Existing law, effective February 1, 2012, dissolved all redevelopment agencies and community development agencies and provides for the designation of successor agencies, as specified. Existing law requires successor agencies to service the enforceable obligations of the dissolved agencies and otherwise wind down the affairs of the dissolved agencies.

This bill would establish the Local Control Affordable Housing Act to require the Department of Finance, on or before ____ and on or before the same date each year thereafter, to determine the state General Fund savings for the fiscal year as a result of the dissolution of redevelopment agencies. The bill would provide that, upon appropriation, 50% of that amount or $1,000,000,000, whichever is greater, less, be allocated to the Department of Housing and Community Development to provide funding Development. The bill would require the department to retain ¹/₂ of these funds for state level programs and to provide the other ¹/₂ to local agencies for housing purposes, except as specified. The bill would require the Department of Housing and Community Development to create an equitable funding formula, formula for funding distributed to local agencies, which shall the bill would require to be geographically balanced and shall take into account factors of need including, but not limited to, poverty rates and lack of supply of affordable housing for persons of low and moderate incomes in local jurisdictions. The bill would also specify the housing purposes for which those funds may be used.

Existing law, effective February 1, 2012, dissolved all redevelopment agencies and community development agencies and provides for the designation of successor agencies, as specified. Existing law requires successor agencies to service the enforceable obligations of the dissolved agencies and otherwise wind down the affairs of the dissolved agencies.

This bill would establish the Local Control Affordable Housing Act to require the Department of Finance, on or before ____ and on or before the same date each year thereafter, to determine the state General Fund savings for the fiscal year as a result of the dissolution of redevelopment agencies. The bill would provide that, upon appropriation, 50% of that amount amount or $1,000,000,000, whichever is greater, be allocated to the Department of Housing and Community Development to provide funding to local agencies for housing purposes. purposes, except as specified. The bill would require the Department of Housing and Community Development to create an equitable funding formula, which shall be geographically balanced and shall take into account factors of need including, but not limited to, poverty rates and lack of supply of affordable housing for persons of low and moderate incomes in local jurisdictions. The bill would also specify the housing purposes for which those funds may be used.

Existing law, effective February 1, 2012, dissolved all redevelopment agencies and community development agencies and provides for the designation of successor agencies, as specified. Existing law requires successor agencies to service the enforceable obligations of the dissolved agencies and otherwise wind down the affairs of the dissolved agencies.

This bill would establish the Local Control Affordable Housing Act to require the Department of Finance, on or before ____ and on or before the same date each year thereafter, to determine the state General Fund savings for the fiscal year as a result of the dissolution of redevelopment agencies. The bill would provide that, upon appropriation, 50% of that amount be allocated to the Department of Housing and Community Development to provide funding to local agencies for housing purposes. The bill would require the Department of Housing and Community Development to create an equitable funding formula, which shall be geographically balanced and shall take into account factors of need including, but not limited to, poverty rates and lack of supply of affordable housing for persons of low and moderate incomes in local jurisdictions. The bill would also specify the housing purposes for which those funds may be used.

Date of Hearing: May 4, 2016

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 2734

Author:(Atkins) – As Amended Ver:April 5, 2016

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill enacts the Local Control Affordable Housing Act to redirect state savings realized from the dissolution of redevelopment agencies (RDAs). Requires the Department of Finance (DOF) to determine, each year, the amount of General Fund savings as a result of the dissolution of RDAs, and requires that 50% of those savings or $1 billion, whichever is less, be redirected to the Department of Housing and Community Development (HCD) for distribution to both state-level programs and local agencies for housing purposes.

FISCAL EFFECT:

Cost of $500 million GF to redirect money to HCD for housing purposes, including approximately $5 million for the startup costs, including 34 positions, at HCD in the first year assuming the bill would allocate 50 percent of $1 billion to HCD.  Ongoing costs of $3.8 million to staff the program in the out years.

COMMENTS:

1. Purpose. According to the author: “Increasing the construction and availability of affordable housing is good for our economy, the state budget, job creation, and families. Affordable housing saves money — on average, a single homeless Californian incurs $2,897 per month in county costs for emergency room visits and in-patient hospital stays as well as the costs of arrests and incarceration. Roughly 79% of these costs are cut when that person has an affordable home. Development creates jobs — an estimated 29,000 jobs are created for every $500 million spent on affordable housing. Affordable housing alleviates poverty — California households with the lowest 25% of incomes spend 67% of their income on housing, leaving little left over for other essential needs.”
2. Funding for Housing. Historically, the state has invested in low- and moderate-income housing primarily by providing funding for construction. Because of the high cost of land and construction and the subsidy needed to keep housing affordable to residents, affordable housing is expensive to build. Developers typically use multiple sources of financing, including voter-approved housing bonds, state and federal low-income housing tax credits, private bank financing, and local matching dollars.

Voter-approved bonds to support the construction of affordable housing include Proposition 46 of 2002 and Proposition 1C of 2006, which together provided $4.95 billion for affordable housing. These funds financed the construction, rehabilitation, and preservation of 57,220 affordable apartments, including 2,500 supportive homes for people experiencing homelessness, and over 11,600 shelter spaces. In addition, these funds have helped 57,290 families become or remain homeowners. Nearly all of these funds have been awarded.

California's affordable housing funding has declined 66.5% since 2008, a loss of over $1.7 billion per year. More than $1 billion of this total comes from the loss of redevelopment funds that were directed to affordable housing purposes. According to the California Housing Consortium, California has a shortfall of 1.5 million affordable units for extremely low- and very-low income renter households. The Public Policy Institute of California reports that 31.5% of mortgaged homeowners and 47.4% of renters spend more than one-third of their total household income on housing and, that while California has 12% of the nation’s population, it has 20% of the nation’s homeless.

1. Recent Legislation.
2. AB 1335 (Atkins), 2015, sought funding for affordable housing through the increase of a document recording fee for real estate related transactions (excluding home sales). That bill died on the Assembly Floor.
3. AB 2 (Alejo), Chapter 319, Statutes of 2015, allows for the creation of Community Revitalization Authorities which allow for a more limited use of tax increment financing for infrastructure that includes affordable housing.
4. SB 628 (Beall), Chapter 785, Statutes of 2014, established enhanced infrastructure finance districts which allowed the financing of infrastructure projects (that could include affordable housing) by establishing a process to use tax increment financing in a more limited way than existed in redevelopment.

Analysis Prepared by: Jennifer Swenson / APPR. / (916) 319-2081

Date of Hearing: April 13, 2016

ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT

Susan Talamantes Eggman, Chair

ABPCA Bill Id:AB 2734 (

Author:Atkins) – As Amended Ver:April 5, 2016

SUBJECT: Local Control Affordable Housing Act.

SUMMARY: Enacts the Local Control Affordable Housing Act to use state savings realized from the dissolution of redevelopment agencies. Specifically, this bill:

1. Requires the Department of Finance (DOF) to determine the amount of General Fund savings for the fiscal year as a result of the dissolution of redevelopment agencies (RDAs), on or before an unspecified date, and on or before the same date each year thereafter.
2. Requires, upon appropriation, 50% of the savings computed pursuant to 1), above, or $1 billion, whichever is less, in each fiscal year, to be allocated to the Department of Housing and Community Development (HCD) for the following:
   1. One-half of these funds to be retained by HCD for state level programs;
   2. One-half to be provided to local agencies for housing purposes, pursuant to 3), below.
3. Requires HCD to create an equitable funding formula for funding distributed to local agencies, which shall be geographically balanced and shall take into account factors of need including, but not limited to, poverty rates and lack of supply of affordable housing for persons of low and moderate incomes in local jurisdictions.
4. Requires an appropriation pursuant to 2), above, to be suspended for any fiscal year in which the transfer of General Fund revenues to the Budget Stabilization Account is suspended or reduced or funds are returned to the General Fund from the Budget Stabilization Account, pursuant to the Section of the California Constitution dealing with the Governor’s proclamation declaring a budget emergency, as specified.
5. Requires a local agency that has received funds to only use the funds for any of the following purposes:
   1. The development, acquisition, rehabilitation, and preservation or provision of rental housing and homeownership opportunities that are affordable to extremely low-, very low-, low-, and moderate-income households, including necessary capitalized reserves for operating and rental subsidies and resident services;
   2. Capitalized reserves for capitalized operating costs, rental subsidies, and resident services connected to the creation of new permanent supportive housing, including, but not limited to, developments funded through the Veterans Housing and Homelessness Prevention Program;
   3. Modifications to homes to increase accessibility and visitability, in conjunction with the construction, acquisition, and rehabilitation or preservation of homes affordable to lower- income households;
   4. The acquisition and rehabilitation and reuse of foreclosed and vacant homes;
   5. Infrastructure related to affordable infill housing development and other related infill development infrastructure;
   6. The acquisition of land necessary for the development of affordable housing as part of an overall development strategy; and,
   7. Rapid rehousing of homeless individuals and families.
6. Specifies that at least 25% of the expenditures shall be directed towards housing for persons of extremely low income and at least 50% of the expenditures shall be directed towards housing for persons of very low income.
7. Requires any housing built with funds to require, by recorded covenants or restrictions, that housing units built shall remain available at affordable housing costs to, and occupied by, persons and families of very low, low-, or moderate-income households for the longest feasible time, but for not less than 55 years for rental units and 45 years for owner-occupied units.
8. Requires any local agency that receives funds to provide to HCD a plan for a no net loss of housing as a result of destruction of any affordable housing units.
9. Prohibits more than 5% of the funds from being used for administrative costs.
10. Requires any local agency that receives funds to provide an annual report to HCD on the expenditure of the funds.
11. Specifies that a local agency shall return unexpended funds to HCD, if a local agency that receives funds and does not expend the funds in full within five years, and requires HCD to award those funds to another qualifying local agency.
12. Defines the terms “extremely low income households,” “low-income households,” “moderate-income households,” and “very-low income households.”
13. Makes a number of findings and declarations.

EXISTING LAW:

1. Dissolved all redevelopment agencies and community development agencies, effective February 1, 2012.
2. Provides for the designation of successor agencies, as specified.
3. Establishes a number of programs at HCD and California Housing Finance Agency (CalHFA) to make housing more affordable to California families and individuals, including the following main programs:
   1. The Multifamily Housing Program, to fund the new construction, rehabilitation, and preservation of permanent and transitional rental homes for lower-income households through loans to local governments, non-profit developers, and for-profit developers;
   2. The Joe Serna, Jr., Farmworker Housing Program, to fund the development of ownership or rental homes for agricultural workers through grants to local governments and non-profit organizations;
   3. The Emergency Housing and Assistance Program, to fund emergency shelters and transitional homes for homeless individuals and families through grants to counties and non-profit entities for rehabilitation, renovation, expansion, site acquisition, and equipment;
   4. The CalHome Program, to fund down payment assistance, home rehabilitation, counseling, self-help mortgage assistance, and technical assistance for self-help and shared housing through grants and loans; and,
   5. The California Homebuyer Downpayment Assistance Program, to aid first-time homebuyers with downpayments and/or closing costs.

FISCAL EFFECT: This bill is keyed fiscal.

COMMENTS:

1. Bill Summary. This bill enacts the Local Control Affordable Housing Act to use state savings realized from the dissolution of RDAs. Each year, DOF would determine the amount of General Fund savings as a result of the dissolution of RDAs, and, upon appropriation, allocate 50% of the savings to HCD for both state-level programs and for the creation of a local housing program. For the local program, the bill specifies that HCD will create an equitable funding formula for funding to be distributed to local agencies, which should be geographically balanced and take into account specified factors of need. The bill places a number of other parameters on the local funding piece, including a required annual report to HCD on how the funds are being spent by the locality.

This bill is an author-sponsored measure.

1. Author’s Statement. According to the author: “Increasing the construction and availability of affordable housing is good for our economy, the state budget, job creation, and families. Affordable housing saves money — on average, a single homeless Californian incurs $2,897 per month in county costs for emergency room visits and in-patient hospital stays as well as the costs of arrests and incarceration. Roughly 79% of these costs are cut when that person has an affordable home. Development creates jobs — an estimated 29,000 jobs are created for every $500 million spent on affordable housing. Affordable housing alleviates poverty — California households with the lowest 25% of incomes spend 67% of their income on housing, leaving little left over for other essential needs.”
2. Arguments in Support. Supporters argue that this bill is an effort to help the state and local governments accelerate the production of affordable housing and would enable thousands of new affordable homes to be developed.
3. Arguments in Opposition. None on file.
4. Double-Referral. This bill was heard by the Housing and Community Development Committee on March 30, 2016, where it passed with a 6-1 vote.

REGISTERED SUPPORT / OPPOSITION:

Support

American Planning Association, California Chapter

Association of Regional Center Agencies

California Apartment Association

California Building Industry Association

California Housing Consortium

Cities of Glendale and Santa Monica

Housing California

League of California Cities

National Association of Social Workers, California Chapter

Orange County Business Council

San Diego Housing Federation

Opposition

None on file

Analysis Prepared by: Debbie Michel / L. GOV. / (916) 319-3958

Date of Hearing: March 30, 2016

ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT

David Chiu, Chair

ABPCA Bill Id:AB 2734 (

Author:Atkins) – As Amended Ver:March 17, 2016

SUBJECT: Local Control Affordable Housing Act

SUMMARY: Requires that state savings realized from the dissolution of redevelopment agencies (RDA) be distributed to local agencies for housing purposes. Specifically, this bill:

1. Includes the following definitions:
   1. “Extremely low income households” means persons and families whose incomes do not exceed 30% of median area income.
   2. “Very low-income households” means persons and families whose incomes do not exceed 50% of median area income.
   3. “Low-income households” means persons and families whose income does not 80% of median area income.
   4. “Moderate-income households” means persons and families of low or moderate income whose income exceeds the income limit for lower income households.
2. Requires the Department of Finance to annually, beginning on an unspecified date and each year thereafter, determine the General Fund savings resulting from of the dissolution of RDAs.
3. Provides that, upon appropriation, 50% of the savings calculated in each fiscal year, or one billion dollars, whichever is greater, be allocated to the Department of Housing and Community Development (HCD).
4. Provides that the appropriation shall be suspended for any fiscal year in which the transfer of General Fund revenues to the Budget Stabilization Account is suspended, reduced, or funds are returned to the General Fund from the Budget Stabilization Account.
5. Requires HCD to create an equitable formula for allocating the funds to local agencies for housing purposes that is geographically balanced and takes into account factors of need, as specified.
6. Requires at least 25% of expenditures be directed towards housing for extremely low-income persons, and at least 50% towards housing persons with very low-income.
7. Requires housing units built with these funds to remain affordable for at least 55 years for rental units and 45 years for owner-occupied units.
8. Requires that local agencies receiving funds only use the funds for any of the following purposes:
   1. The development, acquisition, rehabilitation, preservation or provision of rental housing and homeownership opportunities that are affordable to extremely low-, very low-, low-, and moderate-income households, including necessary capitalized reserves for operating and rental subsidies and resident services.
   2. Capitalized reserves for capitalized operating costs, rental subsidies, and resident services connected to the creation of new permanent supportive housing, including, but not limited to, developments funded through the Veterans Housing and Homelessness Prevention Program.
   3. Modifications to homes to increase accessibility and visitability, in conjunction with the construction, acquisition, rehabilitation, or preservation of homes affordable to lower income households.
   4. The acquisition, rehabilitation, and reuse of foreclosed and vacant homes.
   5. Infrastructure related to affordable infill housing development and other related infill development infrastructure.
   6. The acquisition of land necessary for the development of affordable housing as part of an overall development strategy.
   7. Rapid rehousing of homeless individuals and families.
9. Makes other findings and declarations.

EXISTING LAW:

1. Dissolved all redevelopment agencies and community development agencies, effective February 1, 2012.
2. Provides for the designation of successor agencies, as specified.
3. Establishes a number of programs at HCD and California Housing Finance Agency (CalHFA) to make housing more affordable to California families and individuals, including the following main programs:
4. The Multifamily Housing Program, to fund the new construction, rehabilitation, and preservation of permanent and transitional rental homes for lower-income households through loans to local governments, non-profit developers, and for-profit developers.
5. The Joe Serna, Jr., Farmworker Housing Program, to fund the development of ownership or rental homes for agricultural workers through grants to local governments and non-profit organizations.
6. The Emergency Housing and Assistance Program, to fund emergency shelters and transitional homes for homeless individuals and families through grants to counties and non-profit entities for rehabilitation, renovation, expansion, site acquisition, and equipment.
7. The CalHome Program, to fund down payment assistance, home rehabilitation, counseling, self-help mortgage assistance, and technical assistance for self-help and shared housing through grants and loans.
8. The California Homebuyer Downpayment Assistance Program, to aid first-time homebuyers with downpayments and/or closing costs.

FISCAL EFFECT: Unknown

COMMENTS:

Previous state funding for housing: Historically, the state has invested in low- and moderate-income housing primarily by providing funding for construction. Because of the high cost of land and construction and the subsidy needed to keep housing affordable to residents, affordable housing is expensive to build. Developers typically use multiple sources of financing, including voter-approved housing bonds, state and federal low-income housing tax credits, private bank financing, and local matching dollars.

Voter-approved bonds have been an important source of funding to support the construction of affordable housing. Proposition 46 of 2002 and Proposition 1C of 2006 together provided $4.95 billion for affordable housing. These funds financed the construction, rehabilitation, and preservation of 57,220 affordable apartments, including 2,500 supportive homes for people experiencing homelessness, and over 11,600 shelter spaces. In addition, these funds have helped 57,290 families become or remain homeowners. Nearly all of these funds have been awarded.

In 1945, the Legislature authorized local agencies to create RDAs to address urban blight in local communities. Several years later, voters approved a redevelopment financing program referred to as “tax increment financing.” Under this process, a city or county could declare an area to be blighted and in need of urban renewal. After this declaration, most of the growth in property tax revenue from the “project area” was distributed to the city or county’s RDA as “tax increment revenues” instead of being distributed as general purpose revenues to other local agencies serving the area. SB 90 (Dills), Chapter 1406, Statutes of 1972, created a system of school “revenue limits,” whereby the state guarantees each school district an overall level of funding from local property taxes and state resources combined. Thus, if a district’s local property tax revenues did not grow—due to redevelopment or for other reasons—the state provided additional state funds to ensure that the district had sufficient funds to meet its revenue limit.

By 2008, redevelopment was redirecting 12% of property taxes statewide away from schools and other local taxing entities and into community development and affordable housing. In fiscal year 2009-10, redevelopment agencies collectively deposited $1.075 billion of property tax increment revenues into their low- and moderate-income housing funds.

In 2011, facing a severe budget shortfall, the Governor proposed eliminating RDAs in order to deliver more property taxes to other local agencies. Ultimately, the Legislature approved and the Governor signed two measures, AB 26 X1 (Blumenfield), Chapter 5, Statutes of 2011-12 First Extraordinary Session, and AB 27 X1 (Blumenfield), Chapter 6, Statutes of 2011-12 First Extraordinary Session, that together dissolved RDAs as they existed at the time and created a voluntary redevelopment program on a smaller scale. In response, the California Redevelopment Association (CRA) and the League of California Cities, along with other parties, filed suit challenging the two measures. The Supreme Court denied the petition for peremptory writ of mandate with respect to AB 26 X1. However, the Court did grant the petition with respect to AB 27 X1. As a result, all RDAs were required to dissolve as of February 1, 2012, saving the state approximately $1 billion dollars annually.

California has reduced its funding for the development and preservation of affordable homes by 79% — from approximately $1.7 billion a year to nearly nothing. According to the California Housing Consortium, California has a shortfall of 1.5 million affordable units for extremely low- and very-low income renter households. The Public Policy Institute of California reports that 31.5% of mortgaged homeowners and 47.4% of renters spend more than one-third of their total household income on housing and that while California has 12% of the nation’s population, it has 20% of the nation’s homeless.

Related legislation: A number of bills have sought to establish more regular and permanent funding for affordable housing since the dissolution of redevelopment. For example, AB 1335 (Atkins) sought to do so through the increase of a document recording fee for real estate related transactions (excluding home sales). That bill advanced to the Assembly Floor in 2015 but was not taken up for a vote. Other bills have recreated tools for local governments after the dissolution of redevelopment without touching the schools’ share of tax increment. For example, SB 628 (Beall), Chapter 785, Statutes of 2014, established enhanced infrastructure finance districts which allowed the financing of infrastructure projects (that could include affordable housing) by establishing a process to use tax increment financing in a more limited way than existed in redevelopment. Similarly, AB 2 (Alejo), Chapter 319, Statutes of 2015, allowed for the creation of Community Revitalization Authorities which allow for a more limited use of tax increment financing for infrastructure that includes affordable housing.

Purpose of this bill: According to the author: “Increasing the construction and availability of affordable housing is good for our economy, the state budget, job creation, and families. Affordable housing saves money — on average, a single homeless Californian incurs $2,897 per month in county costs for emergency room visits and in-patient hospital stays as well as the costs of arrests and incarceration. Roughly 79% of these costs are cut when that person has an affordable home. Development creates jobs — an estimated 29,000 jobs are created for every $500 million spent on affordable housing. Affordable housing alleviates poverty — California households with the lowest 25% of incomes spend 67% of their income on housing, leaving little left over for other essential needs.”

Staff comments: The elimination of RDAs may have reduced staff at the local level, thereby reducing the current capacity of local agencies to quickly and efficiently utilize new funding. The state has a robust portfolio of housing programs that support the construction of affordable housing, homeownership, and reduction of homelessness. New resources could potentially be allocated quickly through existing state programs. Thus, it may be prudent for the Committee to consider an alternative model that allocates half of the funds to local agencies and half to existing state programs, such as those administered by HCD and/or CalHFA.

Support

American Planning Association, California Chapter

Association of Regional Center Agencies

League of California Cities

National Association of Social Workers, California Chapter

Opposition

None on file

Analysis Prepared by: Ken Spence / H. & C.D. / (916) 319-2085