(1)Existing law requires the Department of Housing and Community Development to administer various programs intended to promote the development of housing, including the Multifamily Housing Program, pursuant to which the department provides financial assistance in the form of deferred payment loans to pay for the eligible costs of development for specified activities.

Under existing law, the principal and accumulated interest of a loan issued under the Multifamily Housing Program is due and payable upon the completion of the term of the loan. In this regard, existing Existing law prohibits the amount of the required loan payments from exceeding 0.42% per annum for the first 30 years of the loan term.

This bill would prohibit, for the first 30 years of the loan term, the amount of the required loan payments from exceeding 0.42% per annum or $150 $260 per assisted unit, whichever is less. The bill would authorize the department to adjust the $150 $260 cap for inflation based on the California Consumer Price Index, as specified.

(2)Existing law, known as the No Place Like Home Program, requires the Department of Housing and Community Development to award $2,000,000,000 among counties to finance capital costs, including, but not limited to, acquisition, design, construction, rehabilitation, or preservation, and to capitalize operating reserves, of permanent supportive housing for the target population, as specified. Existing law establishes the No Place Like Home Fund, requires specified moneys to be deposited in the fund, and continuously appropriates moneys in the fund for these purposes. the program. Existing law requires loans for capital costs made by the department under the program to be in the form of secured deferred payment loans to pay for the eligible costs of development. Existing law prohibits the amount of the required loan payments from exceeding 0.42% per annum for the first 15 years of the loan term.

This bill would prohibit, for the first 15 years of the loan term, the amount of the required loan payments from exceeding 0.42% per annum or $150 $260 per assisted unit, whichever is less. The bill would authorize the department to adjust the $150 $260 cap for inflation based on the California Consumer Price Index, as specified.

The No Place Like Home Program was ratified and amended by the No Place Like Home Act of 2018, approved by the voters as Proposition 2 at the November 6, 2018, statewide general election. Existing law authorizes the Legislature to amend Proposition 2 by a ²/₃ vote, so long as the amendment is consistent with and furthers the intent of that measure.

The bill would state the finding of the Legislature that these provisions are consistent with, and further the intent of, the No Place Like Home Act of 2018.

(1)Existing law requires the Department of Housing and Community Development to administer various programs intended to promote the development of housing, including the Multifamily Housing Program, pursuant to which the department provides financial assistance in the form of deferred payment loans to pay for the eligible costs of development for specified activities.

Existing law requires the principal and accumulated interest of a loan issued under the Multifamily Housing Program is due and payable upon the term of the loan. In this regard, existing law prohibits the amount of the required loan payments from exceeding 0.42% per annum for the first 30 years of the loan term.

This bill would prohibit, for the first 30 years of the loan term, the amount of the required loan payments from exceeding 0.42% per annum or $150 per assisted unit, whichever is less. The bill would authorize the department to adjust the $150 cap for inflation based on the California Consumer Price Index, as specified.

(2)Existing law, known as the No Place Like Home Program, requires the Department of Housing and Community Development to award $2,000,000,000 among counties to finance capital costs, including, but not limited to, acquisition, design, construction, rehabilitation, or preservation, and to capitalize operating reserves, of permanent supportive housing for the target population, as specified. Existing law establishes the No Place Like Home Fund, requires specified moneys to be deposited in the fund, and continuously appropriates moneys in the fund for these purposes. Existing law requires loans for capital costs made by the department under the program to be in the form of secured deferred payment loans to pay for the eligible costs of development. Existing law prohibits the amount of the required loan payments from exceeding 0.42% per annum for the first 15 years of the loan term.

This bill would prohibit, for the first 15 years of the loan term, the amount of the required loan payments from exceeding 0.42% per annum or $150 per assisted unit, whichever is less. The bill would authorize the department to adjust the $150 cap for inflation based on the California Consumer Price Index, as specified.

The No Place Like Home Program was ratified and amended by the No Place Like Home Act of 2018, approved by the voters as Proposition 2 at the November 6, 2018, statewide general election. Existing law authorizes the Legislature to amend Proposition 2 by a ²/₃ vote, so long as the amendment is consistent with and furthers the intent of that measure.

The bill would state the finding of the Legislature that these provisions are consistent with, and further the intent of, the No Place Like Home Act of 2018.

SENATE COMMITTEE ON

Senator Anthony Portantino, Chair

2023 - 2024 Regular Session

AB 578 (Berman) - Multifamily Housing Program: No Place Like Home Program

Bill Summary:

AB 578 would reduce the amount of annual loan payments that developers pay to the Department of Housing and Community Development (HCD) to cover the ongoing costs of project monitoring under the Multifamily Housing Program (MHP) and the No Place Like Home Program (NPLH Program) to the lesser of the current amount or $260 per unit.

Fiscal Impact:

• HCD indicates that applying the reduced monitoring payment amount to the current portfolio of projects would result in a reduction of approximately $9.73 million in monitoring fee revenue that HCD uses to fund its monitoring activities (a reduction of approximately 56.5% of monitoring revenues). HCD estimates that the bill would require an annual General Fund augmentation of an equivalent amount to cover the costs of existing monitoring and compliance staff. These General Fund costs would likely increase annually as new projects are funded and require ongoing monitoring.
  
• Staff estimates that the bill could also result in unknown, but significant additional one-time administrative costs to restructure loan agreements in the current portfolio of projects to account for the reduced annual monitoring payments. (General Fund)

Background:

Existing law establishes the MHP, which is administered by HCD and provides deferred payment loans to low-income housing developers) for the acquisition, construction, or rehabilitation of housing affordable to low and very-low income families and individuals. The MHP has been primarily funded through the issuance of voter-approved general obligation bonds, but the program has received significant General Fund allocations in recent budget cycles. MHP loans have a term of not less than 55 years at a 3% simple interest rate, and principle and interest payments are deferred until loan maturity, although HCD collects residual payments to cover costs of administering the loan and ongoing compliance monitoring. For the first 30 years of the loan term, the amount of required loan payments must not exceed 0.42% per year.

Existing law authorizes HCD to reduce the interest rate on any loan it issues to a rental housing development to as low as 0.42% per year, or a rate determined by HCD that is sufficient to cover the costs of project monitoring, whichever is greater, if the development meets specified requirements.

Existing law establishes the NPLH Program, which provides funding and tools that allow HCD to address affordability issues associated with creating housing units that are specifically set aside for persons with serious mental illness who are chronically homeless, homeless, or at-risk of being chronically homeless. Existing law, approved by the voters as Proposition 2 in 2018, requires HCD to award $2 billion in revenue bonds over four rounds among counties to finance capital costs of permanent supportive housing development, including acquisition, design, construction, rehabilitation, or preservation, and to capitalize operating reserves. The revenue bonds that fund the NPLH Program have been fully allocated and they are repaid by funding from the Mental Health Services Act. Existing law requires loans for capital costs made by HCD under the NPLH Program to be in the form of secured deferred payment loans to pay for the eligible costs of the development. The loans have a 3% simple interest rate and all principle and interest is deferred until loan maturity. Existing law requires annual loan payments in the minimum amount necessary to cover the costs of project monitoring, and specifies that for the first 15 years, these payments must not exceed 0.42% per year. Program guidelines require these ongoing monitoring payments for the first 30 years of the loan term, consistent with the requirements for MHP.

Proposed Law:

AB 578 would cap the annual loan payments that housing development sponsors pay to HCD during the loan term under the MHP and NPLH Program to cover the costs of project monitoring at 0.42% of the loan amount (the current rate) or $260 per unit, whichever is less. The bill would authorize HCD to adjust the $260 annual loan payment limit for inflation, as specified.

Related Legislation:

AB 2562 (Mullin), Chap. 765/2018, required HCD to reduce the interest on any loan issued to developers of low-income rental housing projects and revised the conditions that a development must meet to qualify for a rate reduction.

AB 523 (Ammiano), Chap. 445/2013, authorized HCD to reduce or eliminate the interest rate on loans for affordable housing developments that meet specified criteria. The bill also authorized HCD to change the interest rate and forgive accrued interest on specified loans if it receives a loan extension request associated with the award of low-income housing tax credits.

Staff Comments:

This bill is intended to reduce the costs incurred by developers for the payment of residual amounts on loans received through the MHP and NPLH Program that cover HCD’s ongoing monitoring and compliance costs. Proponents of the bill contend that the savings from reducing payments made by developers for project monitoring will be leveraged to increase production of additional low-income housing units.

HCD indicates that the 0.42% monitoring fees have historically funded approximately 68% of the Asset Management and Compliance staff positions, related Fiscal Management Office staff positions, Legal Affairs Division staff positions, and overhead such as IT costs, headquarters rent, and administrative staff.  These operations currently have 90 positions requiring $17.23 million annually in funding. HCD estimates that this bill would result in a 56.5% reduction in monitoring fee revenues that are derived from the 0.42% residual loan payments, the equivalent of a $9.73 million reduction in funding annually if the $260 per unit fee were applied to the existing portfolio of projects subject to residual fees. As such, this bill would require a General Fund augmentation of an equivalent amount to cover the costs of existing monitoring and compliance activities.

-- END --

SENATE COMMITTEE ON HOUSING

Senator Scott Wiener, Chair

2023 - 2024 Regular

Bill No: AB 578 Hearing Date: 7/10/2023

SUBJECT: Multifamily Housing Program: No Place Like Home Program

DIGEST: This bill revises the minimum annual loan payment developers must pay to cover the cost of project monitoring for the Multi-family Housing Program (MHP) and the No Place Like Home (NPLH) Program administered by the Department of Housing and Community Development (HCD).

ANALYSIS:

Existing law:

1. Establishes MHP at HCD to assist the new construction, rehabilitation, and preservation of permanent and transitional rental housing for lower-income households through loans to local governments and non- and for-profit developers.
2. Establishes the NPLH Program, administered by HCD, to distribute finance capital costs among counties, including acquisition, design, construction, rehabilitation or preservation and capitalized operating costs of permanent supportive housing for persons who are eligible for services under Proposition 63 and are homeless, chronically homeless, or at risk of chronic homelessness.
3. Requires HCD to charge annual loan payments in the minimum amount necessary to cover the costs of project monitoring.
4. Provides that for MHP and the NPLH program the annual loan payments to cover the cost of project monitoring must not exceed 0.42 percent of the project loan.

This bill:

1. Allows the Department of Housing and Community Development (HCD) to annually charge 0.42% of the total loan for a project or $260 per unit, adjusted for inflation, whichever is less, to cover the cost of project monitoring.
2. Finds and declares that the changes to NPLH are consistent and further the intent of Proposition 2, as approved by the voters at the November 6, 2018 general election.

COMMENTS:

1. Author’s statement. “AB 578 would unlock over $19 million dollars in private financing for affordable housing by updating the monitoring fee that the Department of Housing and Community Development (HCD) charges affordable housing developers while still ensuring HCD has adequate resources to do its monitoring work. Currently, HCD charges an annual fee in the amount of 0.42% of the awarded loan for monitoring the development. Twenty years ago, the amount of the awarded loans were much smaller because the costs of housing developments were cheaper. While charging 0.42% was appropriate when loans were small, this percentage now could result in a fee up to $147,000 per year for a single affordable housing development. This current mechanism to cover HCD’s monitoring costs is antiquated. Despite the fact that the housing landscape and costs to build have drastically changed, this has not been updated in over 23 years. This bill is a reasonable update to the affordable housing monitoring fee that again would unlock $19 million in private financing that could result in more than 300 units of affordable housing being built every year. This is essential and desperately needed to further address California’s housing and homelessness crisis.”

1. California’s housing crisis. The need for and costs of housing have consistently outpaced the development of affordable housing for over 30 years. The lack of supply is the primary factor underlying California’s housing crunch. The state HCD estimates that California needs to build 180,000 new homes a year to keep up with population growth. HCD noted in its statewide housing plan that California must plan for more than 2.5 million homes over the next eight-year cycle, and no less than one million of those homes must meet the needs of lower-income households.
2. MHP. The MHP program is the state’s main affordable multi-family rental housing program. The program provides low-interest, long-term loans for new construction, rehabilitation, and preservation of permanent and transitional housing for lower-income households. MHP is predominately funded through voter-approved tax exempt bonds, although the program received one-time general fund allocations over the last few years. In 2020, AB 434 (Daly, Chapter 192), consolidated multiple programs at HCD that fund affordable rental housing (e.g., programs creating farmworker housing, transit-oriented development, and housing for veterans and people experiencing homelessness) into one Notice of Funding Availability (NOFA) that is administered using the MHP guidelines. This is known as the SuperNOFA. The first SuperNOFA issued in February 2023 was oversubscribed by 4:1 and MHP was oversubscribed 10:1.
3. NLPH. California enacted AB 1618 (Committee on Budget, Chapter 43, Statutes of 2016) and 1628 (Committee on Budget, Chapter 322, Statutes of 2016) that created the NPLH program. In November 2018 voters approved Proposition 2, authorizing the sale of up to $2 billion of revenue bonds and the use of a portion of Proposition 63 taxes for the NPLH program. NPLH program invests in the development of permanent supportive housing for persons who are in need of mental health services and are experiencing homelessness, chronic homelessness, or who are at risk of chronic homelessness. The bonds are repaid by funding from the Mental Health Services Act (MHSA). All of the bond funds have been allocated.
4. Monitoring fees. HCD monitors affordable housing developments that receive funding from MHP and NPLH to ensure that the rents charged are consistent with the affordability requirements. Developments pay a flat annual fee of 0.42% of the total loan amount to support the cost of monitoring. This means that as construction costs rise, these monitoring fees rise. This bill seeks to spur housing production by reducing the large costs these developments incur by capping the fees at $260 per unit, adjusted for inflation. This is modeled after the San Diego Housing Commission, which charges an annual $150 per unit monitoring fee. The California Tax Credit Allocation Committee (TCAC) also charges a one-time, per unit fee, while the California Housing Finance Authority (CalHFA) charges a flat monitoring fee regardless of the units in the development or loan amount. According to the Assembly Appropriations Committee, HCD indicates this bill would lead to a 41% reduction in fee revenue HCD uses to fund its project monitoring activities.

According to one of the sponsors, California Housing Partnership, "AB 578 caps the monitoring fee to $260 per unit in the development, which is still adequate to cover HCD's monitoring costs. In using data from the last round of funding in 2022, the bill saves an average development over $22,000, which can be leveraged to over $23 million from the bank across all developments. Ultimately, there would be a net benefit and money savings for HCD. By leveraging the savings from monitoring costs, hosing providers would ask for less money from HCD."

Related Legislation:

AB 434 (Daly, Chapter 192, Statutes of 2020) — consolidated multiple programs at HCD that fund affordable rental housing into one NOFA that is administered using the MHP guidelines, also known as the SuperNOFA.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

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

July 5, 2023.)

SUPPORT:

California Coalition for Rural Housing (Co-Sponsor)

California Housing Partnership (Co-Sponsor)

California Housing Consortium

California State Association of Counties

City of Thousand Oaks

Eah Housing

Eden Housing

LeadingAge California

Livable California

Midpen Housing Corporation

OPPOSITION:

None received.

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 578

Author:(Berman)

As Amended Ver:May 18, 2023

2/3 vote

SUMMARY

Revises the minimum annual loan payment that developers must pay to cover the cost of project monitoring for the Multi-family Housing Program (MHP) and the No Place Like Home (NPLH) Program.

Major Provisions

1. Allows the Department of Housing and Community Development (HCD) to annually charge 0.42% of the total loan for a project or $260 per unit, adjusted for inflation, whichever is less, to cover the cost of project monitoring.
2. Finds and declares that the changes to NPLH are consistent and further the intent of Proposition 2, as approved by the voters at the November 6, 2018 general election.

COMMENTS

MHP: The MHP program is the state's main affordable multi-family rental housing program. The program provides low-interest, long-term loans for new construction, rehabilitation, and preservation of permanent and transitional housing for lower-income households. MHP is predominately funded through voter-approved tax exempt bonds, although the program received one-time general fund allocations over the last few years. In 2020, AB 434 (Daly), Chapter 192, consolidated multiple programs at HCD that fund affordable rental housing (farmworker housing, transit-oriented development, and veterans housing and homelessness) into one Notice of Funding Availability (NOFA) that is administered using the MHP guidelines. This is known as the SuperNOFA. The first SuperNOFA issued in February 2023 was oversubscribed by 4:1 and MHP was oversubscribed 10:1.

NPLH: In 2016, California enacted AB 1618 (Budget Committee), Chapter 43, Statutes of 2016, and AB 1628 (Budget Committee), Chapter 322, Statutes of 2016, that created the NPLH program. In November 2018 voters approved Proposition 2, authorizing the sale of up to $2 billion of revenue bonds and the use of a portion of Proposition 63 taxes for the NPLH program. NPLH program invests in the development of permanent supportive housing for persons who are in need of mental health services and are experiencing homelessness, chronic homelessness, or who are at risk of chronic homelessness. The bonds are repaid by funding from the Mental Health Services Act (MHSA). All of the bond funds have been allocated.

Fees for monitoring: HCD monitors affordable housing developments that receive funding from MHP and NPLH to ensure that the rents charged are consistent with the affordability requirements. Developments pay a flat fee of 0.42% of the total loan amount to support the cost of monitoring. According to the sponsors of this bill, using data from the SuperNOFA awards announced February 6, 2023, HCD collects close to $3 million in monitoring fees every year. Divided by the 71 developments that received funding in the last NOFA, this results in just over $41,000 per development. Divided by the number of units, the cost per unit is roughly $461.15. Under this bill, the charge would be capped to $260 per unit.

The California Housing Finance Agency (CalHFA), a sister state agency to HCD which also makes loans to affordable housing developments, charges a flat monitoring fee of $7,500 regardless of the number of units in the development.

According to the Author

"AB 578 would unlock over $10 million dollars in private financing for affordable housing by updating the monitoring fee that the Department of Housing and Community Development (HCD) charges affordable housing developers while still ensuring HCD has adequate resources to do its monitoring work. Currently, HCD charges an annual fee in the amount of 0.42% of the awarded loan for monitoring the development. Twenty years ago, the amount of the awarded loans were much smaller because the costs of housing developments were cheaper. While charging 0.42% was appropriate when loans were small, this percentage now could result in a fee up to $126,000 per year for a single affordable housing development. This is equivalent to having more than one full-time staff person tasked with monitoring one development for the entire year.

This current mechanism to cover HCD's monitoring costs is antiquated. Despite the fact that the housing landscape and costs to build have drastically changed, this has not been updated in over 23 years. This bill is a reasonable update to the affordable housing monitoring fee that again would unlock $10 million in private financing that could result in more than 100 units of affordable housing being built every year. This is essential and desperately needed to further address California's housing and homelessness crisis."

Arguments in Support

According to one of the sponsors, California Housing Partnership, "AB 578 caps the monitoring fee to $260 per unit in the development, which is still adequate to cover HCD's monitoring costs. In using data from the last round of funding in 2022, the bill saves an average development over $35,000, which can be leveraged to over $500,000 from the bank. For the entire round of funding, this bill would save HCD over $10 million. This is roughly HCD funding an entire affordable housing development with over 60 units with every round of funding."

Arguments in Opposition

None on file.

FISCAL COMMENTS

According to the Assembly Appropriations Committee, HCD indicates this bill would lead to a 41% reduction in fee revenue HCD uses to fund its project monitoring activities. The 0.42% monitoring fee has historically funded 68% of the Asset Management and Compliance staff positions, related Fiscal Management Office staff positions, Legal Affairs Division staff positions, and overhead such as IT costs, headquarters rent, and administrative staff. These operations currently have 90 positions requiring $17.1 million annually in funding.

VOTES

ASM HOUSING AND COMMUNITY DEVELOPMENT: 8-0-0

YES: Wicks, Joe Patterson, Wendy Carrillo, Gabriel, Juan Carrillo, Quirk-Silva, Sanchez, Ward

ASM APPROPRIATIONS: 11-0-5

YES: Holden, Bryan, Calderon, Wendy Carrillo, Mike Fong, Hart, Lowenthal, Papan, Pellerin, Weber, Ortega

ABS, ABST OR NV: Megan Dahle, Dixon, Mathis, Robert Rivas, Sanchez

UPDATED

VERSION: May 18, 2023

CONSULTANT: Lisa Engel / H. & C.D. / (916) 319-2085 FN: 0000582

Date of Hearing: April 19, 2023

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Chris Holden, Chair

ABPCA Bill Id:AB 578

Author:(Berman) – As Introduced Ver:February 8, 2023

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

SUMMARY:

This bill revises the minimum annual loan payment developers must pay to cover the cost of project monitoring for the Multi-family Housing Program (MHP) and the No Place Like Home (NPLH) Program by capping the annual amount the Department of Housing and Community Development (HCD) may charge at $150 per unit, adjusted for inflation, or 0.42% of the total project loan, whichever is less.

FISCAL EFFECT:

HCD estimates ongoing General Fund costs of $11.47 million to cover the shortfall in funding for ongoing staffing needs. HCD indicates this bill would lead to a 66% reduction in fee revenue HCD uses to fund its project monitoring activities. The 0.42% monitoring fee has historically funded 68% of the Asset Management and Compliance staff positions, related Fiscal Management Office staff positions, Legal Affairs Division staff positions, and overhead such as IT costs, headquarters rent, and administrative staff.  These operations currently have 90 positions requiring $17.23 million annually in funding.

COMMENTS:

1. Purpose. This bill seeks to provide additional funds for affordable housing production by updating (reducing) the project monitoring fee HCD charges affordable housing developers. According to the author:

HCD charges an annual fee in the amount of 0.42% of the awarded loan for monitoring the development. While charging 0.42% was appropriate when loans were small, this percentage now could result in a fee up to $126,000 per year for a single affordable housing development. This is equivalent to having more than one full-time staff person tasked with monitoring one development for the entire year. This current mechanism to cover HCD’s monitoring costs is antiquated. Despite the fact that the housing landscape and costs to build have drastically changed, this has not been updated in over 23 years. This bill is a reasonable update to the affordable housing monitoring fee that would unlock $10 million in private financing that could result in more than 100 units of affordable housing being built every year.

1. Background. Existing law requires HCD to administer various programs intended to promote affordable housing development, including the MHP and NPLH. For both of these programs HCD provides financial assistance in the form of deferred payment loans to pay for the eligible costs of development. HCD monitors affordable housing developments that receive funding from MHP and NPLH to ensure the rents charged are consistent with the affordability requirements. Because these are deferred payment loans, existing law requires HCD to collect annual loan payments of the minimum amount necessary to cover only the costs of project monitoring, not to exceed 0.42% of the project loan. HCD indicates the 0.42% monitoring fee has historically funded 68% of its project monitoring activities.

According to the sponsors of the bill, in a recent round of project funding, the 0.42% monitoring fee equated to approximately $461 per unit. This bill caps the monitoring fee at $150 per unit or 0.42% of the project loan, whichever is less. The sponsors assert this updated fee structure could result in millions of additional dollars for affordable housing.

1. MHP. The MHP program is the state’s main affordable multi-family rental housing program. The program provides low-interest, long-term loans for new construction, rehabilitation, and preservation of permanent and transitional housing for lower-income households. MHP is predominately funded through voter-approved tax exempt bonds, although the program received one-time general fund allocations over the last few years.
2. NPLH. The NPLH program invests in the development of permanent supportive housing for persons who are in need of mental health services and are experiencing homelessness, chronic homelessness, or who are at risk of chronic homelessness. In November 2018 voters approved Proposition 2, authorizing the sale of up to $2 billion of revenue bonds and the use of a portion of Proposition 63 taxes for the NPLH program. The bonds are repaid by funding from the Mental Health Services Act.

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

Date of Hearing: March 29, 2023

ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT

Buffy Wicks, Chair

ABPCA Bill Id:AB 578 (

Author:Berman) – As Introduced Ver:February 8, 2023

SUBJECT: Multifamily Housing Program: No Place Like Home Program

SUMMARY: Revises the minimum annual loan payment that developers must pay to cover the cost of project monitoring for the Multi-family Housing Program (MHP) and the No Place Like Home (NPLH) Program. Specifically, this bill:

1. Allows the Department of Housing and Community Development (HCD) to annually charge 0.42 percent of the total loan for a project or $150 per unit, adjusted for inflation, whichever is less, to cover the cost of project monitoring.
2. Finds and declares that the changes to NPLH are consistent and further the intent of Proposition 2, as approved by the voters at the November 6, 2018 general election.

EXISTING LAW:

1. Establishes the NPLH Program, administered by HCD, in consultation with an advisory committee with a specified membership, to distribute $2 billion among counties to finance capital costs, including acquisition, design, construction, rehabilitation or preservation and capitalized operating costs of permanent supportive housing for persons who are eligible for services under Proposition 63 and are homeless, chronically homeless, or at risk of chronic homelessness. (Welfare and Institutions Code (WIC) Section 5849.1)
2. Requires HCD to charge annual loan payments in the minimum amount necessary to cover the costs of project monitoring. (Health and Safety Code (HSC) Section 50675.6)
3. Establishes the MHP to provide loans to acquire, rehabilitate and preserve affordable rental housing for households at or below 80 percent of the area median income. (HSC Section 50675.6)
4. Provides that for MHP and the NPLH program the annual loan payments to cover the cost of project monitoring must not exceed 0.42 percent of the project loan. (HSC Section 50675.6 and WIC Section 5849.8)

FISCAL EFFECT: Unknown.

COMMENTS:

Author’s statement: “AB 578 would unlock over $10 million dollars in private financing for affordable housing by updating the monitoring fee that the Department of Housing and Community Development (HCD) charges affordable housing developers while still ensuring HCD has adequate resources to do its monitoring work. Currently, HCD charges an annual fee in the amount of 0.42% of the awarded loan for monitoring the development. Twenty years ago, the amount of the awarded loans were much smaller because the costs of housing developments were cheaper. While charging 0.42% was appropriate when loans were small, this percentage now could result in a fee up to $126,000 per year for a single affordable housing development. This is equivalent to having more than one full-time staff person tasked with monitoring one development for the entire year.

This current mechanism to cover HCD’s monitoring costs is antiquated. Despite the fact that the housing landscape and costs to build have drastically changed, this has not been updated in over 23 years. This bill is a reasonable update to the affordable housing monitoring fee that again would unlock $10 million in private financing that could result in more than 100 units of affordable housing being built every year. This is essential and desperately needed to further address California’s housing and homelessness crisis.”

MHP: The MHP program is the state’s main affordable multi-family rental housing program. The program provides low-interest, long-term loans for new construction, rehabilitation, and preservation of permanent and transitional housing for lower-income households. MHP is predominately funded through voter-approved tax exempt bonds, although the program received one-time general fund allocations over the last few years. In 2020, AB 434 (Daly), Chapter 192, consolidated multiple programs at HCD that fund affordable rental housing (farmworker housing, transit-oriented development, and veterans housing and homelessness) into one Notice of Funding Availability (NOFA) that is administered using the MHP guidelines. This is known as the SuperNOFA. The first SuperNOFA issued in February 2023 was oversubscribed by 4:1 and MHP was oversubscribed 10:1.

NPLH: In 2016, California enacted Assembly Bills 1618 (Chapter 43, Statutes of 2016) and 1628 (Chapter 322, Statutes of 2016) that created the NPLH program. In November 2018 voters approved Proposition 2, authorizing the sale of up to $2 billion of revenue bonds and the use of a portion of Proposition 63 taxes for the NPLH program. NPLH program invests in the development of permanent supportive housing for persons who are in need of mental health services and are experiencing homelessness, chronic homelessness, or who are at risk of chronic homelessness. The bonds are repaid by funding from the Mental Health Services Act (MHSA). All of the bond funds have been allocated.

Fees for monitoring: HCD monitors affordable housing developments that receive funding from MHP and NPLH to ensure that the rents charged are consistent with the affordability requirements. Developments pay a flat fee of 0.42 percent of the total loan amount to support the cost of monitoring. According to the sponsors of this bill, using data from the SuperNOFA awards announced February 6, 2023, HCD collects close to $3 million in monitoring fees every year. Divided by the 71 developments that received funding in the last NOFA, this results in just over $41,000 per development. Divided by the number of units, the cost per unit is roughly $461.15. Under this bill, the charge would be capped to $150 per unit, meaning HCD would have instead received $937,477 for monitoring costs from the February 2023 SuperNOFA, which equals a little over $13,200 per development. 

The California Housing Finance Agency (CalHFA), a sister state agency to HCD which also makes loans to affordable housing developments, charges a flat monitoring fee of $7,500 regardless of the number of units in the development.

Arguments in support: According to one of the sponsors, California Housing Partnership, “AB 578 caps the monitoring fee to $150 per unit in the development, which is still adequate to cover HCD’s monitoring costs. In using data from the last round of funding in 2022, the bill saves an average development over $35,000, which can be leveraged to over $500,000 from the bank. For the entire round of funding, this bill would save HCD over $10 million. This is roughly HCD funding an entire affordable housing development with over 60 units with every round of funding.”

Arguments in opposition: None on file.

REGISTERED SUPPORT / OPPOSITION:

Support

California Coalition for Rural Housing (Sponsor)

California Housing Partnership (Sponsor)

California Housing Consortium

Community Corporation of Santa Monica

Community Housing Improvement Program (CHIP)

Community HousingWorks

Danco Communities

EAH Housing

East Bay Asian Local Development Corporation

Eden Housing

Housing Authority of the City of Santa Barbara

Housing California

Many Mansions

Mercy Housing California

MidPen Housing Corporation

Resources for Community Development

San Diego Housing Federation

San Joaquin Valley Housing Collaborative

Self-help Enterprises

Wakeland Housing and Development Corporation

Opposition

None on file.

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