development, at the time notice is
required to be provided pursuant to existing law, that
benefits from the government assistance.
4)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.
5)Allows any affected tenant or affected public entity to seek
injunctive relief should the owner fail to comply with the
notice requirements.
6)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.
7)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.
8)Requires that the notice of opportunity to offer to purchase
be posted in a conspicuous place in the common area of the
development.
9)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.
10)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.
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11)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.
12)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.
13)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
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.
FISCAL EFFECT : None
COMMENTS :
1)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
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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.
2)Only those entities to which the owner is required to provide
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.
3)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."
4)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
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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.
5)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.
6)AB 2019 (Fuentes, 2008) contained similar provisions to this
bill and was vetoed by Governor Schwarzenegger with the
following message:
"This bill would give tenants the ability to initiate legal
action against an owner of publicly subsidized,
rent-restricted, or assisted housing if the owner fails to
provide the proper legal notice when the owner decides to
remove the property from the subsidized housing market.
This measure, while well intentioned, attempts to achieve this
goal by expanding the number of individuals who have standing
to initiate legal action and enforce current notification
requirements. This could increase overall litigation
throughout the state. In addition, owners, who may have
simply been unaware of the notification requirements, may face
excessive and unnecessary delays or court cost prior to the
sale or transfer of their property. These types of delays and
burdens could discourage potential buyers of the affordable
housing development and increase the chances that individuals
who own, or are considering the purchase of, affordable
housing units will choose not to enter the market."
7)Support arguments: Expanding enforcement authority to include
affected tenants and public agencies is a way to ensure that
there is greater compliance, thus providing more opportunities
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to preserve housing affordability.
Opposition arguments: The expanded enforcement provisions
could increase the number of unnecessary suits against
apartment owners, which could increase project costs and delay
developments.
8)This bill was heard by the Housing and Community Development
Committee on
April 27, 2011, where it passed with a 5-2 vote.
REGISTERED SUPPORT / OPPOSITION :
Support
CA Rural Legal Assistance Foundation �SPONSOR]
City of Santa Monica
Western Center on Law and Poverty
Opposition
None on file
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958