Senate Standing Committee on Housing

Good afternoon. I'd like to call to order this meeting of the Senate Standing Committee on Housing for Tuesday, March 17th, 2026. I'm Senator Jesse Arreguín, the chair of the committee. We do not yet have a quorum, but we'll begin with bill presentations, and we'll go now to File Item Four: SB 1091 by Senator Caballero. The sergeants can please let members know that their attendance is requested. Thank you. And good afternoon, Senator. Whenever--

Good afternoon, Mr. Chair.

--you're ready, you may begin.

Thank you for the opportunity to present SB 1091, an important bill to stabilize low-income families in the communities and prevent tenant displacement through the acquisition and preservation of existing rental housing. Specifically, this bill creates the Community Anti-Displacement and Preservation Program, or CAPP, within the Department of Housing and Community Development, HCD.

The program will provide financial resources and technical capacity-building to community organization, nonprofit affordable housing developer, and local jurisdictions that wish to acquire unsubsidized housing developments that currently exist and are affordable from this-- from the speculative market and preserve them as affordable rental housing or homeownership opportunities.

As California's affordable housing crisis worsens, unsubsidized affordable housing is disappearing, and fewer low-income families can find stable housing. As rent outpaces demand, housing becomes less accessible and more unaffordable, displacing people from their homes and the communities where they live.

Acquisition and preservation of unsubsidized affordable housing is a proven successful local model that prevents displacement and grows the supply of affordable housing. SB 1091 is one important step. It's not gonna solve the housing problem, but it's one important step to prevent displacement, homelessness, and to stabilize families in their communities in homes that they can afford.

With me today to testify is Justine Marcus, State and Local Policy Director for Enterprise Community Partners, and Karla Guerra, Policy and Advocacy Senior Management for the Unity Council.

Thank you very much. Good afternoon. It's good to see some familiar faces.

Good afternoon. Thank you, Chair and committee members, for the opportunity to speak today. I'm Justine Marcus. I'm the State and Local Policy Director with Enterprise Community Partners and a proud co-sponsor of SB 1091. As the senator mentioned, there is no silver bullet to addressing our housing and homelessness crisis.

We need a comprehensive approach and preservation, specifically this type of acquisition preservation is a critical tool in the state's housing toolbox. In communities across the state--nonprofit organizations, community land trusts, cities, housing authorities--have been doing this innovative work of acquisition preservation for over a decade.

And as the senator described, these organizations are purchasing the rental housing from the private market where low-income households live today and preserving it as deed-restricted for the long-term. CAPP was envisioned and designed based on the lessons learned and best practices from these local efforts.

The program was also modeled off of the success of the state's Golden State Acquisition Fund, which, for over a decade, has provided acquisition capital to purchase land to build new affordable housing. CAPP is designed in that image as a partnership between the state and nonprofit lenders who can distribute program funds quickly and effectively support organizations to purchase buildings off the private market at the speed of the market.

These local organizations manage these buildings as deed-restricted affordable, either as rental or homeownership opportunities. We like to say that acquisition preservation is a two-birds-one-seed approach. It stabilizes households where they live now, preventing displacement and homelessness, but it also invests in our stock of permanently affordable housing for the long run. It is quick, often closing in months rather than years, and has cost efficiencies relative to new construction.

We hear from our local partners regularly about the impact of their preservation efforts, but we also hear about the missed opportunities because there are not resources sufficient to do this work. It is this critical gap that the CAPP program can fill.

SB 1091 and CAPP were designed to fill this gap, and with a potential state Affordable Housing Bond on the ballot this November to provide new funding to CAPP, we have the opportunity to jump-start this new program. We respectfully urge your aye vote. Thank you.

Thank you very much. Let's pause for a moment. We do have a quorum. The committee assistant can please call the roll.

[Roll call].

Okay. Thank you very much. And Ms. Guerra.

Can you hear me or do I grab it? Good afternoon, Chair Arreguín and members of the committee. Thank you for the opportunity to testify today. My name is Karla Guerra, and I serve as the Policy and Advocacy Senior Manager at the Unity Council based in Oakland, California.

And for more than 60 years, the Unity Council has worked to build thriving communities by ensuring families have access to stable housing, economic opportunity as well, and supportive services. And a key part of advancing that mission is acquiring and preserving naturally occurring affordable housing.

I'm here today in strong support of SB 1091, which creates the Community Anti-Displacement and Preservation Program, or CAPP, and we know that building new affordable housing, it's important, but it takes years. It's so expensive.

It's so difficult to get there. Preservation allows us to protect housing that already exists. Across California, hundreds of thousands of the subsidized affordable homes are at risk of losing affordability in the coming years, contributing to displacement and homelessness if we do not act now. At the Unity Council, we have seen firsthand how powerful this strategy can be. In 2020, we acquired an 80-unit portfolio consisting of three properties at 1921, 2000, and 2022 36th Avenue in East Oakland.

Preserving those homes is affordable housing for at least the next 55 years. Through that acquisition, we were able to stabilize the buildings and ensure families could remain in the community. But opportunities like this are often limited by funding. Just an example, in the past year, we executed letters of intent with three property owners to acquire a 165 units across their respective multifamily properties.

But unfortunately, low rental income meant that the properties were unable to leverage much debt, and dedicated preservation funding was not available to fill that gap. So right now, there are many multi-family properties on the market, some in good condition and others in need of repair, but without preserving or preservation funding, these buildings are at risk of deteriorating from deferred maintenance, losing affordability, or just becoming unsafe and inhabitable.

So by preserving their existing stock, we can provide quality homes that are less expensive, faster to deliver, and built with fewer raw materials. This long-term sustainable effort prevents displacement and ensures that the housing we have today continues to serve families tomorrow. Without tools like CAPP, we will continue to lose housing faster than we can replace it.

When we lose housing, we lose stability, we lose community, and we push more families towards homelessness. SB 1091 allows organizations like ours, like the Unity Council, to step in when housing is at risk--

Thank you.

--to preserve homes, to stabilize communities, and to keep families together. For these reasons, the Unity Council respectfully urges your support on SB 1091. Thank you for your time and your--

Thank you very much. We'll now take any of the members of the public wishing to express support for SB 1091. If you can please approach the microphone, state your name, organization, and position on the bill. And, we'll limit your testimony just to name, organization, and position. Thank you.

Good afternoon-- good afternoon, Chair and members. Andrés Ramos, on behalf of Public Advocates as co-sponsors of SB 1091 in strong support, and also on behalf of Tenants Together in strong support as well. Thank you.

Good afternoon. Maddie Ribble, on behalf of the California Community Land Trust Network, a co-sponsor of 1091, in strong support.

Good afternoon. Natalie Spievack with Housing California, proud co-sponsor and in strong support. Thank you.

Good afternoon, Chair and members. Brian Augusta, on behalf of a few organizations in support: the Sacramento Housing Alliance, the California Coalition for Community Investment, and the California Coalition for Rural Housing, all in support. Thank you.

Good afternoon. Ruth Sosa-Martinez, on behalf of PowerCalifornia Action, in strong support.

Good afternoon. Ryan Sears of Neighborhood Partnership Housing Services, in strong support.

Good afternoon. Leo Goldberg, on behalf of Rock USA, in support.

Thank you very much. Any other members of the public wishing to express support for SB 1091? Seeing no one else, we'll now take up to two principal witnesses in opposition. In order to testify as a principal witness, you need to have filed your letter of opposition with the portal in advance of the meeting. So are there any principal witnesses in opposition to SB 1091?

Seeing none, are there any members of the public wishing to express opposition to SB 1091? Seeing no one else, bring it back to the committee for any questions or comments. Or a motion. Moved by Senator Durazo. Yes, Senator Ochoa Bogh.

I have a question. So, one of the concerns that was expressed in the analysis was the-- how the program would be funded as one of the primary concerns for this new program. I'm assuming--and just for clarification, with the Affordable Housing Bond Act of 2026, which is SB 417 from my colleague right next to me, with that funding, it's currently in the Assembly and we allocate 500 million to an affordable housing program that would be administered by HCD. Are you counting that that bond and that funding would actually fund the Community Anti-Displacement and Preservation Program?

Yes, that's what we're hoping, that there would be money in the bond specifically for this program.

Okay. And is that currently within that bond or is this something that you folks are working towards adding language for it?

We're working towards adding the language to it. Right now, this bill is the language that I've had for a while and it's a negotiation.

Okay. I'm assuming a negotiation that looks promising?

Yes. Well, and if it-- the answer is yes, but regardless, this would be a prime opportunity for the General Fund to do it as well, if we have resources in the General Fund. We'll know a little bit more in May, by May.

By May. Okay. So basically, from my understanding, the biggest concern that we have is the funding for that issue. Now, the other concern that I see here is that the concern would be of maybe perhaps using public funds through loans or grants to acquire market-rate buildings could drive up housing prices and discourage private investment in purchasing and rehabilitating affordable housing. Do you have any thoughts on that concern?

Well, I mean, what this bill does is it identifies properties that are naturally affordable right now, not artificially affordable. In other words, they're either in neighborhoods or in the amount where the people that are living there can afford to live there. All we're doing is saying, look as a private realtor, you can come in and purchase those houses if you want to, remodel them and ask for a higher price.

But we're looking at the opportunity to take public funds and do that exact same thing but keep them affordable because they're public funds involved. So I don't see any increase in the cost of housing. I don't see any diminution of the ability to build housing caused by this kind of a program. This is just identifying opportunities for us to put public investment in housing that we can remain affordable.

Okay.

So I'm really not sure where that statement-- how the statement will affect the ability for anybody else to purchase those properties as well.

I think the other follow-up question would probably be for me is, you know, you described naturally affordable, and your understanding is naturally affordable as to what that would mean, because I mean, the competition-- coming from a realtor perspective in practice-- and I'm trying to literally look to see how this would actually look like once it's implemented, is that you have housing in general just everywhere.

And usually investors will come in or, you know, folks that are-- you know, that do this as their living to look at distressed properties, remodel them and refurbish them, and then sell them at market rate usually at that case. With the state coming in, you're basically competing with other folks coming in with the private market, right?

So you're looking at distressed properties as in properties that are in bad shape that need to be fixed up, and that may be the case in some of these, but that's not what we're looking at.

What we look at is-- let me give you an example. When I was on the City Council--this was a million years ago--but we developed a first-time homebuyer's program and we could get farmworker families into a brand new home with a 10,000 down payment because the rent, the cost of the housing was affordable for them at 30-- or 30 to 50% of the median income.

And as long as they made between 30 and 50% of the median income and had a good credit score, then they, with our $10,000 city down payment, they could afford to buy a house. That's no longer the case because of the price of the house right now, the price of housing.

And so what-- there are still units, some may be condos, some may be single-family homes, where you can purchase and it's still--because of the rents that are being charged--you can still make whatever improvements need to be be made--and I'm not talking about distressed, I'm talking about naturally occurring affordable units--and ensure with public dollars that it remains below market rate. In other words, the rent that they would pay on it is below market rate because it is subsidized.

Yeah. I just-- and I'll give you my personal experience when I see government coming in with well, good-intended ideas. I believe it was around right after 2008, the downturn of the market.

So that's gonna be a difficult example to meet because when the market was at its lowest where the best prices you could get because somebody was really in distress, right? The whole market was distressed.

Go ahead. I didn't mean to--

Yes.

No, no, no. No, not at all. But that market, I was working in real estate and, you know, government came in and said, hey, we wanna get people off the fence and allow our--especially our first-time homebuyers--come into the market, and so we're gonna give you a tax credit of-- I think it was either between 8,000 and $10,000, which was great. The intent was to really get people back into the market, right, because we had a lot of homes.

People were really hesitant about buying a home because of the downturn of the of the market. So government came in and said, we're gonna give you this tax credit. It worked way above what it was supposed to do and it actually started hurting our buyers. Why? Because now we had so many folks inundating the market that we ended up having homes that had prices or offers that were between 15 and 30 offers per home because everybody wanted to get this tax credit for $10,000.

I wanna say it's $10,000-- could have been 8,000. $10,000. And what it did is that it-- actually, they got the credit, but then the prices of those homes went up quite a bit. In my area, I remember homes were going between 10,000 to $30,000 above the listed price, which then meant that they couldn't be appraised at that value because they were overpriced.

So only folks that had, perhaps, you know, cash in hand or could have family members that could lend them the money to have to pay for those homes could then afford to buy those homes because they weren't appraising.

So I'm always a little leery when, you know, government comes in and says, okay, we're gonna help subsidize, you know, we're gonna help you. Well-intended, right? It's well-intended, but the unintended consequence to that price and to the market, it artificially impacts it. And so that's when I get a little nervous about, you know, well-intended, well-sounding folks, but then what it does to the actual consumer moving forward.

It actually is detrimental to them and to the market. And so that's why I'm a little leery. So I'm trying to find a way to-- to find a reason of why I would support this because I think it's good-sounded, but I am incredibly hesitant based on historical-- you know, historical experience about what this will look like in reality, in practice. That's why I'm asking the question. That's why I'm kinda hesitant about, as of right now, just kind of staying off of the bill.

But I do-- I appreciate the effort and the rationale behind it because I think it is needed. But when it comes to purchasing, government subsidizing, historically, those don't look very good, for me.

So just let me say that--

And we do have a queue, so I wanna make sure we can get to the other senators.

Yes. The experience has not been that. There's not enough money in this program to start raising the cost of housing all over the state. The program has been in existence, but what you heard is that they don't have enough resources in order to be able to effectuate the program success. And so, if we-- part of the challenge many times in housing is we try something new.

This is already tried and true. It's worked in many communities and it's narrowed to the nonprofits that do this kind of work so that we're not setting up a pipeline where we're supporting businesses that are gonna make money off it.

This is to put money into projects that will allow people to stay in their own communities, to continue living in these units if they're there already, and to continue paying affordable rents that are affordable for their family income.

So I appreciate what you're saying, but I don't see it as-- I don't think there's enough money in this kind of a program to be able to do that. We're trying-- we're not trying to move people out of houses and to move other people in. We're trying to keep people.

Thank you. Before I go to Senator Cabaldon, just to clarify, comment, I have comments I'll make at the end after members have spoken. Funding for housing preservation is in both versions of the Housing Bond legislation by Wicks and Cabaldon, for the record.

And the language does state in Section 50581, Subsection 81, this is creating the fund, and that upon appropriation of the Legislature, the fund would actually be administered and funds would be made available to people that are applying for these loans. So it's upon appropriation by the Legislature. So this is establishing the fund, establishing the program. It would actually be implemented once the money is actually put into the fund. Senator Cabaldon.

Yeah. Thank you, Mr. Chair. And the author jokingly made reference to having been on the City Council a million years ago. I think we were elected to our city councils at about the same time and it did feel like a million years ago.

But at the time, I know both of us, and maybe just the two of us, were voting on affordable housing covenants that seemed like they were forever. Like we never even considered that they would someday expire because 30 years or 50 years just seemed like so far in the future, like, that's not possible.

And maybe by then, we will have solved the housing affordability problem, but also some of these folks that are moving into affordable housing projects by then, maybe their incomes will be high enough that they'll be able to buy a home in the same market, buy that same home back when when the covenant goes away.

I don't wanna say it was wishful thinking, because we were really thinking-- it just seemed like it was-- you know, we were like 18-year-olds thinking about our retirement, our 401Ks-- well, today's 18-year-olds are, but back then, we didn't think about that either. So our policies around affordable housing have always had this time limitation on them, and that made sense and they should continue to do that.

But this bill is a natural consequence of that in that many of those covenants aren't expiring. So even though it applies to unrestricted units, in some cases, these are units that might have been recently restricted or two years ago were restricted and have not yet fallen into the unaffordable markets.

And so, I think it's a smart approach to this. I really appreciate the author's, you know, careful stewardship of the state's assets and resources as well as doggedness on this proposal because it is-- it's humble and it's also-- it's focused on the people.

I was looking through the bill. I'm the co-author of it so I was already committed to it, but just looking through it as we're preparing for the hearing, just to assure, you know, that it would work in communities throughout the state and meet people where they're at.

If you are in a naturally affordable housing apartment complex or neighborhood in any of our communities, it's really about keeping you in your housing, and I wanna check. Okay. Let me make sure there isn't a requirement here that it has to have a covenant placed on it that is only available for the very low-- the very, very lowest income category because we wanna make sure we're protecting the people that already live there.

And lo and behold, the bill does say that. Says the-- you know, that the state will-- the treasurer will consider, can consider income levels in terms of the covenants, but it doesn't require it, and it puts that alongside geographic equity and other considerations. I just think that's really important that we're-- that the focus here is keeping people, whoever they are, wherever they're at in the whole range of being unable to afford housing in the regular market, keeping them in their homes.

It is, as been said by the Chair, in the bond measure, but as the author also said, this approach doesn't have to be an ongoing permanent General Fund commitment every single year of the same amount. I'm not saying it shouldn't be or that I wouldn't join a sign-on letter and I know some of the advocates are cringing at the moment, but it doesn't require-- none of this requires, you know, hiring $500 million worth of staff in an agency or anything like that.

This would allow us to meter it based on our resources and so I-- in addition to the bond, you hinted at it but if this-- if in years, like perhaps this one, where the state has excess revenues that are essentially not one-time but aren't permanent, this is exactly the kind of investments that we should be making is to make sure that our assets are managed properly and that assets have always included, you know, aqueducts and highways, but they need to include our stock of affordable housing as well.

And so, I think that the author's done an outstanding job on crafting this and finding the exact right approach, and I'm pleased to support the motion when the time comes. Thanks, Mr. Chair.

Senator Durazo.

Thank you very much to the author. I think this is great. I have at least three or four buildings in my area where the covenant expired and the rents just shot up, and there's seniors, there's an area in my district that's artists. There's just different groups who had these-- who had the affordable housing for all these years and then overnight, they find themselves in a place that they can't-- they don't have-- there's no limit.

They're just shooting up and the owners are saying, well, we've gotta recuperate our investment, blah, blah, blah. So I just wanna make sure that's what we're talking about here, right, is making sure that there's an alternative to making it market-rate housing, that this is the alternative to that--

This is the alternative, yes.

--for people to be able to, you know, continue to live in affordable housing. Yes.

That's correct.

Yes. And you know, some of these people have lived here for 20 years, 25 years, and they're committed to the neighborhood. They they have friends. That's exactly what it's set up to do.

Thank you.

Any other questions or comments? I will now give my perspective on this. I strongly support this bill and would love to be added as a co-author at the appropriate time. And several points. One, this is already in both versions of the Housing Bond legislation.

At some point, hopefully soon, we'll hear the Wicks bill so we can keep moving that forward. And as I've said in many public statements since I was appointed as chair, I believe that as a state, we need to focus on the three P's: a production of new housing, including permanently affordable housing, the protection of existing renters from displacement so we can prevent homelessness and stabilize neighborhoods, and the preservation of existing naturally occurring affordable housing.

What is naturally occurring affordable housing? This is existing rental housing that exists in our neighborhoods throughout California that is far more affordable than new market-rate housing.

Often times, they are rent-controlled or have some sort of affordability restriction, and these properties end up going on the market. They end up being sold. And often times, people are evicted in the process of those properties being put on the market. And so I think this program is essential to not just expand the supply of affordable housing in California because we just can't build enough, unfortunately.

We need to build millions of homes in California, and we know it's very expensive to build an affordable unit, and we need to do more as a state to reduce the cost and time involved in building affordable housing, but this is a more cost-effective approach to getting affordable housing on the market and to prevent displacement and to reduce homelessness in California, which I think is all something that we support.

I wanna lift up some programs in my district. I helped create the program in the City of Berkeley when I was mayor to allow for the acquisition of buildings under 30 units, and we were able to prevent evictions and to keep those units permanently affordable, including to allow for cooperative ownership of those properties to ensure there's long-term equity and stability for those communities.

And also, I wanna lift up Keep Oakland Housed, which was a program that was started in Oakland, which was, I think, the genesis of this bill, which was very successful in helping stabilize homes in the City of Oakland as well. I wanna thank the author for the work with the California Association of Realtors. I think we've gotten them to a place where they are not opposed to this bill, which I think is important, really focusing on those properties five minutes or more where we can have the most impact.

And just to put this in perspective, the cost of actually acquiring and rehabbing a unit, you know, $300,000 compared to $700 to $1 million a door to build a permanently affordable unit, just the cost benefit of that is far more significant. So I really wanna thank the senator for bringing this bill forward, and hopefully this will benefit from the new department and the streamlined process we're gonna create to have people apply for affordable housing in California through one more streamlined effective way.

And this will be implemented when the Legislature either appropriates money or the bond measure appropriates money. So with that, I'm proud to support the bill today. I'll turn it back over to you to close.

Thank you very much, Mr. Chair. I'll adopt your statement as my closing, and respectfully ask for your aye vote.

Okay. We have a motion by Senator Durazo. The motion is do pass to the Committee on Judiciary.

[Roll call].

Okay. We'll keep that bill on call. Thank you. Okay. Senator Seyarto, are you prepared to present on SB 904?

And, Vice Chair Seyarto whenever you're ready.

Alright. I'm ready. Thank you, honorable chair. I'm here to present SB 904. So SB 904 builds upon the broad and coordinated agency response efforts demonstrated in the LA County And Palisades Fires last year.

It ensures similar responses will be undertaken for all future state of emergency wildfire disasters. Specifically, the bill codifies the provisions from executive order N 425 that focus on- focuses on identifying permitting requirements and building codes that may impede rebuilding efforts. While there is a long road ahead for rebuilding in LA County, rebuilding permit reviews, the actual permit reviews, are averaging under thirty days in accordance with the goals of the executive order, and roughly one for every five of the homes lost have been permitted. That doesn't- doesn't mean they've got to be built yet because of other issues, but they've been permitted as of January 2026. This exemplifies a relatively faster recovery process than years past.

Contrast this with communities impact by the Camp Fire in 2018. Almost eight years later, only one in five homes have been rebuilt. While there are varying factors that impact recovery speed in much in different communities and contexts, one wonders how much similar regulatory relief efforts and agency coordination could have assisted in their recovery. The bottom line is that this sort of relief and urgent coordination ought to be the standard procedure for all wildfire disasters moving forward in our state. This bill will help to ensure no wildfire disaster communities get overlooked in future recovery efforts.

Furthermore, this standard reporting mechanism with state and local agency expertise will equip the legislature with the best data to respond to each emergency context. I respectfully ask for an aye vote and because this was on consent, we do not have any witnesses today.

Okay. Thank you, Mr. Vice Chair. Are there any other members of the public wishing to express support for SB 904 who are in the committee room? If you can please come forward and state your name, organization, and position on the bill. Any other support witnesses? Okay. We'll now take any principal witnesses in opposition to SB 904. Are there any witnesses in opposition? Okay. Seeing none, I'll bring it back to the committee and moved by Senator Ochoa Bogh. Senator Cabaldon.

Yeah. Thank you. Thank you, Mr. Chair and thanks to the author. I- I- I- I- I - I'm supportive of the concept and I think the key lesson here that the authors bringing forward regarding the the LA, the Eaton and the Palisades fires and the and the governor's quick response in in those regards.

I- I represent, you know, a part of California that before the LA fires was one of the state's main epicenters. And we constantly experience wildfires in Napa and Sonoma County, which are not large jurisdictions. And there could there and I- I see a benefit from- from this approach where- where it becomes problematic for me is that it's too- when you it's- it's too frequent and it's too often, and it's- and it's a bit too much for a small community. I also serve on the budget subcommittee that oversees these agents, HCD and some of the other agencies. And I'm- I'm- I'm worried about how if- if there's a fire in Napa County as there was last year and there was one there two years previously and one two years before that.

Like, how I'm not- I'm not comfortable having HCD and several other state agencies each time to produce essentially the same report because it's not- it's not optional. They're required to produce- to take these actions and so it's- it's not a good use of their- of anybody's time to go back and do that over and over and over and over again. And so I- I, you know, I wonder whether, you know, the- the if this were, you know, once in, you know, once in in five years for the jurisdiction or- or, you know, or- or at the direction of the governors, you know, some- some way so we're not those of us that are- are- are don't experience Groundhog Day, with more and more reports that ACD has to do and that we have to pay for because there's no funding source separately for this. So that's- that's- that's one issue. The others, the e permitting, provision and I I appreciate the- the- the- the author and I think the committee was involved in this too.

The exemption for small counties and for cities that are in small counties, I would note that the two- the two counties with all- all the counties in my district experienced wildfires but Napa and Sonoma experienced them the most. They're both over 100,000 and they include communities within them that are- that are quite small. Calistoga, Yountville, others. And I think, you know, the- the challenge in communities of- of that- of that size is when we say, look, you just- you- you- you know, your- your planning director is also, you know, the deputy chief of police and also Moonlines is- is- is the assistant city clerk. Like, there's not a lot of staff capacity there.

You have a wildfire event that is within your jurisdiction and then suddenly, you have to mount a whole e permitting system, a digital permitting system out of nowhere when you need to be, you know, with your limited staff of five people at city hall or eight people at city hall, you need to be focused on the disaster itself. And so I the- the thresholds that are in the bill that I think are trying to get at this issue, we don't wanna, you know, we we wanna respect the- the unique challenges that smaller jurisdictions face. They- They in LA County, a 100,000 is- is a lot- is- is a minuscule amount of people. But it really doesn't- it's- it doesn't work in the part of California that I represent for cities and counties to have to be- to have to engage in the E permitting process that they probably don't have already because they don't have that many development applications in the first place. So I have to mount that in the midst of a crisis.

Isn't the best use of their resources at a time when- when their- when their residents need them the most. So I think those are the two issues where this- where Napa is and when they're not were nothing like LA County. And the ideas here are right. They make sense. But I worry about the cost implications of high frequency HCD facilitated state agency responses to the same questions over and over and over again.

And then the e permitting, mandates that we would be imposing on jurisdictions that are, in counties that are more than a 100,000 people in them.

Okay. So I'm gonna take the second one first. That can be worked with. I understand some agencies don't have e permitting. A lot of- A lot of cities, especially incorporated cities, no matter how big or small they are, I have several in my district, do have that capability.

And if they have that capability, it's probably a good use of, their time to use it, especially when you have a 150 or 200 homes that have burned down in your district. And, and this will speed things along. The idea here is to identify hurdles, that people have, depending upon which jurisdiction they're in. Down in the Palisades, I can tell you the Coastal Commission comes into- to play. In my district, it does not.

We don't have any coast. So what we're trying to do is, have a way of uniformly applying these same type of standards that have been looked at and tried in the Palisades and also in Eaton Eaton, fires so that we can learn from those fires about what is necessary and what is not during the rebuilding process. What is fair to the homeowners and what is not fair to the homeowners? Because and- and each and like I said, each area has a different, may have a different agency, they may have a different habitat land or whatever it is. This just requires HCD within thirty days to get together with the local agencies that are involved and identify any potential hurdles.

Because all they- they have is they have a list of- of of things that they have the check off box of list of agencies and things that they have to, look at, and identify ones that aren't necessary for this type of- of an event, especially because it is a catastrophic event. We're trying to get people back into their homes as quickly as possible. We're not building a new neighborhood on a vacant lot. So that's what it's about. And the reason for HCD doing the coordination is because they are the housing people.

They know the most about the laws, and they know about the regulations. And they can also help identify as they keep doing these And last year, there were four- four of them, that they would have had to do this on. And- And once it's done, we learn from that. Absent that, we have no data whatsoever.

So we are reinventing the wheel every single time we have an incident, including in your area. So that's what this is trying to do is not reinvent the wheel, but go ahead and get our data set from the first incident that we start doing this on, and then build on that. And after a few incidents, then it'll- it'll be pretty streamlined. They kinda know what's gonna affect what and where what areas. And- And so that's the only way that we are going to make sure that a fire in the Palisades or in Eden Canyon and a fire up in Riverside County at the airport fire, that those people aren't looking at ruins five years later, while the people that did have the benefit of of having some of these streamlining done get their homes built in a year and a half or two years.

And because a lot of people, especially in the North State, still haven't got their homes back. We need to fix that and that's what this bill does.

And if I-

Senator Cabaldon.

Yeah. Just just follow-up. The- The bill does not say after the seventh or eighth report that they don't have to do it anymore. They- They continue to have to produce this report over and over and over again.

It's not just ACD, it's ACD and six other state agencies which- for which no funding is provided. And I mean the- the- what the governor's action was in response to was the largest- the largest fire disaster in state history. And so the governor took, you know, said we need to- we need to learn from this and this never happened before. We need to do this but if you're experiencing, state of emergency level wildfires on a regular basis, it just seems to- it seems to me that that you should not have to keep repeating and reinventing the same report over and over and over again. That's- That's fundamental.

That's- That's not a good use of state resources for these agencies to be doing that. At what point can we say, okay, we've learned enough from this type of incident and until something different happens, you don't have to keep within thirty days of it- of a- of an- of a declaration of emergency. You don't have to keep reporting these over and over again.

So I would answer that by saying this. In- In six months, they're supposed to get back with us to tell us if the things that are being done like the- the- the exemptions that have happened for, the current fires. They're supposed to get back and tell us if it's working or not. And then from there, we can determine if there's something else that we missed and that if there's something that we can continue to work with. And- And what you're saying is- is absolutely correct.

After a while, it gets pretty quick because they've got all the data that they need. They've done it enough times where they can- they understand different areas have these different type of rules and that can be waived so that we can get people into their homes again and start rebuilding again. So but if we're- if we do nothing, then we are going to do exactly what you're talking about, is reinvent the wheel every single time there's a state of emergency declaration. And in some areas, like up in the North State, they're gonna get left behind. And other areas are not.

And they're gonna wonder why. Five years later, they're still building they're still waiting for their houses to be built and get through the process. So that's all this does is- is it tries to start building on something that we have been lacking, and that's a part of the recovery phase of prevention, response, and recovery. This is part of the recovery, and it's an important part. Because this is what's going to identify some of the things that can help us recover faster and get people through a process faster.

If we don't do it, we won't know what it is and we'll never and we'll never know. So, you know, I- I stand by this bill and what its intent is and what it will do. HCD can- can manage to do this. This isn't that big of a a lift. And, so with that, anybody other- other questions?

Senator Cabaldon, you.

I- I just as- as- as though- as the one from the- that represents the North State here, that's we should just be doing- the intent is correct and we should do it once. And at that point, there isn't if- if we in- if we in Sonoma County or Napa County have four fire incidents over two years, we do not- no one- no one needs or is asking for ACD, the Governor's Office of Land Use and Climate Innovation, OES, DGS, the State Farm Marshal, the Energy Commission, and the building standards code commission, all to collaborate all four times on separate reports. Like, we should take the first one, learn from it, and then move on and so it's there. I- I'm- I've been- I'm hoping to hear we could- we could do what's happened in LA. Do- Go through that process because I think the idea is right.

We should do that but we just don't- we- we need to turn off the Groundhog Day alarm clock and say, okay, we've done that. Let's if another fire happens five years later, we'll do it again. But in the- But within, you know, a few months or a few years of the same exact thing, we don't need to ask state agencies without any funding provided at all to go and do this exercise over and over again. So I'm just hope I was hoping, I'm- or I'm still hoping to hear that we could that we could get this bill to be focused on the- that- that first deliverable, and not have it endlessly repeating.

One more response on that. The first deliverable is, includes the Coastal Commission. Does the Coastal Commission have any jurisdiction up at the Camp Fire?

Zero.

So that one wouldn't be- that one wouldn't be carried on to what the Camp Fire is.

Every jurisdiction, my jurisdiction, we don't have Coastal Commission issues. What we have is several different habitat agency issues. So that's something that is unique to our area that might be not unique to another. So there's a lot to be learned by each of these fires. That's all this is trying to do.

And eventually, we will get to there. We will get to that. But each area that has a burn, they'll have some expertise already in it and they'll be able to streamline those areas and and get them through the process.

Okay. We do have a queue. Go next to Senator Durazo. And if any other members like to ask a question or make a comment, please let me know.

Thank you. I- I- I'm very inclined to- to support you because I- I can see what, you're trying to do. I- My, concern is more about when you say specific permitting requirements that are posing barriers, the agencies will have to report on- on those. Is that- And- And then the the other other side of it is strategies that expedite the building process will be reported on. How- How do we- it's just reported on.

Right? So it's not like there would be a list of things that you found to be barriers and therefore, you would take action on them regardless of

No.

Any other-

We can potentially take action.

You can-

Yeah. It- It's a report-

Use that.

To the governor and the legislature on things that we can potentially do to help people move their projects along.

Okay. Okay. Good.

Any other questions or comments? Senator Cabaldon.

Yeah. Could we try one other person without trying to rewrite the bill in the committee but just trying to understand directionally where HCD could on its own after the first- after this happens once, with that HCD could on its own then determine whether or not it needs to or there's benefit to- to engaging in this process and and another time in succession. The first time- The first time would be mandatory but the second time and the second time is still mandatory unless HED determines that there's no that the conditions aren't different.

How do you reconcile the coast with- with Paradise?

They're- They're just two different areas and they're gonna present two different issues. And- And within a few- a few fires, we'll have captured most of the areas and the issues for each of these areas.

I mean, I-

I'm- I'm talking-

And then we can we can look at it and if they- if they feel they are being redundant at that time, we can change it. But not doing anything is not Okay.

So I think- I- I think I understand where- where- where- where we may be met up connecting. I'm only talking about repeats within the same exact geography. I wasn't saying that it okay. They did this report for LA and therefore they don't need to do it ever again for Temecula or for- or for Sonoma. But once they've done one of these in- in Napa Sonoma in that- in that Cal Fire area or whatever and another incident happens six months later, could HCD then have the ability to say, look, nothing's- nothing- this is the same incident basically that we had six months ago.

We don't need to do this process again. Not that nobody in the whole state would have to do it.

Unless the second area abuts up to a preservation area and they have different rules for that. That's what I mean. Every- Every incident is gonna have some kind of different variation. And so this is this is why they identify. But they'll be able to do it in probably five minutes because they'll be able to go, hey, this is just like that.

Only we have a preservation area that we have to answer to. Because those are big- those are big deals. You have to deal with all of that stuff. And so that- that's why this is a- this is a process. It's gonna work its way through, and then eventually, we'll get to a place where it'll be pretty easy. But the the at the end of the day, we're just trying to help people get back into their homes.

Senator Ochoa Bogh?

Yeah. I- I think so I'm trying to mitigate because I understand both sides, both concerns. And I think let me- let me frame it this way. I think what is intended is that the reports be done consecutively. Only if or when there's a different department or agency involved because of the area in which the fire is occurring. So I think that's- that's probably more of what and I don't wanna speak on behalf of my- of- of my colleague here from Sacramento.

But I was just thinking of, the reports continue to happen unless there's new agencies, departments being impacted. So, if it's happening in the same area, same departments, it's not needed to do another report. But unless- But- But- But if it, you know, it buds to another area and there's another commission, another department, then it triggers the requirement for a report. I think that's- that's having language in there that just says, it's only needed once unless there's new commissions, new entities that are actually being involved within that fire geography area. I think that's- that's the language that, might be considered.

If I can just interject that, the the bill before us is the bill before us. Yeah. These are comments or suggestions to the author to consider if this bill were to advance from committee today.

Yeah. Yeah. Yeah. Yeah. Just Yeah. Absolutely. Understood. So I think that- that is the- the language or the- the- the consideration that might be moving forward conversations on- on that you might wait. Correct. Is that fair enough?

If I'm a staff member, that's a naturally occurring process. Because if I just wrote a report for one area and the other area is exactly the same, they're gonna look really- they're gonna look a lot alike except for the one thing I have to change on this to address another issue. So I- I understand what you're saying. I don't wanna get too terribly prescriptive with HCD because then that becomes a whole issue into itself.

Okay. Any other questions or comments? I'll just close by, thank you for bringing this bill forward. I think, we can learn from, what happened, last year and how we can streamline the process of rebuilding. And I did recommend that this bill be on consent, but I think this has been a productive discussion.

I hope you'll take into consideration the input that members have provided on this bill. I'll just note this bill's key fiscal, so it will go next to the Appropriations Committee. And I would encourage you to consider some of the if it some of the amendments are are streamlining suggestions that members have provided because that may make that bill more likely to move out of appropriations to reduce the cost to state agencies. But I think it's an- it's an important, bill, an important process. And I'll be, voting aye today.

Thank you. And I'll turn it back over to you to close.

Oh, I think the discussion has plenty plenty enough to close. So I very appreciate your consideration.

Okay. Thank you. Do we have a motion?

So moved.

Moved by Senator Ochoa Bogh. If we can please call the roll.

Motion do pass to emergency management. [roll call].

Okay. We'll keep that bill on call. Thank you. But it does have sufficient votes to pass out of committee. Okay. We'll go back and file order to file item one, SB 1007 by Senator Menjivar. And then we'll go to our last item, SB 996. And do you have any... Oh, the witnesses will approach the microphone. Yeah. But Senator Menjivar, whenever you're ready, you may begin.

Thank you, Mr. Chair, Committee Members. I don't know if you knew, but approximately 14 million Californians live in homeowner associations, or commonly known as HOAs. And while we know that the Davis-Stirling Act prescribes requirements on these HOAs, these associations largely operate outside of any state oversight, but hold tremendous power over their neighbors.

And these associations represent an ever growing share of California's housing stock, and membership is mandatory. In fact, nationwide all new housing construction, 64% of that is falling under HOAs. During a time when Californians are experiencing both a housing shortage and an affordability crisis, it's imperative that we continue to act on this crisis.

I've heard from many constituents, maybe you have as well from your constituents, about the concerns related to transparency of HOAs, broad operations, and the need to protect their pocketbooks. Homeowners are play are paying sometimes their monthly fees.

And homeowners pay their monthly fees, and they have the right to know exactly how their fees are being utilized. Some HOAs are upkept beautifully. Other HOAs perhaps not utilizing the funding that they need for maintenance. Other HOAs are paying a third party management company to assist with those operations. How much of their fees are going to fund a subcontractor?

If, in other cases, if a homeowner is being accused of a violation and now is being charged a penalty, my bill is asking that if HOA has evidence of that violation, only if they have evidence, to share said evidence. If a homeowner is being charged a penalty because they painted their house pink where and they took a photo of said pink house, show that photo to the homeowner as to why you're being charged this.

If no evidence has been provided by HOA on said violation, no evidence needs to be proven proved to the homeowner. SB, on top of that, SB 1007 wants to make sure that homeowners are accounting for how much their fees are gonna be. Currently in state law, homeowners HOAs are allowed to assess up to 20% increase in their annual fees.

This bill, as a starting point, is looking to cap not from 20% and do it to a cost of inflation. Current bill in front of you does not have a defined exact index of what the cost of inflation is. Ongoing conversations are happening in that realm. We do have some affordable units in HOAs that have a different kind of cap, and we're looking at that as an example, but we have not landed on what that would be. Not every homeowner... Sorry.

Getting confused with homeowner and HOA. Not every HOA increases the fees up to 20% every year, but some do. One example we saw of an article is in Yorba Linda. There was a HOA that increased their fees 20% that year and at the same time levied another special tax. Homeowners were now gonna have to pay $9,000 a year broken down monthly, and it was mandatory.

We're seeing in that specific HOA that new homeowners were questioning if they needed to sell the home they just moved into because of the increase in fees associated upon them. Another thing we're looking to do is every single year homeowners are giving a report of what their HOAs are funding and the breakdown of that.

Colleagues, we've seen and gone through the budget process here. We know how convoluted the budget process can be. We're giving reports of numbers and squares here and all this. And sometimes it's confusing to get a grasp on it. We're asking the HOAs to put that information in a more digestible manner for you to be able to understand exactly how your funding is, how your money is being used.

We're not asking for management, vendors, or HOAs to add more data or show more data. We're simply asking for them to show it in a way that you as a homeowner could understand. At the end of the day, this bill is about providing information to a homeowner to understand how much they're gonna be paying through the year so they can finance their pocketbooks in a more transparent manner.

We wanna make sure if they're being charged that $100 fee for a violation and if there is evidence, they know about that evidence because we do know they have the ability to appeal, that's allowed right now, and for them to see that evidence.

And again, like I mentioned, we wanna make sure that there's some type of visual aid breakdown of the data that is already proven or already given to the homeowners. Lastly, I'll say, in conversations with this Chair, given the tight deadlines we had of providing amendments and the placement of this bill on one of the first committee hearings, we weren't able to address any concerns from opposition. We weren't able to amend anything.

I'm already in conversations with the Chair of the next committee. I've already committed to this Chair as well as some of the concerns that he brought for them to be addressed in the next committee. I have a 100% committed even to almost all of you of those amendments going in to the next committee. I have not committed on what exact amendment is gonna be in the bill.

But I have committed to addressing potential compromise in the 20% to what kind of cap. Also addressing the unclarity around the visual aid and what that really entails. With that, colleagues, asking for an aye vote. Mr. Chair, I'd like to turn over now to my witnesses.

Okay. Thank you. Hi. Good afternoon.

Good afternoon, Chair and Members of the Committee. I'm Marjorie Murray, President of the Center for California Homeowner Association Law, founded twenty years ago in order to try to solve some of the many consumer issues that face what the Senator has already identified as the 14 million homeowners who live in California associations.

That's the fastest growing form of housing, not only in the state, but also in the country. One of the most pressing issues is the matter of assessments. And I wanna make the framework for my comments the fact that, and this is not news to the committee, that the federal guidelines issued by Housing and Urban Development prescribe that both renters and homeowners should not be paying more than 30% of their monthly income on housing.

What does that mean for a homeowner? That they should be spending 30% on mortgage, taxes, insurance, utilities. Notice that I haven't even mentioned assessments, and neither does HUD. But yet, state law allows all of these associations to raise assessments by 20% a year. And believe me, many of them do.

The example that the Senator just provided is a real live example from Orange County where low moderate income homeowners were told that they were going to have to pay $9,000 in a special assessment that came out of nowhere.

And in addition to that, their regular assessments are going to be raised 20%. Well, this is unsustainable. Even regular assessments raised 20% will double in four years and triple in five. Nobody's salary or Social Security or retirement income goes up by those kinds of percentages.

The interesting thing is that even the association industry in Washington and Virginia from its national headquarters, which sets policy for associations across the country, has recognized that this is unsustainable. And they have just issued a chart and a policy statement that associations need to be doing much better planning and to be using nationally recognized indexes like the Consumer Price Index or construction indexes in order to plan reserves and plan regular assessments.

Everybody needs transparency. They need to know going into an association what their obligations are going to be. Just as when they go to the lender, they get voluminous documents explaining what their obligations are going to be under the mortgage.

Ma'am, if you can please complete your comments.

I'm right to the last sentence.

Great. Thank you.

We urge an aye vote on this really important measure because it provides transparency and also introduces an important conversation on taking a very hard look at that 20% cap and indexing it to some more rational percentage. Thank you.

Thank you very much. Is there another principal witness? Okay. You have two minutes.

Thank you. Good afternoon, Mr. Chairman and Members. I'm Robert Herrell. I'm the Executive Director of the Consumer Federation of California. We're a proud co-sponsor of this measure. You've heard from the author.

You've heard from Ms. Murray about housing affordability. It's obviously a key issue. I don't need to tell you how important an issue it is. CFC has a long history of working on affordability even before that term became back in vogue as it has for the last number of months. Junk and hidden fees, price transparency, dealing with misleading or misnamed fees and costs.

Fees that try to create the false impression their government fee when they're not, things like that. But none of these are easy. I certainly have scars from rental housing fee bills that we've worked on over the past number of years. But what has been missed I think for the last few years in some of this is the way that this is impacting HOAs.

My late mother had been in one for a quarter century and really saw the amount skyrocket, including with special assessments. At one point the HOA told my then 92 year old mother that for a few months they weren't gonna have water.

And so she needed to go to a nearby gym that they had worked a deal out with to go get showers and things like that. This is a woman who was using a, you know, a cane and then a walker. So the lack of transparency, the lack of thinking about your own membership has been a problem for some, not all, for some HOAs.

That's why Senator Menjivar introduced this bill. We want to enhance transparency so that HOA boards really line up to the governance ideas and requirements that they're supposed to. As you just heard from Ms. Murray. As the analysis points out very clearly, HOA boards have plenty of latitude to increase fees.

And in some cases, quite dramatically on their members. This bill introduces some common sense restraints on those massive fee hikes that really hinder housing affordability while still allowing for justified increases with transparency. We urge an aye vote, Mr. Chair. Thank you very much. Happy to answer questions.

Thank you very much. Are there any other members of the public wishing to express support for SB 1007? If you can please come forward and state your name, organization, position on the bill.

Hi. Good afternoon. My name is Kevin Rodgers. I'm with the California Association of Realtors, and we're in support. Thank you.

Thank you very much. Are there any other members of the public wishing to express support? Okay. Seeing no one else, we'll now take up to two principal witnesses in opposition to the bill.

Good afternoon, Mr. Chairman and Members. My name is Jeremy Wilson. I'm the Chair of the California Association of Community Managers Board of Directors. I'm also a certified community association manager and manage communities throughout California.

CACM respectfully opposes SB 1007, as it will negatively impact an association's ability to fund critical operations such as infrastructure, insurance, utilities, and maintenance obligations. It also costs, it also adds costs by requiring unnecessary and duplicative disclosures.

CACM shares the same goal of affordability for homeowners. However, by eliminating the 20% allowance for boards to raise assessments without a membership vote, it takes away the board's ability to plan and spread costs across multiple years for members of members to adequately fund critical infrastructure and operational demands.

The result will be larger special and emergency assessments that homeowners are unable to plan for. While the bill does allow for inflation adjustments, the inflation itself simply does not meet up with current requirements. Staggering costs for insurance alone exceeds inflation.

I can tell you from experience that membership approval for assessment increases is a rarity. Not only are the homeowners struggling to make ends meet, but the lack of voter engagement in HOAs is pervasive. The reality is that under SB 1007 reserve funding will be cut, maintenance will be delayed, and large future repair projects will hit homeowners in a much bigger way.

If the state expects the HOA structure to work, I encourage you to think of these issues in a comprehensive way. There must be a reliable revenue stream to fund the services the association is obligated to provide for the quality of life that homeowners expect and deserve. Additionally, CACM is opposed to the requirement of a new separate statement of management fees.

Not because we oppose transparency, but because this already is required through the budget process. Now to require another piece of paper at the cost to the homeowners just doesn't make sense. We look forward to moving forward and working with the author as this bill moves forward as well. But at this time, we respectfully oppose SB 1007.

Thank you very much. Is there another principal witness in opposition?

Thank you, Mr. Chair and Members. Carlos Gutierrez here on behalf of the Community Associations Institute, California Legislative Action Committee. As really simply stated, 14 million Californians live within our 55,000 associations that we represent. It's true that you can increase regular assessments up to 20%, but note that that's the ceiling.

That is not a target for associations. Those are to cover real operating costs and maintain communities. We know that SB 1007 would instead cap increases at the rate of inflation, but unfortunately, many of the costs associations face raise faster than that of inflation.

We're talking about labor costs, utility costs, construction, as already mentioned by the previous speaker. Insurance cost premiums that go up to close to a thousand percent. At the same time, the legislature has enacted new requirements on association, like balcony inspection laws, turf restrictions, and more complex election procedures.

That also increased costs. Associations can only budget for actual expenses, So limiting their ability to adjust just makes it harder for to meet those obligations. The bill also suggests that you can simply ask homeowners to vote to exceed that cap.

But in practice, it's very difficult, also as you heard from our previous speaker. Voter apathy and fatigue is real in HOAs. So much that the legislature has recognized by passing laws to increase turnout. And if owners don't vote or vote no for the assessment, the association is left at a standstill.

Costs continue to rise, but the assessment won't. That means maintenance gets delayed and the communities deteriorate over time. And I'd just like to point out that 62% of the associations in California are 20 plus years or older. So they are aging, and it's real. There's also federal financing concerns.

Fannie Mae and Freddie Mac now expect associations to fund at least 10% of their reserve studies, and that number may increase in the future. So if association can't meet those funding levels, buyers may not be able to obtain loans in those communities. And lastly, this becomes ultimately a pay now or pay later situation for homeowners. And so for these reasons, we remain opposed unless amended. And we look forward to working with the author. Thank you.

Thank you very much. Is anyone else wishing to express opposition to SB 1007? Okay. Seeing no one else, I'll bring it back to the committee for questions and comments. Senator Grayson.

Thank you, Mr. Chair. And I want to express my gratitude and thanks to the author for bringing this bill forward. As a co-author, I'm obviously supportive of it. I don't believe the intent of the bill is to make HOAs insolvent or not be able to do business or represent the community members that are within that HOA.

I do know that maybe time was pressed for the author to be able to work with opposition. I'm absolutely confident knowing the author that there will be an open door to have discussions and work on the issues. But to be frank, there are some dire need, there are dire needs in addressing some issues that exist right now presently with HOAs.

So having real life experience in that arena, I really appreciate the author bringing it forward to at least put it on the table for discussion so that we can all come together and with the optimism of opposition saying when the bill gets through, they look forward to working with the author. So I also look forward to seeing the results of that as well. Thank you so very much to all that spoke today.

Thank you. I have next in the queue Durazo, Senator Durazo, Gonzalez, and Ochoa Bogh. Okay. Senator Durazo.

Thank you, Mr. Chair. I wanna thank the author as well. And I'm just wondering, give me a sense of what's gonna guide you as you have continued conversations with the opposition.

What would guide you as far as what you hear are the most important ways to protect from gouging and still paying attention to what the real needs are? Because everybody wants their home, you know, to be safe, to have all, you know, be taken care of and maintained. So what would, give me an idea what you would take into consider.

One of the things would be I hate duplicative work, repetitive work. I don't, I wanna avoid that. I don't wanna add more bureaucracy to any kind of system. So ensuring that the provision on the visual aid, it's not an extra piece of paper added to the 500 page report that homeowners get.

Or the disclosure on how much the fees pay for a third party management, even I know opposition said it's a requirement. It's not a requirement right now. Some HOAs do it. Others don't. I'm not also trying to add another page. I've seen some reports.

Opposition has showed me some reports, and they showed me a really great one that that's kind of the intent that I want. I've seen a report where they disclosed a pie graph. It's exactly what I was talking about in my intention.

The first page of the budget breakdown shows the percentage at the right corner of every single line item so that if you don't understand all these different numbers, you can see how much the percentage goes into that category. So they've shown me that it is possible.

That's one example of one HOA. See if we can replicate that across HOA. So not to duplicate work. Try to see if we can just streamline some of it. Another north star for me in this conversation is, like Senator Grayson mentioned, is I wanna make sure they have the funding to fix anything that they need to fix.

So that's not the intent here is to make to put them in situation where they're scrambling. However, you and I all have to get votes from our colleagues if we want to pass a new thing. You and I have to go to the voters for a tax increase on them.

And they get to decide if they want to pay more or less on a different thing. I'm asking them to do the exact same thing at a HOA. They're saying that they're gonna struggle to get people to vote. Well, then the homeowners themselves decided they didn't wanna vote to fix x, y, and z.

It is a democracy. I'm putting the onus and the homeowners to decide if they wanna pay a $100 more to get a new statue in front of their, in front of their opening of their community. I want them to decide if they're okay with this. So the North Star is around that.

So not adding more bureaucracy and red tape, not making a report five pages longer, making sure that the dollars are, that savings is adequate to the costs associated to implementing this are the things that I'm thinking in mind. And then the last thing I'll say is right now it's a cost of inflation.

That is gonna be the key point of conversations with the opposition of what exactly does that look like. Do we move somewhere else? I've gotten some ideas that but we haven't gone back and forth on those separate idea to see where we can land on that. I do assume that needle is gonna move.

Senator Gonzalez.

Yeah. I too wanna say thank you so much for bringing this forward. I can't tell you how many constituent concerns that I received. I've been working with one dear friend of mine in Downtown Long Beach who's been I think she, you would think that she was an HOA expert at this time because she's gone back and forth with her specific HOA.

And I'm just really appreciative of her just continuing to educate me on this issue, but also just being a super proponent of this bill. And so for that, I would like to be added as a co-author since this is very important for my residents back home.

And I think you are trying to find that good balance. You know, in terms of, like, the CPI and just figuring out what that, you know, actually looks like, do you have any sort of direction and what that could look and entail in the next few months?

I do, actually. So there are certain units right now in HOAs that used 5%, say if I under if I can say this adequately. The affordable some units in HOAs have a 5% above cost of inflation right now that they can be increased for.

Those are the affordable units. That's an example that can be applied to all said units, that it's a formula that has been accepted or understand or understood by current HOAs that can be applied across the board. That's one thing I'm looking at, but I haven't had conversations with the opposition about that.

No other idea. Oh, well, one idea was proposed by opposition of just putting a notice on homeowners saying you will be increased 20%. That doesn't solve anything. I don't wanna know that I'm getting increased 20%. I want an actual solution to decrease. So that, I already know that I won't take that solution. But I will be taking something that decreases the 20%. Maybe that's not CPI, but it's something in the middle.

That's great. And then, as you, I know obviously being on an HOA board inherently should require this fiduciary responsibility sort of training and ethics and oftentimes that does not happen. And so I would just, you know, I know your bill doesn't specifically state that.

It's more on the transparency side of, you know, if there's an external management company being used, what is their compensation? I think every homeowner has a right to know that. Which is important. But I'd also like to know, you know, what sort of, you know, training are they going through to be able to understand, you know, who to pick and solicit, you know, in terms of a management company to begin with.

The last part is just an another curiosity of mine as well given, you know, what's going on in Downtown Long Beach is the local component with city attorneys and prosecutors getting involved. And I'm just wondering if you've thought through that in terms of, you know, oftentimes, we'll obviously put forward some bills if you do get this to the Governor's desk and it gets signed.

What does that mean for our local cities to be in and counties to be involved so they understand, you know, all the particulars. And so there's not, you know, misinformation being put out there to the homeowners who are super busy, may not have time to serve on the board, etcetera.

Senator, I think you brought up a point that we as legislators think about all our bills. Like, how are they gonna be implemented? Who's gonna know about them? The awareness, oftentimes, which is why we don't like writing bills that say, okay, only if consumer ask about this, you will offer said benefit. We hate to put the onus on said consumer because it's hard to disseminate all this information down.

I haven't gone into a solution on how I will be getting this out to individuals, always hoping that, like, the woman who was one of my witnesses, you know, homeowner associations and so forth, not the HOAs. Homeowners can spread the word. But more than happy if you have any other solution we can add to this because right now I don't.

Yeah. Okay. That would be great. I would love to work with you on that piece on the local aspect. I appreciate it. Thank you so much for your work on this. I look forward to discussion.

Okay. Senator Ochoa Bogh, then Caballero, then Cabaldon.

Thank you, Mr. Chair. So currently, in a place here that has a homeowners association visa, when I first saw this, on the surface, I was like, yes. This is great, having a cap. Because our homeowners association has gone up I think over $200, and I think in the course of four years. And very expensive and it's troublesome.

From a realtor perspective, when homeowners association fees go up, that means that it impacts the future property value. Right? Because there's less buyers that can actually be able to purchase that because that HOA fee is considered into the qualification for those buyers.

So it impacts buyers and it also impacts the value of those homes. So as I'm looking, I'm look, I'm speaking to my local neighbors and saying, hey guys, you guys really need need to rein this in because this is impacting the value of the homes for many of the homeowners.

So huge concern, huge concerns. However, there's quite a bit of concerns that I also have. You know, once again, as I mentioned earlier in a previous bill, well intended, right? We wanna make sure that we're protecting the homeowners from skyrocketing HOA fees or any fees on there.

But the reality is that we live in the state of California where the cost of living because and due to legislation, much of it due to legislation that has impacted so many different industries that impact the cost of living, energy, building materials, construction, all of that, it increases.

So a lot of the increase of the cost of living in California is due to legislation. Right? That is coming in. And now we're coming in saying, okay, to these HOAs that they need to, you know, cap their their fees to a certain amount.

You know, whatever that may end up being later on, you know, decided upon, you know, the committee consultants, stakeholders, and the author that moving forward. The reality is is that we don't know what the cost of living will be increasing for.

So you could cap it and decide at some point we're gonna cap it at this amount. But we don't know what the cost of insurance is gonna be. The cost of energy, the cost of materials. I mean, there's so many factors that come into play, that will impact the cost of doing business for these associations that you as government cannot decide upon.

And it has to be decided upon with conversations between the board that, you know, most of these associations have that are local residents that live within those communities that actually have the ability to give feedback to that homeowner association that they've hired to kinda manage it.

This is why boards are so important. Yes. Do we have apathy by so many homeowners that are not engaged in voting upon issues in the legislate in the homeowners association? Absolutely. Which is why the legislature has come in and tried to kinda mitigate that by allowing, you know, various forms to be able to allow community members to vote in a variety of ways.

Electronically, whatever it might be. Right? So the state is coming in and trying to mitigate that. But it doesn't take away for the fact that these local associations, homeowners associations, those local communities have a board that is within the purview of their...

I mean, they have that purview of their own communities to make decisions to, you know, go door to door, knock on those doors, and let those community members say, hey, we need to do this or or we can't, we don't wanna support this measure but it's needed. We need feedback.

That engagement is great and I think we should trust the local folks who make those decisions on that. Especially when you, us as the legislature, we don't know what the cost will be moving forward. We really don't. So a couple of questions. Those are some of my thoughts on there and why I'm having a really hard time with this bill.

And I honestly, at this point, it sounds, based on your original comments, as far as when it was introduced and your inability to meet with everybody and make those negotiations, have those conversations. It sounds like this could be a great two year bill to move forward because it does need a lot of work if you're gonna be successful in implementing and having those conversations with all the stakeholders.

But currently, what is the thought process behind if, say, an election outcome does not support the increase to cover the insurance premium or other cost that increase at a greater rate? What is your, what's your mindset on that? What where do you think you would go with this?

So they don't need to vote for a special assessment. If the regular assessments they've been assessed for the beginning of the year or fiscal year. And somehow in the middle of that year, insurance premiums increase and they don't have enough funding to fund that. They don't need to go and put a vote.

They can levy a special assessment without a vote to cover the insurance premiums. Another example is, say, during that same year, after they've already assessed the regular assessment, there's a pipe burst, there's an emergency, a tree fell on something, they can levy what's called an emergency assessment without any vote either to collect money for any emergencies that happen that exceed the amount of money they have.

So there are two opportunities for HOAs to assess fees or assess assessments without a vote. The only vote they need is for when they wanna assess regular monthly HOAs, that if they wanna assess it higher than the cost of inflation, they will need a vote for. But if something were to increase in the middle of the year and they need to increase the, do a special, they don't need to vote for that. So that still exists in law.

Okay. And then, here's another one. Is there currently evidence of associations abusing current law which clearly states that they can only budget for anticipated cost?

Say that again to me, Senator.

Sure. Is there evidence of associations abusing current law, which clearly states that they can only budget for anticipated cost?

I don't know if I have a direct answer. I mean, we have several anecdotal examples of just HOAs reaching that 20% cap and recognizing that people can't keep up with that every single year of an increase of 20%. It's not a violation of it because they're allowed to increase up to 20%.

So a violation would be over 20%. So it's hard as they're not violating the current law. They're just going up to 20%. Not all HOAs, but some are going up to 20%. So can't say it's a violation or if that was I don't know if I'm answering your question correctly.

That's my question. You're right question. I do, you just gave me a great idea. Wouldn't it be great if the legislature could be capped at what bills they could pass?

We are.

We're not. We're capped as to the cost of increase in legal assistance.

Let's bring it back to the merits of the...

I know. I'm just saying. I'm just saying. It was just brought up in my thinking because we're trying to address the cost of living expenses in California, which this is part of it and this is government coming in saying we're gonna cap it.

Which in reality we don't have control over as to what the costs are for these individual associations and trying to maintain. And this is coming from conversations that I've had with my own association where they're saying, hey, energy costs have increased. You know, our security, labor costs have increased. Our, what else, our insurance costs have increased.

Where and they've created, just so you know, they've created a, in a kind of a little club of folks from the community that is actually trying to address many of the things that are breaking within the association so that they don't have to pay it out and save money by the association. That's how creatively they're trying to address the cost of living in the state.

Last question. Is it possible that the restriction to raise assessments at only the cost of inflation could cause some HOAs to experience financial failure? And what happens to the residents financial failure. And what happens to the residents if that happens?

It kinda goes to one of your first questions, Senator. So and to what Senator Grayson mentioned. I'm not trying to make them insolvent. Like, I want them to be able to have funds necessary to do the things that they're are towed or expected to from the homeowners. That's not the, that's not my intent whatsoever here.

So if like I mentioned, if there's a case where they don't have funding to pay for insurance, they can come and assess a special assessment. So they have avenues to get more funding should they need more funding. What we're trying to do is to plan accordingly given the cost of everything. We just wanna plan accordingly.

And I think I've heard, you know, people, I've heard your party on the other side talk about do more with what you have. So it's kinda around those, around that arena of right now we can't be spending so much on extra things.

Pay with what is intended to be paid for. Maintain what you need to maintain. Ensure your homeowners have a full transparency of what is being paid for. And don't increase it all the way up to 20%. And if you want to do it above cost of of inflation, get a vote from your homeowners so they can all decide if like this is something we wanna take on. But there's avenues for them to assess a no vote levy.

Okay. Thank you. We do have other Senators wishing to speak. Senator Caballero, then Cabaldon.

I'm gonna make this real short. I support what you're trying to do here. There may be some creative ways to be able to balance which you're trying to balance, which is that the increases have to be reasonable. But if there's a cost that was unforeseen or was, yeah, unforeseen, that there's another process you can use in between to be able to go back to the homeowners and get approval for. So I'd like to work with you on it and I'll support it today.

Thank you so much. She is my HOA expert on the legislature. So I have committed to working with her closely.

Senator Cabaldon.

Yeah. Thank you, Mr. Chair, and thanks to the author and for our conversations about the bill as well. I, with my prior HOA, had a dispute because they find me for a gigantic tree in a pot on the porch of my condo, which was there when I moved in. It wasn't my thing. And they gave me five days to fix it or pay a fee.

And then in my current neighborhood, I am the Chair of the Architectural Review Committee. But I've tried. I'm the Chair of it because I can't get anyone else to do it. Because we don't have fee revenue to hire a management company. And none of, none of my neighbors and I agreed to do this in between being Mayor and Senator. So I was in a moment of weakness.

But it's absolutely, there's no way we could do our even our limited scope association could possibly work without a management association. That's somehow it used to be. I mean, it used to be a group of neighbors just like a group of, you know, local residents being on the board of the nonprofit health clinic could just do the job.

And you could do that with an HOA, but it's no longer possible because we have created so many regulations. And I, you know, there's always something as a volunteer board member, you're like, I can't afford to miss. There's a law that requires that it be a pie chart, not a bar chart.

I didn't know that. I don't wanna go to jail. And so these are kind of trade offs that we deal with. And so, it's a, when we talk about the increasing cost of management, we do pay bear some responsibility for that. But sometimes for the right reasons, often for the right reasons.

But the management cost itself is partly driven by our requirements that are there to protect the fiduciary obligations of the association and to its members. And so I just I'm reluctant but not it's not a religious issue like, the pie chart issue and other stuff.

Like, it's not like I hate that one but I love this one. It's just the kind of the accumulation of more and more requirements in the end. And then I'm just I'm always skeptical of, you know, the documents anyway because, you know, folks move into houses being told that there's lead paint and it's gonna kill their kids.

But then we think that the a bar a pie chart's gonna in the moment where they finally found a place to live and this is it. They found their dream home. They're already imagining what they're gonna do to the kitchen and they see the pie chart and they're actually no. HOA is spending 38% on maintenance and only 22% on insurance or whatever. People don't, it just doesn't, I'm not sure it really matters.

So it's again, it's not a for me it's not a like please take that provision now. It's just you know, let's pay attention to this as we're going forward that we're not contributing unless there's real value. Demonstrated value to protecting the folks that we are trying to.

I'm gonna support the bill today because I know the author's done a great job today and witnesses as well and also understanding the key challenges. I think the inflation standard is too it's too strict because of some of these other cost areas.

And we've talked about, you know, some other ideas. I'm interested in the you know, the cushion over inflation as an option. There are, I think the Federal Reserve recognizes 387 different measures of inflation. Some of which account are specifically designed for the cost of maintenance, deferred maintenance, and insurance. Right?

There's lots of bespoke insurance measures that might better capture the kind of cost profile because HOAs aren't typically not buying Cheerios or a new car. Right? There's a, there and insurance and other things are going up at at a higher rate.

So I think looking at some of some other ways of addressing that and or simply being clear that, you know, insurance within some certain range can't go up by more than the, you know, insurance is outside of the inflation calculation. So really focus.

We're trying to keep the cost down that we can. The other, the other piece of that is the maintenance and the deferred maintenance in particular, not statues, definitely not statues. Maybe not even paint, but I think the Miami situation a few years back.

You know, where in that instance, the association just partly because they couldn't get the votes, just systematically under invested in maintenance, important structural maintenance of their common property, which then collapsed. And so it can't only be like when we vote on things, and I appreciated the analogy. But when we vote on things, we're not a collective.

We don't bear collective, the collective impacts of our decisions as individuals. Whereas in an HOA, if you don't, if 49% of people wanna make an investment into maintenance, then 51% don't, and then the water system collapses or whatever some bad outcome.

I mean, that's we can't just leave it or or you have to or you have to comply with with local zone, local, you know, health and safety code. That's not something, it's not optional. So we can't simply say well, you know, you lost this vote, come back next year with your two year bill. Like we have to figure that out.

So those two areas to me seem like they're special. And so I just encourage you as you're thinking this through, to be attentive to that. At the same time, I think 20% is just ridiculous. It's just too much on a 20% every year with no other anchoring is equally problematic as a just a strict inflation alone. So I think you're on, I think the bill as it is think is problematic in those ways.

I think you're on to the right topic and just encouraged that, you know, we do this in a way that is sensitive to the cost that we're imposing ourselves through some of these elements and understand that we can only control so much on the inflation and the maintenance side, but we want those things to be done.

Because as I understand, and please correct me. I'm not asking you because I know the Chair's already, like, glaring at me, which I'm not looking at him, so please stop. So but if I'm right, as I understand it, the the the special assessment that you can do, so you in the middle of the year after you adopt your budget and the insurance notification comes in and it's gonna go up by 12%.

And I think this year, the projections for 2026 was at HOA insurance was gonna go up seven or 10% on average. But let's say, let's say 8%. So within that range, it goes up 8%. You get that notice that you can impose a special assessment without going to a vote, but that special assessment is capped at 5%. So you can't quite meet the whole cost, but then that's only for that year.

So then you then have to incorporate it into next year's assessment, which you can do without a vote, but right now that's also limited. And so, you know, I think the mechanisms that you're describing that already exist seem like they are workable, but I wonder whether or not they are adequate to that those particular needs. So.

Would you like to address that in your close?

Okay. Yes.

Thank you, Mr. Chairman.

Seeing no other questions or comments. Oh, Vice Chair Seyarto.

Not in this one. I know. It's okay. It sounds like a great idea. Let's beat up on the HOAs. I love to beat up on the HOAs. But here's the problem. When I doubt their financials, when they send me their annual financials, I go through them with a fine tooth comb.

And one of the reasons I do that is because I can. And I know a lot of people who live there, they just look at it and go, I don't even know what this is. Most of those are line item budgets. They show you exactly what the money is being spent on.

So, you know, as far as transparency, there's as much transparency as they could possibly make given, you know, they can't make it to do education and understanding levels of 228 people in it, HOA. There are too many cost variables. That has been brought up over and over and over.

And all those cost variables far exceed a 2% cost of living rates. Insurance costs alone in one, in one instance went from $90,000 to $400,000. So, if you're going to go out and give somebody an assessment for what amounts to about $2,500 each, and then next year, what are you gonna do?

Right? You're gonna go ahead and raise the the the HOA fee another $100 or just keep giving in a special assessment every year just for the insurance. HOA's are responsible for the streets. They're responsible for the underneath all the stuff.

If a sewer breaks or something, they have to call a plumber. They don't get the city to come out. They get a plumber. They have to pay for that. If the street caves in because there's too much rain and it washes away the under underlayment of the street, they have to, they have to absorb that cost.

So all these different costs. And before these guys even spoke, I wrote down insurance, paving, reserve requirements, roof replacement, pool equipment, gates, retrieve, removal, and trimming, balcony and structural repairs, labor cost updates when you're doing the maintenance, the reserves for maintenance.

That's another thing. You know, when you're doing, when you figure, okay, every twenty years we have to paint, and it's usually 10. They figure out how much it's gonna cost. But every year, they have to look at the current labor market and add that to their reserves.

Because if they're not carrying those reserves, guess who doesn't get to refi their property? The people that live there. Guess who doesn't get to buy a new property there? The person that wants to buy a new property there because they don't have the reserves.

They can't go to the bank. They can't get any financing for it. So, there's so many complexities to what you're trying to do. I get it. You know, somebody moves into a place and it's crap when you get a $20 increase in your dues in one year.

But the alternatives don't make sense either. And the other alternative, you say you don't want them to go broke. Well, they're gonna go broke. And what happens is they start not doing the maintenance. And then guess what happens to your property values?

Down they go. Now you've lost $80,000 just because your property is not worth as much because everything looks like hell. And the pool's closed because they can't fix it. So there's just too many variables here. I can't support this bill.

I understand you wanna work on this more. I don't see where it's workable. So, you know, that's my two cents on it. And I wish, I wish I could support because, you know, there are times when I'd really like to beat them up. But in this particular arena, it's kind of hard for me to jump on board with that.

Unless there are any other questions or comments, I'll turn it back over to the author to close.

Thank you so much. You know, Senator Seyarto, don't know what is the better arena, you know, for this match right now. We're in the best position to try to balance all the comments I heard from all of you today, to try to find a balance between everything you just said and addressing affordability.

But if we, and we as we should, question everything that we're looking to to address affordability, we'd at the at the end of the day say, what is outweighing the other thing? Are we really looking to help our constituents with just a little bit more back in their in their pockets?

Knowing that, hopefully, what this product is gonna be molded into is a good balance. I think that outweighs. There's more pros there than cons. Most of you or a lot of you are in Judic Committee, which you're gonna be seeing this bill again. I 100% give my word that this bill will look dramatically different in the next committee than what you saw right here.

And I hope you don't, my word is not to be taken... Well, I shouldn't wanna say taken taken lightly. This sounds like a threat. But I do promise to continue to work. And, Senator Seyarto, I think there is a path forward here. I have not, I don't give up easily on issues.

And this is an issue that continues to come up in everyday conversations that I hear in town halls, in coffees in my district. What about HOAs? What about HOAs? That we do a lot of work in every other space, but not HOAs. Senator Cabaldon, you mentioned amazing, you brought up amazing points that some I've thought about and some that I had not thought about that we're taking back to the drawing board.

Because I think the most beat up thing in this conversation was the pie chart. And ensuring that I'm not dying on a hill for a pie chart here and ensuring that there is value in these provisions and people are actually gonna get something out of it.

And I'm just not adding a different another regulation just to add a regulation that doesn't have any benefit to it. That's not the kind of bill I'm looking to introduce. I want substance in a bill.

So to that point, I appreciate the support I will be getting today to allow me to continue with those conversations with both the opposition, this current Chair, a couple of you as colleagues, and the next committee to really mold it and get a, get a product that is gonna allow some protection for homeowners, some relief to our homeowners, and also some confidence in the HOAs that they'll be able to continue to do what they are what they can do.

Maybe a little less, maybe a tiny bit less. But I think in given everything that we're doing right now, everyone's trying to be creative and how we can do more with what we have right now. And with that, respectfully asking for an aye vote.

Thank you very much. Is there a motion? Okay. Moved by Senator Grayson. Thank you. The motion is do pass to the Judiciary Committee. Please call the roll.

[Roll Call]

Okay. We'll keep that bill on call. Thank you very much. We have one more bill to take up, which is file item three, SB 996 by Senator Padilla. And then after that, we're gonna lift calls so Members can join us so we can close the roll.

Mosey on down. Senator, whenever you're ready, you may present.

Thank you very much, mister chairman. It's my pleasure to present SB996. I wanna begin by thanking you and the committee staff and accepting. We will be accepting amendments. Talk a lot about affordability and wealth disparity.

Many of you are familiar with what we now call manufactured homes, which started out with an older term called mobile homes even though most of them are not mobile, but they are certainly homes, certainly for people often on limited incomes. This bill addresses said homes that are situated on non profit, resident owned properties and public land. They do not, I wanna clarify upfront, address, privately held or owned mobile home parks. This time, I think that's an important distinction. Under California law, manufactured home can only be classified as real property for tax purposes, certainly for title purposes.

Homeowners are required to title their homes as personal property similar to an RV or other vehicle despite the fact that a majority of them live in these homes and are they are never ever relocated. According to research by the Pew Charitable Trust, the inability to classify as real property causes many manufactured home borrowers who do own the home structure to be able to have access to fair and competitive lending at reasonable rates. High cost loans available for personal property often at least in today's market have average ranges between interest rates between 812%. Well, conversely those that are secured by those that are titled as as real property, between 57%. There are other jurisdictions and states that have taken similar steps as those contemplated by this bill.

This bill creates an opt in process for manufactured homeowners to have their homes title as real property, provided as you can see in your analysis and in the language that they meet certain stipulations as to their leasehold agreements, the duration of those, and how they're fixed to the property itself. This aligns legal classifications with the physical reality that these are in fact homes and that folks who are acquiring this form of affordable property should have access to more competitive lending and that is an affordability issue. I wanna thank the chair and the committee staff again for working productively with my staff on this bill. Today with me to testify is Ryan Sears, the head of policy and research at neighborhood partnership housing services and Leo Goldberg with ROK USA. And ask You've been very patient.

Witnesses are approaching. Just wanna call attention to the committee amendments on pages seven and eight of the analysis.

Hello, Chair Arreguin and fellow committee members. I promise to keep this quick. My name is Ryan Sears. I am the head of policy and research at Neighborhood Partnership Housing Services. We are a non profit community development financial institution, which is a financial institution that is committed to expanding access to financial products that typically have been, unable to be taken advantage of by those who have either been redlined or have been locked out of traditional financial markets.

Now, SB 996 as Senator Padilla has shared, is a bill rooted in expanding access to financial services and to expand access to consumer protections. One of California's most underserved housing populations is manufactured housing communities. These are communities that right now in the state of California number around 4,500 communities with over 1,500,000 Californians residing within them. Now, those homeowners by and large do not have access to a traditional mortgage. What they have access to is a 23 year personal property loan.

It is titled with the DMV and unless the home was built after 1980, it is taxed under the DMV. But for every home built after 1980, which represents more than 50% of California's mobile home stock, they are taxed as real property on the local property tax rolls. What they are not is titled as real property, which means that folks are paying property taxes, but they're not legally classified as real property. And so they're unable to get favorable financing rates, and they're unable to really take advantage of the consumer protections that a traditional mortgage offers. You may be asking, how does a titling change lower interest rates or help consumers?

First, it creates a secure chain of title. Lenders are very familiar with the idea that your title is held with your local recorders and assessors, not with the DMV. So, for lenders, that is a very confusing process. It requires having completely different staff. It requires a completely different underwriting model.

So, they are not aware of how to do that as easily and for the specialized lenders that do operate in that space, one of them controls 50% of the market. So it is very easy for them to charge much higher interest rates. Additionally, we can demonstrate by real property titling that these homes are functionally immobile. 95% of manufactured homes per our own board of equalization have shown that these homes are not moving. And so if we know that these homes don't move and we count them towards general plans, we should consider them as such. Which is why, I look forward to answering questions regarding this bill and I respectfully request an aye vote on this.

Thank you very much.

Good afternoon, Chair Arreguin members. My name is Leo Goldberg and I'm representing Rock USA, a national nonprofit that empowers residents by facilitating the transformation of investor owned manufactured home communities into Resident Owned Cooperatives or ROCs. ROCK USA provides technical assistance and financing that helps residents purchase the land and infrastructure beneath their homes, so that they become their own landlords. Creating rocks fosters housing stability, pride, and economic security. Today in California and most states, manufactured homes are by default titled as personal property like a car or a boat, rather than real property like nearly every other home.

Thus manufactured homes must be financed by the very small number of lenders willing to make personal property loans as we just heard from Ryan. As a result, manufactured homeowners pay significantly higher costs than they would if they were eligible for traditional mortgages mortgages. Allowing manufactured homeowners and home buyers to access the highly efficient and competitive mortgage system will dramatically improve the cost in terms of home financing and rocks. And in doing so, help facilitate the growth of resident ownership in California. New Hampshire, which titles manufactured homes as real property by default, is also the state where the resident owned community resident owned community model originated.

Fannie Mae purchases mortgages made in New Hampshire rocks and through SB 996 we have an opportunity to extend that program to California. We thank Senator Padilla for his leadership on this issue and we respectfully request your eye vote on SB 996.

Thank you very much. Are there any other members of the public wishing to express support for SB 996? If you can please come forward and state your name, organization, and position on the bill.

Good afternoon, mister chair and members. Erin Norwood on behalf of the California Land Title Association. We had a support if amended position. Just wanted to thank the author and the sponsor for their willingness to work with us and think that we're gonna get to the full support. So thank you.

Good afternoon, chair and members. Brian Agusta on behalf of the Rural Community Assistance Corporation, the California Coalition for Rural Housing, and the California Coalition for Community Investment in Support.

Good afternoon. Jeff Neil, representing the California Manufactured Housing Institute. Didn't get a letter in end time, but happy to support the bill.

Good afternoon, chair and members. Karen Stout here on behalf of UNIDOS US. Likewise, in strong support. Thank you.

Good afternoon, chair and members of the committee. Jordan Panana Carbajal on behalf of California YIMBY in support. Thank you so much.

Good afternoon, chair and members. Natalie Spivak with Housing California in support. Thank you.

Thank you very much. We'll now take up to two principal witnesses in opposition to SB 996.

Thank you, Mr. Chair and members. Jason Eichert on behalf of the California Mobile Home Park Owners Alliance. In very respectful opposition in part because of what the senator said at the start. We appreciate the amendments being taken today that narrow the scope of this bill to exclude, privately owned rental properties. But we do just given the big, change that we're making here because in California, it is a big change to establish real property rights in a park.

We just wanted to flag briefly some of those issues. From from the from the perspective of park financing, it certainly adds a layer of complexity. Right now, for lenders that lend to a a a mobile home park owner, in the instance of a foreclosure, they get to essentially walk right into the shoes of a park owner. They have all the same rights. They have essentially they have one real property right in the property. In a model where we have a a real property right tied to a protected right to occupy, we essentially have multiple real property rights fixed to the same property.

That creates risk for a lender who's doing business with a park. So that is an issue that for any park that this bill does apply to, it it would need to be resolved. There's also a question of sort of the existing rights that a park owner has today. You know, we obviously have the right to evict for failure to pay rent. We have the right to evict for, just cause failure to abide by park rules, etcetera.

We also have the right when a resident sells their home to someone else to to have a right of prior approval, to make sure that a resident is appropriate for a park for a variety of reasons. It's a little bit unclear to us how a real property interest interacts with those rights. And at a minimum, it creates a question of, of, of having a a new third party. Right now today, eviction and a right of prior approval is between a park owner and a resident. This brings a mortgage lender into the, mix, for for the resident.

Then, of course, there are issues related to bankruptcy. All of these things, again, just want to acknowledge, we appreciate that the senators taking an amendment that does, not apply this bill to rental own parks. But, you know, as a matter of setting precedent, we wanna make sure that we get this bill right as it moves forward and we look forward to kinda rolling up our sleeves and working with the senator on that. We are not sure whether it would ever be appropriate for it to apply to rental parks, but again, just gonna continue to work on this. Thank you.

Thank you. Is there another principal witness in opposition?

Thank you, mister chair, members. Chris Wysocki with WMA and I wanna first of all thank the author and the sponsor for this because they've largely addressed our concerns. And because of that, we did not put a letter in for either support or oppose, but we are neutral on the bill. But I wanted to make sure that this committee knew that we actually agree that residents and homeowners deserve affordable financing. This is a good goal that park owners have in common with with homeowners and we want we think we can get there.

And because of the collaboration that senator Padilla's office, the sponsors, and us have had, we're very confident and appreciative that we can actually work through many of the issues that we've faced. So with that, to keep things short, we're currently neutral on the bill but we're confident and hopeful that we can work through the remaining issues that we have and I think we can get there. This is, you know, we believe in the goals. Thank you.

Thank you very much. Is there anyone else wishing to express opposition to s b 996? Seeing no one else, any questions, comments, or motion? Senator Grayson.

Thank you, mister chair. I know a few people that can have opposition come in and praise their bill as you have had today. Senator, thank you for this. It's very, very important especially when it comes to ownership. And again, this term we continue to bat around affordability and to be able to have access to financial products that otherwise right now they don't have.

I do trust, senator that you will continue to work with opposition to be able to finalize those just those last few little adjustments and, make it the great bill you intended from the very beginning.

That I move the bill. Moved by Senator Grayson. Okay. Senator Seyarto.

Thank you. And now I'm just kind of on the fence about the bill because I didn't quite understand some of the underlying and actually physically underlying issues. We have a home on the top and somebody else's property underneath. But I think you've answered those and I think you're still in the process of working with them. So I'm, I'm gonna vote in favor of the bill today and keep an eye on, whether those things can be ironed out because legally I mean, it it makes a lot of sense to be able to get these loans so people can actually that's one of it it would be make even more sense if they'd add it to the REIN accounts, Because this is one of the last bastions of affordability. So Great.

Maybe that's something else we can look at. Thank you.

Great. Any other questions or comments from the committee? Okay. Seeing none. Thank you, Senator Padilla, for bringing this bill forward and working with our committee on these amendments.

And also meeting with the opposition and trying to hear their concerns. And I'm confident, that we'll find a path forward here. And and really this is about, you know, increasing access to financing and making sure that we can make this type of housing continue to make it affordable for Californians. So with that, I'll turn it over to you to close. Thank you very

much, mister Sherman. Thank you again for your leadership and your staff's collaboration. Just wanna draw a couple quick distinctions here. It's important to remember that the titling and tax treatment goes to what we've heretofore as chattel. Goes to the the physical manufactured home and not to an interest in, that is what is being treated from a tax and titling standpoint as real property and allows certain access to certain financing mechanisms.

The question of, you know, a private home, you know, first of all, also private parks are not the subject, of this bill and they're not before the committee. Just wanna point out that there's a distinction on foreclosure proceedings. I think that is a misunderstanding of the language in the bill that gets into a whole another set of legal issues including subordinate title and other things that are not properly in front of the committee. And I would also just point out that there's no impact here based on, the language in this bill on unlawful retainer process with respect to an owner, the right to evict a tenant with respect to all kinds of appropriate reasons under law. So with that, I would, just wanna make those clarifications and respectfully ask for an aye vote.

Okay. Thank you. We have a motion by Senator Grayson which is, do passes amended to the Committee on Revenue and Taxation. Please call the roll back.

[Roll Call]

Okay. That bill is Well, we'll keep that bill on call for Senator Gonzales, but it has sufficient votes to move out today. Any members who've been in the entire hearing, you're free to go, because you've recorded your votes. Let's lift the call on bills starting with filing a one s b 1007

[Roll Call]

Okay. File item 3 SB96 is out on a vote of 10 to zero. And file item four is also out on a vote of 10 to zero. And that completes our agenda for today. So with that, the this meeting of the Senate Committee on Housing is now adjourned.