BILL ANALYSIS �
AB 1699
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ASSEMBLY THIRD READING
AB 1699 (Torres)
As Amended April 17, 2012
Majority vote
HOUSING 4-2 APPROPRIATIONS 12-5
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|Ayes:|Torres, Atkins, Bradford, |Ayes:|Fuentes, Blumenfield, |
| |Hueso | |Bradford, Charles |
| | | |Calderon, Campos, Davis, |
| | | |Gatto, Ammiano, Hill, |
| | | |Lara, Mitchell, Solorio |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Beth Gaines, Knight |Nays:|Harkey, Donnelly, |
| | | |Nielsen, Norby, Wagner |
| | | | |
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SUMMARY : Allows the Department of Housing and Community
Development (HCD) to refinance and restructure older loans made
through affordable, rental housing programs. Specifically, this
bill :
1)Includes legislative findings and declarations.
2)Allows HCD to approve an extension or subordination of a loan
or an investment of tax credit equity for affordable housing
developments financed through Rental Housing Construction
Program (RHCP), Family Housing Demonstration Program (FHDP),
California Housing Rehab Program (CHRP), and Deferred Payment
Rehabilitation Loan Program (DPRLP).
3)Allows HCD to adopt new guidelines developed through a process
that includes public input not subject to the review of the
Office of Administrative Law.
4)Provides that HCD may extend the term of an existing rental
housing development loan with the following conditions:
a) The development is being operated consistent with the
regulatory agreement;
b) The development requires an extension in order to
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continue to operate; and,
c) The interest rate of the new loan is 3%.
1)Provides that the extension of terms for an existing rental
housing development loan must be for a period of not less than
10 years and the total term shall not exceed 55 years or not
more than 58 years if necessary to match tax credit
restrictions.
2)Provides that for developments financed through RHCP the rent
for low-income units may be increased up to a maximum of 30%
of 60% of area median income (AMI) and for very-low income
units up to a maximum of 30% of 35% of AMI.
3)Provides that for developments financed under DPRLP, CHRP, and
FHDP rents may be increased as follows:
a) In counties with an AMI of 110% or less of state AMI
rents for at least 35% of assisted units must be restricted
to no more than 30% of 30% of state median income; and,
b) In counties with an AMI of more than 110% of state AMI
rents for at least 35% of assisted units shall be
restricted to no more than 30% of 35% of state median
income and rents for the balance of assisted units may be
increased to up to a maximum of 30% of 60% of area median
income.
4)Provides that for existing tenants in a development financed
by any program, rents may be increased as follows:
a) For existing tenants with incomes that are not more than
35% of AMI, increases must be limited to 5% per year until
the rents reach the levels described above;
b) For existing tenants with incomes more than 35% of AMI,
increases are limited to 10% per year until they reach the
rent levels described above; and,
c) For existing tenants who move, rents may be increased
immediately to the rent levels described above.
1)Provides that once rents reach their new ultimate level, any
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future increase will be in response to increases in the AMI.
2)Provides that when a tenant vacates a unit, the new tenants
income level must correspond to the new income limits
described above.
3)Provides that when a development is refinanced or
restructured, the income levels and rent limits will be
calculated consistent with the methodology used for the
Low-Income Housing Tax Credit Program and the Multifamily
Housing Program.
4)Provides that when a loan is extended or subordinated or when
a new tax credit investment occurs, the regulatory agreement
must include provisions that do the following:
a) Include standards for tenant selection to ensure
eligible households;
b) Restrict rents for assisted units;
c) Provide for periodic inspection, occupancy, and
financial reports and financial audits of the development;
d) Govern the use of operating income and reserves for the
development; and,
e) Have a term that is not less than the term of the loan,
including extensions.
1)Provides that a new or amended regulatory agreement is binding
on the development's owner and successor regardless of
pre-payment of the loan.
2)Requires the new or amended regulatory agreement to be
recorded in the county recorder's office in which the
development is located.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, there is a potential cost from extending the terms of
the existing loans, potentially in the millions of dollars. To
the extent that there are projects that cannot pay the state
back under the current loan terms, the net cost of the bill is
reduced. Administrative costs are expected to be minor and
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absorbable.
COMMENTS : The HCD has financed a variety of affordable
multi-family housing projects under different state-funded
programs. From 1980 to 1995, HCD operated multiple programs
that provided low-interest loans for affordable multifamily
housing. The programs provided 3% interest rate, deferred
payment loans for rehabilitation or new construction of housing
for low-income families, single room occupancy hotels, and other
special needs populations. Many of these housing developments
are 20 to 30 years old and are in need of capital improvements
or have significant operating deficits. The terms of the loan
agreements do not give HCD authority to renegotiate the
financing of these projects to allow for additional debt to fund
needed improvements to make these projects viable in the long
term. This bill gives HCD authority to extend the terms of an
existing rental housing development loan and the period of
repayment for as long as the housing is being operated in a
manner consistent with the regulatory agreement and the
development requires the extension in order to continue to
operate.
HCD's current program to finance affordable rental housing is
the Multifamily Housing Program (MHP). Created in 1999, this
program is the department's omnibus rental housing program, able
to finance different types of rental housing for various
populations under a uniform structure. This program funds the
new construction, rehabilitation, and preservation of affordable
rental housing through loans to local governments, non-profit
developers, and for-profit developers. Affordable units are
those affordable to households earning no more than 60% of the
area (county) median income (AMI), but HCD gives heavy priority
to projects that serve households at even lower income levels.
Loans are for a term of 55 years at a rate of 3% simple
interest. All payments are deferred except for a standard
annual interest payment (currently .42%) to cover HCD's ongoing
monitoring and management duties.
In 2007, SB 707 (Ducheny), Chapter 658, gave HCD authority to
refinance loans made under several programs originated in the
1970s and 1980s, the Rental Housing Construction Program,
Special User Housing Rehabilitation Program and Deferred Payment
Rehabilitation Loan Program. HCD restructured these older loans
to conform to the MHP guidelines. SB 707 gave parameters for
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the refinance and restructuring of loans and allowed HCD to
adopt the new provisions through guidelines rather than
regulations.
AB 1699 gives HCD the authority to extend and modernize the
loans in its older portfolio through conversion to MHP. As
noted above, many of these loans were awarded in the late 1990s
and are coming close to their term. Once the loan is paid off,
the regulatory agreement which requires the units to remain
affordable is extinguished. Many affordable housing providers
would like to keep their projects affordable but need to take on
additional debt financed with a low interest rate. By extending
the loans on those projects this bill could preserve numerous
affordable housing units currently in existence.
Analysis Prepared by : Lisa Engel / H. & C.D. / (916) 319-2085
FN: 0003803