BILL ANALYSIS �
AB 1216
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CONCURRENCE IN SENATE AMENDMENTS
AB 1216 (Fuentes)
As Amended June 22, 2011
Majority vote
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|ASSEMBLY: |50-27|(May 19, 2011) |SENATE: |21-18|(August 18, |
| | | | | |2011) |
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Original Committee Reference: H. & C.D.
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.
The Senate amendments make minor technical changes to improve
clarity.
AS PASSED BY THE ASSEMBLY , this bill was substantially similar
to the version passed by the Senate.
FISCAL EFFECT : None
COMMENTS : Under current 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.
Current 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
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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
notice of the opportunity to offer to purchase have standing to
enforce the offer-to-purchase provisions should the owner fail
to comply. This bill 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 is 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
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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 ensuring 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.
Analysis Prepared by : Anya Lawler / H. & C.D. / (916)
319-2085
FN: 0001373