Existing law establishes the Department of Housing and Community Development in the Business, Consumer Services, and Housing Agency. The department is responsible for administering various housing and home loan programs throughout the state. Existing law also establishes the California Housing Finance Agency within the department, and provides that the primary purpose of the agency is to meet the housing needs of persons and families of low to moderate income.

Existing federal law requires the Secretary of the Department of Housing and Urban Development to establish a Housing Trust Fund to provide grants to states to increase the supply of rental housing for extremely low- and very low income families, including homeless families, and home ownership for extremely low- and very low income families.

This bill would designate the Department of Housing and Community Development as the state agency responsible for administering funds received by the state from the federal Housing Trust Fund. This bill would require the department to administer the funds through existing or newly created programs that produce, preserve, rehabilitate, or support the operation of rental housing for extremely low income and very low income households, except that up to 10% of funding may be used to support home ownership for extremely low income and very low income households. The bill would require any rental project funded from the federal Housing Trust Fund to restrict affordability for 55 years, as specified, and require any home ownership program funded from the federal Housing Trust Fund to restrict affordability for 30 years, as specified.

This bill would require the department to collaborate with the California Housing Finance Agency to develop an allocation plan to demonstrate how the funds will be distributed, based on the priority housing needs identified in the states consolidated plan, and to convene a stakeholder process to inform the development of the plan. The bill would require the allocation plan and guidelines to give priority to projects based on specified factors. The bill would require the department to submit the plan to the Assembly Committee on Housing and Community Development and the Senate Transportation and Housing Committee 30 days after receipt of the federal funds.

The bill would authorize the department to adopt, amend, or repeal guidelines to implement these provisions. The bill would exempt these guidelines from the Administrative Procedure Act.

Existing law requires, on or before December 31 of each year, the department to submit an annual report, containing specified information, to the Governor and both houses of the Legislature on the operations and accomplishments during the previous fiscal year of the housing programs administered by the department.

This bill would require that annual report to also include an evaluation of any program established by the department to meet the legal requirements of the Federal Housing Trust Fund program guidelines.

This bill would incorporate additional changes to Section 50408 of the Healthy and Safety Code proposed by AB 388 that would become operative if this bill and AB 388 are enacted and this bill is enacted last.

Existing law establishes the Department of Housing and Community Development in the Business, Consumer Services, and Housing Agency. The department is responsible for administering various housing and home loan programs throughout the state. Existing law also establishes the California Housing Finance Agency within the department, and provides that the primary purpose of the agency is to meet the housing needs of persons and families of low to moderate income.

Existing federal law requires the Secretary of the Department of Housing and Urban Development to establish a Housing Trust Fund to provide grants to states to increase the supply of rental housing for extremely low- and very low income families, including homeless families, and home ownership for extremely low- and very low income families.

This bill would designate the Department of Housing and Community Development as the state agency responsible for administering funds received by the state from the federal Housing Trust Fund. This bill would require the department to administer the funds through existing or newly created programs that produce, preserve, rehabilitate, or support the operation of rental housing for extremely low income and very low income households, except that up to 10% of funding may be used to support home ownership for extremely low income and very low income households. The bill would require any rental project funded from the federal Housing Trust Fund to restrict affordability for 55 years, as specified, and require any home ownership program funded from the federal Housing Trust Fund to restrict affordability for 30 years, as specified.

This bill would require the department to collaborate with the California Housing Finance Agency to develop an allocation plan to demonstrate how the funds will be distributed, based on the priority housing needs identified in the states consolidated plan, and to convene a stakeholder process to inform the development of the plan. The bill would require the allocation plan and guidelines to give priority to projects based on specified factors. The bill would require the department to submit the plan to the Assembly Committee on Housing and Community Development and the Senate Transportation and Housing Committee 30 days after receipt of the federal funds.

The bill would authorize the department to adopt, amend, or repeal guidelines to implement these provisions. The bill would exempt these guidelines from the Administrative Procedure Act.

Existing law requires, on or before December 31 of each year, the department to submit an annual report, containing specified information, to the Governor and both houses of the Legislature on the operations and accomplishments during the previous fiscal year of the housing programs administered by the department.

This bill would require that annual report to also include an evaluation of any program established by the department to meet the legal requirements of the Federal Housing Trust Fund program guidelines.

This bill would incorporate additional changes to Section 50408 of the Healthy and Safety Code proposed by AB 388 that would become operative if this bill and AB 388 are enacted and this bill is enacted last.

Existing law establishes the Department of Housing and Community Development in the Business, Consumer Services, and Housing Agency. The department is responsible for administering various housing and home loan programs throughout the state. Existing law also establishes the California Housing Finance Agency within the department, and provides that the primary purpose of the agency is to meet the housing needs of persons and families of low to moderate income.

Existing federal law requires the Secretary of the Department of Housing and Urban Development to establish a Housing Trust Fund to provide grants to states to increase the supply of rental housing for extremely low- and very low income families, including homeless families, and homeownership home ownership for extremely low- and very low income families.

This bill would designate the Department of Housing and Community Development as the state agency responsible for administering funds received by the state from the federal Housing Trust Fund. This bill would require the department to administer the funds through existing or newly created programs that produce, preserve, rehabilitate, or support the operation of rental housing for extremely low income and very low income households, except that up to 10% of funding may be used to support homeownership home ownership for extremely low income and very low income households. The bill would require any rental project funded from the federal Housing Trust Fund to restrict affordability for 55 years years, as specified, and require any homeownership home ownership program funded from the federal Housing Trust Fund to restrict affordability for 30 years. years, as specified.

This bill would require the department to collaborate with the California Housing Finance Agency to develop an allocation plan to demonstrate how the funds will be distributed, based on the priority housing needs identified in the states consolidated plan, and to convene a stakeholder process to inform the development of the plan. The bill would require the allocation plan and guidelines to give priority to projects based on specified factors. The bill would require the department to submit the plan to the Assembly Committee on Housing and Community Development and the Senate Transportation and Housing Committee 30 days after receipt of the federal funds.

Existing law requires, on or before December 31 of each year, the department to submit an annual report, containing specified information, to the Governor and both houses of the Legislature on the operations and accomplishments during the previous fiscal year of the housing programs administered by the department.

This bill would require that annual report to also include an evaluation of any program established by the department to meet the legal requirements of the Federal Housing Trust Fund program guidelines.

Existing law establishes the Department of Housing and Community Development in the Business, Consumer Services, and Housing Agency. The department is responsible for administering various housing and home loan programs throughout the state. Existing law also establishes the California Housing Finance Agency within the department, and provides that the primary purpose of the agency is to meet the housing needs of persons and families of low to moderate income.

Existing federal law requires the Secretary of the Department of Housing and Urban Development to establish a Housing Trust Fund to provide grants to states to increase the supply of rental housing for extremely low- and very low income families, including homeless families, and homeownership for extremely low- and very low income families.

This bill would designate the Department of Housing and Community Development as the state agency responsible for administering funds received by the state from the federal Housing Trust Fund. This bill would require the department to administer the funds through programs that produce, preserve, rehabilitate, or support the operation of rental housing for extremely low income and very low income households, except that up to 10% of funding may be used to support first-time homeownership for extremely low income and very low income households. The bill would require any rental project funded from the federal Housing Trust Fund to restrict affordability for 55 years and require any homeownership program funded from the federal Housing Trust Fund to restrict affordability for 30 years.

This bill would require the department to collaborate with the California Housing Finance Agency to develop an allocation plan to demonstrate how the funds will be distributed, based on the priority housing needs identified in the states consolidated plan, and to convene a stakeholder process to inform the development of the plan. The bill would require the allocation plan to give priority to projects based on specified factors. The bill would require the department to submit the plan to the Assembly Committee on Housing and Community Development and the Senate Transportation and Housing Committee 30 days after receipt of the federal funds.

Existing law requires, on or before December 31 of each year, the department to submit an annual report, containing specified information, to the Governor and both houses of the Legislature on the operations and accomplishments during the previous fiscal year of the housing programs administered by the department.

This bill would require that annual report to also include an evaluation of any program established by the department to meet the Federal Housing Trust Fund program guidelines.

Existing federal law requires the Secretary of the Department of Housing and Urban Development to establish a Housing Trust Fund to provide grants to states to increase the supply of rental housing for extremely low- and very low income families, including homeless families, and homeownership for extremely low- and very low income families.

This bill would designate the Department of Housing and Community Development as the state agency responsible for administering funds received by the state from the federal Housing Trust Fund. The bill would require the department to administer the federal funds pursuant to the multifamily housing program, except that up to 10% of the funds may be appropriated by the Legislature to the CalHome Program. The bill would require the department to submit notifications with specified information relating to the distribution, awarding, and expenditure of the federal funds, as prescribed. This bill would require the department to administer the funds through programs that produce, preserve, rehabilitate, or support the operation of rental housing for extremely low income and very low income households, except that up to 10% of funding may be used to support first-time homeownership for extremely low income and very low income households. The bill would require any project funded from the federal Housing Trust Fund to restrict affordability for 55 years.

Existing law establishes the multifamily housing program under the administration of the Department of Housing and Community Development to provide a standardized set of program rules and features applicable to all housing types based on the departments California Housing Rehabilitation Program. Existing law also establishes the CalHome Program under the administration of the department to provide grants and loans to enable low- and very low income households to become or remain homeowners.

Existing federal law requires the Secretary of the Department of Housing and Urban Development to establish a Housing Trust Fund to provide grants to states to increase the supply of rental housing for extremely low- and very low income families, including homeless families, and homeownership for extremely low- and very low income families.

This bill would designate the Department of Housing and Community Development as the state agency responsible for administering the federal Housing Trust Fund. The bill would require the department to administer the federal funds pursuant to the multifamily housing program, except that up to 10% of the funds may be appropriated by the Legislature to the CalHome Program. The bill would require the department to submit notifications with specified information relating to the distribution, awarding, and expenditure of the federal funds, as prescribed.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 90

Author:(Chau and Atkins)

As Amended Ver:August 31, 2015

Majority vote

Original Committee Reference: H. & C.D.

SUMMARY: Designates the Department of Housing and Community Development (HCD) as the agency responsible for administering the federal Housing Trust Fund (HTF). Specifically, this bill:

1. Requires HCD to administer the HTF funds through existing or newly-created programs that produce, rehabilitate, or support the operation of rental housing for extremely low- and very low-income households.

2. Allows up to 10% of the HTF funds to be used to support first-time homeownership for extremely low- and very low-income households.

3. Requires that any rental project funded from the federal HTF be restricted to 55 years affordability through a recorded and enforceable affordability covenant.

4. Requires that any homeownership program funded from the federal HTF be restricted to 30 years affordability through either a recorded and enforceable affordability covenant or a recorded and enforceable equity recapture agreement.

5. Requires HCD, in collaboration with the California Housing Finance Agency (CalHFA), to develop an allocation plan to show how the HTF funds will be spent based on the priority needs identified in the state's consolidated plan.

6. Requires HCD to submit the allocation plan to the Assembly Housing and Community Development Committee and the Senate Transportation and Housing Committee 30 days prior to receiving the HTF funds.

7. Requires the allocation plan and guidelines to give priority to projects based on the following:

1. Geographic diversity;

2. The extent to which rents are affordable, especially to low-income households;

3. The merits of a project;

4. Applicants readiness; and

5. The extent to which projects will use nonfederal funds.

8. Requires HCD to convene a stakeholder process to inform the allocation plan and to include organizations that provide rental housing to extremely low- and very low-income households or assist extremely low- and very low-income households to become homeowners.

9. Provides that HCD may adopt, amend, or repeal guidelines to implement this chapter, and exempts these guidelines from the Administrative Procedure Act.

10. Includes chaptering out amendments.

The Senate amendments:

1. Clarify that HCD must administer the HTF funds through existing or newly-created programs.

2. Require that any home ownership program funded from the HTF shall restrict affordability through either a recorded and enforceable affordability covenant or a recorded and enforceable equity recapture agreement.

3. Require that any rental project funded from the federal HTF shall restrict affordability through a recorded and enforceable affordability covenant.

4. Provide that HCD may adopt, amend, or repeal guidelines to implement this chapter, and exempt these guidelines from the Administrative Procedure Act.

5. Make technical, clarifying changes.

6. Include chaptering out amendments.

FISCAL EFFECT:

According to the Senate Appropriations Committee:

1. One-time HCD costs of approximately $589,000 in Fiscal Year 2015-16 for 4.5 Personnel Year (PY) of staff time to develop a program for distribution of federal HTF funds (General Fund). It is likely that these funds could be reimbursed from the initial distribution of federal funds, which is expected in 2016-17.

2. On-going HCD costs in the range of $1 million in 2016-17 for 9 PY of staff time for program evaluation, development, and administration (federal funds). HCD's ongoing administrative costs would be adjusted annually, based upon expected allocations of federal HTF funds. All costs are expected to be below the ten percent allowance for administrative costs that may be retained by HCD from federal HTF allocations.

3. Ongoing HCD local assistance expenditures of approximately $40 million, beginning in 2016-17 (federal funds). Amounts of HTF funds available for expenditure are dependent upon federal formulas and the aggregate amount of mortgages funded through specified federal entities

COMMENTS: Background: The Public Policy Institute of California has identified that more than 36% of mortgaged homeowners and 47% of all renters are spending more than 35% of their household incomes on housing. In California we have about 134,000 homeless people living in our streets, parks, alleys, and freeway off-ramps. At the same time vacancy rates are low and rents are increasing.

According to the United States Department of Housing and Urban Development, California has six of the most expensive rental markets in the country. Nationwide, rents in 2014 grew the fastest in the San Jose and San Francisco metropolitan areas, increasing by 14.4% and 13.5%, respectively. Between 2006 and 2011, rents increased throughout the state by an average of 10%. Lower-income households represent a majority of renter households. Out of 5.1 million renters in California, 60% are in lower-income households, while one in four renter households are in the extremely low-income. One in two renters in California pay in excess of 30% of their income towards housing and one in four renters pay half of their income towards housing.

The funding sources to support construction of affordable housing have drastically diminished over the last five years. The dissolution of redevelopment agencies eliminated up to $1 billion in funding that was available for affordable housing construction. The last statewide housing bond was approved in 2008 and the proceeds of those bonds have been exhausted.

The Federal Housing Trust Fund: The Housing and Economic Recovery Act (HERA) of 2008 directed Fannie Mae and Freddie Mac to set aside 0.042% of new business for the federal HTF. Sixty-five percent was directed to the federal HTF and 35% to the Capital Magnet Fund. Before the funds could be directed toward the HTF, the banking and foreclosure crisis hit and funding for the program was put on hold. In December of last year, the Federal Housing Finance Agency lifted the suspension of funding and directed Fannie Mae and Freddie Mac to set aside funds for the HTF starting on January 1, 2015. It is anticipated that funds may be allocated as soon as the summer of 2016.

The HTF is a permanent federal funding source for affordable housing and the funds must be used to produce, preserve, rehabilitate, or support the operation of rental housing for extremely low- and very low-income families, including homeless families, and for homeownership for extremely low- and very low-income families. Ninety percent of funding from the HTF must be used toward rental housing and up to 10% may be used toward homeownership. Additionally, 75% of funding must go toward extremely low-income families. Further, when there is only $1 billion available in the federal HTF then 100% of the funds must be used to benefit extremely low-income households.

Federal guidelines require that the HTF be distributed to states by a formula based on:

1. Shortage and availability of rental housing for extremely-low income families and very-low income families;

2. Number of extremely low- and very low-income families who are severely rent burdened or pay more than 50% of their income toward rent and utilities.

Purpose of this bill: Each state is required to choose a state agency to administer the HTF. This bill establishes HCD as that agency and requires the department to develop a plan for how the funds will be spent. The federal guidelines require states to develop an allocation plan each year to show how the HTF will be distributed in the coming year. The allocation plan must be based on the priority needs identified in the state's consolidated plan. This bill aligns with the federal requirements to develop an allocation plan for how the funds will be allocated each year.

Analysis Prepared by: Rebecca Rabovsky / H. & C.D. / (916) 319-2085 FN: 0002064

 THIRD READING  

Bill No: AB 90

Author: Chau (D) and Atkins (D)

Amended: 4/22/15 in Assembly

Vote: 21

SENATE TRANS. & HOUSING COMMITTEE: 11-0, 6/30/15

AYES: Beall, Cannella, Allen, Bates, Gaines, Galgiani, Leyva, McGuire, Mendoza, Roth, Wieckowski

SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/27/15

AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen

ASSEMBLY FLOOR: 80-0, 6/4/15 - See last page for vote

SUBJECT: Federal Housing Trust Fund

SOURCE: Author

DIGEST: This bill designates the California Department of Housing and Community Development (HCD) as the agency responsible for administering the federal Housing Trust Fund (HTF), pursuant to the federal Housing and Economic Recovery Act of 2008.

ANALYSIS:

Existing law:

1. Creates the federal HTF as part of the Housing and Economic Recovery Act of 2008 (HERA). This program will allocate funds to state and state-designated entities on a formula basis for the production or preservation of affordable housing. Federal regulations, released in January 2015, specify how states must use these funds.

2. Defines extremely low-income (ELI) households as households with incomes between zero and 30% of area median income and very low-income (VLI) families’ incomes as between 30% and 50% of area median income.

3. Requires HCD to report on or before December 31 of each year to the Governor and both houses of the Legislature on the operations and accomplishments during the prior fiscal year of the housing programs administered by it.

This bill:

1. Designates HCD as the agency responsible for administering the federal HTF pursuant to HERA.

2. Requires HCD to administer the funds through programs that produce, preserve, rehabilitate, and support the operation of rental housing for ELI and VLI households.

3. Allows up to 10% of funding to be used to support homeownership for ELI and VLI households.

4. Requires any rental project funded by the federal HTF to be affordable for 55 years.

5. Requires any homeownership program funded from the federal HTF to be affordable for 30 years.

6. Requires HCD to collaborate with the California Housing Finance Agency (CalHFA) to develop an allocation plan to demonstrate how the federal funds shall be distributed based upon the priority housing needs identified in the state consolidated plan. The allocation plan shall give priority to projects based on:

1. Geographic diversity;

2. The extent to which rents are affordable, especially to ELI households;

3. The merits of a project;

4. Applicants’ readiness; and

5. The extent to which projects will use nonfederal funds.

7. Requires HCD to submit the allocation plan to the Assembly Committee on Housing and Community Development and the Senate Transportation and Housing Committee 30 days prior to receiving the HTF funds.

8. Requires HCD and CalHFA to convene a stakeholder process to inform the development of the allocation plan. Stakeholders shall include, but not be limited to, organizations that provide rental housing for ELI households and VLI households or assist ELI households and VLI households to become homeowners.

9. Requires HCD to add to a yearly report, due to the Governor and both houses of the Legislature on or before December 31 of each year, an evaluation of the program established by HCD to meet the federal HTF program guidelines.

Comments

Purpose of this bill. According to the authors, our state is facing an affordable housing crisis. The funding sources to support construction of affordable housing have drastically diminished over the last five years. The dissolution of redevelopment agencies eliminated up to $1 billion in funding that was available for affordable housing construction. The last statewide housing bond was approved in 2008 and the proceeds of those bonds have been exhausted. This bill is part of a larger package of bills to address the growing affordable housing crisis. This bill designates HCD as the state entity responsible for administering the federal HTF. It also requires HCD to develop an allocation plan for how to spend the funds and to provide that plan to the Senate Transportation and Housing Committee and the Assembly Housing and Community Development Committee. The allocation plan will be developed through a stakeholder process. HCD is required to report back to the Legislature on how HTF funds are spent.

Lack of funding for affordable housing. The U.S. Department of Housing and Urban Development defines “affordable” as housing that costs no more than 30% of a household’s monthly income. That means rent and utilities in an apartment or the monthly mortgage payment and housing expenses for a homeowner should be less than 30% of a household’s monthly income to be considered affordable. According to the national Center for Housing Policy, 34% of working renters in California spend half or more of their income on housing. Among all 50 states, California has the highest fraction of working renters who spend half or more of their income on housing. In recent years, the funding for the construction of affordable housing has dramatically decreased with the loss of redevelopment funds and the expenditure of funding from the last state-wide housing bond.

Federal Housing Trust Fund. HTF is an affordable-housing production program that will complement existing federal, state, and local efforts to increase and preserve the supply of decent, safe, and sanitary affordable housing for ELI and VLI households, including homeless families. The HTF was created under the HERA of 2008. HERA directed Fannie Mae and Freddie Mac to set aside .042% of new mortgage purchases in the federal HTF. Sixty-five percent was directed to the federal HTF and 35% to the Capitol Magnet Fund. Unfortunately, before the funds could be directed to the HTF, the banking and mortgage crisis hit and funding for the program was put on hold. In December of 2014, the Federal Housing Finance Agency lifted the suspension of funding and directed Fannie Mae and Freddie Mac to set aside funds for the HTF beginning on January 1, 2015. These funds may be allocated as soon as the summer of 2016 on a formula basis.

States and state-designated entities are eligible grantees for the HTF. HTF funds may be used for the production or preservation of affordable housing through the acquisition, new construction, reconstruction, and/or rehabilitation of non-luxury housing with suitable amenities. All HTF-assisted units will be required to have a minimum affordability period of 30 years. Federal law also requires money to be distributed to states by formula. This formula is based upon shortage of rental properties affordable and available to ELI and VLI households and number of ELI and VLI renter households paying more than 50% of their income for rent and utilities. Priority will be given to ELI households.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee:

• One-time HCD costs of approximately $589,000 in FY 2015-16 for 4.5 PY of staff time to develop a program for distribution of federal HTF funds (General Fund). It is likely that these funds could be reimbursed from the initial distribution of federal funds, which is expected in 2016-17.

• Ongoing HCD costs in the range of $1 million in 2016-17 for 9 PY of staff time for program evaluation, development, and administration (federal funds). HCD’s ongoing administrative costs would be adjusted annually, based upon expected allocations of federal HTF funds. All costs are expected to be below the 10 percent allowance for administrative costs that may be retained by HCD from federal HTF allocations.

• Ongoing HCD local assistance expenditures of approximately $40 million, beginning in 2016-17 (federal funds). Amounts of HTF funds available for expenditure are dependent upon federal formulas and the aggregate amount of mortgages funded through specified federal entities.

SUPPORT: (Verified 8/28/15)

A Community of Friends

AARP, California

Abode Communities

Access to Independence

Bridge Housing

Building Industry Association of Southern California's Los Angeles/Ventura Chapter

California Catholic Conference of Bishops

California Building Industry Association

California Catholic Conference

California Chamber of Commerce

California Community Foundation

Californians for Safety and Justice

California Housing Consortium

California Infill Builders Federation

California Rural Legal Assistance Foundation

California State Council of the Service Employees International Union

City and County of San Francisco

City of Los Angeles

City of Morgan Hill

City of San Jose

City of Santa Monica

City of Torrance

City of West Hollywood

Coalition for Economic Survival

Community Corporation of Santa Monica

Department of Housing and Community Development of Los Angeles

East LA Community Corporation

Enterprise Community Partners

Habitat for Humanity

Highridge Costa Housing Partners

Highridge Costa Investors

Housing Authority of the City of Los Angeles

Housing California

Hunger Advocacy Network

Inquilinos Unidos

Jewish Family Services of San Diego

Leading Age California

League of California Cities

LINC Housing

Los Angeles Business Council

Mayor, City of Long Beach

Mayor, City of Los Angeles

Mayor, City of Oakland

Mayor, City of Sacramento

Mayor, City of San Francisco

Mayor, City of San Jose

Mayor, City of Santa Ana

Mercy Housing California

National Association of Social Workers, California Chapter

Non- Profit Housing Association of Northern California

PATH

Public Counsel

Related California

San Diego and Imperial Counties Labor Council

San Diego County Apartment Association

Santa Clara County Board of Supervisors

SEIU California

Southern California Association of Nonprofit Housing

Skid Row Housing Trust

United Way of Greater Los Angeles

Western Center on Law and Poverty

West Hollywood Community Housing Corporation

WORKS

OPPOSITION: (Verified 8/28/15)

None received

ASSEMBLY FLOOR: 80-0, 6/4/15

AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins

Prepared by: Alison Dinmore / T. & H. / (916) 651-4121

8/31/15 8:32:55

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

AB 90 (Chau) - Federal Housing Trust Fund

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

AB 90 would designate the Department of Housing and Community Development (HCD) as the agency responsible for administering the federal Housing Trust Fund (HTF).

Fiscal Impact:

• One-time HCD costs of approximately $589,000 in FY 2015-16 for 4.5 PY of staff time to develop a program for distribution of federal HTF funds (General Fund). It is likely that these funds could be reimbursed from the initial distribution of federal funds, which is expected in 2016-17.

• On-going HCD costs in the range of $1 million in 2016-17 for 9 PY of staff time for program evaluation, development, and administration (federal funds). HCD’s ongoing administrative costs would be adjusted annually, based upon expected allocations of federal HTF funds. All costs are expected to be below the ten percent allowance for administrative costs that may be retained by HCD from federal HTF allocations.

• Ongoing HCD local assistance expenditures of approximately $40 million, beginning in 2016-17 (federal funds). Amounts of HTF funds available for expenditure are dependent upon federal formulas and the aggregate amount of mortgages funded through specified federal entities (see below).

Background:

The federal Housing and Economic Recovery Act (HERA) of 2008 was major federal housing legislation enacted to reform and improves the regulation of Fannie Mae and Freddie Mac, strengthen neighborhoods hardest hit by the foreclosure crisis, enhance mortgage protection and disclosures, and maintain the availability of affordable home loans. HERA established the Federal Housing Trust Fund (HTF) and other affordable housing programs, to be funded by an annual set-aside amount equal to 4.2 basis points (0.42 percent) of each dollar of unpaid principal balance of the combined new business purchases of Fannie Mae and Freddie Mac.

The purpose of HTF is to provide grants to state governments to increase and preserve the supply of rental housing for extremely low- and very low-income families, including homeless families, and to increase homeownership for extremely low- and very low-income families. Through the program, states will receive grants (pursuant to a need-based formula), of which at least 80 percent must be used for rental housing, up to 10 percent may be used for homeownership, and up to 10 percent may be retained by the grantee for reasonable administrative and planning costs. HTF funds may be used for the production or preservation of affordable housing through the acquisition, new construction, reconstruction, and/or rehabilitation of specified housing.

The Federal Housing Finance Authority suspended Fannie Mae and Freddic Mac contributions for affordable housing programs after they were placed in conservatorship in 2008, but recently reinstated the contributions. It is anticipated that funds will be available for allocation to states as soon as the summer of 2016.

Proposed Law:

AB 90 would designate HCD as the agency responsible for administering the federal HTF and implementing federal regulations. The bill would also do the following:

• Require HCD to administer the HTF funds through programs that produce, rehabilitate, or support the operation of rental housing for extremely low- and very low-income households, except that up to 10 percent of funds may be used to support homeownership for extremely low- and very low-income households.

• Require that any rental project funded from the federal HTF must restrict affordability for 55 years, and requires that any homeownership project funded from the federal HTF must restrict affordability for 30 years.

• Require HCD, in collaboration with the California Housing Finance Agency (CalHFA), to develop an allocation plan that is informed by a specified stakeholder process and based on the priority needs identified in the state's consolidated plan.

• Require HCD to submit the allocation plan to the Legislature’s housing policy committees thirty days after receiving HTF funds

• Require the allocation plan to give priority to projects based on geographic diversity, affordability of rents (especially to extremely low-income households), the merits of a project, the applicant's readiness, and the extent to which projects will use nonfederal funds.

• Require HCD to add an evaluation of any program established to meet federal HTF program guidelines to its annual report to the Governor and Legislature.

Staff Comments:

HCD’s ongoing administrative costs would depend upon the amount of annual federal allocations to California. According to the most recent available estimates, Fannie Mae and Freddie Mac are expected to contribute approximately $350 million to the federal HTF in 2015. HCD estimates that approximately $41 million will be allocated to California in 2016. Based upon tasks associated with administering current state programs that provide funding for low-income rental housing construction and homeownership programs, the Multifamily Housing Program (MHP) and CalHOME Program, respectively, HCD estimates annual administrative costs in the range of $1 million. This is based upon the assumption that a $41 million allocation of HTF funds would generate approximately 25 applications, and funding would be provided for seven rental projects and three homeownership projects. Although federal regulations allow states to retain up to 10 percent of a federal allocation for administrative purposes, HCD would incur General Fund costs in 2015-16 to develop the program prior to receiving federal funding. First year costs for program development would likely be eligible for reimbursement from the initial federal allocation in 2016-17.

-- END --

SENATE COMMITTEE ON TRANSPORTATION AND HOUSING

Senator Jim Beall, Chair

2015 - 2016 Regular

Bill No: AB 90 Hearing Date: 6/30/2015

SUBJECT: Federal Housing Trust Fund

DIGEST: This bill designates the California Department of Housing and Community Development (HCD) as the agency responsible for administering the federal Housing Trust Fund (HTF), pursuant to the federal Housing and Economic Recovery Act of 2008.

ANALYSIS:

Existing law:

1. Created the federal HTF as part of the Housing and Economic Recovery Act of 2008 (HERA). This program will allocate funds to state and state-designated entities on a formula basis for the production or preservation of affordable housing. Federal regulations, released in January 2015, specify how states must use these funds.

2. Defines extremely low-income (ELI) households as households with incomes between zero and 30% of area median income and very low-income (VLI) families’ incomes as between 30% and 50% of area median income.

3. Requires HCD to report on or before December 31 of each year to the Governor and both houses of the Legislature on the operations and accomplishments during the prior fiscal year of the housing programs administered by it.

This bill:

1. Designates HCD as the agency responsible for administering the federal HTF pursuant to HERA.

2. Requires HCD to administer the funds through programs that produce, preserve, rehabilitate, and support the operation of rental housing for ELI and VLI households.

3. Allows up to 10% of funding to be used to support homeownership for ELI and VLI households.

4. Requires any rental project funded by the federal HTF to be affordable for 55 years.

5. Requires any homeownership program funded from the federal HTF to be affordable for 30 years.

6. Requires the department to collaborate with the California Housing Finance Agency (CalHFA) to develop an allocation plan to demonstrate how the federal funds shall be distributed based upon the priority housing needs identified in the state consolidated plan. The allocation plan shall give priority to projects based on:

1. Geographic diversity;

2. The extent to which rents are affordable, especially to extremely low-income households;

3. The merits of a project;

4. Applicants’ readiness; and

5. The extent to which projects will use nonfederal funds.

7. Requires HCD to submit the allocation plan to the Assembly Committee on Housing and Community Development and the Senate Transportation and Housing Committee 30 days prior to receiving the HTF funds.

8. Requires HCD and CalHFA to convene a stakeholder process to inform the development of the allocation plan. Stakeholders shall include, but not be limited to, organizations that provide rental housing for ELI households and VLI households or assist ELI households and VLI households to become homeowners.

9. Requires HCD to add to a yearly report, due to the Governor and both houses of the legislature on or before December 31 of each year, an evaluation of the program established by the department to meet the federal HTF program guidelines.

COMMENTS:

Purpose of the bill. According to the author, our state is facing an affordable housing crisis. The funding sources to support construction of affordable housing have drastically diminished over the last five years. The dissolution of redevelopment agencies eliminated up to $1 billion in funding that was available for affordable housing construction. The last statewide housing bond was approved in 2008 and the proceeds of those bonds have been exhausted. This bill is part of a larger package of bills to address the growing affordable housing crisis. This bill designates HCD as the state entity responsible for administering the federal HTF. It also requires HCD to develop an allocation plan for how to spend the funds and to provide that plan to this committee and our counterpart in the Assembly. The allocation plan will be developed through a stakeholder process. HCD is required to report back to the Legislature on how HTF funds are spent.

Lack of funding for affordable housing. The U.S. Department of Housing and Urban Development (HUD) defines “affordable” as housing that costs no more than 30% of a household’s monthly income. That means rent and utilities in an apartment or the monthly mortgage payment and housing expenses for a homeowner should be less than 30% of a household’s monthly income to be considered affordable. According to the national Center for Housing Policy, 34% of working renters in California spend half or more of their income on housing. Among all 50 states, California has the highest fraction of working renters who spend half or more of their income on housing.

According to HUD, California has six of the most expensive rental markets in the country. Nationwide, rents in 2014 grew the fastest in San Jose and San Francisco, by 14.4% and 13.5% respectively. Lower income individuals represent a majority of renter households. Additionally, California has 113,952 homeless people, which accounts for 20% of the nation’s homeless population. California also has the highest rate of unsheltered people at 62.7% (71,437 were unsheltered).

In recent years, the funding for the construction of affordable housing has dramatically decreased with the loss of redevelopment funds and the expenditure of funding from the last state-wide housing bond.

Federal Housing Trust Fund. HTF is an affordable-housing production program that will complement existing federal, state, and local efforts to increase and preserve the supply of decent, safe, and sanitary affordable housing for ELI and VLI households, including homeless families. The HTF was created under the HERA of 2008. HERA directed Fannie Mae and Freddie Mac to set aside .042% of new mortgage purchases in the federal HTF. Sixty-five percent was directed to the federal HTF and 35% to the Capitol Magnet Fund. Unfortunately, before the funds could be directed to the HTF, the banking and mortgage crisis hit and funding for the program was put on hold. In December of 2014, the Federal Housing Finance Agency lifted the suspension of funding and directed Fannie May and Freddie Mac to set aside funds for the HTF beginning on January 1, 2015. These funds may be allocated as soon as the summer of 2016 on a formula basis.

States and state-designated entities are eligible grantees for the HTF. A state must use at least 80% of each annual grant for rental housing, up to 10% for homeownership, and up to 10% for the grantee’s reasonable administrative and planning costs. In each fiscal year, not less than 75% of funds awarded to each grantee must be provided to rental or homeownership projects that benefit ELI or families with incomes at or below the poverty line, whichever is greater. Additionally, when there is only $1 billion available in the federal HTF, 100% of the funds must be used to benefit ELI households.

HTF funds may be used for the production or preservation of affordable housing through the acquisition, new construction, reconstruction, and/or rehabilitation of non-luxury housing with suitable amenities. All HTF-assisted units will be required to have a minimum affordability period of 30 years.

Federal law requires money to be distributed to states by formula. This formula is based upon shortage of rental properties affordable and available to ELI and VLI households and number of ELI and VLI renter households paying more than 50% of their income for rent and utilities. Priority will be given to ELI households. The amount of money a state receives depends on the shortage of affordable rental housing. Each state and the District of Columbia (DC) shall receive a minimum of $3 million. If the HTF does not have sufficient funds to provide $3 million to each state and DC, HUD will publish a notice in the Federal Register describing an alternative method and seek comments.

Assembly Votes:

Floor: 80-0

Appr: 17-0

H&CD: 7-0

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

POSITIONS: (Communicated to the committee before noon on Wednesday,

June 24, 2015.)

SUPPORT:

Abode Communities

AARP, CA

A Community of Friends

ACCESS

BIA of Southern California's Los Angeles/Ventura Chapter

Bridge Housing

California Catholic Conference of Bishops

California Building Industry Association,)

California Catholic Conference

California Chamber of Commerce

California Community Foundation

Californians for Safety and Justice

California Housing Consortium

California Infill Builders Federation

California Rural Legal Assistance Foundation

City and County of San Francisco

City of Los Angeles

City of Morgan Hill

City of San Jose

City of Santa Monica

City of Torrance

City of West Hollywood

Coalition for Economic Survival

Community Corporation of Santa Monica

Department of Housing and Community Development of Los Angeles

East LA Community Corporation

Enterprise Community Partners

Habitat for Humanity

Highridge Costa Housing Partners

Highridge Costa Investors

Housing Authority of the City of Los Angeles

Housing California

Hunger Advocacy Network

Inquilinos Unidos

Jewish Family Services of San Diego

Leading Age California

League of California Cities

LINC Housing

Los Angeles Business Council

Mayor, City of Long Beach — Robert Garcia

Mayor, City of Los Angeles — Eric Garcetti

Mayor, City of Oakland — Libby Schaaf

Mayor, City of Sacramento — Kevin Johnson

Mayor, City of San Francisco — Ed Lee

Mayor, City of San Jose — Sam Liccardo

Mayor, City of Santa Ana — Miguel Pulido

Mercy Housing California

National Association of Social Workers, California Chapter

Non- Profit Housing Association of Northern California

PATH

Public Counsel

Related California

San Diego and Imperial Counties Labor Council

San Diego County Apartment Association

Santa Clara County Board of Supervisors

SEIU California

Southern California Association of Nonprofit Housing

Skid Row Housing Trust

United Way of Greater Los Angeles

Western Center on Law and Poverty

West Hollywood Community Housing Corporation

WORKS

OPPOSITION:

None received

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 90

Author:(Chau and Atkins)

As Amended Ver:April 22, 2015

Majority vote

SUMMARY:

Designates the Department of Housing and Community Development (HCD) as the agency responsible for administering the federal Housing Trust Fund (HTF). Specifically, this bill:

1. Requires HCD to administer the HTF funds through programs that produce, rehabilitate, or support the operation of rental housing for extremely low- and very low-income households.

2. Allows up to 10% of the HTF funds to be used to support first-time homeownership for extremely low- and very low-income households.

3. Requires that any rental project funded from the federal HTF be restricted to 55 years affordability.

4. Requires that any homeownership program funded from the federal HTF be restricted to thirty years affordability.

5. Requires HCD, in collaboration with the California Housing Finance Agency (CalHFA), to develop an allocation plan to show how the HTF funds will be spent based on the priority needs identified in the state's consolidated plan.

6. Requires HCD to submit the allocation plan to the Assembly Housing and Community Development Committee and the Senate Transportation and Housing Committee 30 days prior to receiving the HTF funds.

7. Requires the allocation plan to give priority to projects based on the following:

1. Geographic diversity;

2. The extent to which rents are affordable, especially to low-income households;

3. The merits of a project;

4. Applicants readiness; and

5. The extent to which projects will use nonfederal funds.

8. Requires HCD to convene a stakeholder process to inform the allocation plan and to include organizations that provide rental housing to extremely low- and very low-income households or assist extremely low- and very low-income households to become homeowners.

FISCAL EFFECT:

According to the Assembly Appropriations Committee:

1. One-time costs in Fiscal Year 2015-16 of approximately $590,000 (General Fund) to HCD for 4.5 Past Years, operating expenses and equipment to development the program based on the typical number of applications received and awards made under the Multifamily Housing Program and Home Investment Partnerships programs. Some or all of this amount would be reimbursable out of HCDs allocation of the federal HTF once funds are received.

2. On-going costs in the range of $1 million (federal funds) for continued administration and evaluation of the program with adjustments each year, depending on the size and growth of the federal HTF and HCD's allocation. This cost falls within the allowable administrative costs reimbursable from the federal HTF.

Note: According to California Housing Financing Agency, the latest estimate of Fannie Mae and Freddie Mac contributions for the calendar year 2015 as originally authorized by Housing and Economic Recovery Act is about $350 million, with an estimated allocation to California of $41 million. Administrative costs to administer the funds may not exceed 10% of the annual allocation, pursuant to United States (U.S.) Department of Housing and Urban Development regulations.

COMMENTS:

Background:

The Public Policy Institute of California has identified that more than 36% of mortgaged homeowners and 47% of all renters are spending more than 35% of their household incomes on housing. In California we have about 134,000 homeless people living in our streets, parks, alleys, and freeway off-ramps. At the same time vacancy rates are low and rents are increasing. 

According to the U.S. Department of Housing and Urban Development, California has six of the most expensive rental markets in the country. Nationwide, rents in 2014 grew the fastest in the San Jose and San Francisco metropolitan areas, increasing by 14.4% and 13.5%, respectively. Between 2006 and 2011, rents increased throughout the state by an average of ten percent. Lower-income households represent a majority of renter households. Out of 5.1 million renters in California, 60% are in lower-income households, while one in four renter households are in the extremely low-income. One in two renters in California pay in excess of 30% of their income towards housing and one in four renters pay half of their income towards housing.

The funding sources to support construction of affordable housing have drastically diminished over the last five years. The dissolution of redevelopment agencies eliminated up to $1 billion in funding that was available for affordable housing construction. The last statewide housing bond was approved in 2008 and the proceeds of those bonds have been exhausted.

The Federal Housing Trust Fund:

The Housing and Economic Recovery Act (HERA) of 2008 directed Fannie Mae and Freddie Mac to set aside 0.042% of new business for the federal HTF. Sixty-five percent was directed to the federal HTF and 35% to the Capital Magnet Fund. Before the funds could be directed toward the HTF, the banking and foreclosure crisis hit and funding for the program was put on hold. In December of last year, the Federal Housing Finance Agency lifted the suspension of funding and directed Fannie Mae and Freddie Mac to set aside funds for the HTF starting on January 1, 2015. It is anticipated that funds may be allocated as soon as the summer of 2016.

The HTF is a permanent federal funding source for affordable housing and the funds must be used to produce, preserve, rehabilitate, or support the operation of rental housing for extremely low- and very low-income families, including homeless families, and for homeownership for extremely low- and very low-income families. Ninety percent of funding from the HTF must be used toward rental housing and up to 10% may be used toward homeownership. Additionally, 75% of funding must go toward extremely low-income families. Further, when there is only $1 billion available in the federal HTF then 100% of the funds must be used to benefit extremely low-income households.

Federal guidelines require that the HTF be distributed to states by a formula based on:

1. Shortage and availability of rental housing for extremely-low income families and very-low income families;

2. Number of extremely low- and very low-income families who are severely rent burdened or pay more than 50% of their income toward rent and utilities.

Purpose of the bill:

Each state is required to choose a state agency to administer the HTF. This bill establishes HCD as that agency and requires the department to develop a plan for how the funds will be spent. The federal guidelines require states to develop an allocation plan each year to show how the HTF will be distributed in the coming year. The allocation plan must be based on the priority needs identified in the state's consolidated plan. This bill aligns with the federal requirements to develop an allocation plan for how the fund will be allocated each year.

Analysis Prepared by: Lisa Engel / H. & C.D. / (916) 319-2085 FN: 0000681

Date of Hearing: April 29, 2015

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Jimmy Gomez, Chair

ABPCA Bill Id:AB 90

Author:(Chau) – As Amended Ver:April 22, 2015

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

SUMMARY: This bill designates the Department of Housing and Community Development (HCD) as the agency responsible for administering the federal Housing Trust Fund (HTF). Specifically, this bill:

1. Requires HCD to administer the HTF funds through programs that produce, rehabilitate, or support the operation of rental housing for extremely low- and very low-income households.

2. Allows up to 10% of the HTF funds to be used to support homeownership for extremely low- and very low-income households.

3. Requires that any rental project funded from the federal HTF must restrict affordability for fifty-five years, and requires that any homeownership project funded from the federal HTF must restrict affordability for thirty years.

4. Requires HCD, in collaboration with the California Housing Finance Agency (CalHFA), to develop an allocation plan to show how the HTF funds will be spent based on the priority needs identified in the state's consolidated plan.

5. Requires HCD to submit the allocation plan to the Assembly Committee on Housing and Community Development and the Senate Committee on Transportation and Housing thirty days prior to receiving the HTF funds.

6. Requires the allocation plan to give priority to projects based on geographic diversity, affordability of rents (especially to low-income households), the merits of a project, the applicant's readiness, and the extent to which projects will use nonfederal funds.

7. Requires HCD to convene a stakeholder process to inform the development of the allocation plan and to include organizations that provide rental housing to extremely low- and very low-income households or assist extremely low- and very low-income households to become homeowners.

FISCAL EFFECT

1. One-time costs in FY 2015-16 of approximately $590,000 (GF) to HCD for 4.5 PYs, operating expenses and equipment to development the program based on the typical number of applications received and awards made under the MHP and HOME programs. Some or all of this amount would be reimbursable out of HCDs allocation of the federal HTF once funds are received.

2. On-going costs in the range of $1 million (federal funds) for continued administration and evaluation of the program with adjustments each year, depending on the size and growth of the federal HTF and HCD's allocation. This cost falls within the allowable administrative costs reimbursable from the federal HTF.

Note: According to CalHFA, the latest estimate of Fannie Mae and Freddie Mac contributions for the calendar year 2015 as originally authorized by HERA is about $350 million, with an estimated allocation to California of $41 million. Administrative costs to administer the funds may not exceed 10 percent of the annual allocation, pursuant to HUD regulations.

COMMENTS:

Purpose. Each state is required to choose a state agency to administer the federal HTF. AB 90 establishes HCD as that agency and requires the department to develop a plan for how the funds will be spent. The federal guidelines require states to develop an allocation plan each year to show how the HTF will be distributed in the coming year. The allocation plan must be based on the priority needs identified in the state's consolidated plan. AB 90 aligns with the federal requirements to designate an agency and develop an allocation plan for spending the funds.

Background. The Housing and Economic Recovery Act (HERA) of 2008 directed Fannie Mae and Freddie Mac to set aside 0.042% of new business for the federal HTF. Sixty-five percent was directed to the federal HTF and 35% to the Capital Magnet Fund. Before the funds could be directed toward the HTF, the banking and foreclosure crisis hit and funding for the program was put on hold. In December of 2014, the Federal Housing Finance Agency lifted the suspension of funding and directed Fannie Mae and Freddie Mac to set aside funds for the HTF starting on January 1, 2015. It is anticipated that funds may be allocated as soon as the summer of 2016.

The HTF is a permanent federal funding source for affordable housing and the funds must be used to produce, preserve, rehabilitate, or support the operation of rental housing for extremely low- and very low-income families, including homeless families, and for homeownership for extremely low- and very low-income families. Ninety percent of funding from the HTF must be used toward rental housing and up to 10% may be used toward homeownership. Additionally, seventy-five percent of funding must go toward extremely low-income families. Further, when there is only $1 billion available in the federal HTF, 100% of the funds must be used to benefit extremely low-income households.

Federal guidelines require that the HTF be distributed to states by a formula based on the shortage and availability of rental housing for extremely-low income families and very-low income families, and the number of extremely low- and very low-income families who are severely rent burdened or pay more than 50% of their income toward rent and utilities.

Based on estimates, for every $250 million that is generated for the federal HTF, approximately $30 million will be allocated to California.

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

Date of Hearing: April 15, 2015

ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT

Ed Chau, Chair

ABPCA Bill Id:AB 90

Author:(Chau) – As Amended Ver:April 6, 2015

SUBJECT:

Federal Housing Trust Fund.

SUMMARY:

Designates the Department of Housing and Community Development (HCD) as the agency responsible for administering the federal Housing Trust Fund (HTF). Specifically, this bill:

1. Requires HCD to administer the HTF funds through programs that produce, rehabilitate, or support the operation of rental housing for extremely low- and very low-income households.

2. Allows up to 10% of the HTF funds to be used to support first-time homeownership for extremely low- and very low-income households.

3. Requires that any project funded from the federal HTF must be restricted to fifty-five years affordability.

4. Requires HCD, in collaboration with the California Housing Finance Agency (CalHFA), to develop an allocation plan to show how the HTF funds will be spent based on the priority needs identified in the state's consolidated plan.

5. Requires HCD to submit the allocation plan to the Assembly Committee on Housing and Community Development and the Senate Committee on Transportation and Housing thirty days prior to receiving the HTF funds.

6. Requires the allocation plan to give priority to projects based on the following:

1. Geographic diversity;

2. The extent to which rents are affordable, especially to low-income households;

3. The merits of a project;

4. Applicants readiness; and

5. The extent to which projects will use nonfederal funds.

7. Requires HCD to convene a stakeholder process to inform the allocation plan and to include organizations that provide rental housing to extremely low- and very low-income households or assist extremely low- and very low-income households to become homeowners.

EXISTING LAW:

Federal law defines extremely low-income households as households with incomes between zero and 30% of area median income and very low-income families' incomes as between 30% and 50% of area median income.

FISCAL EFFECT:

Unknown.

COMMENTS:

Background:

The Public Policy Institute of California has identified that more than 36% of mortgaged homeowners and 47% of all renters are spending more than 35% of their household incomes on housing. In California we have about 134,000 homeless people living in our streets, parks, alleys, and freeway off-ramps. At the same time vacancy rates are low and rents are increasing. 

According to the U.S. Department of Housing and Urban Development, California has six of the most expensive rental markets in the country. Nationwide, rents in 2014 grew the fastest in the San Jose and San Francisco metropolitan areas, increasing by 14.4% and 13.5%, respectively.  Between 2006 and 2011, rents increased throughout the state by an average of ten percent. Lower-income households represent a majority of renter households. Out of 5.1 million renters in California, 60% are in lower-income households, while one in four renter households are in the extremely low-income. One in two renters in California pay in excess of 30% of their income towards housing and one in four renters pay half of their income towards housing.

The funding sources to support construction of affordable housing have drastically diminished over the last five years. The dissolution of redevelopment agencies eliminated up to $1 billion in funding that was available for affordable housing construction. The last statewide housing bond was approved in 2008 and the proceeds of those bonds have been exhausted.

The Federal Housing Trust Fund:

The Housing and Economic Recovery Act (HERA) of 2008 directed Fannie Mae and Freddie Mac to set aside 0.042% of new business for the federal HTF. Sixty-five percent was directed to the federal HTF and 35% to the Capital Magnet Fund. Before the funds could be directed toward the HTF, the banking and foreclosure crisis hit and funding for the program was put on hold. In December of last year, the Federal Housing Finance Agency lifted the suspension of funding and directed Fannie Mae and Freddie Mac to set aside funds for the HTF starting on January 1, 2015. It is anticipated that funds may be allocated as soon as the summer of 2016.

The HTF is a permanent federal funding source for affordable housing and the funds must be used to produce, preserve, rehabilitate, or support the operation of rental housing for extremely low- and very low-income families, including homeless families, and for homeownership for extremely low- and very low-income families. Ninety percent of funding from the HTF must be used toward rental housing and up to 10% may be used toward homeownership. Additionally, seventy-five percent of funding must go toward extremely low-income families. Further, when there is only $1 billion available in the federal HTF then 100% of the funds must be used to benefit extremely low-income households.

Based on estimates, for every $250,000 that is generated for the HTF, approximately $30 million will be allocated to California. Federal guidelines require that the HTF be distributed to states by a formula based on:

• Shortage and availability of rental housing for extremely-low income families and very-low income families;

• Number of extremely low- and very low-income families who are severely rent burdened or pay more than 50% of their income toward rent and utilities.

Purpose of the bill:

Each state is required to choose a state agency to administer the HTF. AB 90 establishes HCD as that agency and requires the department to develop a plan for how the funds will be spent. The federal guidelines require states to develop an allocation plan each year to show how the HTF will be distributed in the coming year. The allocation plan must be based on the priority needs identified in the state's consolidated plan. AB 90 aligns with the federal requirements to develop an allocation plan for how the fund will be allocated each year.

Support unless amended:

Habitat for Humanity supports the overall direction of AB 90, however they request that up to 10% of funds go to the CalHome Program. According to Habitat for Humanity, "after redevelopment agencies dissolved, CalHome became the primary source of state funding for Habitat for Humanity affiliates throughout the state. It provides grants to local public agencies or nonprofit corporations for first-time homebuyers, down payment assistance, and self-help homeownership." CalHome was funded by the two previous state voter-approved bonds but those fund are exhausted.

REGISTERED SUPPORT / OPPOSITION:

Support

Bridge Housing

California Building Industry (CBIA)

California Infill Builders Federation

California Housing Consortium

California Rural Legal Assistance Foundation

Habitat for Humanity

Highridge Costa Housing Partners, LLC

Highridge Costa Investors, LLC

Housing California

Leading Age California

National Association of Social Workers California Chapter (NASW-CA)

Non-Profit Housing Association of Northern California (NPH)

San Diego County Apartment Association (SDCAA)

Western Center on Law and Poverty

Opposition

None on file

Analysis Prepared by:

Lisa Engel/H. & C.D./(916) 319-2085