The Housing Authorities Law authorizes a housing authority of a city or county to, among other things, prepare, carry out, acquire, lease, and operate housing projects and housing developments for persons of low income, as provided. That law grants powers to an authority relating to, among other things, the issuance of bonds.

This bill would make findings and declarations relating to affordable housing. The bill, until January 1, 2022, would authorize a housing authority located in the City of San Diego or the County of Santa Clara to implement a pilot program to develop and finance a middle-income housing project, as defined, if the project receives gap financing, as defined. The bill would prohibit financial or other assistance from any public or private source, as specified, from being used to provide gap financing to units that will be occupied at or above market-rate rents. The bill would require any gap financing to be approved by the housing authoritys legislative body, as provided, and would require the housing authority to provide a report to the Legislature, as specified.

This bill would also make legislative findings and declarations as to the necessity of a special statute for the City of San Diego and the County of Santa Clara.

The Housing Authorities Law authorizes a housing authority of a city or county to, among other things, prepare, carry out, acquire, lease, and operate housing projects and housing developments for persons of low income, as provided. That law grants powers to an authority relating to, among other things, the issuance of bonds.

This bill would make findings and declarations relating to affordable housing. The bill, until January 1, 2022, would authorize a housing authority located in the City of San Diego or the County of Santa Clara to implement a pilot program to develop and finance a middle-income housing project, as defined, if the project receives gap financing, as defined. The bill would prohibit financial or other assistance from any public or private source, as specified, from being used to provide gap financing to units that will be occupied at or above market-rate rents. The bill would require any gap financing to be approved by the housing authoritys legislative body, as provided, and would require the housing authority to provide a report to the Legislature, as specified.

This bill would also make legislative findings and declarations as to the necessity of a special statute for the City of San Diego and the County of Santa Clara.

The Housing Authorities Law authorizes a housing authority of a city or county to, among other things, prepare, carry out, acquire, lease, and operate housing projects and housing developments for persons of low income, as provided. That law grants powers to an authority relating to, among other things, the issuance of bonds.

This bill would make findings and declarations relating to affordable housing. The bill bill, until January 1, 2022, would authorize an authority a housing authority located in the City of San Diego or the County of Santa Clara to implement a pilot program to develop and finance a middle-income housing project, as defined, if the project receives gap financing, as defined. The bill would prohibit financial or other assistance from any public or private source, as specified, from being used to provide gap financing to units that will be occupied at market-rate rents. The bill would require any gap financing to be approved by the housing authoritys legislative body, as provided, and would require the housing authority to provide a report to the Legislature, as specified.

The Housing Authorities Law authorizes a housing authority of a city or county to, among other things, prepare, carry out, acquire, lease, and operate housing projects and housing developments for persons of low income, as provided. That law grants powers to an authority relating to, among other things, the issuance of bonds.

This bill would make findings and declarations relating to affordable housing. The bill would authorize an authority to develop and finance a middle-income housing project, as defined, if the project receives gap financing, as defined. The bill would prohibit financial or other assistance from any public or private source, as specified, from being used to provide gap financing to units that will be occupied at market-rate rents.

The Housing Authorities Law authorizes a housing authority of a city or county to, among other things, prepare, carry out, acquire, lease, and operate housing projects and housing developments for persons of low income, as provided. That law grants powers to an authority relating to, among other things, the issuance of bonds.

This bill would make findings and declarations relating to affordable housing. The bill would authorize an authority to develop and finance a middle-income housing project project, as defined, if funds received pursuant to bonds are only used to finance units occupied by persons of low income. the project receives gap financing, as defined. The bill would authorize units occupied by persons and families of middle income to be financed with prohibit financial or other assistance from any public or private source. The bill would prohibit funds received pursuant to bonds and specified public sources source, as specified, from being used to finance provide gap financing to units that will be occupied at market-rate rents.

The Housing Authorities Law authorizes a housing authority of a city or county to, among other things, prepare, carry out, acquire, lease, and operate housing projects and housing developments for persons of low income, as provided. That law grants powers to an authority relating to, among other things, the issuance of bonds.

The Housing Authorities Law authorizes a housing authority of a city or county to, among other things, prepare, carry out, acquire, lease, and operate housing projects and housing developments for persons of low income, as provided. That law grants powers to an authority relating to, among other things, the issuance of bonds.

This bill would authorize a housing authority to also develop, operate, and provide financing for mixed-income housing projects, as defined, and to exercise any or all powers granted to the authority relating to, among other things, the issuance of bonds for these purposes.

The Planning and Zoning Law requires, when an applicant proposes a housing development within the jurisdiction of a local government, that the city, county, or city and county provide the developer with a density bonus and other incentives or concessions for the production of lower income housing units or for the donation of land within the development if the developer, among other things, agrees to construct a specified percentage of units for very low, low-, or moderate-income households or qualifying residents. Existing law, in order to provide for the expeditious processing of a density bonus application, requires the local government to, among other things, notify the applicant for a density bonus whether the application is complete in a manner consistent with a specified provision that requires the notification to be in writing.

This bill would make a nonsubstantive change to that provision.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 1637

Author:(Gloria)

As Amended Ver:September 5, 2017

Majority vote

Original Committee Reference: H. & C.D.

SUMMARY: Allows a housing authority in the City of San Diego or County of Santa Clara to implement a pilot program to develop and finance middle-income housing developments. Specifically, this bill:

1. Allows a housing authority in the City of San Diego or County of Santa Clara to implement a pilot program to develop and finance middle-income housing developments as follows:
   1. Middle-income housing projects may receive gap financing from funds received from public and private sources for gap financing.
   2. Prohibits the use of funds from a public source to be used for gap financing for units that will be occupied at or above market-rate rents.
   3. Requires gap financing for middle-income housing projects to be approved by the housing authorities' legislative body by resolution after a public hearing. Requires notice of the hearing to be noticed in a newspaper prior to the hearing as specified.
   4. Requires the resolution approving the gap financing agreement to include a finding that gap financing will provide housing for low- and middle-income persons.
   5. Require a housing authority, on or before January 1, 2020 and or on or before January 1, 2022, to report to the Legislature the following information each calendar year that the housing authority implements the pilot program:
      1. The number of units produced using gap financing;
      2. The amount of gap financing per regulated unit; and
      3. The levels of affordability of those units produced using gap financing.
2. Defines "middle-income housing project" to mean a housing project that includes at least 40% of the units affordable and occupied by persons at or below 80% of Area Median Income (AMI) and at least 10% of the units that are affordable to persons and families at incomes not exceeding 150% of AMI.
3. Defines "persons of low income" to mean persons and families whose income does not exceed 80% of the AMI.
4. Defines "persons and families of middle income" to mean persons and families whose income does not exceed 150% of AMI.
5. Defines "gap financing" to mean a loan from a housing authority to fund the remaining cost of development of a middle-income housing project after other funds have been secured, including, but not limited to, bond funds, tax credits, conventional loans, or other private and public funds.
6. Provides that nothing in the bill shall be construed to change current law housing authority's bond authority beyond existing law
7. Provides that a housing authority in the City of San Diego or the County of Santa Clara is not required to implement a pilot program to finance middle-income housing projects.
8. Provides that a special statute is needed because of the unique needs of the City of San Diego and the County of Santa Clara to develop and finance middle-income housing projects.
9. Includes a sunset date of January 1, 2022.

The Senate amendments:

1. Add legislative findings and declarations.
2. Limit the provisions of the bill to housing authorities located in the city of San Diego and counties of Santa Clara.
3. Add to the definition of "middle-income housing project" a requirement that at least 10% of the units in a development are occupied by persons or families with incomes of 150% of AMI.
4. Define "gap financing" to mean a loan from a housing authority to fund the remaining cost of development of a middle-income housing project after other funds have been secured, including, but not limited to, bond funds, tax credits, conventional loans, or other private and public funds.
5. Provide that nothing in the bill shall be construed to change current law regarding housing authority's bond authority including but not limited to low-income housing tax credits.
6. Add a requirement that cities or counties that develop a pilot program to finance middle income housing projects report specified information to the Legislature on the outcomes of the program.
7. Add a sunset date of January 1, 2022.

FISCAL EFFECT: None.

COMMENTS:

Background: In the 1930s, the federal government authorized the creation of housing authorities to develop and manage public housing and complete urban renewal. Housing authorities are also responsible for administering Section 8 vouchers. In the late 1990s, a small number of housing authorities were designated "Move to Work" agencies – an attempt to provide greater opportunities to create and test locally-designed strategies to increase efficiency, help residents find employment that could lead to self-sufficiency, and increase housing choices for low income families. These agencies were given exemptions from many existing public housing and voucher rules and more flexibility in the use of federal funds. After the dissolution of redevelopment agencies (RDA), many housing authorities took over the assets of the former RDAs and responsibility for monitoring those assets.

Housing authorities can issue tax-exempt revenue bonds to finance the acquisition, construction, rehabilitation, refinance, or development of multi-family rental housing. The amount of state tax- exempt bonds that can be issued in the state is capped. Bonding capacity is allocated to local agencies by the California Tax Credit Allocation Committee (CDLAC). Tax-exempt bonds require that 20% of the units in a development be limited to households at 50% or less of AMI. The remaining units could be of any income, including market rate. Housing authorities cannot lend on any portion of a rental housing development with affordability levels of more than 80% of AMI. Housing authorities have explicit authority in state law to finance for-sale units up to 150% of AMI.

This bill would authorize a housing authority in the City of San Diego or the County of Santa Clara to develop and finance mixed-income developments where 40% of the units are restricted to persons making 80% or less of AMI. Housing authorities could use financial assistance from any public or private source to financed units for middle income households – households with incomes that do not exceed 150% of AMI.

Purpose of this bill: According to the author, "For years California has been unable to produce enough housing to meet the needs of its growing population. Insufficient supply has been driving up the cost of housing across the state and more acutely in major metropolitan areas. The cost to buy or rent in areas like Los Angeles, San Diego, and San Francisco has become prohibitively expensive. At the same time, the units that are being produced are almost entirely being built for the top of the market while a small share are being built to meet affordable housing needs. Almost entirely missing from new development is housing stock aimed at the entry level market. In order to fill the missing middle, the state needs a tool to incentivize the development of housing stock that can meet the needs of our working families and middle class." The author has stated the intent of bill is to provide "gap financing to developers who want to build mixed-income projects and lend on projects where incomes exceed 80% of AMI."

Source of funding: The sponsor, the City of San Diego, has indicated their intent is to use unrestricted local funds generated from transit-oriented development fees and general fund dollars to provide construction loans on rental units that fall between 80% and 150% of AMI. Under existing law, housing authorities can finance projects that are mixed-income provided that 20% of the units are limited to 80% of AMI or less. Housing authorities can accept financial or other assistance from any public or private source and spend those funds for the purpose and activities allowed under state law. The City of San Diego has an existing inclusionary housing ordinance that requires in lieu fees to go toward units serving households at or below 65% of AMI. Tax-exempt multifamily housing bonds are limited to financing projects in which 20% of the units are limited to households making 50% or less of AMI.

Purpose of housing authorities: Historically, the primary purpose of public housing authorities has been to serve low- and very low-income households. The author notes that existing state law authorizes local housing authorities to finance and develop single-family housing up to 150% AMI, and to own mixed-income housing developments in certain circumstances. However, existing law does not specifically authorize local housing authorities to lend money to help finance the higher end portions of these developments. This bill would explicitly allow local authorities to help finance middle-income housing in addition to low-income housing.

Analysis Prepared by: Lisa Engel / H. & C.D. / (916) 319-2085 FN: 0002189

 THIRD READING  

Bill No: AB 1637

Author:

:

Vote:

SENATE TRANS. & HOUSING COMMITTEE: 12-0, 7/18/17

AYES: Beall, Cannella, Allen, Atkins, Gaines, McGuire, Morrell, Roth, Skinner, Vidak, Wieckowski, Wiener

NO VOTE RECORDED: Mendoza

ASSEMBLY FLOOR: 76-0, 5/22/17 - See last page for vote

SUBJECT:

SOURCE: City of San Diego

DIGEST:

This bill authorizes local housing authorities to provide gap financing for development of projects in which at least 40% of housing units will be occupied by low-income individuals and at least 10% of units are affordable to, and will be occupied by, middle-income individuals.

Senate Floor Amendments of 9/5/17 limit this bill to the City of San Diego and County of Santa Clara; require gap financing provided under this bill to first be approved by the housing authority’s legislative body, after a public hearing; require a housing authority that uses gap financing pursuant to this bill to submit a specified report to the Legislature; and sunset this bill on January 1, 2022.

Senate Floor Amendments of 8/22/17 clarify that 40% of units in a project financed under this bill must be affordable to low-income individuals.

ANALYSIS: Existing federal law establishes public housing to provide decent and safe rental housing for eligible low-income families, seniors, and individuals with disabilities. The U.S. Department of Housing and Urban Development (HUD) administers federal aid to local housing authorities that manage public housing for low-income residents at affordable rents. Housing authorities determine an applicant’s eligibility for public housing based on income limits developed by HUD. HUD sets income limits as a percentage of the median income for the county or metropolitan area (area median income, or AMI) as follows:

1. Extremely low-income: 0-30% AMI
2. Very low-income: 31-50% AMI
3. Low-income: 51-80% AMI
4. Moderate income: 81-120% AMI
5. Above moderate income: 121% AMI and above

Existing state law requires a housing authority to rent or lease only to low-income individuals and “to provide safe and sanitary accommodations to the occupants, without overcrowding.” At least 20% of all units in housing projects assisted by a housing authority must be available for occupancy on a priority basis to low-income individuals (up to 80% AMI).

This bill:

1. Authorizes a housing authority in the City of San Diego or Santa Clara County to implement a pilot program to develop and provide gap financing for a middle-income housing project, defined as one in which at least 40% of units are designated low-income (up to 80% AMI) and at least 10% of units are designated middle-income (up to 150% AMI).
2. Prohibits a housing authority from using public funds to provide gap financing for market-rate units.
3. Defines “gap financing” as a loan from a housing authority to fund the remaining cost of development of a middle-income housing project after other funds have been secured, including but not limited to bond funds, tax credits, conventional loans, or other private and public lands.
4. Requires any gap financing to first be approved by the housing authority’s legislative body by resolution after a public hearing that is noticed in accordance with existing law. Requires the resolution to include a finding that gap financing will provide housing for low- and middle-income individuals.
5. Requires the housing authority, on or before January 1, 2020 and January 1, 2022, to submit a report to the Legislature that includes the following information for each year during which the housing authority implemented a pilot program pursuant to this bill:
   1. The number of housing units produced using gap financing.
   2. The amount of gap financing per regulated unit.
   3. The levels of affordability of the units produced using gap financing.
   4. The term of affordability for the units produced using gap financing.
6. Provides that this bill shall sunset on January 1, 2022.

Comments

1. Purpose. The author states that California’s longstanding housing crisis has led the state to become one of the least affordable places to live in the nation. According to the State Department of Housing and Community Development, California families are facing a harder time finding a place to live now than at any other time in history. More than 1.5 million California households spend over half of their monthly income on rent. This has led to overcrowding and housing instability. This bill takes steps to promote production of middle-income housing and relieve housing crisis pressure by authorizing a housing authority to develop and fund middle-income housing projects.
2. No changes to existing restrictions on public funds. This bill allows local housing authorities to provide assistance for middle-income housing up to 150% AMI. Since most federal and state housing funds are capped at 80% AMI, local authorities would not be able to use those funds for purposes of this bill. Instead, the sponsor of this bill, the City of San Diego, envisions funding from “unrestricted” sources such as grants, donations, and local general fund monies. For example, the San Diego Housing Commission derives revenue from the net operating income from the 160 properties the commission owns and operates.
3. Taking funds from low-income units? By allowing local housing authorities to help finance units of up to 150% AMI, this bill potentially decreases funding for low-income housing units. To help address this concern, this bill requires at least 40% of the units in a development funded by a housing authority to be low-income (80% AMI). The author states that this bill will allow housing authorities to leverage funding to help build projects that may not otherwise get built because of funding issues, and to spur growth of not only low-income units, but of “missing” middle-income units. The City of San Diego recently established a Transit Oriented Development Fund “to supplement traditional sources of gap financing for the creation and preservation of affordable housing.” This bill will enable the San Diego Housing Commission to help provide financing to achieve these goals.
4. Setting a new precedent? Historically, the primary purpose of public housing authorities has been to serve low- and very low-income households. The author notes that existing state law authorizes local housing authorities to finance and develop single-family housing up to 150% AMI, and to own mixed-income housing developments in certain circumstances. However, existing law does not specifically authorize local housing authorities to lend money to help finance the higher end portions of these developments. This bill explicitly allows local authorities to help finance middle-income housing in addition to low-income housing. To help address any concerns about setting a new precedent, this bill has been amended to make it a pilot project in one city and one county and to sunset it in 2022.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 9/6/17)

City of San Diego (source)

California Association of Housing Authorities

California Association of Realtors

California Council for Affordable Housing

San Diego County Apartment Association

San Diego Housing Commission

San Diego Regional Chamber of Commerce

OPPOSITION: (Verified 9/6/17)

None received

ARGUMENTS IN SUPPORT: The City of San Diego, sponsor of this bill, states that currently there are inadequate sources of financing available to encourage developers to develop, construct, and operate a sufficient number of mixed income projects to provide for a continuum of housing at various income levels. This bill will provide a tool to incentivize the development of housing stock that can meet the needs of our working families and middle class.

ASSEMBLY FLOOR: 76-0, 5/22/17

AYES: Acosta, Aguiar-Curry, Travis Allen, Arambula, Baker, Berman, Bigelow, Bloom, Bocanegra, Brough, Burke, Caballero, Calderon, Cervantes, Chau, Chávez, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Dababneh, Dahle, Daly, Eggman, Flora, Fong, Frazier, Friedman, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gomez, Gonzalez Fletcher, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Obernolte, O'Donnell, Patterson, Quirk, Quirk-Silva, Reyes, Ridley-Thomas, Rodriguez, Rubio, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Voepel, Waldron, Weber, Wood, Rendon

NO VOTE RECORDED: Bonta, Chen, Harper, Nazarian

Prepared by:

9/6/17 16:02:25

**** END ****

 THIRD READING  

Bill No: AB 1637

Author:

:

Vote:

SENATE TRANS. & HOUSING COMMITTEE: 12-0, 7/18/17

AYES: Beall, Cannella, Allen, Atkins, Gaines, McGuire, Morrell, Roth, Skinner, Vidak, Wieckowski, Wiener

NO VOTE RECORDED: Mendoza

ASSEMBLY FLOOR: 76-0, 5/22/17 - See last page for vote

SUBJECT:

SOURCE: City of San Diego

DIGEST:

This bill authorizes local housing authorities to provide gap financing for development of projects in which at least 40% of housing units will be occupied by low-income individuals and at least 10% of units are affordable to, and will be occupied by, middle-income individuals.

Senate Floor Amendments of 8/22/17 clarify that 40% of units in a project financed under this bill must be affordable to low-income individuals.

ANALYSIS: Existing federal law establishes public housing to provide decent and safe rental housing for eligible low-income families, seniors, and individuals with disabilities. The U.S. Department of Housing and Urban Development (HUD) administers federal aid to local housing authorities that manage public housing for low-income residents at affordable rents. Housing authorities determine an applicant’s eligibility for public housing based on income limits developed by HUD. HUD sets income limits as a percentage of the median income for the county or metropolitan area (area median income, or AMI) as follows:

• Extremely low-income: 0-30% AMI
• Very low-income: 31-50% AMI
• Low-income: 51-80% AMI
• Moderate income: 81-120% AMI
• Above moderate income: 121% AMI and above

Existing state law requires a housing authority to rent or lease only to low-income individuals and “to provide safe and sanitary accommodations to the occupants, without overcrowding.” At least 20% of all units in housing projects assisted by a housing authority must be available for occupancy on a priority basis to low-income individuals (up to 80% AMI).

This bill:

1. Authorizes a housing authority to develop and provide gap financing for a middle-income housing project, defined as one in which at least 40% of units are designated low-income (up to 80% AMI) and at least 10% of units are designated middle-income (up to 150% AMI).
2. Prohibits a housing authority from using public funds to provide gap financing for market-rate units.
3. Defines “gap financing” as a loan from a housing authority to fund the remaining cost of development of a middle-income housing project after other funds have been secured, including but not limited to bond funds, tax credits, conventional loans, or other private and public lands.

Comments

1. Purpose. The author states that California’s longstanding housing crisis has led the state to become one of the least affordable places to live in the nation. According to the State Department of Housing and Community Development, California families are facing a harder time finding a place to live now than at any other time in history. More than 1.5 million California households spend over half of their monthly income on rent. This has led to overcrowding and housing instability. This bill takes steps to promote production of middle-income housing and relieve housing crisis pressure by authorizing a housing authority to develop and fund middle-income housing projects.
2. No changes to existing restrictions on public funds. This bill allows local housing authorities to provide assistance for middle-income housing up to 150% AMI. Since most federal and state housing funds are capped at 80% AMI, local authorities would not be able to use those funds for purposes of this bill. Instead, the sponsor of this bill, the City of San Diego, envisions funding from “unrestricted” sources such as grants, donations, and local general fund monies. For example, the San Diego Housing Commission derives revenue from the net operating income from the 160 properties the commission owns and operates.
3. Taking funds from low-income units? By allowing local housing authorities to help finance units of up to 150% AMI, this bill potentially decreases funding for low-income housing units. To help address this concern, this bill requires at least 40% of the units in a development funded by a housing authority to be low-income (80% AMI). The author states that this bill will allow housing authorities to leverage funding to help build projects that may not otherwise get built because of funding issues, and to spur growth of not only low-income units, but of “missing” middle-income units. The City of San Diego recently established a Transit Oriented Development Fund “to supplement traditional sources of gap financing for the creation and preservation of affordable housing.” This bill will enable the San Diego Housing Commission to help provide financing to achieve these goals.
4. Setting a new precedent? Historically, the primary purpose of public housing authorities has been to serve low- and very low-income households. The author notes that existing state law authorizes local housing authorities to finance and develop single-family housing up to 150% AMI, and to own mixed-income housing developments in certain circumstances. However, existing law does not specifically authorize local housing authorities to lend money to help finance the higher end portions of these developments. This bill explicitly allows local authorities to help finance middle-income housing in addition to low-income housing.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 8/23/17)

City of San Diego (source)

California Association of Housing Authorities

California Association of Realtors

California Council for Affordable Housing

San Diego County Apartment Association

San Diego Housing Commission

San Diego Regional Chamber of Commerce

OPPOSITION: (Verified 8/23/17)

None received

ARGUMENTS IN SUPPORT: The City of San Diego, sponsor of this bill, states that currently there are inadequate sources of financing available to encourage developers to develop, construct, and operate a sufficient number of mixed income projects to provide for a continuum of housing at various income levels. This bill will provide a tool to incentivize the development of housing stock that can meet the needs of our working families and middle class.

ASSEMBLY FLOOR: 76-0, 5/22/17

AYES: Acosta, Aguiar-Curry, Travis Allen, Arambula, Baker, Berman, Bigelow, Bloom, Bocanegra, Brough, Burke, Caballero, Calderon, Cervantes, Chau, Chávez, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Dababneh, Dahle, Daly, Eggman, Flora, Fong, Frazier, Friedman, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gomez, Gonzalez Fletcher, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Obernolte, O'Donnell, Patterson, Quirk, Quirk-Silva, Reyes, Ridley-Thomas, Rodriguez, Rubio, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Voepel, Waldron, Weber, Wood, Rendon

NO VOTE RECORDED: Bonta, Chen, Harper, Nazarian

Prepared by:

8/23/17 10:56:45

**** END ****

 THIRD READING 

Bill No: AB 1637

Author:

:

Vote:

SENATE TRANS. & HOUSING COMMITTEE: 12-0, 7/18/17

AYES: Beall, Cannella, Allen, Atkins, Gaines, McGuire, Morrell, Roth, Skinner, Vidak, Wieckowski, Wiener

NO VOTE RECORDED: Mendoza

ASSEMBLY FLOOR: 76-0, 5/22/17 - See last page for vote

SUBJECT:

SOURCE: City of San Diego

DIGEST:

This bill authorizes local housing authorities to provide gap financing for development of projects in which at least 40% of housing units are designated as low-income and at least 10% of units are designated as middle-income.

ANALYSIS: Existing federal law establishes public housing to provide decent and safe rental housing for eligible low-income families, seniors, and individuals with disabilities. The U.S. Department of Housing and Urban Development (HUD) administers federal aid to local housing authorities that manage public housing for low-income residents at affordable rents. Housing authorities determine an applicant’s eligibility for public housing based on income limits developed by HUD. HUD sets income limits as a percentage of the median income for the county or metropolitan area (area median income, or AMI) as follows:

• Extremely low-income: 0-30% AMI
• Very low-income: 31-50% AMI
• Low-income: 51-80% AMI
• Moderate income: 81-120% AMI
• Above moderate income: 121% AMI and above

Existing state law requires a housing authority to rent or lease only to low-income individuals and “to provide safe and sanitary accommodations to the occupants, without overcrowding.” At least 20% of all units in housing projects assisted by a housing authority must be available for occupancy on a priority basis to low-income individuals (up to 80% AMI).

This bill:

1. Authorizes a housing authority to develop and provide gap financing for a middle-income housing project, defined as one in which at least 40% of units are designated low-income (up to 80% AMI) and at least 10% of units are designated middle-income (up to 150% AMI).
2. Prohibits a housing authority from using public funds to provide gap financing for market-rate units.
3. Defines “gap financing” as a loan from a housing authority to fund the remaining cost of development of a middle-income housing project after other funds have been secured, including but not limited to bond funds, tax credits, conventional loans, or other private and public lands.

Comments

1. Purpose. The author states that California’s longstanding housing crisis has led the state to become one of the least affordable places to live in the nation. According to the State Department of Housing and Community Development, California families are facing a harder time finding a place to live now than at any other time in history. More than 1.5 million California households spend over half of their monthly income on rent. This has led to overcrowding and housing instability. This bill takes steps to promote production of middle-income housing and relieve housing crisis pressure by authorizing a housing authority to develop and fund middle-income housing projects.
2. No changes to existing restrictions on public funds. This bill allows local housing authorities to provide assistance for middle-income housing up to 150% AMI. Since most federal and state housing funds are capped at 80% AMI, local authorities would not be able to use those funds for purposes of this bill. Instead, the sponsor of this bill, the City of San Diego, envisions funding from “unrestricted” sources such as grants, donations, and local general fund monies. For example, the San Diego Housing Commission derives revenue from the net operating income from the 160 properties the commission owns and operates.
3. Taking funds from low-income units? By allowing local housing authorities to help finance units of up to 150% AMI, this bill potentially decreases funding for low-income housing units. To help address this concern, this bill requires at least 40% of the units in a development funded by a housing authority to be low-income (80% AMI). The author states that this bill will allow housing authorities to leverage funding to help build projects that may not otherwise get built because of funding issues, and to spur growth of not only low-income units, but of “missing” middle-income units. The City of San Diego recently established a Transit Oriented Development Fund “to supplement traditional sources of gap financing for the creation and preservation of affordable housing.” This bill will enable the San Diego Housing Commission to help provide financing to achieve these goals.
4. Setting a new precedent? Historically, the primary purpose of public housing authorities has been to serve low- and very low-income households. The author notes that existing state law authorizes local housing authorities to finance and develop single-family housing up to 150% AMI, and to own mixed-income housing developments in certain circumstances. However, existing law does not specifically authorize local housing authorities to lend money to help finance the higher end portions of these developments. This bill explicitly allows local authorities to help finance middle-income housing in addition to low-income housing.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 7/20/17)

City of San Diego (source)

California Association of Housing Authorities

California Association of Realtors

California Council for Affordable Housing

San Diego County Apartment Association

San Diego Housing Commission

San Diego Regional Chamber of Commerce

OPPOSITION: (Verified 7/18/17)

None received

ARGUMENTS IN SUPPORT: The City of San Diego, sponsor of this bill, states that currently there are inadequate sources of financing available to encourage developers to develop, construct, and operate a sufficient number of mixed income projects to provide for a continuum of housing at various income levels. This bill will provide a tool to incentivize the development of housing stock that can meet the needs of our working families and middle class.

ASSEMBLY FLOOR: 76-0, 5/22/17

AYES: Acosta, Aguiar-Curry, Travis Allen, Arambula, Baker, Berman, Bigelow, Bloom, Bocanegra, Brough, Burke, Caballero, Calderon, Cervantes, Chau, Chávez, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Dababneh, Dahle, Daly, Eggman, Flora, Fong, Frazier, Friedman, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gomez, Gonzalez Fletcher, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Obernolte, O'Donnell, Patterson, Quirk, Quirk-Silva, Reyes, Ridley-Thomas, Rodriguez, Rubio, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Voepel, Waldron, Weber, Wood, Rendon

NO VOTE RECORDED: Bonta, Chen, Harper, Nazarian

Prepared by:

8/22/17 10:42:26

**** END ****

 CONSENT  

Bill No: AB 1637

Author:

:

Vote:

SENATE TRANS. & HOUSING COMMITTEE: 12-0, 7/18/17

AYES: Beall, Cannella, Allen, Atkins, Gaines, McGuire, Morrell, Roth, Skinner, Vidak, Wieckowski, Wiener

NO VOTE RECORDED: Mendoza

ASSEMBLY FLOOR: 76-0, 5/22/17 - See last page for vote

SUBJECT:

SOURCE: City of San Diego

DIGEST:

This bill authorizes local housing authorities to provide gap financing for development of projects in which at least 40% of housing units are designated as low-income and at least 10% of units are designated as middle-income.

ANALYSIS: Existing federal law establishes public housing to provide decent and safe rental housing for eligible low-income families, seniors, and individuals with disabilities. The U.S. Department of Housing and Urban Development (HUD) administers federal aid to local housing authorities that manage public housing for low-income residents at affordable rents. Housing authorities determine an applicant’s eligibility for public housing based on income limits developed by HUD. HUD sets income limits as a percentage of the median income for the county or metropolitan area (area median income, or AMI) as follows:

• Extremely low-income: 0-30% AMI
• Very low-income: 31-50% AMI
• Low-income: 51-80% AMI
• Moderate income: 81-120% AMI
• Above moderate income: 121% AMI and above

Existing state law requires a housing authority to rent or lease only to low-income individuals and “to provide safe and sanitary accommodations to the occupants, without overcrowding.” At least 20% of all units in housing projects assisted by a housing authority must be available for occupancy on a priority basis to low-income individuals (up to 80% AMI).

This bill:

1. Authorizes a housing authority to develop and provide gap financing for a middle-income housing project, defined as one in which at least 40% of units are designated low-income (up to 80% AMI) and at least 10% of units are designated middle-income (up to 150% AMI).
2. Prohibits a housing authority from using public funds to provide gap financing for market-rate units.
3. Defines “gap financing” as a loan from a housing authority to fund the remaining cost of development of a middle-income housing project after other funds have been secured, including but not limited to bond funds, tax credits, conventional loans, or other private and public lands.

Comments

1. Purpose. The author states that California’s longstanding housing crisis has led the state to become one of the least affordable places to live in the nation. According to the State Department of Housing and Community Development, California families are facing a harder time finding a place to live now than at any other time in history. More than 1.5 million California households spend over half of their monthly income on rent. This has led to overcrowding and housing instability. This bill takes steps to promote production of middle-income housing and relieve housing crisis pressure by authorizing a housing authority to develop and fund middle-income housing projects.
2. No changes to existing restrictions on public funds. This bill allows local housing authorities to provide assistance for middle-income housing up to 150% AMI. Since most federal and state housing funds are capped at 80% AMI, local authorities would not be able to use those funds for purposes of this bill. Instead, the sponsor of this bill, the City of San Diego, envisions funding from “unrestricted” sources such as grants, donations, and local general fund monies. For example, the San Diego Housing Commission derives revenue from the net operating income from the 160 properties the commission owns and operates.
3. Taking funds from low-income units? By allowing local housing authorities to help finance units of up to 150% AMI, this bill potentially decreases funding for low-income housing units. To help address this concern, this bill requires at least 40% of the units in a development funded by a housing authority to be low-income (80% AMI). The author states that this bill will allow housing authorities to leverage funding to help build projects that may not otherwise get built because of funding issues, and to spur growth of not only low-income units, but of “missing” middle-income units. The City of San Diego recently established a Transit Oriented Development Fund “to supplement traditional sources of gap financing for the creation and preservation of affordable housing.” This bill will enable the San Diego Housing Commission to help provide financing to achieve these goals.
4. Setting a new precedent? Historically, the primary purpose of public housing authorities has been to serve low- and very low-income households. The author notes that existing state law authorizes local housing authorities to finance and develop single-family housing up to 150% AMI, and to own mixed-income housing developments in certain circumstances. However, existing law does not specifically authorize local housing authorities to lend money to help finance the higher end portions of these developments. This bill explicitly allows local authorities to help finance middle-income housing in addition to low-income housing.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 7/20/17)

City of San Diego (source)

California Association of Housing Authorities

California Association of Realtors

California Council for Affordable Housing

San Diego County Apartment Association

San Diego Housing Commission

San Diego Regional Chamber of Commerce

OPPOSITION: (Verified 7/18/17)

None received

ARGUMENTS IN SUPPORT: The City of San Diego, sponsor of this bill, states that currently there are inadequate sources of financing available to encourage developers to develop, construct, and operate a sufficient number of mixed income projects to provide for a continuum of housing at various income levels. This bill will provide a tool to incentivize the development of housing stock that can meet the needs of our working families and middle class.

ASSEMBLY FLOOR: 76-0, 5/22/17

AYES: Acosta, Aguiar-Curry, Travis Allen, Arambula, Baker, Berman, Bigelow, Bloom, Bocanegra, Brough, Burke, Caballero, Calderon, Cervantes, Chau, Chávez, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Dababneh, Dahle, Daly, Eggman, Flora, Fong, Frazier, Friedman, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gomez, Gonzalez Fletcher, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Obernolte, O'Donnell, Patterson, Quirk, Quirk-Silva, Reyes, Ridley-Thomas, Rodriguez, Rubio, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Voepel, Waldron, Weber, Wood, Rendon

NO VOTE RECORDED: Bonta, Chen, Harper, Nazarian

Prepared by:

7/20/17 11:14:18

**** END ****

SENATE COMMITTEE ON TRANSPORTATION AND HOUSING

Senator Jim Beall, Chair

2017 - 2018 Regular

Bill No: AB 1637 Hearing Date: 7/18/2017

SUBJECT: Local housing authority: middle-income housing projects

DIGEST: This bill authorizes local housing authorities to provide gap financing for development of projects in which at least 40% of housing units are designated as low-income and at least 10% of units are designated as middle-income.

ANALYSIS:

Existing federal law establishes public housing to provide decent and safe rental housing for eligible low-income families, seniors, and individuals with disabilities. The U.S. Department of Housing and Urban Development (HUD) administers federal aid to local housing authorities that manage public housing for low-income residents at affordable rents.

Housing authorities determine an applicant’s eligibility for public housing based on income limits developed by HUD. HUD sets income limits as a percentage of the median income for the county or metropolitan area (area median income, or AMI) as follows:

1. Extremely low-income: 0-30% AMI
2. Very low-income: 31-50% AMI
3. Low-income: 51-80% AMI
4. Moderate income: 81-120% AMI
5. Above moderate income: 121% AMI and above

Existing state law requires a housing authority to rent or lease only to low-income individuals and “to provide safe and sanitary accommodations to the occupants, without overcrowding.” At least 20% of all units in housing projects assisted by a housing authority must be available for occupancy on a priority basis to low-income individuals (up to 80% AMI).

This bill:

1. Authorizes a housing authority to develop and provide gap financing for a middle-income housing project, defined as one in which at least 40% of units are designated low-income (up to 80% AMI) and at least 10% of units are designated middle-income (up to 150% AMI).
2. Prohibits a housing authority from using public funds to provide gap financing for market-rate units.
3. Defines “gap financing” as a loan from a housing authority to fund the remaining cost of development of a middle-income housing project after other funds have been secured, including but not limited to bond funds, tax credits, conventional loans, or other private and public lands.

COMMENTS:

1. Purpose. The author states that California’s longstanding housing crisis has led the state to become one of the least affordable places to live in the nation. According to the state Department of Housing and Community Development, California families are facing a harder time finding a place to live now than at any other time in history. More than 1.5 million California households spend over half of their monthly income on rent. This has led to overcrowding and housing instability. This bill takes steps to promote production of middle-income housing and relieve housing crisis pressure by authorizing a housing authority to develop and fund middle-income housing projects.
2. No changes to existing restrictions on public funds. This bill allows local housing authorities to provide assistance for middle-income housing up to 150% AMI. Since most federal and state housing funds are capped at 80% AMI, local authorities would not be able to use those funds for purposes of this bill. Instead, the sponsor of this bill, the City of San Diego, envisions funding from “unrestricted” sources such as grants, donations, and local general fund monies. For example, the San Diego Housing Commission derives revenue from the net operating income from the 160 properties the commission owns and operates.
3. Taking funds from low-income units? By allowing local housing authorities to help finance units of up to 150% AMI, this bill potentially decreases funding for low-income housing units. To help address this concern, this bill requires at least 40% of the units in a development funded by a housing authority to be low-income (80% AMI). The author states that this bill will allow housing authorities to leverage funding to help build projects that may not otherwise get built because of funding issues, and to spur growth of not only low-income units, but of “missing” middle-income units. The City of San Diego recently established a Transit Oriented Development Fund “to supplement traditional sources of gap financing for the creation and preservation of affordable housing.” This bill would enable the San Diego Housing Commission to help provide financing to achieve these goals.
4. Setting a new precedent? Historically, the primary purpose of public housing authorities has been to serve low- and very low-income households. The author notes that existing state law authorizes local housing authorities to finance and develop single-family housing up to 150% AMI, and to own mixed-income housing developments in certain circumstances. However, existing law does not specifically authorize local housing authorities to lend money to help finance the higher end portions of these developments. This bill would explicitly allow local authorities to help finance middle-income housing in addition to low-income housing.

Assembly Votes

Floor: 76-0

H&CD: 7-0

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

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

July 12, 2017)

SUPPORT:

City of San Diego (sponsor)

California Association of Housing Authorities

California Council for Affordable Housing

California Association of Realtors

San Diego Housing Commission

San Diego Regional Chamber of Commerce

OPPOSITION:

None received.

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 1637

Author:(Gloria)

As Amended Ver:May 15, 2017

Majority vote

SUMMARY: Allows housing authorities to develop or finance mixed-income housing projects in which 40% of the units are limited to households whose income does not exceed 80% of area median income (AMI). Specifically, this bill:

1. Allows housing authorities to develop or finance mixed-income housing projects in which 40% of the units are limited to households whose income does not exceed 80% of AMI and as follows:
2. Funds received from bonds shall only be used to finance units occupied by low income persons;
3. Units occupied by persons and families of low income may be financed with financial or other assistance from any public or private source;
4. Prohibits the use of bond funds or finance or other assistance from any public source to finance units occupied at market-rate rents.
5. Defines "persons of low income" to mean persons and families whose income does not exceed 80% of the AMI.
6. Defines "persons and families of middle income" to mean persons and families whose income does not exceed 150% of AMI.

EXISTING LAW:

1. Allows a housing authority to do all of the following:
   1. Prepare, carry out, acquire, lease, and operate housing projects for low income persons;
   2. Provide for the construction, reconstruction, improvement, alteration or development of all or a part of a housing development;
   3. Provide financing for the acquisition, construction, rehabilitation, refinancing, or development of dwelling accommodations for low income persons;
   4. Provide counselling, referral, and advisory services to persons and families that are low or moderate income in connection with purchasing, renting, occupying, maintaining, or repairing housing;
2. Provide security necessary to a project and its inhabitants;
3. Assist housing projects with financing pursuant to Health and Safety Code Section 34312.3. (Health and Safety Code Section 34312).
4. Allows a housing authority to accept financial or other assistance from any public or private source and expend any funds received for the purposes allowed under state law including leased housing (Health and Safety Code Section 34315.3).
5. Requires that not less than 20% of the units financed by a housing authority must be available for occupancy on a priority basis to persons with an income of 80% or less of AMI (Health and Safety Code Section 34312.3).

FISCAL EFFECT: None.

COMMENTS:

Background: In the 1930s, the federal government authorized the creation of housing authorities to develop and manage public housing and complete urban renewal. Housing authorities are also responsible for administering Section 8 vouchers. In the late 1990s, a small number of housing authorities were designated "Move to Work" agencies – an attempt to provide greater opportunities to create and test locally-designed strategies to increase efficiency, help residents find employment that could lead to self-sufficiency, and increase housing choices for low income families. These agencies were given exemptions from many existing public housing and voucher rules and more flexibility in the use of federal funds. After the dissolution of redevelopment agencies (RDA), many housing authorities took over the assets of the former RDAs and responsibility for monitoring those assets.

Housing authorities can issue tax-exempt revenue bonds to finance the acquisition, construction, rehabilitation, refinance, or development of multi-family rental housing. The amount of state tax- exempt bonds that can be issued in the state is capped. Bonding capacity is allocated to local agencies by the California Tax Credit Allocation Committee (CDLAC). Tax-exempt bonds require that 20% of the units in a development be limited to households at 50% or less of AMI. The remaining units could be of any income, including market rate. Housing authorities cannot lend on any portion of a rental housing development with affordability levels of more than 80% of AMI. Housing authorities have explicit authority in state law to finance for-sale units up to 150% of AMI.

This bill would authorize a housing authority to develop and finance mixed-income developments where 40% of the units are restricted to persons making 80% or less of AMI. Housing authorities could use financial assistance from any public or private source to financed units for middle income households – households with incomes that do not exceed 150% of AMI.

Purpose of this bill: According to the author, "For years California has been unable to produce enough housing to meet the needs of its growing population. Insufficient supply has been driving up the cost of housing across the state and more acutely in major metropolitan areas. The cost to buy or rent in areas like Los Angeles, San Diego, and San Francisco has become prohibitively expensive. At the same time, the units that are being produced are almost entirely being built for the top of the market while a small share are being built to meet affordable housing needs. Almost entirely missing from new development is housing stock aimed at the entry level market. In order to fill the missing middle, the state needs a tool to incentivize the development of housing stock that can meet the needs of our working families and middle class." The author has stated the intent of bill is to provide "gap financing to developers who want to build mixed-income projects and lend on projects where incomes exceed 80% of AMI."

Source of funding: The sponsor, the City of San Diego, has indicated their intent is to use unrestricted local funds generated from transit-oriented development fees and general fund dollars to provide construction loans on rental units that fall between 80% and 150% of AMI. Under existing law, housing authorities can finance projects that are mixed-income provided that 20% of the units are limited to 80% of AMI or less. Housing authorities can accept financial or other assistance from any public or private source and spend those funds for the purpose and activities allowed under state law. The City of San Diego has an existing inclusionary housing ordinance that requires in lieu fees to go toward units serving households at or below 65% of AMI. Tax-exempt multifamily housing bonds are limited to financing projects in which 20% of the units are limited to households making 50% or less of AMI. In light of existing law, the committee may wish to limit the bill to allow housing authorities to use funds it receives from other sources, other than bonds, to finance units for middle income households.

Purpose of housing authorities: Historically, the primary purpose of housing authorities has been to serve low and very-low income households. According to data produced by the San Diego Housing Commission and the San Diego Association of Governments, 49% of all very low income families in San Diego County pay more than 50% of their income toward rent. This bill would expand that purpose to financing rental units up to 150% of AMI and could potentially result in the housing authority subsidizing market rate units. The median income in San Diego County is $79,300; at 150% of AMI a household earning $119,000 could qualify for a subsidized unit. At an affordable housing cost, a family would be limited to paying 30% of their income toward rent or $2,927 per month. The average rent for a two-bedroom apartment in San Diego County is $1,800. State law defines households of low and moderate income as those making 120% or less of AMI.

Analysis Prepared by: Lisa Engel / H. & C.D. / (916) 319-2085 FN: 0000431

Date of Hearing: May 10, 2017

ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT

David Chiu, Chair

ABPCA Bill Id:AB 1637 (

Author:Gloria) – As Amended Ver:May 3, 2017

SUBJECT: Local housing authority: mixed-income housing projects

SUMMARY: Authorizes a housing authority to finance mixed-income housing developments that include rental housing units for households whose income is 150% of area median income (AMI) or less. Specifically, this bill:

1. Makes legislative findings and declarations.
2. Allows a housing authority to develop, operate, and provide financing for mixed-income housing projects.
3. Allows a housing authority to exercise any or all powers granted to the authority by existing law to develop mixed-income housing.
4. Defines "persons of workforce income" to mean persons and households whose income is 150% or less of AMI.
5. Defines "persons of low income" to mean persons and households whose income is 80% or less of AMI.
6. Defines "mixed income housing project" to mean a project to which both of the following apply:
7. At least 20% of the units, except for the manager's unit, are affordable to, and occupied by persons of low income; and
8. The project includes workforce housing.
9. Defines "workforce housing" to means units affordable to, and occupied by, persons of workforce income.

EXISTING LAW:

1. Allows a housing authority to do all of the following:
2. Prepare, carry out, acquire, lease, and operate housing projects for low income persons;
3. Provide for the construction, reconstruction, improvement, alteration or development of all or a part of a housing development;
4. Provide financing for the acquisition, construction, rehabilitation, refinancing, or development of dwelling accommodations for low income persons;
5. Provide counselling, referral, and advisory services to persons and families that are low or moderate income in connection with purchasing, renting, occupying, maintaining, or repairing housing;
6. Provide security necessary to a project and its inhabitants;
7. Assist housing projects with financing pursuant to Health and Safety Code Section 34312.3. (Health and Safety Code Section 34312).
8. Allows a housing authority to accept financial or other assistance from any public or private source and expend any funds received for the purposes allowed under state law including leased housing (Health and Safety Code Section 34315.3).
9. Requires that not less than 20% of the units financed by a housing authority must be available for occupancy on a priority basis to persons with an income of 80% or less of AMI (Health and Safety Code Section 34312.3).

FISCAL EFFECT: None.

COMMENTS:

Background:

In the 1930s, the federal government authorized the creation of housing authorities to develop and manage public housing and complete urban renewal. Housing authorities are also responsible for administering Section 8 vouchers. In the late 1990s, a small number of housing authorities were designated “Move to Work” agencies – an attempt to provide greater opportunities to create and test locally-designed strategies to increase efficiency, help residents find employment that could lead to self-sufficiency, and increase housing choices for low income families. These agencies were given exemptions from many existing public housing and voucher rules and more flexibility in the use of federal funds. After the dissolution of redevelopment agencies (RDA), many housing authorities took over the assets of the former RDAs and responsibility for monitoring those assets.

Housing authorities can issue tax-exempt revenue bonds to finance the acquisition, construction, rehabilitation, refinance, or development of multi-family rental housing. The amount of state tax- exempt bonds that can be issued in the state is capped. Bonding capacity is allocated to local agencies by the California Tax Credit Allocation Committee (CDLAC). Tax-exempt bonds require that 20% of the units in a development be limited to households at 50% or less of AMI. The remaining units could be of any income, including market rate. Housing authorities cannot lend on any portion of a rental housing development with affordability levels of more than 80% of AMI. Housing authorities have explicit authority in state law to finance for-sale units up to 150% of AMI.

This bill would authorize a housing authority to operate, develop, or finance mixed-income developments where 20% of the units are restricted to persons making 80% or less of AMI and the remaining units would include "workforce housing." Workforce housing is not defined but the bill does include a definition of "persons of workforce income" as persons and households with an income of 150% or less of AMI.

Purpose of this bill: According to the author, "For years California has been unable to produce enough housing to meet the needs of its growing population. Insufficient supply has been driving up the cost of housing across the state and more acutely in major metropolitan areas. The cost to buy or rent in areas like Los Angeles, San Diego, and San Francisco has become prohibitively expensive. At the same time, the units that are being produced are almost entirely being built for the top of the market while a small share are being built to meet affordable housing needs. Almost entirely missing from new development is housing stock aimed at the entry level market. In order to fill the missing middle, the state needs a tool to incentivize the development of housing stock that can meet the needs of our working families and middle class." The author has stated the intent of bill is to provide "gap financing to developers who want to build mixed-income projects and lend on projects where incomes exceed 80% of AMI."

Source of funding: The sponsor, the City of San Diego, has indicated their intent is to use unrestricted local funds generated from transit-oriented development fees and general fund dollars to provide construction loans on rental units that fall between 80% and 150% of AMI.   Under existing law, housing authorities can finance projects that are mixed-income provided that 20% of the units are limited to 80% of AMI or less. Housing authorities can accept financial or other assistance from any public or private source and spend those funds for the purpose and activities allowed under state law. The City of San Diego has an existing inclusionary housing ordinance that requires in lieu fees to go toward units serving households at or below 65% of AMI. Tax-exempt multifamily housing bonds are limited to financing projects in which 20% of the units are limited to households making 50% or less of AMI. In light of existing law, the committee may wish to limit the bill to allow housing authorities to use funds it receives from other sources, other than bonds, to finance units for middle income households. 

Purpose of housing authorities: Historically, the primary purpose of housing authorities has been to serve low and very-low income households. According to data produced by the San Diego Housing Commission and the San Diego Association of Governments, 49% of all very low income families in San Diego County pay more than 50% of their income toward rent. This bill would expand that purpose to financing rental units up to 150% of AMI and could potentially result in the housing authority subsidizing market rate units. The median income in San Diego County is $79,300; at 150% of AMI a household earning $119,000 could qualify for a subsidized unit. At an affordable housing cost, a family would be limited to paying 30% of their income toward rent or $2,927 per month. The average rent for a two-bedroom apartment in San Diego County is $1,800. State law defines households of low and moderate income as those making 120% or less of AMI. The committee may wish to consider limiting the bill to household with incomes of 120% or less of AMI.

Committee amendments: The committee may wish to consider amendments to narrow the scope of the bill to allow housing authorities to use financial assistance from public or private sources to finance units in a development up to 120% of AMI where 20% of the units in the development are limited to 80% of AMI and below.

REGISTERED SUPPORT / OPPOSITION:

Support

City of San Diego (Sponsor)

Opposition

None on file

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