BILL ANALYSIS
AB 398
Page 1
Date of Hearing: May 19, 1999
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Carole Migden, Chairwoman
AB 398 (Migden) - As Amended: April 8, 1999
Policy Committee: Housing and
Community Development Vote:7-4
Urgency: No State Mandated Local
Program:NoReimbursable:
SUMMARY :
This bill proposes that a $750 million general obligation bond
measure for housing be placed on the next statewide election
ballot. The bonds would be used for the following purposes:
1)$550 million for construction, rehabilitation, or preservation
of affordable rental housing.
2)$150 million to assist first-time homebuyers.
3)$50 million for farmworker housing.
FISCAL EFFECT :
General Fund debt services costs of about $1.25 billion over 25
years, or about $50 million per year, assuming the bonds are
sold at an interest rate of 5.0 percent.
COMMENTS :
1)Previous Housing Bonds . In 1988, voters approved Propositions
77 and 84, and in 1990 voters approve Proposition 107. These
propositions authorized the issuance of $600 million in
general obligation bonds for state housing programs. The
bonds served as the primary funding source for the state's
affordable housing programs. All of the funds from these
measures were sold by January 1992.
2)Financing Affordable Housing . Virtually every affordable
rental housing project in California is financed from a
combination of the following sources:
a) Commercial debt, i.e. a bank loan.
b) Federal and or state tax credits, usually in combination
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with tax exempt bond financing.
c) Grant monies, which come from a variety of sources,
including:
i) Local funds--redevelopment tax increment monies
earmarked for affordable housing.
ii) Federal funds-Community Development Block Grants
(CDBG) and the HOME program.
iii) State funds-from general obligation bonds or the
state General Fund.
The grant monies can be used to build more affordable units
and/or to increase the level of affordability of a project, i.e.
to make it affordable to very low income families. The grant
monies will typically finance 35-50 percent of total project
development costs.
3)Funding Affordable Rental Housing . The following sources have
been available to fund affordable rental housing in the state:
a) Federal and state tax credits-about $460 million per
year. (The state credit is $50 million.)
b) Tax exempt bond financing-about $950 million per year.
c) Local redevelopment funds-about $500 million per year
statewide.
d) Federal HOME program funds-about $180 million per year.
e) Federal CDBG funds-about $150 million to $250 million
per year.
4)The Need for Affordable Housing . The Department of Housing
and Community Development reports the following:
a) Total state housing permits have averaged 116,000 units
annually in the 1990s, but the projected housing need
through 2003 is for about 185,000 housing units annually.
b) High housing burdens are a significant statewide
problem, particularly for low-income renters. In 1990,
more than 1.3 million households paid in excess of 50
percent of their income on housing and the situation has
deteriorated during the decade.
c) In 1990, over 1.2 million households experienced housing
overcrowding. Renters were three times more likely than
owners to be in overcrowded conditions.
d) Several thousand units of affordable rental housing
under federal Section 8 contracts could convert to market
rate housing in the next few years. The units most at-risk
to conversion are in the highest cost rental markets.
e) Farmworkers have major housing problems generally due to
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low incomes, large household size, substandard housing, and
acute shortages during periods of peak harvest.
The California Debt Limit Allocation Committee indicates that,
in its most recent funding round, requests to fund affordable
rental housing projects exceeded the amount available by over
$600 million. The Tax Credit Allocation Committee indicates
that, in its most recent funding round, requests also exceeded
the amount available by $1.3 billion.
5)Need for state general obligation bonds . State bonds would be
one of many fund sources to build new affordable rental
housing, rehabilitate existing rental housing, and preserve
through acquisition units most at risk of converting to market
rate due to the expiration of federal Section 8 contracts, and
farmworkers and assist first-time homebuyers. The bonds
cannot fully address the huge need, but they can supplement
the substantial federal and local funding currently provided
from other sources as discussed above. Of course, the
allocation of the state's debt for this purpose should be
considered in the context of competing demands for state
bonds.
6)Related Legislation . SB 510 (Alarcon), proposes a housing
bond totaling $980 million spread over four election cycles,
is on the Senate Appropriations Committee suspense file. AB
97 (Torlakson) would eliminate the January 2000 sunset date
for the state's $50 million tax credit for low income rental
housing, is on the committee's suspense file.
Analysis Prepared by : Chuck Nicol / APPR. / (916)319-2081