Existing law establishes the California Housing Finance Agency within the Department of Housing and Community Development, and authorizes the agency to, among other things, make loans to finance affordable housing, including residential structures, housing developments, multifamily rental housing, special needs housing, and other forms of housing, as specified.

This bill would establish the California Affordable and Foster Youth Housing Finance Innovation Program and would require the agency to issue credit instruments, as defined, to qualified housing sponsors, as defined, for the construction, acquisition, and renovation of qualified projects, as defined. For all dwelling units in a qualified project that are reserved for specified tenants, the bill would require the qualified housing sponsor to, upon request of the agency, verify each tenant that satisfies specified provisions is either a current or former foster youth or a low-income household and would prohibit the qualified housing sponsor from charging such tenants a rent that exceeds the fair market rent, as specified.

The bill would set forth the requirements for the agency to administer the program including, among other requirements, to provide to an applicant a written notice informing the applicant whether the agency has approved or disapproved the application, and if disapproved, the reason for the disapproval, as specified. The bill would require the agency to issue loan guarantees for qualified loans made by financial institutions to qualified housing sponsors for the construction, acquisition, and renovation of qualified projects. The bill would also require the agency to enter into agreements to make lines of credit available, as specified, to obligors in the form of direct loans to be made by the agency for a qualified project. The bill would prohibit a credit instrument issued under these provisions from obligating the General Fund and would require a secured loan guarantee, secured loan, or line of credit issued under these provisions be exclusively secured by moneys in the California Housing Finance Fund from specified revenue sources. The bill would also make related findings and declarations.

Existing law establishes the California Housing Finance Agency within the Department of Housing and Community Development, and authorizes the agency to, among other things, make loans to finance affordable housing, including residential structures, housing developments, multifamily rental housing, special needs housing, and other forms of housing, as specified.

This bill would establish the California Affordable and Foster Youth Housing Finance Innovation Program and would require the agency to issue credit instruments, as defined, to qualified housing sponsors, as defined, for the construction, acquisition, and renovation of qualified projects, as defined. For all dwelling units in a qualified project that are reserved for specified tenants, the bill would require the qualified housing sponsor to, upon request of the agency, verify each tenant that satisfies specified provisions is either a current or former foster youth or a low-income household and would prohibit the qualified housing sponsor from charging such tenants a rent that exceeds the fair market rent, as specified.

The bill would set forth the requirements for the agency to administer the program including, among other requirements, to provide to an applicant a written notice informing the applicant whether the agency has approved or disapproved the application, and if disapproved, the reason for the disapproval, as specified. The bill would require the agency, upon appropriation, agency to issue loan guarantees for qualified loans made by financial institutions to qualified housing sponsors for the construction, acquisition, and renovation of qualified projects. The bill would also require the agency to, upon appropriation, to enter into agreements to make lines of credit available, as specified, to obligors in the form of direct loans to be made by the agency for a qualified project. The bill would prohibit a credit instrument issued under these provisions from obligating the General Fund and would require a secured loan guarantee, secured loan, or line of credit issued under these provisions be exclusively secured by moneys in the California Housing Finance Fund from specified revenue sources. The bill would also make related findings and declarations.

Existing law establishes the California Housing Finance Agency within the Department of Housing and Community Development, and authorizes the agency to, among other things, make loans to finance affordable housing, including residential structures, housing developments, multifamily rental housing, special needs housing, and other forms of housing, as specified.

This bill would establish the California Affordable and Foster Youth Housing Finance Innovation Program and would require the agency to issue credit instruments, as defined, to qualified housing sponsors, as defined, for the construction, acquisition, and renovation of qualified projects, as defined. For all dwelling units in a qualified project that are reserved for specified tenants, the bill would require the qualified housing sponsor to, upon request of the agency, verify each tenant that satisfies specified provisions is either a current or former foster youth or a low-income household and would prohibit the qualified housing sponsor from charging such tenants a rent that exceeds the fair market rent, as specified.

The bill would set forth the requirements for the agency to administer the program including, among other requirements, to provide to an applicant a written notice informing the applicant whether the agency has approved or disapproved the application, and if disapproved, the reason for the disapproval, as specified. The bill would require the agency, upon appropriation, to issue loan guarantees for qualified loans made by financial institutions to qualified housing sponsors for the construction, acquisition, and renovation of qualified projects. The bill would also require the agency to, upon appropriation, enter into agreements to make lines of credit available, as specified, to obligors in the form of direct loans to be made by the agency for a qualified project. The bill would also make related findings and declarations.

Date of Hearing: May 15, 2024

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

ABPCA Bill Id:AB 2674

Author:(Schiavo) – As Amended Ver:April 25, 2024

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

SUMMARY:

This bill requires the California Housing Finance Agency (CalHFA) to establish the California Affordable and Foster Youth Housing Finance Innovation Program (the Program) to provide loan guarantees, secured loans, or lines of credit for housing developments that provide a percentage of housing for former or current foster youth and lower income households.

Specifically, this bill:

1. Requires CalHFA to establish the Program to issue credit instruments to qualified housing sponsors for the new construction, acquisition, and renovation of permanent or interim housing that includes: a minimum of 25% of the total dwelling units reserved for tenants who are current or former foster youth who are 18 to 25 years of age that qualify for various federal and state programs; and a minimum of 25% of the total number of dwelling units reserved for tenants who are lower income households.
2. Requires CalHFA to administer the Program and specifies requirements for doing so, including the amount of rent that can be charged and how applications must be processed.
3. Requires CalHFA, by December 31, 2028, and every three years thereafter, to submit a report to the Legislature on the operations, financial performance, and accomplishments of the Program during the previous fiscal year.
4. Requires CalHFA to issue loan guarantees for qualified loans made by financial institutions to qualified housing sponsors for the construction, acquisition, and renovation of qualified projects in accordance with this bill. Provides a financial institution that issues a loan guaranteed by the agency pursuant to this article must be fully reimbursed for up to 49% of the guaranteed portion of principal and interest that result from a loan or loans that are in default.
5. Requires CalHFA to offer secured loans to obligors, the proceeds of which must be used by qualified housing sponsors for the construction, acquisition, and renovation of qualified projects as specified.
6. Requires CalHFA, upon appropriation, to enter into agreements to make lines of credit available to obligors in the form of direct loans to be made by the agency for a qualified project, as specified.

FISCAL EFFECT:

1. One-time General Fund (GF) cost of approximately $3 million to $4 million for CalHFA to develop and implement the Program. CalHFA indicates it does not currently handle construction financing, nor is this product in line with CalHFA’s business model.
2. CalHFA estimates ongoing GF costs of $740,000 annually for four staff positions to administer and monitor the Program. CalHFA notes it typically receives a 5% administration fee on appropriated program funds. This bill does not provide administrative funding, thus requiring the agency to stand up the Program without guaranteed staff.
3. CalHFA will be reliant on continued appropriations to fund and staff the Program, unlike programs CalHFA typically administers.

According to the Legislative Analyst’s Office, the General Fund faces a structural deficit in the tens of billions of dollars over the next several fiscal years.

COMMENTS:

1. Purpose. According to the Author:

[This bill] will expand the number of affordable housing units available to former foster youth struggling with housing security. Stable housing impacts virtually all aspects of life and is a critical social determinant of health. Unfortunately, foster youth experience homeless and housing insecurity at greater rates than the general population. By leveraging the backing of the state for low-risk loans and creating lines of credit to build more affordable housing serving foster youth, California will be able to accelerate housing construction while supporting thousands of foster youth with the goal of forestalling homelessness. One easy step in addressing our homeless crisis is an investment in prevention. That is, doing everything we can to make sure foster youth have an affordable place to live as they transition from the foster care system and into adulthood.

1. Background. CalHFA is the state’s affordable housing bank. CalHFA borrows money from the private financial market at below-market interest rates by issuing tax-exempt revenue bonds. CalHFA passes these interest rate savings on to low- and moderate-income first-time homebuyers and affordable rental housing developers by offering below market-rate mortgages. These bonds are backed only by CalHFA revenues and not by the state GF.

CalHFA provides a variety of programs to assist families with homeownership, primarily through downpayment assistance. In September 2021, CalHFA launched the ADU Grant Program, which provides qualified homeowners up to $25,000 to help cover ADU construction costs, with a focus on homeowners with low incomes, low equity in their homes, and those residing in low-income areas. The fiscal year (FY) 2022-23 budget provided $500 million for CalHFA to create and administer the California Dream for All homebuyer program to provide shared appreciation loans to qualified low- and moderate-income, first-time homebuyers.

The Governor’s January budget proposes to cut $1.2 billion in existing budget commitments to affordable housing programs, including eliminating $500 million for the state Low Income Housing Credit, a core program necessary to fund affordable multi-family housing programs. The last voter-approved housing bond, Proposition 1 from 2018, provided $3 billion for various affordable housing programs, which is fully spent down.

Because of the high level of affordability in the bill, the program this bill requires CAlHFA to create would require additional state subsidy in the form of LIHTC or long-term equity investments to support the overall affordability of developments. This bill requires CalHFA to offer loan guarantees to traditional lenders to entice more private capital into the affordable housing finance. This will require some state funding to back the loans. The bill prohibits using General Fund money for this purpose.

1. Related Legislation. AB 963 (Schiavo), of this legislative session, authorizes the California Infrastructure and Economic Development Bank (I-Bank) to establish one or more programs to guarantee qualified loans for the construction, acquisition, and renovation of housing for current or former foster youth who are 18 to 25 years of age. AB 963 was held on this committee’s suspense file.

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

Date of Hearing: April 23, 2024

ASSEMBLY COMMITTEE ON HUMAN SERVICES

Alex Lee, Chair

ABPCA Bill Id:AB 2674 (

Author:Schiavo) – As Amended Ver:April 15, 2024

SUBJECT: The California Affordable and Foster Youth Housing Finance Innovation Act

SUMMARY: Establishes The California Affordable and Foster Youth Housing Finance Innovation Program (Program) within the California Housing Finance Agency (CalHFA). Specifically, this bill:

1. Requires CalHFA to establish the Program to issue credit instruments to qualified housing sponsors for the new construction, acquisition, and renovation of permanent or interim housing that includes: a minimum of 25% of the total dwelling units reserved for tenants who are current or former foster youth who are 18 to 25 years of age that qualify for various federal and state programs; and a minimum of 25% of the total number of dwelling units reserved for tenants who are lower income households.
2. Specifies requirements for how CalHFA administers the Program, including the amount of rent that can be charged and how applications must be processed.
3. Requires CalHFA, by December 31, 2028, and every three years thereafter, to submit a report to the Legislature on the operations, financial performance, and accomplishments of the Program during the previous fiscal year.
4. Requires CalHFA, upon appropriation, to issue loan guarantees for qualified loans made by financial institutions to qualified housing sponsors for the construction, acquisition, and renovation of qualified projects in accordance with this bill. Provides that any financial institution that issues a loan that is guaranteed by the agency pursuant to this article shall be fully reimbursed for up to 49% of the guaranteed portion of principal and interest that result from a loan or loans that are in default.
5. Requires CalHFA, upon appropriation, to offer secured loans to obligors, the proceeds of which shall be used by qualified housing sponsors for the construction, acquisition, and renovation of qualified projects as specified.
6. Requires CalHFA, upon appropriation, to enter into agreements to make lines of credit available to obligors in the form of direct loans to be made by the agency for a qualified project, as specified.
7. Includes the following definitions:
   1. “Agency” means CalHFA;
   2. “Credit instrument” means a secured loan guarantee, secured loan, or line of credit authorized to be made under this chapter with respect to a qualified project;
   3. “Eligible costs” means the costs paid or incurred on or after January 1, 2025, for the construction, acquisition, and renovation of a qualified project;
   4. “Financial institution” means regulated banking organizations, including national banks and trust companies authorized to conduct business in California and state-chartered commercial banks, trust companies, credit unions, and savings and loan associations;
   5. “Line of credit” means an agreement entered into by the agency with an obligor to provide a direct loan at a future date upon the occurrence of certain events;
   6. “Loan guarantee” means any guarantee or other pledge by the agency to pay for all or a part of the principal and interest on a loan or other debt obligation issued by a financial company or financial institution to a qualified housing sponsor for eligible costs to construct, acquire, and renovate a qualified project;
   7. “Qualified housing sponsor” means any individual, joint venture, partnership, limited partnership, trust, corporation, limited equity housing cooperative, cooperative, local public entity, duly constituted governing body of an Indian reservation or rancheria, tribally designated housing entity, nonprofit organization, or other legal entity, or any combination thereof, qualified to either own, construct, acquire, or rehabilitate a housing development, or a residential structure other than an owner-occupied single unit whether for profit, nonprofit, or organized for limited profit, that is authorized to conduct business in the state, and has its primary business location within the boundaries of this state;
   8. “Qualified loan” means a loan or a portion of a loan made by a financial company or financial institution to a qualified housing sponsor for eligible costs to construct, acquire, or renovate a qualified project;
   9. “Secured loan” means a direct loan or other debt obligation issued by an obligor and funded by the agency to a qualified housing sponsor for eligible costs to construct, acquire, or renovate a qualified project;
   10. “Qualified project” means new construction of dwelling units, the conversion of units from nonresidential to residential, or the acquisition and rehabilitation of motels, hotels, hostels, or other sites and assets, including apartments or homes, and other buildings with existing uses that could be converted to permanent or interim housing. A qualified project results in dwelling units that meet the following conditions:
       1. A minimum of 25% of the total number of dwelling units, except for developments authorized pursuant to specified law, are reserved for tenants who are current or former foster youth who are 18 to 25 years of age, inclusive, and qualify for one of the following programs: the Independent Living Program; the Transitional Housing Placement Program for Non-Minor Dependents; The Transitional Housing Program-Plus Program; Assistance available to eligible youth pursuant to the Family Unification Program; or, The federal Foster Youth to Independence Initiative, administered by the United States Department of Housing and Urban Development (HUD); and,
          
       2. A minimum of 25% of the total number of dwelling units are reserved for tenants who are lower income households, as specified.

EXISTING LAW:

1. Establishes a state and local system of child welfare services, including foster care, for children who have been adjudged by the court to be at risk or have been abused or neglected, as specified. (Welfare and Institutions Code [WIC] § 202)
2. States that the purpose of foster care law is to provide maximum safety and protection for children who are currently being physically, sexually, or emotionally abused, neglected, or exploited, and to ensure the safety, protection, and physical and emotional well-being of children who are at risk of harm. (WIC § 300.2)
3. Provides for extended foster care funding for youth until age 21, and adopts other changes to conform to the federal Fostering Connections to Success Act. (WIC §§ 241.1, 303, 366.3, 388, 391, 450, 11400, 11402, 11403)
4. Permits a nonminor former foster youth under the age of 21 to petition the court for re-entry into foster care if the guardian or adoptive parent is no longer providing support, as specified. (WIC § 388.1)
5. Defines “nonminor dependent” as a current or former foster youth who is between 18 and 21 years of age, in foster care under the responsibility of the county welfare department, county probation department, or Indian tribe, and participating in a transitional independent living plan (TILP), as specified. (WIC § 11400(v))
6. Requires, when appropriate, for a nonminor dependent (NMD), the transitional independent living case plan, as described, to include in the TILP, a written description of the programs and services that will help the youth dependent, consistent with their best interests, to prepare for transition from foster care. Requires, if applicable, the case plan to describe the individualized supervision provided in the supervised independent living placement. Requires the case plan to be developed with the NMD and individuals identified as important to the youth and to include steps the agency is taking to ensure that the youth dependent achieves permanence, including maintaining or obtaining permanent connections to caring and committed adults. (WIC § 16501.1(g)(16)(A)(i)(ii)

FISCAL EFFECT: Unknown, this bill has not been analyzed by a fiscal committee.

COMMENTS: Note: While this bill has other components related to housing in general and CalHFA specifically, this analysis is focused on the elements related to foster youth and the unique obstacles transition-age foster youth face when securing housing.

Background: Child Welfare Services (CWS). California’s CWS system exists to protect children from abuse and neglect, and in doing so, to provide for their health, safety, and overall well-being. When suspicions of abuse or neglect arise, often as a result of a report by a mandated reporter like a doctor or teacher, Child Protective Services is tasked with investigating the report. If the allegation of abuse or neglect is substantiated, it is then determined whether it is in the best interest of the child to remain in their parent’s custody or be placed within the CWS system. If a child is suspected to be at risk of neglect, abuse, or abandonment, the juvenile court holds legal jurisdiction, and the CWS system appoints a social worker to ensure that the needs of the youth are met. As of January 1, 2024, there were 43,633 youth between the ages of 0 and 20 placed in California’s CWS system.

Extended Foster Care. California was one of the first states to opt into the federal opportunity to create an extended foster care program which represented a historic expansion of services to foster youth and was intended to improve outcomes for youth, who often faced enormous challenges as they emancipated from the foster care system at 18 years of age often facing poverty, homelessness, and incarceration.

In 2010, Governor Schwarzenegger signed AB 12 (Beall), Chapter 559, Statutes of 2010, which extended foster care benefits for certain eligible youth until the age of 21. Prior to the adoption of AB 12, known as the Fostering Connections to Success Act, youth aged out of the CWS system at 18 years old and were required to navigate the challenges of young adulthood, including obtaining education, stable housing, and employment, without the support of the CWS system. In recognition of these difficulties, AB 12 provided eligible youth between 18 and 21 years of age, known as NMDs, with the services and supports they need to experience independent living in supervised living environments. Extended foster care also enables youth to obtain educational and employment training to better prepare them to transition to adulthood and self-sufficiency.

At the six-month hearing prior to a youth attaining 18 years of age, the youth’s social worker or probation officer must have a plan to ensure that the youth will meet at least one of the following criteria for participation in extended foster care:

1. Be enrolled in a high school or equivalent program;
2. Be enrolled in a college, community college, or vocational program;
3. Be employed at least 80 hours a month;
4. Participate in a program or activity designed to remove barriers to employment; or,
5. Be unable to do one of the above requirements due to a medical condition.

NMDs must also sign an agreement to remain in foster care within six months of turning 18, reside in an eligible placement, and agree to work with their social worker to meet the goals of their transitional living plan.

Foster Youth and Homelessness. In the latest HUD count conducted in January 2023, 34,703 unaccompanied youth were reported to be experiencing homelessness in the United States. These unaccompanied youth constituted 22% of all people under the age of 25 who were facing homelessness. Between 2022 and 2023, the number of unaccompanied youth increased by 15%, which translates to 4,613 more youth. For youth, homelessness can mean living in cars, shelters, or couch surfing with friends; due to an increased susceptibility to exploitation and violence, youth experiencing homelessness may develop substance use disorders or engage in survival sex in exchange for shelter or food.

Youth who age out of the foster care system are at high risk of becoming homeless; a 2013 study published in the Journal of Public Health found that between 31% and 46% of former foster youth had been homeless at least once by age 26. According to the study, the odds of becoming homeless by age 19 were higher for youth who had been physically abused before entering foster care, had run away more than once while in foster care, had engaged in delinquent behaviors, were placed in a group care setting at baseline, and did not feel very close to a biological parent or grandparent.

A study conducted by the University of Chicago’s Chapin Hall and released in 2020, addressed whether extending foster care past the age of 18 influenced outcomes during the transition to adulthood, what factors influence the types of support youth receive in extended foster care; and how living arrangements and other services that result from extending foster care influence the relationship between extending care and youth outcomes. The study reported that more than one-in-four reported experiencing at least one night of homelessness in the past two years, while nearly 30% said they had couch surfed, staying with friends because they lacked housing. From the research conducted when the youth were 21 years old, they concluded: “In particular, our findings raise questions about the wisdom of abruptly curtailing services for these young people when they reach their 21st birthday. Our findings suggest that when COVID-19 is behind us, it will still be the case that many young adults in care could potentially benefit from ongoing support past their 21st birthday.”

Housing Options for Foster Youth:

There are many housing models and programs available to foster youth as they make the transition from care to independence. Below is a list of programs designed for foster youth and are a part of the services and supports that are available while in foster care and upon their discharge from foster care:

The Housing Navigation & Maintenance Program. Formerly the Housing Navigators Program, this program was established in the Budget Act of 2019, AB 74 (Ting), Chapter 23, Statutes of 2019, and allocated $5 million to help young adults between 18 and 21 years of age secure and maintain housing, with priority given to NMDs in the foster care system. The program is administered by the California Department of Housing and Community Development (HCD) to county child welfare agencies to provide housing navigators to help young adults secure and maintain housing. Funds allocated to counties may be used to provide housing navigation services directly or through a contract with other housing assistance programs in the county, and counties are encouraged to coordinate with the local Continuum of Care to facilitate communication and collaboration. Funds may be used to: assist young adults secure and maintain housing; provide housing case management, including essential services in emergency supports to foster youth; prevent young adults from becoming homeless; and, improve coordination of services and linkages to key resources across the community. Effective July 1, 2022, as a result of the enactment of SB 187 (Committee on Budget and Fiscal Review), Chapter 50, Statutes of 2022, the program expanded the upper age limit to include youth up to turning 25 years old, in order to align the program with federal Housing Choice Voucher Programs for former foster youth. The Governor’s Proposed Budget for 2024-25 includes a reduction of $13.7 million for the Housing Navigators Program.

Transitional Housing Placement (THP). In 2019, SB 80 (Committee on Budget and Fiscal Review), Chapter 27, Statutes of 2019, allocated $8 million in grants to counties for child welfare services agencies to help young adults 18 to 25 years of age find and maintain housing. The THP program required that priority be given to youth who were formerly in the foster care or probation systems. SB 80 required the HCD to consult with the California Department of Social Services, Department of Finance (DOF), and the County Welfare Directors Association of California to develop an allocation schedule for purposes of distributing funds, and subjected the program to suspend implementation on December 31, 2021, unless DOF made certain findings related to General Fund revenues and expenditures. Use of funds can include: identifying and assisting housing services; helping youth secure and maintain housing; improving coordination of services and linkages to community resources within the child welfare system and the homeless continuum of care; and, outreach and targeting to serve those with the most severe needs.

Transitional Housing Placement Program for Non-Minor Dependents. When AB 12 enacted extended foster care, the legislation also created the “Transitional Housing Placement Program + Foster Care” placement, now known as THP-NMD. This placement provides NMDs between 18 and 21 years of age with transitional housing and supportive housing based on the youth’s TILP. Youth participating in a THP-NMD placement receive case management, supervision, and supportive services from their THP-NMD provider. The goal of these services is to help the NMD transition to independent living by helping them meet education goals, obtain gainful employment, learn financial management, and other daily living skills.

Transitional Housing Program-Plus (THP-Plus). The THP-Plus program provides housing for former foster youth between 18 and 24 years of age who exited foster care on or after their 18th birthday. A qualifying youth can then receive THP-Plus housing and services for 24 cumulative months, or until they turn 24 if that occurs before their 24-month clock has run. To participate, an eligible youth must be actively pursuing the goals of their TILP, which is reviewed and updated annually. Additionally, the youth must report any changes to their TILP to their independent living plan coordinator, including but not limited to, changes in their address, living circumstances, or education training. Residential units including apartments, single-family dwellings, condominiums, college dormitories, and host family models may all qualify as an acceptable residential unit for the purposes of a THP-Plus placement. These placements are certified by the county social services agency must ensure certain health and safety standards are met and must certify that the program is needed by the county and the provider is capable of effectively operating the program and meeting the needs of the identified population. In fiscal year 2020-21, California had the capacity to serve 1,309 youth in THP-Plus at a moment in time.

Supervised Independent Living Placements (SILPs). NMDs in extended foster care also have the option of living in a SILP which allows the youth to live independently while still receiving the supports and services extended foster care provides. In a SILP, a youth lives in an apartment, house, condominium, room and board arrangement, or college dorm, either alone or with an approved roommate, while still under the supervision of their social worker or probation officer. A SILP may also include a transitional living setting approved by the county to support youth who are entering or reentering foster care or transitioning between placements, but prohibits this setting from including a youth homelessness prevention center or an adult homeless shelter. Youth must be approved to live in an SILP, and this occurs through them undergoing a SILP Readiness Assessment that reviews the youth’s preparedness to live independently. If this assessment finds the youth is ready for a SILP, then the housing arrangement the youth has found must undergo and pass a health and safety inspection which is conducted by the county. If the residence passes this inspection, a placement agreement is completed by the NMD and their social worker or probation officer whereby they agree that the placement has met certain safety standards and is an appropriate placement for the youth.

Author’s Statement: According to the Author, “[This bill] will expand the number of affordable housing units available to former foster youth struggling with housing security. Stable housing impacts virtually all aspects of life and is a critical social determinant of health. Unfortunately, foster youth experience homeless and housing insecurity at greater rates than the general population. By leveraging the backing of the state for low-risk loans and creating lines of credit to build more affordable housing serving foster youth, California will be able to accelerate housing construction while supporting thousands of foster youth with the goal of forestalling homelessness. One easy step in addressing our homeless crisis is an investment in prevention. That is, doing everything we can to make sure foster youth have an affordable place to live as they transition from the foster care system and into adulthood.”

Equity Implications: The provisions of this bill seek to address the significant amount of homelessness among transitional-age foster youth by creating a program to build housing that would specifically prioritize this population. While the lack of sufficient affordable housing impacts all segments of California, the state has a particular responsibility to ensure that foster youth have access to a basic need like housing. A 2020-21 Statewide Analysis of Supportive Housing for Former Foster Youth issued by John Burton Advocates for Youth (JBAY) asked and answered multiple questions related to the resources that are available to assist these youth out of care and into stable housing. The report highlighted that there is an unmet need of 1,249 youth in need of supportive housing who are unable to access it due to a lack of capacity. Additionally, the report stated that as of June 30, 2021, 473 youth were on a waiting list for a THP-Plus program and 290 were on a waiting list for a specialized Housing Choice Voucher for former foster youth. It is clear from the data that foster youth are in need of housing solutions. This bill addresses the need for foster youth to have housing options by establishing the Program to issue credit instruments to qualified housing sponsors for the new construction, acquisition, and renovation of permanent or interim housing for housing that includes a minimum of 25% of the total dwelling units reserved for tenants who are current or former foster youth.

When it comes to employment, educational attainment, financial independence, criminal justice involvement, and overall physical and mental health, foster youth fare poorly when compared to their non-foster youth peers. In addition to the trauma these youth experience by being removed from their home due to either abuse or neglect or a combination of both, only 53% of foster youth in California graduate high school compared to 83% for non-foster youth. Compounding these factors, research indicates that as many as 38% of foster youth experience homelessness, a figure much higher than the general population. The Legislative Analyst’s Office released an analysis in March of 2022 that stated foster youth are disproportionately low-income, Black, and Native American and that the proportions of Black and Native American youth in foster care are around four times larger than the proportions of Black and Native American youth in California overall. Recent research also suggests that lesbian, gay, bisexual, transgender, queer and/or questioning, and other non-cishet gender identities and sexualities youth are overrepresented in unstable housing and foster care and face poorer treatment while in the system and lower rates of achieving permanency, as well as bleaker outcomes after they age out, including lower educational attainment and higher odds of homelessness and financial instability.

When taking all of these factors into consideration, it becomes even more crucial that policies that address barriers to foster youth accessing basic needs such as housing are implemented to assist this vulnerable population as they transition from care into independence.

Policy Considerations: Currently, this bill ties the Program’s eligibility requirements for current and former foster youth to specific programs and ostensibly limits the age range of the occupants to those who are between 18 and 25 years of age. However, according to the Author and Sponsors, the intent of this bill is to provide more housing to current and former foster youth, as well as those who are low-income.

Should this bill move forward, the author may wish to consider streamlining the eligibility requirements for the Program so that the maximum number of current and foster youth would be eligible for housing.

Proposed Committee Amendments: The Committee proposes amendments to address policy considerations stated above to do the following:

• Strike requirements that current and former foster youth must be eligible for specific programs and instead allow eligibility for current and foster youth whose dependency was established on or after their 13^th birthday to be eligible.
• Strike the age requirements and instead allow all current and former foster youth to be eligible for the dwelling units with priority given to current and former foster youth who are 18 to 25 years of age, inclusive.

Double referral: This bill was previously heard in the Assembly Housing and Community Development Committee on April 10, 2024, and was approved on a 9-0 vote.

RELATED AND PRIOR LEGISLATION:

AB 963 (Schiavo) of 2023, was substantially similar to this bill and would have authorized the California Infrastructure and Economic Development Bank to establish one or more programs to guarantee qualified loans for the construction, acquisition, and renovation of housing for current or former foster youth who are 18 to 25 years of age. AB 963 was held on the Assembly Appropriations Committee suspense file.

REGISTERED SUPPORT / OPPOSITION:

Support

Walden Family Services (Sponsor)

A Better Way

Aspiranet

Association of Community Human Service Agencies

California Alliance of Caregivers

California Alliance of Child and Family Services

California Youth Connection (CYC)

Children Now

Ethos

First Place for Youth

PowerCA Action

Safe Place for Youth

Sycamores

Youth Law Center

Opposition

None on file.

Analysis Prepared by: Jessica Langtry / HUM. S. / (916) 319-2089

Date of Hearing: April 10, 2024

ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT

Christopher M. Ward, Chair

ABPCA Bill Id:AB 2674 (

Author:Schiavo) – As Introduced Ver:February 14, 2024

SUBJECT: The California Affordable and Foster Youth Housing Finance Innovation Act

SUMMARY: Requires the California Housing Finance Agency (CalHFA) to establish the California Affordable and Foster Youth Housing Finance Innovation Program (the program) to provide loan guarantees, secured loans, or lines of credit for housing developments that provide a percentage of housing for former or current foster youth. Specifically, this bill:

1. Includes the following definitions:
   1. “Agency” means the California Housing Finance Agency;
   2. “Credit instrument” means a secured loan guarantee, secured loan, or line of credit authorized to be made under this chapter with respect to a qualified project;
   3. “Eligible costs” means the costs paid or incurred on or after January 1, 2025, for the construction, acquisition, and renovation of a qualified project;
   4. “Financial institution” means regulated banking organizations, including national banks and trust companies authorized to conduct business in California and state-chartered commercial banks, trust companies, credit unions, and savings and loan associations;
   5. “Line of credit” means an agreement entered into by the agency with an obligor to provide a direct loan at a future date upon the occurrence of certain events;
   6. “Loan guarantee” means any guarantee or other pledge by the agency to pay for all or a part of the principal and interest on a loan or other debt obligation issued by a financial company or financial institution to a qualified housing sponsor for eligible costs to construct, acquire, and renovate a qualified project;
   7. “Qualified housing sponsor” means any individual, joint venture, partnership, limited partnership, trust, corporation, limited equity housing cooperative, cooperative, local public entity, duly constituted governing body of an Indian reservation or rancheria, tribally designated housing entity, nonprofit organization, or other legal entity, or any combination thereof, qualified to either own, construct, acquire, or rehabilitate a housing development, or a residential structure other than an owner-occupied single unit whether for profit, nonprofit, or organized for limited profit, that is authorized to conduct business in the state, and has its primary business location within the boundaries of this state;
   8. “Qualified loan” means a loan or a portion of a loan made by a financial company or financial institution to a qualified housing sponsor for eligible costs to construct, acquire, or renovate a qualified project;
   9. “Secured loan” means a direct loan or other debt obligation issued by an obligor and funded by the agency to a qualified housing sponsor for eligible costs to construct, acquire, or renovate a qualified project;
   10. “Qualified project” means new construction of dwelling units, the conversion of units from nonresidential to residential, or the acquisition and rehabilitation of motels, hotels, hostels, or other sites and assets, including apartments or homes, and other buildings with existing uses that could be converted to permanent or interim housing. A qualified project results in dwelling units that meet the following conditions:
       1. A minimum of 25% of the total number of dwelling units, except for developments authorized pursuant to specified law, are reserved for tenants who are current or former foster youth who are 18 to 25 years of age, inclusive, and qualify for one of the following programs:
          1. The Independent Living Program, established pursuant to the federal Consolidated Omnibus Budget Reconciliation Act of 1985 (Public Law 99-272);
          2. The Transitional Housing Placement Program for Non-Minor Dependents, as described in subdivision (c) of Section 16522.1 of the Welfare and Institutions Code;
          3. The Transitional Housing Program-Plus, pursuant to subdivision (s) of Section 11400 of the Welfare and Institutions Code and paragraph (2) of subdivision (a) of Section 11403.2 of the Welfare and Institutions Code;
          4. Assistance available to eligible youth pursuant to the Family Unification Program, authorized under Section 8(x) of the United States Housing Act of 1937 (Public Law 75–896); or
          5. The federal Foster Youth to Independence Initiative, administered by the United States Department of Housing and Urban Development.
       2. A minimum of 25% of the total number of dwelling units are reserved for tenants who are lower income households, as specified.
2. Requires CalHFA to establish the financing program to issue credit instruments to qualified housing sponsors for the new construction, acquisition, and renovation of permanent or interim housing for housing that includes 1) a minimum of 25% of the total dwelling units reserved for tenants who are current or former foster youth who are 18 to 25 years that qualify for rental assistance from various federal and state programs; and 2) a minimum of 25% of the total number of dwelling units reserved for tenants who are lower income households.
3. Specifies requirements for how CalHFA administers the program, including the amount of rents that can be charged and how applications must be processed.
4. Requires CalHFA, by December 31, 2028, and every three years thereafter, to submit a report to the Legislature on the operations, financial performance, and accomplishments of the financing program during the previous fiscal year.
5. Requires CalHFA, upon appropriation, to issue loan guarantees for qualified loans made by financial institutions to qualified housing sponsors for the construction, acquisition, and renovation of qualified projects in accordance with this bill. Provides that any financial institution that issues a loan that is guaranteed by the agency pursuant to this article shall be fully reimbursed for up to 49% of the guaranteed portion of principal and interest that result from a loan or loans that are in default.
6. Requires CalHFA, upon appropriation, to offer secured loans to obligors, the proceeds of which shall be used by qualified housing sponsors for the construction, acquisition, and renovation of qualified projects as specified.
7. Requires CalHFA, upon appropriation, to enter into agreements to make lines of credit available to obligors in the form of direct loans to be made by the agency for a qualified project, as specified.

EXISTING LAW:

1. Establishes a state and local system of child welfare services, including foster care, for children who have been adjudged by the court to be at risk or have been abused or neglected, as specified. (Welfare and Institutions Code (WIC) Section 202)
2. States that the purpose of foster care law is to provide maximum safety and protection for children who are currently being physically, sexually, or emotionally abused, neglected, or exploited, and to ensure the safety, protection, and physical and emotional well-being of children who are at risk of harm. (WIC 300.2)
3. Provides for extended foster care funding for youth until age 21, and adopts other changes to conform to the federal Fostering Connections to Success Act. (WIC 241.1, 303, 366.3, 388, 391, 450, 11400, 11402, 11403)
4. Permits a nonminor former foster youth under the age of 21 to petition the court for re-entry into foster care if the guardian or adoptive parent is no longer providing support, as specified. (WIC 388.1)
5. Defines “nonminor dependent” as a current or former foster youth who is between 18 and 21 years old, in foster care under the responsibility of the county welfare department, county probation department, or Indian tribe, and participating in a transitional independent living plan (TILP), as specified. (WIC 11400(v))
6. Requires, when appropriate, for a nonminor dependent (NMD), the transitional independent living case plan, as described, to include in the TILP a written description of the programs and services that will help the youth dependent, consistent with their best interests, to prepare for transition from foster care. Requires, if applicable, the case plan to describe the individualized supervision provided in the supervised independent living placement. Requires the case plan to be developed with the NMD and individuals identified as important to the youth and to include steps the agency is taking to ensure that the youth dependent achieves permanence, including maintaining or obtaining permanent connections to caring and committed adults. (WIC 16501.1 (g)(16)(A)(i)(ii))

FISCAL EFFECT: Unknown.

COMMENTS:

Author’s Statement: According to the author, “AB 2674 will expand the number of affordable housing units available to former foster youth struggling with housing security. Stable housing impacts virtually all aspects of life and is a critical social determinant of health. Unfortunately, foster youth experience homeless and housing insecurity at greater rates than the general population. By leveraging the backing of the state for low-risk loans and creating lines of credit to build more affordable housing serving foster youth, California will be able to accelerate housing construction while supporting thousands of foster youth with the goal of forestalling homelessness. One easy step in addressing our homeless crisis is an investment in prevention. That is, doing everything we can to make sure foster youth have an affordable place to live as they transition from the foster care system and into adulthood.”

CalHFA: CalHFA is the state’s affordable-housing bank. CalHFA borrows money from the private financial market at below-market interest rates by issuing tax-exempt revenue bonds. CalHFA passes these interest rate savings on to low- and moderate-income first-time homebuyers and affordable rental housing developers by offering below market-rate mortgages. These bonds are backed only by CalHFA revenues and not by the state General Fund. CalHFA also provides downpayment assistance in the form of deferred, “silent second” mortgages (i.e., the borrower makes no monthly payments but repays the loan at sale or refinance) for families who need extra assistance achieving homeownership. CalHFA receives 15% of the funds generated by SB 2 (Atkins, Chapter 364, Statutes of 2017) for the Mixed Income Program (MIP) for the purposes of creating mixed-income, multifamily residential housing for lower- or moderate-income households. The 2019-2020 Budget provided an additional one-time $500 million investment into the MIP program. CalHFA also received $150 million for Home Purchase Assistance from Proposition 1 bond funds to provide first and junior loan options for low- to moderate-income families, including low to zero interest rate down payment assistance loans. In September 2021, CalHFA launched a new program to help homeowners finance ADUs. The ADU Grant Program will provide qualified homeowners up to $25,000 to help cover construction costs, with a focus on homeowners with low incomes, low equity in their homes, and those residing in low-income areas. The 2022-23 budget also provided $500 million for CalHFA to create and administer the California Dream for All homebuyer aid program. This program will provide shared appreciation loans to qualified low- and moderate-income, first-time homebuyers.

Housing Options for Foster Youth: There are many housing models and programs available to foster youth as they make the transition from care to independence. Below is a list of programs designed for foster youth and are a part of the services and supports that are available while in foster care and upon their discharge from foster care:

The Housing Navigation & Maintenance Program. Formerly the Housing Navigators Program, this program was established in Budget Act of 2019, AB 74 (Ting), Chapter 23, Statutes of 2019, and allocated $5 million to help young adults between 18 and 21 years old secure and maintain housing, with priority given to NMDs in the foster care system. The program is administered by the California Department of Housing and Community Development (HCD) to county child welfare agencies to provide housing navigators to help young adults secure and maintain housing. Funds allocated to counties may be used to provide housing navigation services directly or through a contract with other housing assistance programs in the county, and counties are encouraged to coordinate with the local Continuum of Care to facilitate communication and collaboration. Funds may be used to: assist young adults secure and maintain housing; provide housing case management, including essential services in emergency supports to foster youth; prevent young adults from becoming homeless; and, improve coordination of services and linkages to key resources across the community. Effective July 1, 2022, as a result of the enactment of SB 187 (Committee on Budget and Fiscal Review), Chapter 50, Statutes of 2022, the program expanded the upper age limit to include youth up to until turning 25 years old, in order to align the program with federal Housing Choice Voucher Programs for former foster youth.

Transitional Housing Placement (THP). In 2019, SB 80 (Committee on Budget and Fiscal Review), Chapter 27, Statutes of 2019, allocated $8 million in grants to counties for child welfare services agencies to help young adults ages 18 to 25 years find and maintain housing. The THP program required that priority be given to youth who were formerly in the foster care or probation systems. SB 80 required HCD to consult with the California Department of Social Services, Department of Finance (DOF), and the County Welfare Directors Association of California to develop an allocation schedule for purposes of distributing funds, and subjected the program to suspend implementation on December 31, 2021, unless DOF made certain findings related to General Fund revenues and expenditures. Use of funds can include: identifying and assisting housing services; helping youth secure and maintain housing; improving coordination of services and linkages to community resources within the child welfare system and the homeless continuum of care; and, outreach and targeting to serve those with the most severe needs.

Transitional Housing Placement Program for Non-Minor Dependents. When AB 12 enacted extended foster care, the legislation also created the “Transitional Housing Placement Program + Foster Care” placement, now known as THP-NMD. This placement provides 18 to 21-year-old NMDs with transitional housing and supportive housing based on the youth’s TILP. Youth participating in a THP-NMD placement receive case management, supervision, and supportive services from their THP-NMD provider. The goal of these services is to help the NMD transition to independent living by helping them meet education goals, obtain gainful employment, learn financial management and other daily living skills.

Transitional Housing Program-Plus. The THP-Plus program provides housing for former foster youth between the ages of 18 and 24 who exited foster care on or after their 18th birthday. A qualifying youth can then receive THP-Plus housing and services for 24 cumulative months, or until they turn 24 if that occurs before their 24 month clock has run out. To participate, an eligible youth must be actively pursuing the goals of their TILP, which is reviewed and updated annually. Additionally, the youth must report any changes to their TILP to their ILP coordinator, including but not limited to, changes in their address, living circumstances, or education training. Residential units, including apartments, single family dwellings, condominiums, college dormitories, and host family models may all qualify as an acceptable residential unit for the purposes of a THP-Plus placement. These placements are certified by the county social services agency who must ensure certain health and safety standards are met and must certify that the program is needed by the county and the provider is capable of effectively operating the program and meeting the needs of the identified population. In fiscal year 2020-21, California had the capacity to serve 1,309 youth in THP-Plus at a moment in time.

Supervised Independent Living Placements (SILPs). NMDs in extended foster care also have the option of living in a SILP which allows the youth to live independently while still receiving the supports and services extended foster care provides. In an SILP, a youth lives in an apartment, house, condominium, room and board arrangement, or college dorm, either alone or with an approved roommate, while still under the supervision of their social worker or probation officer. A SILP may also include a transitional living setting approved by the county to support youth who are entering or reentering foster care or transitioning between placements, but prohibits this setting from including a youth homelessness prevention center or an adult homeless shelter. Youth must be approved to live in an SILP, and this occurs through them undergoing a SILP Readiness Assessment that reviews the youth’s preparedness to live independently. If this assessment finds the youth is ready for a SILP, then the housing arrangement the youth has found must undergo and pass a health and safety inspection which is conducted by the county. If the residence passes this inspection, a placement agreement is completed by the NMD and their social worker or probation officer whereby they agree that the placement has met certain safety standards and is an appropriate placement for the youth.

Efforts to Consolidate and Streamline State Housing Programs: The state provides funding for affordable housing production through Low Income Housing Tax Credits and long-term loans in that infuse equity into the development. In the past few years, the Legislature has attempted to streamline affordable housing funding, to reduce the complexity and time for developers. Affordable housing developers often cite the need to apply for multiple programs to fund one affordable housing development as a cost driver to development. State housing programs are administered by HCD, CalHFA, the Tax Credit Allocation Committee (TCAC), and the Strategic Growth Council. In an effort to streamline funding, the Legislature passed AB 484 (Daly), Chapter 434, Statutes of 2020 which required HCD to create a combined notice of funding availability (NOFA), commonly called the Super NOFA, for multiple overlapping programs that fund multi-family rental housing for lower-income families. Last year, AB 519 (Schiavo), Chapter 742 required TCAC, HCD, and CalHFA to convene an Affordable Housing Finance Workgroup to make recommendations to develop a common application process for the programs they administer on or before January 1, 2027.

Budget Challenges: Although final revenues are not in, the Legislative Analyst’s Office estimates that the state is facing a $58 billion budget deficit. The Governor’s January budget proposes to cut $1.2 billion in existing budget commitments to affordable housing programs, including eliminating $500 million for the state Low Income Housing Credit, a core program necessary to fund affordable multi-family housing programs. The last voter-approved housing bond, Proposition 1 from 2018, provided $3 billion for various affordable housing programs, which has fully spent down.

Policy Considerations: This bill would create a new program in a time when the state is attempting to consolidate and streamline existing programs. HCD operates the Multi-family Housing Program, the state’s flagship multi-family loan program that could fund the types of programs envisioned by this bill. The Legislature adds additional complexity to affordable housing finance when specialized funding programs for specific sub-populations. The developments funded by this new program are similar to affordable housing for lower-income families which rely upon federal Housing Choice Vouchers as a source of ongoing revenue to fund rents. Private lenders are familiar with this model and underwriting projects that utilize Housing Choice Vouchers. Because of the high level of affordability in the bill (50% - 25% for former foster youth and 25% for lower income households) the program envisioned by this bill would require additional state subsidy in the form of LIHTC or long-term equity investments to support the overall affordability of developments. This bill would require CalHFA to offer loan guarantees to traditional lenders in an effort to entice more private capital into the affordable housing finance. This will require some state funding, either from the General Fund or some other source, to back the loans.

Arguments in Support: According to the sponsor, Walden Family Services, “by offering secured loans, loan guarantees, and lines of credit to housing developers and qualified organizations for the construction, acquisition, and renovation of housing – a portion of which will be dedicated to current and former foster youth – AB 2674 will increase the total supply of affordable housing for young people and low-income families.”

Arguments in Opposition: None on file.

Related Legislation:

AB 963 (Schiavo) of 2023 would have required the California Infrastructure and Economic Development Bank (IBank) to establish one or more programs to guarantee qualified loans for the construction, acquisition, and renovation for housing for current or former foster youth who are 18 to 25 years of age and qualify for specified housing programs, with preference given to municipalities with high housing inelasticity and high rates of foster youth. This bill was held in Assembly Appropriations Committee.

Double Referred: This bill was also referred to the Assembly Committee on Human Services, where it will be heard should it pass out of this committee.

REGISTERED SUPPORT / OPPOSITION:

Support

Walden Family Services (Sponsor)
A Better Way

Aspiranet

Association of Community Human Service Agencies
California Alliance of Caregivers
California Alliance of Child and Family Services
California Youth Connection
Children Now
Ethos
First Place for Youth

Fred Finch Youth & Family Services
PowerCA Action
Safe Place for Youth
Sycamores
Youth Law Center

Opposition

None on file.

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