BILL ANALYSIS �
AB 1699
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CONCURRENCE IN SENATE AMENDMENTS
AB 1699 (Torres)
As Amended August 24, 2012
Majority vote
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|ASSEMBLY: |50-27|(May 29, 2012) |SENATE: |22-10|(August 29, |
| | | | | |2012) |
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Original Committee Reference: H&C.D.
SUMMARY : Allows the Department of Housing and Community
Development (HCD) to refinance and restructure older loans made
through affordable, rental housing programs.
The Senate amendments :
1)Phase out the existing guidelines for restructuring and
refinancing HCD loans once the new guidelines authorized by
this bill are adopted.
2)Allow the guidelines developed by this bill for restructuring
or refinancing loans to also apply to the following programs:
the California Natural Disaster Assistance Program, the State
Earthquake Rehabilitation Assistance Program, and the Families
Moving to Work Program.
3)Require HCD to follow the procedure the Tax Credit Allocation
Committee uses for developing the guidelines authorized by
this bill.
4)Establish restrictions on how much rents can be increased on
existing tenants as a result of restructuring or refinancing a
HCD loan.
5)Require a project sponsor to give tenants notice of rent
increases that result from a restructuring or refinancing of a
HCD loan.
6)Allow HCD to develop guidelines for extensions for group home
loans and specifies the amount that rents can be increased on
existing tenants.
7)Allow HCD to subordinate a loan to refinance in order to
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reimburse a sponsor for borrower advances for predevelopment
costs, recent capital improvements, and recent operating
deficits.
8)Delete the requirement that loans restructured or refinanced
under this bill are subject to the same interest rate as the
Multi-family Housing Program (MHP)
9)Permit HCD to charge a fee to cover the aggregate costs of
monitoring the new loan for the years that it is extended and
a transaction fee for processing a loan restructuring.
10)Provide that all loans restructured or refinanced are
deferred except for residual receipts which shall be
structured to avoid reducing the amount paid to local
governments but are otherwise subject to the MHP regulations.
11)Require HCD, within available resources, to publish
information on its Internet Web site regarding household
incomes and rents for developments approved for restructuring.
12)Make technical changes.
AS PASSED BY THE ASSEMBLY , this bill:
1)Included legislative findings and declarations.
2)Allowed 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)Allowed 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)Provided 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;
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b) The development requires an extension in order to
continue to operate; and,
c) The interest rate of the new loan is 3%.
1)Provided 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)Provided 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)Provided 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)Provided 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)Provided 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)Provided that when a tenant vacates a unit, the new tenant's
income level must correspond to the new income limits
described above.
3)Provided 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)Provided 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)Provided that a new or amended regulatory agreement is binding
on the development's owner and successor regardless of
pre-payment of the loan.
2)Required 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 Senate Appropriations
Committee:
1) Extensions of loan terms would result in a deferral of
an unknown, potentially significant amount of loan
repayment revenue to HCD (various special funds). Absent
this bill, these loan repayments would most likely be used
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to provide additional affordable housing. However, the
costs of funding new affordable housing stock is higher
than preserving and rehabilitating existing affordable
housing through loan extensions, as provided in this bill.
Therefore, absent the bill, there would be increased costs
to maintain the current level of affordable housing.
2) All HCD costs to process loan restructuring transactions
and to conduct ongoing monitoring activities would be fully
covered by fees charged to applicants and payments on
restructured loans.
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
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county 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
the refinance and restructuring of loans and allowed HCD to
adopt the new provisions through guidelines rather than
regulations.
This bill 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:
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