Existing law establishes the Department of Housing and Community Development (HCD) and requires it to administer various housing programs.

This bill would require HCD to administer a program to provide financing assistance, as specified, to a qualified school district, as defined, and to a qualified developer, as defined, for the creation of affordable rental housing for school employees, as defined. The bill would require a qualified school district and a qualified developer to apply for this financing assistance. The bill would require the State Department of Education and HCD to certify that a school district seeking a grant meets the definition of qualified school district, as provided. The bill would create in the State Treasury the California School Employee Housing Assistance Fund and make implementation of its provisions subject to appropriation by the Legislature for that purpose.

Existing law establishes the Department of Housing and Community Development (HCD) and requires it to administer various housing programs.

This bill would require HCD to administer a program to provide financing assistance, as specified, to a qualified school district, as defined, and to a qualified developer, as defined, for the creation of affordable rental housing for school employees, as defined. The bill would require a qualified school district and a qualified developer to apply for this financing assistance. The bill would require the State Department of Education and HCD to certify that a school district seeking a grant meets the definition of qualified school district, as provided. The bill would create in the State Treasury the California School Employee Housing Assistance Fund and make implementation of its provisions subject to the enactment of an appropriation of up to $25,000,000 by the Legislature for that purpose.

Existing law requires the California Housing Finance Agency establishes the Department of Housing and Community Development (HCD) and requires it to administer various housing programs.

This bill would require the California Housing Finance Agency HCD to administer a program to provide financing assistance, as specified, to a qualified school district, as defined, and to a qualified developer, as defined, for the creation of affordable rental housing for school employees, including teachers. as defined. The bill would require a qualified school district and a qualified developer to apply for this financing assistance. The bill would require the State Department of Education and HCD to certify that a school district seeking a grant meets the definition of qualified school district, as provided. The bill would create in the State Treasury the California School Employee Housing Assistance fund. The bill would Fund and make implementation of its provisions subject to the enactment of an appropriation of up to $25,000,000 for that purpose.

Existing law requires the California Housing Finance Agency to administer various housing programs.

This bill would require the California Housing Finance Agency to administer a program to provide financing assistance, as specified, to a qualified school district, as defined, and to a qualified developer, as defined, for the creation of affordable rental housing for school employees, including teachers. The bill would require a qualified school district and a qualified developer to apply for this financing assistance. The bill would require the State Department of Education to certify that a school district seeking a grant meets the definition of qualified school district, as provided. The bill would transfer $100,000,000 from the General Fund to create in the State Treasury the California School Employee Housing Assistance Fund, which this bill would create, and would appropriate those moneys to the agency for the purposes described above and to reimburse the agency and the State Department of Education for costs incurred in the administration of the program. This bill would state that funds appropriated by this bill would not be applied toward the minimum funding requirements for school districts and community college districts imposed by Section 8 of Article XVI of the California Constitution. The bill would require qualified school districts and qualified developers to apply for the financing assistance, as provided. fund. The bill would make implementation of its provisions subject to the enactment of an appropriation of up to $25,000,000 for that purpose.

Existing law requires the California Housing Finance Agency to administer various housing programs.

This bill would require the California Housing Finance Agency to administer a program to provide financing assistance, as specified, to a qualified school district, as defined, and to a qualified developer, as defined, for the creation of affordable rental housing for school employees, including teachers. The bill would require the State Department of Education to certify that a school district seeking a grant meets the definition of qualified school district, as provided. The bill would transfer $100,000,000 from the General Fund to the California School Employee Housing Assistance Fund, which this bill would create, and would appropriate those moneys to the agency for the purposes described above and to reimburse the agency and the State Department of Education for costs incurred in the administration of the program. This bill would state that funds appropriated by this bill would not be applied toward the minimum funding requirements for school districts and community college districts imposed by Section 8 of Article XVI of the California Constitution. The bill would require qualified school districts and qualified developers to apply for the financing assistance, as provided.

Existing law requires the California Housing Finance Agency to administer various housing programs.

This bill would require the California Housing Finance Agency to administer a program to provide financing assistance, as specified, to a qualified school district, as defined, and to a qualified developer, as defined, for the creation of affordable rental housing for school employees, including teachers. The bill would require the State Department of Education to certify that a school district seeking a grant meets the definition of qualified school district. district, as provided. The bill would transfer $100,000,000 from the General Fund to the California School Employee Housing Assistance Fund, which this bill would create, and would appropriate those moneys to the agency for the purposes described above and to reimburse the agency and the State Department of Education for costs incurred in the administration of the program. This bill would state that funds appropriated by this bill would not be applied toward the minimum funding requirements for school districts and community college districts imposed by Section 8 of Article XVI of the California Constitution. The bill would require qualified school districts and qualified developers to apply for the financing assistance, as provided.

Existing law requires the California Housing Finance Agency to administer various housing programs.

This bill would require the California Housing Finance Agency to administer a program to provide financing assistance, as specified, to a qualified school district, as defined, and to a qualified developer, as defined, for the creation of affordable rental housing for school employees, including teachers. The bill would require the State Department of Education to certify that a school district seeking a grant meets the definition of qualified school district. The bill would transfer $100,000,000 from the General Fund to the California School Employee Housing Assistance Fund, which this bill would create, and would appropriate those moneys to the agency for the purposes described above and to reimburse the agency and the State Department of Education for costs incurred in the administration of the program. This bill would state that funds appropriated by this bill would not be applied toward the minimum funding requirements for school districts and community college districts imposed by Section 8 of Article XVI of the California Constitution. The bill would require qualified school districts and qualified developers to apply for the financing assistance, as provided.

GOVERNOR'S VETO

GV Bill Id:AB 45

Author:(Thurmond)

As Enrolled Ver:September 15, 2017

2/3 vote

Original Committee Reference: H. & C.D.

SUMMARY: Requires the Department of Housing and Community Development (HCD) to administer the California School Employee Housing Assistance Program (Program), a predevelopment grant and loan program, to fund the creation of affordable housing for school district employees, including teachers. Specifically, this bill:

1. Defines "affordable housing" to mean housing that serves persons and families that make up to 120% of the area median income (AMI).
2. Defines "qualified developer" to mean a developer that has partnered with a "qualified school district."
3. Defines "school district employee" to mean employees of a public or charter school district, including teachers located in the jurisdiction boundaries of the school district.
4. Defines "qualified school district" to mean a school district that satisfies all of the following:
5. Has acquired land from a school district, special district, or city that may be used to engage in a lease and development agreement, including but not limited to, a joint occupancy agreement for the purposes of design, construction, financing, and long-term operation of a housing development and amenities;
6. The State Department of Education has determined there is a high percentage of teachers with intern credentials, permits and waivers based on the most recent report published by the Commission on Teach Credentialing at the time that the school district submits its application; and
7. Demonstrates to the State Department of Education that any project funded by a predevelopment grant is subject to a project labor agreement and is either a public work or is subject to a legally binding requirement that prevailing wages be paid to all workers.
8. Requires a school district seeking a predevelopment loan to apply to the State Department of Education for certification as a "qualified school district."
9. Requires HCD to make predevelopment grants as follows:
10. Grants shall be awarded to qualified school districts and qualified developers in partnership;
11. Grants shall be based on the accomplishment of predevelopment milestones as determined by HCD; and
12. Priority shall be given to partnerships in which qualified school districts have 60% or more of the students participating in the National School Lunch Program.
13. Requires the affordability of units financed using predevelopment grants and loans be restricted for 55 years.
14. Limits the amount that can be used for predevelopment grants to 20% of the total amount appropriated to the Program.
15. Authorizes an unspecified amount of funding to reimburse the State Department of Education for the cost of certifying qualified school districts.
16. Requires HCD to make loans to qualified developers using a project selection process that meets the following requirements:
17. Ensures, to the extent feasible, a reasonable geographic distribution of funds;
18. The proposed project is located within a reasonable proximity to public transportation and services;
19. Development costs for the proposed project are reasonable compared to the cost of comparable projects in the area; and
20. The proposed project is feasible.
21. Provides that loans are for a term of not less than 55 years and principal and interest are due and payable upon completion of the loan. The loan shall bear simple interest at the rate of 3% per year on the unpaid principal balance.
22. Limits the loan amount per project to $10 million.
23. Provides that implementation of the program is subject to appropriation in the Budget Act or another bill.
24. Provides that appropriations made to the Program are not deemed "General Fund revenues appropriated for school districts" for the purposes of Proposition 98.

The Senate amendments:

1. Require HCD rather than the California Housing Finance Agency (CalHFA) to administer the program.
2. Delete reference to the need for a $25 million appropriation necessary to implement the program.

FISCAL EFFECT: According to the Senate Appropriations Committee:

1. General Fund cost pressures in the tens of millions annually to provide ongoing funding for the California School Employee Housing Assistance Grant Program. (General Fund)
2. HCD would incur ongoing costs in the hundreds of thousands annually to administer the program. Actual costs would depend upon the level of funding provided. For illustrative purposes, HCD estimates costs of approximately $873,000 for 6.2 Personnel Years of staff time to develop and administer a new program, assuming a one-time appropriation of $25 million. (General Fund).
3. Ongoing HCD compliance monitoring costs, initially in the low hundreds of thousands and growing over time, to the extent funding is provided for the program, which would be partially covered by residual loan payments. (California School Employee Housing Assistance Fund)
4. Ongoing CDE costs of at least $60,000 annually for staff time to certify that a school district is eligible for funding, including verification that the district has a problem recruiting and/or retaining teachers. (General Fund)

COMMENTS:

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

Voter-approved bonds have been an important source of funding to support the construction of affordable housing. Proposition 46 of 2002 and Proposition 1C of 2006 together provided $4.95 billion for affordable housing. These funds financed the construction, rehabilitation, and preservation of 57,220 affordable apartments, including 2,500 supportive homes for people experiencing homelessness, and over 11,600 shelter spaces. In addition, these funds have helped 57,290 families become or remain homeowners. Nearly all of these funds have been awarded. In addition, prior to their dissolutions, redevelopment agencies generated as much as $1.1 billion a year in local funding to support affordable housing.

HCD, the state's affordable housing bank, provides down payment assistance to qualified low- and moderate-income buyers through a loan secured on the property that is repaid when a home sells. In addition, HCD provides loans to multifamily housing developers to construct affordable housing. HCD does not receive funding from the General Fund and pays for its programs by issuing bonds which are then repaid from loan proceeds.

HCD operates a variety of programs that support the acquisition, rehabilitation and construction of affordable housing to very low-, low- and moderate-income households. The MHP provides gap financing to affordable housing developers. Developments financed using MHP or CalHFA's multi-family loans agree to provide the housing for a term of 55 years. The loans are made for 55 years at 3% interest per year on the outstanding balance of the loan. If the development cash flows it is required to pay on the outstanding debt. HCD also operates a predevelopment loan program that provides loans up to $100,000 to non-profit housing developers, local governments, housing cooperates or limited liability companies in which all the members are non-profits. The loans may be used for control, site acquisition for future low-income housing development, engineering studies, architectural plans, application fees, legal services, permits, bonding, and site preparation.

This bill would require HCD to create and administer the California School Employee Housing Assistance Program to provide both predevelopment grants and development loans to qualified school districts and developers for the creation of affordable rental housing for school employees, including teachers.

Purpose of the bill: According to the author, "there are two reasons why this bill is needed: lack of predevelopment financing and inadequate funding sources. The predevelopment process, which includes feasibility studies, entitlements, environmental impact reports, among other activities, requires funds that many cash-strapped school districts cannot cover up-front. This bill would provide funding necessary to begin development.

Furthermore, current funding for the development phase of such housing is inadequate for school districts in high-cost areas. State and federal subsidies are effectively capped at 60% Area Median Income (AMI), which for some school districts, is only slightly above the income for a starting teacher. The consequence of this threshold, as was experienced by the Los Angeles Unified School District, is that teachers in such districts would not qualify. This bill would provide the development financing needed to subsidize units above the existing threshold of 60% AMI

GOVERNOR'S VETO MESSAGE:

This bill establishes a new program under the Department of Housing and Community Development for the purpose of providing predevelopment grants and loans to developers for the creation of affordable rental housing for school district employees.

I recently signed Senate Bill 2 into law which provides an ongoing funding source for housing. In the first year, SB 2 directs 50% of the funding to be made available to local governments for planning purposes. In subsequent years, 70% of the funding is directly allocated to local governments so they can address their own unique housing needs and 15% of the funding will be targeted towards workforce housing through the California Housing Financing Authority.

Rather than creating a new program at this time, I encourage the author to work with the local governments in his district and collaborate with the California Housing Financing Authority to maximize the funding in SB 2.

Analysis Prepared by: Lisa Engel / H. & C.D. / (916) 319-2085 FN: 0002499

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 45

Author:(Thurmond)

As Amended Ver:September 1, 2017

Majority vote

Original Committee Reference: H. & C.D.

SUMMARY: Requires the Department of Housing and Community Development (HCD) to administer the California School Employee Housing Assistance Program (Program), a predevelopment grant and loan program, to fund the creation of affordable housing for school district employees, including teachers. Specifically, this bill:

1. Defines "affordable housing" to mean housing that serves persons and families that make up to 120% of the area median income (AMI).
2. Defines "qualified developer" to mean a developer that has partnered with a "qualified school district."
3. Defines "school district employee" to mean employees of a public or charter school district, including teachers located in the jurisdiction boundaries of the school district.
4. Defines "qualified school district" to mean a school district that satisfies all of the following:
5. Has acquired land from a school district, special district, or city that may be used to engage in a lease and development agreement, including but not limited to, a joint occupancy agreement for the purposes of design, construction, financing, and long-term operation of a housing development and amenities;
6. The State Department of Education has determined there is a high percentage of teachers with intern credentials, permits and waivers based on the most recent report published by the Commission on Teach Credentialing at the time that the school district submits its application; and
7. Demonstrates to the State Department of Education that any project funded by a predevelopment grant is subject to a project labor agreement and is either a public work or is subject to a legally binding requirement that prevailing wages be paid to all workers.
8. Requires a school district seeking a predevelopment loan to apply to the State Department of Education for certification as a "qualified school district."
9. Requires HCD to make predevelopment grants as follows:
10. Grants shall be awarded to qualified school districts and qualified developers in partnership;
11. Grants shall be based on the accomplishment of predevelopment milestones as determined by HCD; and
12. Priority shall be given to partnerships in which qualified school districts have 60% or more of the students participating in the National School Lunch Program.
13. Requires the affordability of units financed using predevelopment grants and loans be restricted for 55 years.
14. Limits the amount that can be used for predevelopment grants to 20% of the total amount appropriated to the Program.
15. Authorizes an unspecified amount of funding to reimburse the State Department of Education for the cost of certifying qualified school districts.
16. Requires HCD to make loans to qualified developers using a project selection process that meets the following requirements:
17. Ensures, to the extent feasible, a reasonable geographic distribution of funds;
18. The proposed project is located within a reasonable proximity to public transportation and services;
19. Development costs for the proposed project are reasonable compared to the cost of comparable projects in the area; and
20. The proposed project is feasible.
21. Provides that loans are for a term of not less than 55 years and principal and interest are due and payable upon completion of the loan. The loan shall bear simple interest at the rate of 3% per year on the unpaid principal balance.
22. Limits the loan amount per project to $10 million.
23. Provides that implementation of the program is subject to appropriation in the Budget Act or another bill.
24. Provides that appropriations made to the Program are not deemed "General Fund revenues appropriated for school districts" for the purposes of Proposition 98.

The Senate amendments:

1. Require HCD rather than the California Housing Finance Agency (CalHFA) to administer the program.
2. Delete reference to the need for a $25 million appropriation necessary to implement the program.

FISCAL EFFECT: According to the Senate Appropriations Committee:

1. General Fund cost pressures in the tens of millions annually to provide ongoing funding for the California School Employee Housing Assistance Grant Program. (General Fund)
2. HCD would incur ongoing costs in the hundreds of thousands annually to administer the program. Actual costs would depend upon the level of funding provided. For illustrative purposes, HCD estimates costs of approximately $873,000 for 6.2 Personnel Years of staff time to develop and administer a new program, assuming a one-time appropriation of $25 million. (General Fund).
3. Ongoing HCD compliance monitoring costs, initially in the low hundreds of thousands and growing over time, to the extent funding is provided for the program, which would be partially covered by residual loan payments. (California School Employee Housing Assistance Fund)
4. Ongoing CDE costs of at least $60,000 annually for staff time to certify that a school district is eligible for funding, including verification that the district has a problem recruiting and/or retaining teachers. (General Fund)

COMMENTS:

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

Voter-approved bonds have been an important source of funding to support the construction of affordable housing. Proposition 46 of 2002 and Proposition 1C of 2006 together provided $4.95 billion for affordable housing. These funds financed the construction, rehabilitation, and preservation of 57,220 affordable apartments, including 2,500 supportive homes for people experiencing homelessness, and over 11,600 shelter spaces. In addition, these funds have helped 57,290 families become or remain homeowners. Nearly all of these funds have been awarded. In addition, prior to their dissolutions redevelopment agencies generated as much as $1.1 billion a year in local funding to support affordable housing.

HCD, the state's affordable housing bank, provides down payment assistance to qualified low- and moderate-income buyers through a loan secured on the property that is repaid when a home sells. In addition, HCD provides loans to multifamily housing developers to construct affordable housing. HCD does not receive funding from the General Fund and pays for its programs by issuing bonds which are then repaid from loan proceeds.

HCD operates a variety of programs that support the acquisition, rehabilitation and construction of affordable housing to very low-, low- and moderate-income households. The MHP provides gap financing to affordable housing developers. Developments financed using MHP or CalHFA's multi-family loans agree to provide the housing for a term of 55 years. The loans are made for 55 years at 3% interest per year on the outstanding balance of the loan. If the development cash flows it is required to pay on the outstanding debt. HCD also operates a predevelopment loan program that provides loans up to $100,000 to non-profit housing developers, local governments, housing cooperates or limited liability companies in which all the members are non-profits. The loans may be used for control, site acquisition for future low-income housing development, engineering studies, architectural plans, application fees, legal services, permits, bonding, and site preparation.

This bill would require HCD to create and administer the California School Employee Housing Assistance Program to provide both predevelopment grants and development loans to qualified school districts and developers for the creation of affordable rental housing for school employees, including teachers.

Purpose of the bill: According to the author, "there are two reasons why this bill is needed: lack of predevelopment financing and inadequate funding sources. The predevelopment process, which includes feasibility studies, entitlements, environmental impact reports, among other activities, requires funds that many cash-strapped school districts cannot cover up-front. This bill would provide funding necessary to begin development.

"Furthermore, current funding for the development phase of such housing is inadequate for school districts in high-cost areas. State and federal subsidies are effectively capped at 60% Area Median Income (AMI), which for some school districts, is only slightly above the income for a starting teacher. The consequence of this threshold, as was experienced by the Los Angeles Unified School District, is that teachers in such districts would not qualify. This bill would provide the development financing needed to subsidize units above the existing threshold of 60% AMI."

Analysis Prepared by: Lisa Engel / H. & C.D. / (916) 319-2085 FN: 0001823

SENATE COMMITTEE ON

Senator Ricardo Lara, Chair

2017 - 2018 Regular Session

AB 45 (Thurmond) - California School Employee Housing Assistance Grant Program

*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********

The following information is revised to reflect amendments

adopted by the committee on September 1, 2017

Bill Summary:

AB 45 would require the Department of Housing and Community Development (HCD) to administer the California School Employee Housing Assistance (CSEHA) Program to provide predevelopment grants and loans to developers that partner with school districts for the creation of affordable rental housing for school district employees. Implementation of the bill would be contingent upon an appropriation by the Legislature of up to $25 million.

Fiscal Impact:

• General Fund cost pressures in the tens of millions annually to provide ongoing funding for the CSEHA Program. (General Fund)
  
• HCD would incur ongoing costs in the hundreds of thousands annually to administer the program. Actual costs would depend upon the level of funding provided. For illustrative purposes, HCD estimates costs of approximately $873,000 for 6.2 PY of staff time to develop and administer a new program, assuming a one-time appropriation of $25 million. (General Fund).
  
• Ongoing HCD compliance monitoring costs, initially in the low hundreds of thousands and growing over time, to the extent funding is provided for the program, which would be partially covered by residual loan payments. (California School Employee Housing Assistance Fund)
  
• Ongoing Department of Education (CDE) costs of at least $60,000 annually for staff time to certify that a school district is eligible for funding, including verification that the district has a problem recruiting and/or retaining teachers. (General Fund)

Author Amendments:

Specify that HCD, rather than CDE, would be responsible for certifying that a project receiving grant funding is subject to a project labor agreement or a legally binding requirement that prevailing wages are paid to all workers employed on the project. The amendments also delete the language specifying that implementation of the program is subject to enactment of an appropriation of up to $25 million, and instead make implementation contingent upon an appropriation by the Legislature.

-- END --

 THIRD READING  

Bill No: AB 45

Author:

Amended: 9/1/17 in Senate

Vote:

SENATE TRANS. & HOUSING COMMITTEE: 9-3, 6/27/17

AYES: Beall, Cannella, Allen, Atkins, McGuire, Mendoza, Roth, Skinner, Wiener

NOES: Bates, Gaines, Morrell

NO VOTE RECORDED: Wieckowski

SENATE EDUCATION COMMITTEE: 5-2, 7/12/17

AYES: Allen, Galgiani, Leyva, Mendoza, Pan

NOES: Wilk, Vidak

SENATE APPROPRIATIONS COMMITTEE: 5-2, 9/1/17

AYES: Lara, Beall, Bradford, Hill, Wiener

NOES: Bates, Nielsen

ASSEMBLY FLOOR: 53-19, 5/31/17 - See last page for vote

SUBJECT:

SOURCE: California Federation of Teachers

California Teachers Association

State Building Trades and Construction Council

DIGEST:

This bill requires the California Housing Finance Agency (CalHFA) to administer the California School Employee Housing Assistance Grant Program, a predevelopment grant and loan program, to fund the creation of affordable housing for school district employees, including teachers.

ANALYSIS: Existing law establishes a number of programs at the Department of Housing and Community Development (HCD) to make housing more affordable to California families and individuals, including the following main programs:

1. Multifamily Housing Program, which funds the new construction, rehabilitation, and preservation of permanent and transitional rental homes for lower income households through loans to local governments, non-profit developers, and for-profit developers.
2. CalHome Program, which funds downpayment assistance, home rehabilitation, counseling, self-help mortgage assistance programs and technical assistance for self-help and shared housing through grants and loans.

This bill:

1. Requires HCD to administer a program to provide financing assistance for the creation of affordable rental housing, defined as serving persons and families of low- or moderate-income, for school district employees. The financing shall be in the form of predevelopment grants to qualified school districts and loans to qualified developers.
2. Defines “qualified developer” as a developer that has partnered with a qualified school district to create affordable rental housing for school district employees.
3. Defines “qualified school district” as a school district that satisfies the following:
   1. Has acquired land that may be used to engage in a lease and development agreement, including, but not limited to, a joint occupancy agreement, for the purposes of design, construction, financing, and long-term operation of a housing development and amenities from a school district, special district or a city.
   2. Has a high percentage, as determined by the California Department of Education (CDE) of teachers with intern credentials, permits, and waivers, based upon the most recent report published by the Commission on Teacher Credentialing at the time the school district has submitted an application, as specified.
   3. Demonstrates to the CDE that the project is both subject to a project labor agreement and is either a public work or otherwise subject to a legally binding requirement that prevailing wages be paid to all workers employed by the project.
4. Requires HCD to oversee the program, make loans to qualified developers, publish deadlines and procedures for applicants, require affordability of units to be restricted to 55 years, and award predevelopment grants, as specified.
5. Requires HCD to make loans to qualified developers using a project selection process established by HCD that meets all of the following requirements:
   1. To the extent feasible, ensure a reasonable geographic distribution of funds.
   2. Require applications for projects to meet minimum threshold requirements, including but not limited to all of the following:
      1. The proposed project is located within reasonable proximity to public transportation and services.
      2. Development costs for the proposed project are reasonable compared to costs of comparable projects in the area.
      3. The proposed project is feasible.
   3. The proposed project leverages other funds where they are available.
   4. Each project shall be eligible for a loan not to exceed $10 million.
6. Requires loans made pursuant to this program to be for a term of not less than 55 years. Principal and interest is due and payable upon completion of the term of the loan and the loan shall bear simple interest at the rate of 3% per year on the unpaid principal balance. HCD shall require annual loan payments in a minimum amount necessary to cover the costs of project monitoring. For the first 30 years of the loan term, the amount of the required loan payments shall not exceed .42% per year. Any money received in repayment of the loans shall be deposited in the Fund.
7. States that implementation is subject to appropriation by the Legislature.

Background

1. Housing Financing. Historically, the state has funded housing programs through the sale of general obligations bonds. Most recently, the voters approved a $2.1 billion bond through Proposition 46 in 2002 and then a $2.85 billion bond through Proposition 1C in 2006. These funds financed the construction, rehabilitation, and preservation of 183,000 units, including shelter spaces and permanent supportive housing for the homeless. HCD has awarded almost all of the funds made available under these propositions, particularly in its main programs. Additionally with the loss of redevelopment funding, California has lost an estimated $1.5 - $1.7 billion per year in funding for affordable housing.
2. Appropriations Amendments. This bill was amended in Assembly Appropriations to require the implementation of this program to be subject to appropriation by the Legislature, removing a $25 million appropriation.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Senate Appropriations Committee:

• General Fund cost pressures in the tens of millions annually to provide ongoing funding for the California School Employee Housing Assistance Grant Program.  (General Fund)
• HCD would incur ongoing costs in the hundreds of thousands annually to administer the program.  Actual costs would depend upon the level of funding provided.  For illustrative purposes, HCD estimates costs of approximately $873,000 for 6.2 PY of staff time to develop and administer a new program, assuming a one-time appropriation of $25 million.   (General Fund).
• Ongoing HCD compliance monitoring costs, initially in the low hundreds of thousands and growing over time, to the extent funding is provided for the program, which would be partially covered by residual loan payments. (California School Employee Housing Assistance Fund)
• Ongoing CDE costs of at least $60,000 annually for staff time to certify that a school district is eligible for funding, including verification that the district has a problem recruiting and/or retaining teachers.  (General Fund)

SUPPORT: (Verified 9/1/17)

California Federation of Teachers (co-source)

California Teachers Association (co-source)

State Building Trades and Construction Council (co-source)

AFL-CIO Housing Investment Trust

California Apartment Association

California Association of Realtors

California Faculty Association

California School Employees Association

Common Sense Kids Action

Compton Unified School District

Congressmember Mark DeSaulnier, 11th District

Contra Costa Supervisor John Gioia

League of California Cities

San Francisco Unified School District

Santa Clara County Office of Education

The Arc and United Cerebral Palsy Collaboration

United Teachers of Richmond

West Contra Costa Unified School District

OPPOSITION: (Verified 9/1/17)

California Fire Sprinkler Association

Central Valley Association Builders and Contractors

Independent Roofing Contractors of California

Plumbing-Heating-Cooling Contractors Association of California

San Diego Associated Builders and Contractors

Southern California Associated Builders and Contractors

Western Electrical Contractors Association

ARGUMENTS IN SUPPORT: According to the author, “AB 45 is a solution that works to provide a balance of jobs and housing that will support and strengthen our diverse communities. Housing for our school employees has proven to be a solution in various districts both within and outside this state. Providing a mechanism for school districts to provide affordable housing and improve student outcomes is a win for community and for our kids.”

ARGUMENTS IN OPPOSITION: A coalition of builders and contractors is opposed to this bill due to the requirement in the bill that any project funded by a predevelopment grant is subject to a project labor agreement (PLA). The opposition states that supporters of PLAs justify them in complex, major projects comprised of many trades, but point out that building affordable housing is not complex. The opposition also points to studies that demonstrated PLAs result in higher bidding and construction costs.

ASSEMBLY FLOOR: 53-19, 5/31/17

AYES: Aguiar-Curry, Arambula, Berman, Bloom, Bocanegra, Bonta, Burke, Caballero, Calderon, Cervantes, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Frazier, Friedman, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gomez, Gonzalez Fletcher, Gray, Holden, Irwin, Jones-Sawyer, Kalra, Levine, Limón, Low, McCarty, Medina, Mullin, Muratsuchi, Nazarian, O'Donnell, Quirk, Quirk-Silva, Reyes, Ridley-Thomas, Rodriguez, Rubio, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Weber, Wood, Rendon

NOES: Acosta, Travis Allen, Baker, Bigelow, Brough, Chávez, Dahle, Flora, Fong, Gallagher, Harper, Kiley, Lackey, Mathis, Mayes, Obernolte, Patterson, Voepel, Waldron

NO VOTE RECORDED: Chen, Choi, Cunningham, Daly, Eggman, Grayson, Maienschein, Melendez

Prepared by:

9/4/17 12:33:27

**** END ****

SENATE COMMITTEE ON

Senator Ricardo Lara, Chair

2017 - 2018 Regular Session

AB 45 (Thurmond) - California School Employee Housing Assistance Grant Program

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

Bill Summary:

AB 45 would require the Department of Housing and Community Development (HCD) to administer the California School Employee Housing Assistance (CSEHA) Program to provide predevelopment grants and loans to developers that partner with school districts for the creation of affordable rental housing for school district employees. Implementation of the bill would be contingent upon an appropriation by the Legislature of up to $25 million.

Fiscal Impact:

• General Fund costs and cost pressures in the tens of millions annually to provide ongoing funding for the CSEHA Program. Initial implementation is contingent upon an appropriation up to $25 million, but there would be ongoing annual cost pressures to provide additional funding for the program. (General Fund)
  
• HCD estimates costs of approximately $873,000 for 6.2 PY of staff time to develop and administer a new program, assuming a one-time appropriation of $25 million. While initial costs to establish the program are fixed, actual ongoing administrative costs would depend on the level of funding provided. (General Fund).
  
• Ongoing HCD compliance monitoring costs, initially in the low hundreds of thousands and growing over time if future funding is provided, which would be partially covered by residual loan payments. (California School Employee Housing Assistance Fund)
  
• Ongoing Department of Education (CDE) costs of at least $60,000 annually for staff time to certify that a school district is eligible for funding, including verification that the district has a problem recruiting and/or retaining teachers. (General Fund)

Background:

The California Housing Financing Authority (CalHFA), the state's affordable housing bank, provides down payment assistance to qualified low- and moderate-income buyers through a loan secured on the property that is repaid when a home sells. CalHFA also provides loans to multifamily housing developers to construct affordable housing. CalHFA programs are funded through the issuance of bonds that are paid off with borrower loan payments.

HCD operates a variety of programs that support the acquisition, rehabilitation and construction of affordable housing to very low-, low- and moderate-income households. Existing law establishes the Multi-family Housing Program (MHP) to provide loans to fund the acquisition, rehabilitation, and construction of multi-family housing for low-income persons (at or below 60% area median income). MHP loans have a term of 55 years and a simple interest rate of 3% per annum on the outstanding balance of the loan. HCD only requires annual loan payments in the minimum amount necessary to cover the costs of project monitoring; for the first 30 years of the loan term, payments of 0.42% are due annually with the balance of principal and interest due and payable upon completion of the loan term.

HCD also administers a predevelopment loan program that provides loans up to $100,000 to non-profit housing developers, local governments, housing cooperatives or limited liability companies in which all the members are non-profits. The loans may be used for control, site acquisition for future low-income housing development, engineering studies, architectural plans, application fees, legal services, permits, bonding, and site preparation.

Proposed Law:

AB 45 would establish the CSEHA Program to provide grants and loans to developers partnering with qualified school districts to create affordable rental housing for school district employees, including teachers. Specifically, this bill would:

• Define a “qualified school district” as district that satisfies all of the following:
  • Has acquired land that may be used to engage in a lease and development agreement, as specified, for the purposes of design, construction, financing, and long-term operation of a housing development and amenities from a school district, a special district, or a city.
  • Demonstrates to CDE evidence showing a trend over at least three years that the school has problems recruiting and/or retaining teachers using documented data, as specified.
  • Demonstrates to CDE that any project funded through a predevelopment grant is subject to a project labor agreement and is either a public work or otherwise subject to prevailing wage requirements, as specified.
• Require HCD to administer and oversee the program, award predevelopment grants to qualified school districts partnered with developers, make loans to developers, publish deadlines and procedures for applicants, and require affordability of units to be restricted for at least 55 years.
• Require HCD, when awarding predevelopment grants, to give priority to partnerships in which the school district has 60% or more of its students participating in the National School Lunch Program.
• Require CDE to provide certification for school districts seeking predevelopment grants that the district has satisfied the requirements specified above as a “qualified school district.” This provision also requires HCD to certify that a proposed project is subject to a project labor agreement and prevailing wage requirements.
• Require HCD, when making loans to qualified developers, to use a project selection process that ensures a reasonable geographic distribution of funds, requires applications to meet minimum specified requirements, and requires proposed projects to leverage other funds, when available.
• Specify a maximum loan amount of $10 million per project and require loans to have a minimum term of 55 years and a simple interest rate of 3% per annum on the outstanding balance of the loan. HCD would require annual loan payments in the minimum amount necessary to cover the costs of project monitoring; for the first 30 years of the loan term, loan payments would not exceed 0.42% per annum. Loan payments would be deposited into the CSEHA Fund.
• Make the implementation of the program contingent upon the enactment of an appropriation of up to $25 million in the Budget Act or another statute.
• Establish the CSEHA Fund in the State Treasury, specify that availability of moneys in the fund are subject to an appropriation by the Legislature, and specify that appropriations from the fund for purposes of the program are not deemed “General Fund revenues appropriated to school districts” for the purposes of Proposition 98.

Related Legislation:

AB 2220 (Thurmond), which was held on the Assembly Appropriations Committee’s Suspense File last year, was substantially similar to this bill, except that bill required CalHFA to administer the program, rather than HCD.

SB 1413 (Leno), Chap. 732/2016, established the Teacher Housing Act of 2016, which included an explicit authorization that housing provided exclusively for teachers could receive funding from the Low Income Housing Tax Credit Program.

Staff Comments:

This bill would establish a new program to provide predevelopment grants to certified school districts partnering with developers, and loans to developers, for the creation of affordable housing for school district employees. Implementation of the CSEHA Program would be contingent upon an appropriation of up to $25 million.

The bill would require HCD to establish the program, including up-front costs to develop written procedures for applicants, develop and adopt program guidelines, and draft a Notice of Funding Availability. Ongoing administration of the program would require HCD to determine specified predevelopment milestones, review program applications, including determining priority status, award grants and loans, and conduct ongoing monitoring of affordability requirements over 55 years. HCD estimates a need for 6.2 positions to implement and administer the program (1.7 PY of legal staff time and 4.5 PY of administrative staff time) at a cost of $873,332, based on the assumption of a one-time General Fund appropriation of $25 million for the program. Implementation costs to establish the program would be fixed, regardless of the amount of the initial appropriation, but ongoing administrative costs and staffing needs would depend upon the level of funding provided initially, and in future fiscal years. The bill requires residual loan repayments to cover ongoing oversight and monitoring costs related to CSEHA Program loans, but staff notes that funding is not provided for ongoing monitoring of affordability restrictions on projects receiving predevelopment grants.

CDE indicates it would need at least ½ PY of staff, at a cost of at least $60,000 annually, to review and verify data provided by school districts to demonstrate issues of teacher recruitment and/or retention, and provide certification for districts meeting eligibility requirements.

Recommended Amendments:

The bill contains an inconsistency regarding the requirement that a proposed project funded through a predevelopment agreement be subject to a project labor agreement and be a public work or subject to prevailing wage requirements. Specifically, page 3, lines 7-17 of the bill require a district to demonstrate to CDE that it meets the requirement, while page 4, lines 31-34 of the bill requires “the department” (HCD) to certify that a school district has satisfied that requirement. Staff recommends that the bill be amended to clarify that CDE, rather than HCD, would make that certification.

-- END --

SENATE COMMITTEE ON EDUCATION

Senator Benjamin Allen, Chair

2017 - 2018 Regular

Bill No: AB 45 Hearing Date: July 12, 2017

Subject: California School Employee Housing Assistance Grant Program

SUMMARY

This bill requires the California Department of Housing and Community Development (HCD) to administer the California School Employee Housing Assistance Program, a predevelopment grant and loan program, to fund the creation of affordable housing for school district employees and teachers.

BACKGROUND

Existing law:

1. Establishes various housing programs, such as the Multifamily Housing Program and Joe Serna Jr. Farmworker Housing Grant Program administered by the HCD and the Low-Income Housing Tax Credit Program administered by the Tax Credit Allocation Committee within the State Treasurer’s Office, to help low-income families and other specified groups.
2. Defines “rental housing development” as a structure or set of structures with common financing, ownership, and management, and which collectively contain five or more dwelling units, including efficiency units. No more than one of the dwelling units may be occupied as a primary residence by a person or household who is the owner of the structure or structures.
3. Establishes the Teacher Housing Act of 2016 to facilitate the acquisition, construction, rehabilitation, and preservation of affordable rental housing for teachers, school district employees, and their families to allow teachers or school district employees to access and maintain housing stability.

ANALYSIS

This bill:

1. Defines "affordable housing" to mean housing that serves persons and families that make up to 120 percent of the area median income.
2. Defines "qualified developer" to mean a developer that has partnered with a "qualified school district."
3. Defines "school district employee" to mean employees of a public or charter school district, including teachers located in the jurisdiction boundaries of the school district.
4. Defines "qualified school district" to mean a school district that satisfies all of the following:
   1. Has acquired land from a school district, special district, or city that may be used to engage in a lease and development agreement, including but not limited to, a joint occupancy agreement for the purposes of design, construction, financing, and long-term operation of a housing development and amenities.
   2. Demonstrates to the State Department of Education evidence which shows a trend, over a minimum of three years, that the school has a problem recruiting or retaining teachers, or both, using documented data, including, but not limited to, the following:
      1. A high percentage of teachers not teaching in the academic subjects or grade levels that the teachers were trained to teach.
      2. A high percentage of teachers with emergency, provisional, or temporary certification or licensing.
      3. Exit interviews of school employees.
      4. High local rental housing costs.
      5. High district costs associated with recruiting teachers.
      6. The median time of teachers being employed by the district.
   3. Demonstrates to the State Department of Education that any project funded by a predevelopment grant is subject to a project labor agreement and is either a public work or is subject to a legally binding requirement that prevailing wages be paid to all workers.
5. Requires a school district seeking a predevelopment loan to apply to the State Department of Education for certification as a "qualified school district."
6. Requires the California Department of Housing and Community Development (HCD) to make predevelopment grants as follows:
   1. Grants shall be awarded to qualified school districts and qualified developers in partnership.
   2. Grants shall be based on the accomplishment of predevelopment milestones as determined by HCD.
   3. Priority shall be given to partnerships in which qualified school districts have 60 percent or more of the students participating in the National School Lunch Program.
7. Requires the affordability of units financed using predevelopment grants and loans be restricted for 55 years.
8. Requires the California Department of Housing and Community Development (HCD) to make loans to qualified developers using a project selection process that meets the following requirements:
   1. Ensures, to the extent feasible, a reasonable geographic distribution of funds.
   2. The proposed project is located within a reasonable proximity to public transportation and services.
   3. Development costs for the proposed project are reasonable compared to the cost of comparable projects in the area.
   4. The proposed project is feasible.
9. Provides that loans are for a term of not less than 55 years and principal and interest are due and payable upon completion of the loan. The loan shall bear simple interest at the rate of 3 percent per year on the unpaid principal balance.
10. Limits the loan amount per project to $10 million.
11. Provides that implementation of the program is subject to a $25 million appropriation in the Budget Act or another bill.
12. Provides that appropriations made to the Program are not deemed "General Fund revenues appropriated for school districts" for the purposes of Proposition 98.

STAFF COMMENTS

1. Need for the bill. According to the author, "…there are two reasons why this bill is needed: lack of predevelopment financing and inadequate funding sources. The predevelopment process, which includes feasibility studies, entitlements, environmental impact reports, among other activities, requires funds that many cash-strapped school districts cannot cover up-front. This bill would provide funding necessary to begin development.

Furthermore, current funding for the development phase of such housing is inadequate for school districts in high-cost areas. State and federal subsidies are effectively capped at 60 percent Area Median Income (AMI), which for some school districts, is only slightly above the income for a starting teacher. The consequence of this threshold, as was experienced by the Los Angeles Unified School District, is that teachers in such districts would not qualify. This bill would provide the development financing needed to subsidize units above the existing threshold of 60 percent area median income (AMI)."

1. Affordable housing programs in California. California has seen a decline in funding to support the construction of affordable housing for very low-, low- and moderate-income families. Historically, the state has invested in low- and moderate-income housing primarily by providing funding for construction. Because of the high cost of land and construction and the subsidy needed to keep housing affordable to residents, affordable housing is complicated to build. Developers typically use multiple sources of financing, including voter-approved housing bonds, state and federal low-income housing tax credits, private bank financing, and local matching dollars.

The California Housing Finance Agency (CalHFA) is the state's affordable housing bank, providing down payment assistance to qualified low- and moderate-income buyers through a loan secured on the property that is repaid when a home sells. In addition, CalHFA provides loans to multifamily housing developers to construct affordable housing. CalHFA does not receive funding from the General Fund and pays for its programs by issuing bonds which are then repaid from loan proceeds.

The California Department of Housing and Community Development (HCD) operates a variety of programs that support the acquisition, rehabilitation and construction of affordable housing to very low-, low- and moderate-income households. The Multifamily Housing Program (MHP) provides gap financing to affordable housing developers. Developments financed using MHP or CalHFA's multi-family loans agree to provide the housing for a term of 55 years. The loans are made for 55 years at 3 percent annual interest on the outstanding balance of the loan. The HCD also operates a predevelopment loan program that provides loans up to $100,000 to non-profit housing developers, local governments, housing cooperates, or limited liability companies in which all the members are non-profits. The loans may be used for control, site acquisition for future low-income housing development, engineering studies, architectural plans, application fees, legal services, permits, bonding, and site preparation.

1. Legislative Analyst Office (LAO) report on housing costs. In its March 2015 report “California’s High Housing Costs: Causes and Consequences”, the LAO cites that “Housing in California has long been more expensive than most of the rest of the country. Beginning in about 1970, however, the gap between California’s home prices and those in the rest of the country started to widen. Between 1970 and 1980, California home prices went from 30 percent above U.S. levels to more than 80 percent higher. This trend has continued. Today, an average California home costs $440,000, about two-and-a-half times the average national home price ($180,000). Also, California’s average monthly rent is about $1,240, 50 percent higher than the rest of the country ($840 per month).”

The LAO also cites that California’s housing problems warrant attention from state leaders and that the Legislature should, among other things, recognize the targeted role of affordable housing programs. According to the report, “These programs play an important role in assuring housing access for many Californians with unmet housing needs. We note, however, that the scale of these programs—even if greatly increased—could not meet the magnitude of new housing required that we identify in this report. Accordingly, we recommend the Legislature consider how targeted programs could supplement more private housing construction by assisting those with limited access to market rate housing, such as people experiencing homelessness, those with mental and/or physical health challenges, and those with very low incomes.”

1. Double-referral. This bill was heard in the Senate Transportation and Housing Committee on June 27, 2017.
2. Related Legislation.

SB 765 (Wiener) requires school districts seeking to sell, lease, or jointly occupy property for non-educational purposes to first offer the property to a charter school, except property intended to be used for teacher housing.  SB 765 passed this Committee on April 26, 2017, and is currently pending before the Assembly Education Committee.

AB 1157 (Mullin) excuses school districts that sell, lease, or rent excess real property to be used for teacher or school district employee housing from being required to appoint an advisory committee related to surplus property, and allows school districts to use proceeds from the sale or lease of school district property to construct, reconstruct, or renovate rental housing facilities for teachers and school district employees. AB 1157 passed this Committee on June 28, 2017, and is currently pending before the Senate Governance and Finance Committee.

SUPPORT

California Federation of Teachers (co-sponsor)

California Teachers Association (co-sponsor)

State Building and Construction Trades Council, AFL-CIO (co-sponsor)

California Apartment Association

California Association of Realtors

California School Employees Association

Common Sense Kids Action

Compton Unified School District

Contra Costa County

League of California Cities

San Francisco Unified School District

Santa Clara County Office of Education

The Arc

United Cerebral Palsy California Collaboration

United Teachers of Richmond

West Contra Costa Unified School District

OPPOSITION

American Fire Sprinkler Association

Associated Builders and Contractors

Independent Roofing Contractors of California, Inc.

Plumbing-Heating-Cooling Contractors Association of California

Western Electrical Contractors Association

-- END --

SENATE COMMITTEE ON TRANSPORTATION AND HOUSING

Senator Jim Beall, Chair

2017 - 2018 Regular

Bill No: AB 45 Hearing Date: 6/27/2017

SUBJECT: California School Employee Housing Assistance Grant Program.

DIGEST: This bill requires the California Housing Finance Agency (CalHFA) to administer the California School Employee Housing Assistance Grant Program, a predevelopment grant and loan program, to fund the creation of affordable housing for school district employees, including teachers.

ANALYSIS:

Existing law:

1. Establishes a number of programs at the Department of Housing and Community Development (HCD) to make housing more affordable to California families and individuals, including the following main programs:
2. Multifamily Housing Program (MHP), which funds the new construction, rehabilitation, and preservation of permanent and transitional rental homes for lower income households through loans to local governments, non-profit developers, and for-profit developers.
3. CalHome Program, which funds downpayment assistance, home rehabilitation, counseling, self-help mortgage assistance programs and technical assistance for self-help and shared housing through grants and loans.
4. Establishes CalHFA, which serves as the state’s affordable housing bank.

This bill:

1. Requires CalHFA to administer a program to provide financing assistance for the creation of affordable rental housing, defined as serving persons and families of low- or moderate-income, for school district employees. The financing shall be in the form of predevelopment grants to qualified school districts and loans to qualified developers.
2. Defines “qualified developer” as a developer that has partnered with a qualified school district to create affordable rental housing for school district employees.
3. Defines “qualified school district” as a school district that satisfies the following:
   1. Has acquired land that may be used to engage in a lease and development agreement, including, but not limited to, a joint occupancy agreement, for the purposes of design, construction, financing, and long-term operation of a housing development and amenities from a school district, special district or a city.
   2. Has a high percentage, as determined by the California Department of Education (CDE) of teachers with intern credentials, permits, and waivers, based upon the most recent report published by the Commission on Teacher Credentialing at the time the school district has submitted an application, as specified.
   3. Demonstrates to the CDE that the project is both subject to a project labor agreement and is either a public work or otherwise subject to a legally binding requirement that prevailing wages be paid to all workers employed by the project.
4. Requires CalHFA to oversee the program, make loans to qualified developers, publish deadlines and procedures for applicants, require affordability of units to be restricted to 55 years, and award predevelopment grants, as specified.
5. Creates a California School Employee Housing Assistance Fund, with a $25 million appropriation.
6. Requires CalHFA to make loans to qualified developers using a project selection process established by the agency that meets all of the following requirements:
   1. To the extent feasible, ensure a reasonable geographic distribution of funds.
   2. Require applications for projects to meet minimum threshold requirements, including but not limited to all of the following:
7. The proposed project is located within reasonable proximity to public transportation and services.
   • • 1. Development costs for the proposed project are reasonable compared to costs of comparable projects in the area.
       2. The proposed project is feasible.
   1. The proposed project leverages other funds where they are available.
   2. Each project shall be eligible for a loan not to exceed $10 million.
8. Requires loans made pursuant to this program to be for a term of not less than 55 years. Principal and interest is due and payable upon completion of the term of the loan and the loan shall bear simple interest at the rate of 3% per year on the unpaid principal balance. The agency shall require annual loan payments in a minimum amount necessary to cover the costs of project monitoring. For the first 30 years of the loan term, the amount of the required loan payments shall not exceed .42% per year. Any money received in repayment of the loans shall be deposited in the Fund.

COMMENTS:

1. Purpose of the bill. According to the author, “AB 45 is a solution that works to provide a balance of jobs and housing that will support and strengthen our diverse communities. Housing for our school employees has proven to be a solution in various districts both within and outside this state. Providing a mechanism for school districts to provide affordable housing and improve student outcomes is a win for community and for our kids.”
2. Housing Financing Background. Historically, the state has funded housing programs through the sale of general obligations bonds. Most recently, the voters approved a $2.1 billion bond through Proposition 46 in 2002 and then a $2.85 billion bond through Proposition 1C in 2006. These funds financed the construction, rehabilitation, and preservation of 183,000 units, including shelter spaces and permanent supportive housing for the homeless. HCD has awarded almost all of the funds made available under these propositions, particularly in its main programs. Additionally with the loss of redevelopment funding, California has lost an estimated $1.5 - $1.7 billion per year in funding for affordable housing.
3. CalHFA and HCD. CalHFA, the state’s affordable housing bank, provides down payment assistance to qualified low- and moderate-income buyers through a loan secured on the property that is repaid when a home sells. In addition, CalHFA provides loans to multifamily housing developers to construct affordable housing. CalHFA does not receive funding from the General Fund and pays for its programs by issuing bonds, which are then repaid from loan proceeds.

HCD operates a variety of programs that support the acquisition, rehabilitation and construction of affordable housing to very low-, low- and moderate-income households. MHP provides gap financing to affordable housing developers. Developments financed using MHP or CalHFA's multifamily loans agree to provide the housing for a term of 55 years. The loans are made for 55 years at 3% interest per year on the outstanding balance of the loan. HCD also operates a predevelopment loan program that provides loans up to $100,000 to non-profit housing developers, local governments, housing cooperates or limited liability companies in which all the members are non-profits. The loans may be used for control, site acquisition for future low-income housing development, engineering studies, architectural plans, application fees, legal services, permits, bonding, and site preparation.

Given that this bill proposes to provide general funds for the creation of affordable rental housing for school employees, the author has agreed to require HCD, instead of CalHFA, to administer the California School Employee Housing Assistance Program.

1. Special populations. It is no secret that California currently faces an affordable housing crisis. A person earning minimum wage must work three jobs on average to pay the rent for a two-bedroom unit. Housing units affordable to low-income earners, if available, are often in serious states of disrepair. A recent report by HCD highlighted the depths of the resulting housing shortage, showing that statewide for low-, very low-, and extremely low- households, California is short about 3.5 million rental units. That same report showed that for moderate- and above moderate-income levels, there was a sufficient number of rental housing, at least on a statewide average basis, indicating that the focus should be on the poorest households.

While school employees are adversely affected by the high cost of housing in California, so are many other populations. Are school employees more deserving of housing than children aging out of the foster care system, homeless LGBTQ individuals, and single-mothers with children working multiple jobs, veterans, or domestic violence survivors? The committee may wish to consider whether this program should focus more broadly on finding investments to fund housing affordable to all vulnerable, lower-income populations, rather than single-out individual groups to the detriment of others.

1. Opposition and labor provisions. A coalition of builders and contractors is opposed to this bill due to the requirement in the bill that any project funded by a predevelopment grant is subject to a project labor agreement (PLA). The opposition states that supporters of PLAs justify them in complex, major projects comprised of many trades, but point out that building affordable housing is not complex. The opposition also points to studies that demonstrated PLAs result in higher bidding and construction costs.

According to the Nonprofit Housing Association of Northern California (NPH), who removed their support from this bill following the PLA amendment, the provision would be the most far-reaching and expansive labor requirement in any of the affordable housing funding bills in the Legislature this session. NPH has suggested that, similar to other proposals from the building trades, this bill should instead create a baseline of requiring prevailing wages and leave the imposition of a PLA requirement up to the local jurisdictions that would actually be helping to finance the project.  Some school districts, especially in suburban and rural areas, would want to do a relatively small teacher-housing building with stick construction, surface parking and stairs (no elevators). NPH states that it doesn't make sense to have a 30- or 40-unit project have to try to administer a PLA as if it were a large public works project.

1. Funding. This bill proposes to make a $25 million appropriation, but it is not clear where that funding would come from.
2. Author’s Amendments. The author is proposing to make several relatively technical amendments to the bill, which would do the following: (1) permit school districts to submit documentation to CDE and for CDE to assess whether the school has a recruitment and retention problem; clarify that predevelopment grants are to go to developers, not school districts; provide that no funds will count towards the Proposition 98 funding guarantee; and require HCD to certify that any project funded through a predevelopment grant meets specified requirements.
3. Double-referral. This bill is double-referred to the Senate Education Committee.

RELATED LEGISLATION:

AB 2200 (Thurmond, 2016) — Would have required California Housing Finance Agency (CalHFA) to administer a grant program to provide development financing assistance to qualified school districts for the creation of affordable rental housing for school districts employees, including teachers. This bill was held on the Assembly Appropriations suspense file.

SB 1413 (Leno, Chapter 732, Statutes of 2016) — Established the Teacher Housing Act of 2016 to, among other things, make clear that housing provided exclusively for teachers could receive funding from the Low Income Housing Tax Credit program.

Assembly Votes:

Floor: 53-19

Appr: 12-5

Ed.: 5-2

H&CD: 7-0

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

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

June 21, 2017.)

SUPPORT:

California Federation of Teachers (co-sponsor)

California Teachers Association (co-sponsor)

State Building Trades and Construction Council (co-sponsor)

AFL-CIO Housing Investment Trust

California Apartment Association

California Association of Realtors

California Faculty Association

California School Employees Association

Common Sense Kids Action

Compton Unified School District

Congressmember Mark DeSaulnier, 11th District

Contra Costa Supervisor John Gioia

League of California Cities

San Francisco Unified School District

Santa Clara County Office of Education

The Arc and United Cerebral Palsy Collaboration

United Teachers of Richmond

West Contra Costa Unified School District

OPPOSITION:

California Fire Sprinkler Association

Central Valley Association Builders and Contractors

Independent Roofing Contractors of California

Plumbing-Heating-Cooling Contractors Association of California

San Diego Associated Builders and Contractors

Southern California Associated Builders and Contractors

Western Electrical Contractors Association

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 45

Author:(Thurmond)

As Amended Ver:May 30, 2017

Majority vote

SUMMARY: Requires the California Housing Finance Agency (CalHFA) to administer the California School Employee Housing Assistance Program (Program), a predevelopment grant and loan program, to fund the creation of affordable housing for school district employees, including teachers. Specifically, this bill:

1. Defines "affordable housing" to mean housing that serves persons and families that make up to 120% of the area median income (AMI).
2. Defines "qualified developer" to mean a developer that has partnered with a "qualified school district."
3. Defines "school district employee" to mean employees of a public or charter school district, including teachers located in the jurisdiction boundaries of the school district.
4. Defines "qualified school district" to mean a school district that satisfies all of the following:
5. Has acquired land from a school district, special district, or city that may be used to engage in a lease and development agreement, including but not limited to, a joint occupancy agreement for the purposes of design, construction, financing, and long-term operation of a housing development and amenities;
6. The State Department of Education has determined there is a high percentage of teachers with intern credentials, permits and waivers based on the most recent report published by the Commission on Teach Credentialing at the time that the school district submits its application; and
7. Demonstrates to the State Department of Education that any project funded by a predevelopment grant is subject to a project labor agreement and is either a public work or is subject to a legally binding requirement that prevailing wages be paid to all workers.
8. Requires a school district seeking a predevelopment loan to apply to the State Department of Education for certification as a "qualified school district."
9. Requires CalHFA to make predevelopment grants as follows:
10. Grants shall be awarded to qualified school districts and qualified developers in partnership;
11. Grants shall be based on the accomplishment of predevelopment milestones as determined by CalHFA; and
12. Priority shall be given to partnerships in which qualified school districts have 60% or more of the students participating in the National School Lunch Program.
13. Requires the affordability of units financed using predevelopment grants and loans be restricted for 55 years.
14. Limits the amount that can be used for predevelopment grants to 20% of the total amount appropriated to the Program.
15. Authorizes an unspecified amount of funding to reimburse the State Department of Education for the cost of certifying qualified school districts.
16. Requires CalHFA to make loans to qualified developers using a project selection process that meets the following requirements:
17. Ensures, to the extent feasible, a reasonable geographic distribution of funds;
18. The proposed project is located within a reasonable proximity to public transportation and services;
19. Development costs for the proposed project are reasonable compared to the cost of comparable projects in the area; and
20. The proposed project is feasible.
21. Provides that loans are for a term of not less than 55 years and principal and interest are due and payable upon completion of the loan. The loan shall bear simple interest at the rate of 3% per year on the unpaid principal balance.
22. Limits the loan amount per project to $10 million.
23. Provides that implementation of the program is subject to a $25 million appropriation in the Budget Act or another bill.
24. Provides that appropriations made to the Program are not deemed "General Fund revenues appropriated for school districts" for the purposes of Proposition 98.

EXISTING LAW: Establishes the Multi-family Housing Program (MHP) to provide loans at a rate of 3% simple interest per year to fund the acquisition, rehabilitation, and construction of multi-family housing for persons at or below 60% area median income. (c)  Principal and accumulated interest is due and payable upon completion of the term of the loan. Department of Housing and Community Development (HCD) is authorized to forgive that portion of that loan that is used to cover costs of developing child care facilities. HCD requires annual loan payments in the minimum amount necessary to cover the costs of project monitoring. For the first 30 years of the loan term, the amount of the required loan payments shall not exceed forty-two hundredths of 1% (.42%) per annum.

FISCAL EFFECT: According to the Assembly Appropriations Committee, implementation of this bill is contingent upon an appropriation of up to $25 million (General Fund).

COMMENTS:

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

Voter-approved bonds have been an important source of funding to support the construction of affordable housing. Proposition 46 of 2002 and Proposition 1C of 2006 together provided $4.95 billion for affordable housing. These funds financed the construction, rehabilitation, and preservation of 57,220 affordable apartments, including 2,500 supportive homes for people experiencing homelessness, and over 11,600 shelter spaces. In addition, these funds have helped 57,290 families become or remain homeowners. Nearly all of these funds have been awarded. In addition, prior to their dissolutions= redevelopment agencies generated as much as $1.1 billion a year in local funding to support affordable housing.

CalHFA, the state's affordable housing bank, provides down payment assistance to qualified low- and moderate-income buyers through a loan secured on the property that is repaid when a home sells. In addition, CalHFA provides loans to multifamily housing developers to construct affordable housing. CalHFA does not receive funding from the General Fund and pays for its programs by issuing bonds which are then repaid from loan proceeds.

HCD operates a variety of programs that support the acquisition, rehabilitation and construction of affordable housing to very low-, low- and moderate-income households. The MHP provides gap financing to affordable housing developers. Developments financed using MHP or CalHFA's multi-family loans agree to provide the housing for a term of 55 years. The loans are made for 55 years at 3% interest per year on the outstanding balance of the loan. If the development cash flows it is required to pay on the outstanding debt. HCD also operates a predevelopment loan program that provides loans up to $100,000 to non-profit housing developers, local governments, housing cooperates or limited liability companies in which all the members are non-profits. The loans may be used for control, site acquisition for future low-income housing development, engineering studies, architectural plans, application fees, legal services, permits, bonding, and site preparation.

This bill would require CalHFA to create and administer the California School Employee Housing Assistance Program to provide both predevelopment grants and development loans to qualified school districts and developers for the creation of affordable rental housing for school employees, including teachers.

Purpose of the bill: According to the author, "there are two reasons why this bill is needed: lack of predevelopment financing and inadequate funding sources. The predevelopment process, which includes feasibility studies, entitlements, environmental impact reports, among other activities, requires funds that many cash-strapped school districts cannot cover up-front. This bill would provide funding necessary to begin development.

Furthermore, current funding for the development phase of such housing is inadequate for school districts in high-cost areas. State and federal subsidies are effectively capped at 60% Area Median Income (AMI), which for some school districts, is only slightly above the income for a starting teacher. The consequence of this threshold, as was experienced by the Los Angeles Unified School District, is that teachers in such districts would not qualify. This bill would provide the development financing needed to subsidize units above the existing threshold of 60% AMI."

Related legislation: This bill is substantially similar to AB 2200 (Thurmond) of 2016 which passed this committee with committee amendments with a vote of 5-1. AB 2200 was held on the suspense file in the Assembly Appropriations Committee.

SB 1413 (Leno) Chapter 732, Statutes of 2016, established the Teacher Housing Act of 2016 to among other things make clear that housing provided exclusively for teachers could receive funding from the Low Income Housing Tax Credit program.

Analysis Prepared by: Lisa Engel / H. & C.D. / (916) 319-2085 FN: 0000910

Date of Hearing: May 3, 2017

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

ABPCA Bill Id:AB 45

Author:(Thurmond) – As Amended Ver:April 6, 2017

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

SUMMARY: This bill requires the California Housing Finance Agency (CalHFA) to administer the California School Employee Housing Assistance Program (Program), a predevelopment grant and loan program, to fund the creation of affordable housing for school district employees, including teachers.

FISCAL EFFECT:

1. This bill appropriates $100 million (GF) to the newly created School Employee Housing Assistance Fund.
2. This bill requires money in the Fund to be appropriated to CalHFA for the following purposes:
3. to reimburse the agency for administrative costs, not to exceed 5% of the total appropriation ($5 million);
4. to reimburse the State Department of Education for the costs of certifying qualified school districts, not to exceed and unspecified percent of the total appropriation; and
5. to make predevelopment grants to qualified school districts, not to exceed 20% of the total appropriation ($20 million). Because the original source of the grants would be the General Fund, any predevelopment grants awarded to qualified school districts likely would count toward the Proposition 98 minimum school funding guarantee. To avoid this, the bill provides that appropriations made to the Program are not deemed "General Fund revenues appropriated for school districts" for the purposes of Proposition 98.

COMMENTS:

1. Purpose. According to the author, "there are two reasons why this bill is needed: lack of predevelopment financing and inadequate funding sources. The predevelopment process, which includes feasibility studies, entitlements, environmental impact reports, among other activities, requires funds that many cash-strapped school districts cannot cover up-front. This bill would provide funding necessary to begin development.

Furthermore, current funding for the development phase of such housing is inadequate for school districts in high-cost areas. State and federal subsidies are effectively capped at 60% Area Median Income (AMI), which for some school districts, is only slightly above the income for a starting teacher. The consequence of this threshold, as was experienced by the Los Angeles Unified School District, is that teachers in such districts would not qualify. This bill would provide the development financing needed to subsidize units above the existing threshold of 60% AMI."

1. Background. CalHFA, the state's affordable housing bank, provides down payment assistance to qualified low- and moderate-income buyers through a loan secured on the property that is repaid when a home sells. In addition, CalHFA provides loans to multifamily housing developers to construct affordable housing. CalHFA does not receive funding from the General Fund and pays for its programs by issuing bonds which are then repaid from loan proceeds.

HCD operates a variety of programs that support the acquisition, rehabilitation and construction of affordable housing to very low-, low- and moderate-income households. The MHP provides gap financing to affordable housing developers. Developments financed using MHP or CalHFA's multi-family loans agree to provide the housing for a term of 55 years. The loans are made for 55 years at 3% interest per year on the outstanding balance of the loan. HCD also operates a predevelopment loan program that provides loans up to $100,000 to non-profit housing developers, local governments, housing cooperatives or limited liability companies in which all the members are non-profits. The loans may be used for control, site acquisition for future low-income housing development, engineering studies, architectural plans, application fees, legal services, permits, bonding, and site preparation.

This bill requires CalHFA to create and administer the California School Employee Housing Assistance Program for the creation of affordable rental housing for school employees, including teachers.

1. Prior Legislation.

This bill is substantially similar to AB 2200 (Thurmond), of the 2015-16 Legislative Session, which was held on this Committee's Suspense.

SB 1413 (Leno), Chapter 732, Statutes of 2016, established the Teacher Housing Act of 2016 to among other things, make clear that housing provided exclusively for teachers could receive funding from the Low Income Housing Tax Credit program.

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

Date of Hearing: April 19, 2017

ASSEMBLY COMMITTEE ON EDUCATION

Patrick O'Donnell, Chair

ABPCA Bill Id:AB 45 (

Author:Thurmond) – As Amended Ver:April 6, 2017

[Note: This bill was double-referred to the Assembly Committee on Housing and Community Development and was heard by that committee as it relates to issues under its jurisdiction.]

SUBJECT: California School Employee Housing Assistance Grant Program

SUMMARY: Requires the California Housing Finance Agency (CalHFA) to administer the California School Employee Housing Assistance Program (Program), a predevelopment grant and loan program, to fund the creation of affordable housing for school district employees, including teachers. Specifically, this bill:

1. Defines "affordable housing" to mean housing that serves persons and families that make up to 120% of the area median income (AMI).
2. Defines "qualified developer" to mean a developer that has partnered with a "qualified school district."
3. Defines "qualified school district" to mean a school district that satisfies all of the following:
4. Has acquired land from a school district, special district, or city that may be used to engage in a lease and development agreement, including but not limited to, a joint occupancy agreement for the purposes of design, construction, financing, and long-term operation of a housing development and amenities;
5. The State Department of Education has determined there is a high percentage of teachers with intern credentials, permits and waivers based on the most recent report published by the Commission on Teach Credentialing at the time that the school district submits its application; and
6. Demonstrates to the State Department of Education that any project funded by a predevelopment grant is subject to a project labor agreement and is either a public work or is subject to a legally binding requirement that prevailing wages be paid to all workers.
7. Requires a school district seeking a predevelopment loan to apply to the State Department of Education for certification as a "qualified school district."
8. Requires CalHFA to make predevelopment grants as follows:
9. Grants shall be awarded to qualified school districts and qualified developers in partnership;
10. Grants shall be based on the accomplishment of predevelopment milestones as determined by CalHFA; and
11. Priority shall be given to partnerships in which qualified school districts have 60% or more of the students participating in the National School Lunch Program.
12. Requires the affordability of units financed using predevelopment grants and loans be restricted for 55 years.
13. Limits the amount that can be used for predevelopment grants to 20% of the total amount appropriated to the Program.
14. Authorizes CalHFA to use up to 5% of funding to reimburse the agency for administrative costs.
15. Authorizes an unspecified amount of funding to reimburse the State Department of Education for the cost of certifying qualified school districts.
16. Requires CalHFA to make loans to qualified developers using a project selection process that meets the following requirements:
17. Ensures, to the extent feasible, a reasonable geographic distribution of funds;
18. The proposed project is located within a reasonable proximity to public transportation and services;
19. Development costs for the proposed project are reasonable compared to the cost of comparable projects in the area; and
20. The proposed project is feasible.
21. Provides that loans are for a term of not less than 55 years and principal and interest are due and payable upon completion of the loan. The loan shall bear simple interest at the rate of 3% per year on the unpaid principal balance.
22. Requires CalHFA to require annual loan payments in a minimum amount necessary to cover the costs of project monitoring. For the first 30 years of the loan term, the amount of the required loan payments shall not exceed 0.42% per year.
23. Limits the loan amount per project to $10 million.
24. Appropriates $100 million from the General Fund to the California School Employee Housing Assistance Fund for the Program.
25. Provides that appropriations made to the Program are not deemed "General Fund revenues appropriated for school districts" for the purposes of Proposition 98.

EXISTING LAW: Establishes the Multi-family Housing Program (MHP) to provide loans at a rate of 3% simple interest per year to fund the acquisition, rehabilitation, and construction of multi-family housing for persons at or below 60% area median income. (c)  Principal and accumulated interest is due and payable upon completion of the term of the loan. Department of Housing and Community Development (HCD) is authorized to forgive that portion of that loan that is used to cover costs of developing child care facilities. HCD requires annual loan payments in the minimum amount necessary to cover the costs of project monitoring. For the first 30 years of the loan term, the amount of the required loan payments shall not exceed forty-two hundredths of 1 percent (.42%) per annum.

FISCAL EFFECT: Unknown

COMMENTS:

Purpose of the bill. According to information provided by the author's office, this bill is intended to help recruit and retain teachers in hard-to-staff districts and districts in high cost areas. Projects in North Carolina and West Virginia suggest that the availability of affordable housing influences the decision to teach in a district. Although some school districts in California (Los Angeles, Santa Clara, and San Francisco) have already building affordable housing for school employees or are in the process of doing so, the author's office argues that most districts cannot afford predevelopment costs, which includes feasibility studies, entitlements, and environmental impact reports. This bill provides financing for such costs.

Affordable housing in California. California has seen a drastic decline in funding to support the construction of affordable housing for very low-, low- and moderate-income families. Historically, the state has invested in low- and moderate-income housing primarily by providing funding for construction. Because of the high cost of land and construction and the subsidy needed to keep housing affordable to residents, affordable housing is complicated to build. Developers typically use multiple sources of financing, including voter-approved housing bonds, state and federal low-income housing tax credits, private bank financing, and local matching dollars.

CalHFA, the state's affordable housing bank, provides down payment assistance to qualified low- and moderate-income buyers through a loan secured on the property that is repaid when a home sells. In addition, CalHFA provides loans to multifamily housing developers to construct affordable housing. CalHFA does not receive funding from the General Fund and pays for its programs by issuing bonds which are then repaid from loan proceeds.

HCD operates a variety of programs that support the acquisition, rehabilitation and construction of affordable housing to very low-, low- and moderate-income households. The MHP provides gap financing to affordable housing developers. Developments financed using MHP or CalHFA's multi-family loans agree to provide the housing for a term of 55 years. The loans are made for 55 years at 3% interest per year on the outstanding balance of the loan. HCD also operates a predevelopment loan program that provides loans up to $100,000 to non-profit housing developers, local governments, housing cooperates or limited liability companies in which all the members are non-profits. The loans may be used for control, site acquisition for future low-income housing development, engineering studies, architectural plans, application fees, legal services, permits, bonding, and site preparation.

This bill requires CalHFA to create and administer the California School Employee Housing Assistance Program to provide both predevelopment grants and development loans to qualified school districts and developers for the creation of affordable rental housing for school employees, including teachers.

Determining eligibility. This bill defines a "qualified school district" as one that has acquired the necessary land from a school district, special district, or city and that has a high percentage of teachers with intern credentials, permits, and waivers (i.e., "underqualified teachers") based on the most recent bi-annual report published by the California Commission on Teacher Credentialing (CTC). The presumption is that these are the districts that have the most difficulty recruiting and/or retaining fully credentialed teachers and that the lack of affordable housing may be a contributing factor.

Although the program established by this bill would provide affordable housing for 55 years, district eligibility is based on data from a single point in time. In some cases, a relatively high percentage of underqualified teachers in a district may be a temporary, short-lived condition, caused by circumstances such as a sudden increase in enrollment or an unusually large number of retirements. Accordingly, the committee may wish to consider if eligibility should be based on the prior two or three bi-annual CTC reports, instead of only the most recent one.

In addition, while the author's office states that a purpose of this bill is to assist school districts in areas with high housing costs, the local cost of housing is not a factor in determining eligibility. This means that, all other factors being equal, two districts with different housing costs would be equally eligible for assistance. This may be mitigated somewhat by the bill's requirement that priority be given to districts in which at least 60% of the students enrolled are eligible for free or reduced-price meals (FRPM—the statewide average is just under 60%). This is because some districts with a high FRPM enrollment also have high housing costs. But this is not always the case. Some districts with the highest housing costs in the state would not receive priority under this criterion. In addition, all districts that exceed 60% FRPM enrollment would have equal priority, even though they may have significantly different housing costs. For these reasons, the committee may wish to consider whether the bill should be amended to add local housing costs as a factor for determining eligibility.

Related legislation. This bill is substantially similar to last year's AB 2200 (Thurmond), which passed this committee with committee amendments with a vote of 5-0 and was held on the suspense file in the Assembly Appropriations Committee.

SB 1413 (Leno, Chapter 732, Statutes of 2016) established the Teacher Housing Act of 2016 to among other things make clear that housing provided exclusively for teachers could receive funding from the Low Income Housing Tax Credit program.

REGISTERED SUPPORT / OPPOSITION:

Support

California Federation of Teachers

Common Sense Kids Action

California School Employees Association

California Teachers Association

San Francisco Unified School District

Opposition

None received

Analysis Prepared by: Rick Pratt / ED. / (916) 319-2087

Date of Hearing: April 5, 2017

ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT

David Chiu, Chair

ABPCA Bill Id:AB 45 (

Author:Thurmond) – As Amended Ver:February 21, 2017

SUBJECT: California School Employee Housing Assistance Grant Program

SUMMARY: Requires the California Housing Finance Agency (CalHFA) to administer the California School Employee Housing Assistance Program (Program), a predevelopment grant and loan program, to fund the creation of affordable housing for school district employees, including teachers. Specifically, this bill:

1. Defines "affordable housing" to mean housing that serves persons and families that make up to 120% of the area median income (AMI).
2. Defines "qualified developer" to mean a developer that has partnered with a "qualified school district."
3. Defines "qualified school district" to mean a school district that satisfies all of the following:
4. Has acquired land from a school district, special district, or city that may be used to engage in a lease and development agreement, including but not limited to, a joint occupancy agreement for the purposes of design, construction, financing, and long-term operation of a housing development and amenities;
5. The State Department of Education has determined there is a high percentage of teachers with intern credentials, permits and waivers based on the most recent report published by the Commission on Teach Credentialing at the time that the school district submits its application; and
6. Demonstrates to the State Department of Education that any project funded by a predevelopment grant is subject to a project labor agreement and is either a public work or is subject to a legally binding requirement that prevailing wages be paid to all workers.
7. Requires a school district seeking a predevelopment loan to apply to the State Department of Education for certification as a "qualified school district."
8. Requires CalHFA to make predevelopment grants as follows:
9. Grants shall be awarded to qualified school districts and qualified developers in partnership;
10. Grants shall be based on the accomplishment of predevelopment milestones as determined by CalHFA; and
11. Priority shall be given to partnerships in which qualified school districts have 60% or more of the students participating in the National School Lunch Program.
12. Requires the affordability of units financed using predevelopment grants and loans be restricted for 55 years.
13. Limits the amount that can be used for predevelopment grants to 20% of the total amount appropriated to the Program.
14. Authorizes CalHFA to use up to 5% of funding to reimburse the agency for administrative costs.
15. Authorizes an unspecified amount of funding to reimburse the State Department of Education for the cost of certifying qualified school districts.
16. Requires CalHFA to make loans to qualified developers using a project selection process that meets the following requirements:
17. Ensures, to the extent feasible, a reasonable geographic distribution of funds;
18. The proposed project is located within a reasonable proximity to public transportation and services;
19. Development costs for the proposed project are reasonable compared to the cost of comparable projects in the area; and
20. The proposed project is feasible.
21. Provides that loans are for a term of not less than 55 years and principal and interest are due and payable upon completion of the loan. The loan shall bear simple interest at the rate of 3% per year on the unpaid principal balance.
22. Limits the loan amount per project to $10 million.
23. Appropriates $100 million from the General Fund to the California School Employee Housing Assistance Fund for the Program.
24. Provides that appropriations made to the Program are not deemed "General Fund revenues appropriated for school districts" for the purposes of Proposition 98.

EXISTING LAW: Establishes the Multi-family Housing Program (MHP) to provide loans at a rate of 3% simple interest per year to fund the acquisition, rehabilitation, and construction of multi-family housing for persons at or below 60% area median income. (c)  Principal and accumulated interest is due and payable upon completion of the term of the loan. Department of Housing and Community Development (HCD) is authorized to forgive that portion of that loan that is used to cover costs of developing child care facilities. HCD requires annual loan payments in the minimum amount necessary to cover the costs of project monitoring. For the first 30 years of the loan term, the amount of the required loan payments shall not exceed forty-two hundredths of 1 percent (.42%) per annum.

FISCAL EFFECT: Unknown.

COMMENTS:

Background:

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

Voter-approved bonds have been an important source of funding to support the construction of affordable housing. Proposition 46 of 2002 and Proposition 1C of 2006 together provided $4.95 billion for affordable housing. These funds financed the construction, rehabilitation, and preservation of 57,220 affordable apartments, including 2,500 supportive homes for people experiencing homelessness, and over 11,600 shelter spaces. In addition, these funds have helped 57,290 families become or remain homeowners. Nearly all of these funds have been awarded. In addition, prior to their dissolutions= redevelopment agencies generated as much as $1.1 billion a year in local funding to support affordable housing.

CalHFA, the state's affordable housing bank, provides down payment assistance to qualified low- and moderate-income buyers through a loan secured on the property that is repaid when a home sells. In addition, CalHFA provides loans to multifamily housing developers to construct affordable housing. CalHFA does not receive funding from the General Fund and pays for its programs by issuing bonds which are then repaid from loan proceeds.

HCD operates a variety of programs that support the acquisition, rehabilitation and construction of affordable housing to very low-, low- and moderate-income households. The MHP provides gap financing to affordable housing developers. Developments financed using MHP or CalHFA's multi-family loans agree to provide the housing for a term of 55 years. The loans are made for 55 years at 3% interest per year on the outstanding balance of the loan. If the development cash flows it is required to pay on the outstanding debt. HCD also operates a predevelopment loan program that provides loans up to $100,000 to non-profit housing developers, local governments, housing cooperates or limited liability companies in which all the members are non-profits. The loans may be used for control, site acquisition for future low-income housing development, engineering studies, architectural plans, application fees, legal services, permits, bonding, and site preparation.

This bill would require CalHFA to create and administer the California School Employee Housing Assistance Program to provide both predevelopment grants and development loans to qualified school districts and developers for the creation of affordable rental housing for school employees, including teachers.

Purpose of the bill: According to the author, "there are two reasons why this bill is needed: lack of predevelopment financing and inadequate funding sources. The predevelopment process, which includes feasibility studies, entitlements, environmental impact reports, among other activities, requires funds that many cash-strapped school districts cannot cover up-front. This bill would provide funding necessary to begin development.

Furthermore, current funding for the development phase of such housing is inadequate for school districts in high-cost areas. State and federal subsidies are effectively capped at 60% Area Median Income (AMI), which for some school districts, is only slightly above the income for a starting teacher. The consequence of this threshold, as was experienced by the Los Angeles Unified School District, is that teachers in such districts would not qualify. This bill would provide the development financing needed to subsidize units above the existing threshold of 60% AMI."

Related legislation: This bill is substantially similar to AB 2200 (Thurmond) (2016) which passed this committee with committee amendments with a vote of 5-1. AB 2200 was held on the suspense file in the Assembly Appropriations Committee.

SB 1413 (Leno) Chapter 732, Statutes of 2016 established the Teacher Housing Act of 2016 to among other things make clear that housing provided exclusively for teachers could receive funding from the Low Income Housing Tax Credit program.

Committee amendment:

The committee may wish to consider an amendment to require payment on outstanding loans when a project has cash flow. Similar to the MHP program, the proposed program would require monitoring to ensure enforcement of the affordability restrictions. HCD relies upon the limited cash flow from projects to support monitoring.

On page 5, line 26 after "balance" insert the following: "The department shall require annual loan payments in the minimum amount necessary to cover the costs of project monitoring. For the first 30 years of the loan term, the amount of the required loan payments shall not exceed forty-two hundredths of 1 percent (.42%) per annum."

Double referred:  If AB 45 passes this committee, the bill will be referred to the Committee on Education.

REGISTERED SUPPORT / OPPOSITION:

Support

California Federation of Teachers (co-sponsor)

State Building and Construction Trades Council, AFL-CIO (co-sponsor)

California Apartment Association

California Association of Realtors

California School Employees Association, AFL-CIO

Commons Sense Kids, Action

San Francisco Unified School District

Opposition

California Charter School Association

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