BILL NUMBER: AB 1699 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 17, 2012
INTRODUCED BY Assembly Member Torres
FEBRUARY 15, 2012
An act to add Chapter 3.9 (commencing with Section 50560) to Part
2 of Division 31 of , and to repeal Section 50515.2 of,
the Health and Safety Code, relating to affordable housing.
LEGISLATIVE COUNSEL'S DIGEST
AB 1699, as amended, Torres. Affordable housing.
Existing law authorizes the Department of Housing and Community
Development to provide technical assistance to groups and persons
with various housing needs and to administer various housing loan
programs. Existing law authorizes the department to extend the term
of existing multifamily housing loans made under specified programs
upon the request of any borrower, subject to certain conditions, as
provided.
This bill would authorize the department to extend the term of an
existing department loan, subordinate a department loan to new debt,
and authorize an investment of tax credit equity under certain rental
housing finance programs, subject to specified conditions. The bill
would authorize the department to adopt guidelines that are not
subject to the Administrative Procedures Act, as specified.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
(a) Over the past 30 years, the Legislature has authorized and
funded a variety of affordable rental housing development finance
programs administered by the Department of Housing and Community
Development, each with its own unique requirements for ongoing
operation.
(b) The vast majority of developments funded under these programs
have operated successfully, and remain an important source of
high-quality, highly affordable units for extremely low income and
very low income households. However, some developments need
significant renovation, beyond that which can be covered by existing
project reserves, or are running at a deficit that is not sustainable
on a long-term basis. As developments age, more and more are likely
to fall into this category.
(c) There are decreasing sources of public funding available to
cover needed renovations, and to eliminate operating deficits. For at
least the next few years, private debt and equity generated through
the sale of low-income housing tax credits will likely be the main
source of capital for this purpose.
(d) Accessing private debt and tax credit equity sometimes
requires restructuring the regulatory restrictions applicable to a
development, including increasing rents. Recognizing this, the
Legislature previously enacted legislation, Senate Bill 707 in 2007,
authorizing the restructuring of regulatory restrictions for some of
the oldest developments. This legislation applied only to selected
department programs that were active in the 1980s.
(e) Renovation needs have come to light in a number of projects
financed under another set of department programs, dating from the
early to mid 1990s mid-1990s . To
address these needs, authority is needed for a similar restructuring
of regulatory restrictions for these projects.
(f) It is the intent of the Legislature that the regulatory
restructurings needed to facilitate renovations and eliminate
operating deficits minimize the impact on existing tenants,
particularly those with the lowest incomes, and preserve as much
affordability as possible.
(g) Rather than have multiple different restructuring programs, it
is more efficient to have one program, applicable to all of the
department's older programs, with variations only where essential to
address unique situations associated with the existing historical
programs.
SEC. 2. Section 50515.2 of the Health and
Safety Code is repealed.
SEC. 3. SEC. 2. Chapter 3.9
(commencing with Section 50560) is added to Part 2 of Division 31 of
the Health and Safety Code, to read:
CHAPTER 3.9. PORTFOLIO RESTRUCTURING
50560. (a) The department may approve an extension of a
department loan, the subordination of a department loan to new debt,
or an investment of tax credit equity under one or more of the
following rental housing finance programs: the original Rental
Housing Construction Program established by Chapter 9 (commencing
with Section 50735), the Special User Housing Rehabilitation Program
established by Section 50670, the Deferred Payment Rehabilitation
Loan Program established by Chapter 6.5 (commencing with Section
50660), the rental component of the California Housing Rehabilitation
Program established by Section 50668.5, the component of the Rental
Housing Construction Program funded with bond proceeds governed by
Section 50771.1, and the Family Housing Demonstration Program
established by Chapter 15 (commencing with Section 50880).
(b) Once the department has approved a loan extension,
subordination, or tax credit investment pursuant to subdivision (a),
the statutes enumerated in subdivision (a), and the regulations
promulgated pursuant to these statutes, shall no longer apply.
Developments under subdivision (a) shall instead be governed by this
chapter and guidelines adopted pursuant to subdivision (c).
(c) It is the intent of the Legislature in enacting this chapter
to provide to the department the flexibility necessary to maintain
the quality of the affordable rental housing units for which the
state has already made a significant public investment. The
department may implement this chapter through guidelines that shall
not be subject to Chapter 2.5 (commencing with Section 11340) of Part
1 of Title 2 of the Government Code. These guidelines shall be
developed through a process that allows for public input prior to
their adoption.
50561. (a) The department may extend the term of an existing
rental housing development loan and the time for repayment for
additional terms as long as the rental housing development is being
operated in a manner consistent with the regulatory agreement and the
development requires an extension in order to continue to operate in
a manner consistent with this chapter. Each extension shall be for a
period of not less than 10 years and the total term of the revised
loan shall not exceed 55 years, or not more than 58 years if needed
to match the term of tax credit restrictions. The interest rate shall
be 3 percent simple interest. The department may defer payments. As
necessary to generate sufficient revenue to cover the cost of
processing loan transactions and long-term monitoring of program
requirements, the department may also assess loan processing and
monitoring fees, require periodic or capitalized loan payments, and
require that cashflow be applied on a priority basis toward
department loan payments. In determining the fees and payments to be
charged, the department shall seek to minimize the impact on tenants
with the lowest incomes and on the capacity of the developments to
support private debt or secure tax credit investments.
(b) To the minimum extent needed to support new debt or to secure
tax credit equity to pay for necessary rehabilitation costs, as
determined by the department based on third-party assessments, rents
for assisted units may be increased as follows:
(1) For developments originally financed under the bond-funded
component of the Rental Housing Construction Program pursuant to
Section 50771.1, rents may be increased up to a maximum of 30 percent
of 60 percent of area median income, for units designated in the
development's original regulatory agreement as lower income units,
and up to a maximum of 30 percent of 35 percent of area median
income, for units designated in the development's original regulatory
agreement as very low income units.
(2) For developments originally financed under other programs, and
located in counties with an area median income of 110 percent or
less of state median income, rents for at least 35 percent of
assisted units shall be restricted to no more than 30 percent of 30
percent of state median income, expressed as a percentage of area
median income. For developments originally financed under other
programs, and located in other counties, rents for at least 35
percent of assisted units shall be restricted to no more than 30
percent of 35 percent of state median income, expressed as a
percentage of area median income. Rents for the balance of the
assisted units may be increased up to a maximum of 30 percent of 60
percent of area median income.
(3) For existing tenants with incomes not exceeding 35 percent of
area median income, increases shall be limited to 5 percent per year,
until the rents reach the levels specified in paragraphs (1) and (2)
of subdivision (b) of Section 50561. For existing tenants with
incomes exceeding 35 percent of area median income, increases shall
be limited to 10 percent per year, until they reach the levels
specified in paragraphs (1) and (2) of subdivision (b) of Section
50561. When existing tenants move, the rent for their units may be
increased immediately up to the levels specified in paragraphs (1)
and (2) of subdivision (b) of Section 50561.
(4) Once rents reach their new ultimate restricted level, future
rent increases shall be based on increases in the area median income.
(c) When existing tenants move, and rents are adjusted as
specified in subdivision (b), the income limit for new tenants shall
correspond with the rent limit.
(d) When rents are adjusted pursuant to this section, and income
limits reset, income levels and rent limits shall be calculated
consistent with the calculation methodology used under the Low Income
Housing Tax Credit program and the Multifamily Housing Program.
50562. (a) When a department loan is extended or subordinated, or
when a new tax credit investment occurs, the department shall enter
into a new regulatory agreement with the development's owner, or
amend the existing agreement. The new or amended regulatory agreement
shall:
(1) Set standards for tenant selection to ensure occupancy by the
eligible households.
(2) Govern the terms of occupancy agreements.
(3) Restrict rents for assisted units, consistent with this
chapter.
(4) Provide for periodic inspections, occupancy and financial
reports, and financial audits for the development.
(5) Govern the use of operating income for the development.
(6) Govern the use of reserves for the development.
(7) Have a term for not less than the term of the loan, including
any extension.
(8) Include other provisions necessary to carry out the purposes
of this chapter.
(b) The agreement shall be binding upon the development's owner
and successors in interest upon sale or transfer of the development
property, and regardless of any prepayment of the loan.
(c) The agreement shall be recorded in the office of the county
recorder in the county in which the development is located.