BILL ANALYSIS
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: ab 987
SENATOR ALAN LOWENTHAL, CHAIRMAN AUTHOR: jones
VERSION: 6/5/07
Analysis by: Mark Stivers FISCAL: no
Hearing date: June 12, 2007
SUBJECT:
Affordability restrictions on redevelopment agency-assisted
housing
DESCRIPTION:
This bill creates new requirements related to the recording of
affordability covenants or restrictions on redevelopment
agency-assisted housing, requires redevelopment agencies to
maintain a database of assisted units, and allows low- or
moderate-income families to enforce redevelopment housing
requirements.
ANALYSIS:
The Community Redevelopment Law allows local governments to
establish redevelopment project areas and capture all of the
increase in property taxes (referred to as "tax increment") that
is generated within the area. The law requires redevelopment
agencies to deposit 20% of tax increment funds into a Low &
Moderate Income Housing Fund (L&M Fund) to be used to increase,
improve, and preserve the community's supply of low and moderate
income housing at affordable housing cost. The law also
requires that 30 percent of all new and substantially
rehabilitated housing units development by the agency and 15
percent of all other new and substantially rehabilitated housing
units developed within the project area be affordable to low-
and moderate-income households (referred to as the "production
requirement"). In addition, the law requires that redevelopment
agencies replace any units housing low- or moderate-income
households when those units are demolished or removed from the
market as a result of an agency-assisted project (referred to as
the "replacement requirement").
AB 987 (JONES) Page 2
When an agency expends funds to support the development of
affordable housing or when units are counted towards the
production or replacement requirements, the agency must record a
covenant or restriction against the property that maintains
long-term affordability of the housing. Rental units must
remain affordable for 55 years. Ownership units must be
affordable for 45 years, except that an agency may permit a
resale of the home at market price if the agency has a program,
such as an equity sharing agreement, to protect its investment
of L&M funds. In the event of a market-sale resale of ownership
production or replacement housing, the agency must expend funds
within three years to make an equal number of units affordable
to households of the same income level. These affordability
covenants run with the land and are enforceable against both the
original owner and successor owners through the end of the
compliance period. The covenants may be enforced either by the
agency or by the city or county that sponsors the agency.
This bill creates a number of new requirements related to the
recording of affordability covenants or restrictions, requires
redevelopment agencies to maintain a database of assisted units,
and allows low- or moderate-income families to enforce
redevelopment housing requirements. Specifically, the bill:
Requires a redevelopment agency to maintain a copy of the
recorded covenant or restriction for the life of the covenant.
Requires an agency, for new or substantially rehabilitated
housing units assisted with L&M funds after January 1, 2008,
to additionally record a separate document entitled "Notice of
Affordable Restrictions on Transfer of Property" that includes
the following:
? A recitation of the affordability covenants or
restrictions.
? The date the covenants or restrictions expire.
? The street address and, if applicable, the unit number
of the property.
? The assessor's parcel number for the property.
? The legal description of the property.
Requires an agency to record the notice within 30 days of
recording the covenant or restriction.
Requires the county recorder to index the documents both by
property owner and redevelopment agency.
Allows a county recorder to charge all authorized recording
fees for recording these documents.
AB 987 (JONES) Page 3
Provides that a housing unit shall not be counted towards the
agency's redevelopment law housing obligations unless the
covenant and notice have been recorded in compliance with
these requirements.
Provides that failure to record the Notice of Affordable
Restrictions on Transfer of Property shall not invalidate any
covenants or restrictions.
Requires a redevelopment agency to compile, maintain, and make
available to the public on the internet a database of
existing, new, and substantially rehabilitated housing units
assisted with L&M funds. The database must include:
? The address and parcel number of the property.
? The number of units broken out by the number of
bedrooms.
? The year of construction.
? The date when the affordability covenant or restriction
was recorded.
? The document number of the recording.
? The expiration date of the covenant or restriction.
? The date and document number of the affordability
covenants that are recorded on replacement properties in
the event that an ownership unit is resold at market rate.
Requires HCD to develop and make available to redevelopment
agencies a uniform database format that includes the
information categories described above.
Allows a family of low- or moderate-income to enforce
affordability covenants on agency assisted housing as well as
the production and replacement housing obligations of
redevelopment law.
COMMENTS:
1.Purpose of the bill . Affordability covenants required by
redevelopment law are often recorded within long regulatory
agreements. According to the author, these covenants are not
always enforced, especially when a subsequent property owner
attempts to convert affordable units into more expensive
units. In part, these violations have occurred because
subsequent owners claim to have no actual notice of the
covenants. Moreover, redevelopment agencies, have sometimes
failed to exercise their authority to enforce those covenants.
This bill seeks to ensure that affordable housing remains
affordable for the obligatory time periods by requiring
AB 987 (JONES) Page 4
recording of a separate document that will be noticed by title
companies during sale transactions, requiring agencies to
maintain a database of units subject to covenants, and
allowing potential beneficiaries of the housing to enforce the
law through private actions.
2.An example . As an example of the need for this bill, the
author points to the 100-unit Bristol Hotel in downtown Los
Angeles. In 2004, a new owner planned to convert the
low-income residential hotel into a "boutique hotel," despite
the existence of a 1985 covenant with the Los Angeles
Community Redevelopment Agency (LACRA) that required the units
to remain affordable until 2015. The covenant was attached to
the property when a prior owner received an $850,000 LACRA
loan to renovate the building. According to the Los Angeles
Times, LACRA was supportive of the boutique hotel proposal,
and it was unclear whether the agency would enforce the
covenant or not. The low-income residents had no standing to
enforce the covenant themselves and challenge the conversion.
(Los Angeles Times, June 30, 2004)
3.Applying the bill to production and replacement units . This
bill requires redevelopment agencies to meet various recording
requirements and maintain a database of affordable units
assisted with L&M funds. In most cases, this will cover units
developed as a result of the production and replacement
requirements of redevelopment law, because most receive some
agency financial assistance. To the extent that production
and replacement units are financed exclusively with federal,
state, or other non-redevelopment sources, however, it makes
sense to apply the provisions of this bill to these units as
well. The committee may wish to consider an amendment to
apply the recording and database requirements to production
and replacement units.
4.Veto of AB 2922 . This bill is similar to a measure by the
same author from last session, AB 2922, which Governor
Schwarzenegger vetoed. The veto message stated in part:
While I support the intent of the author, I am concerned
that this bill would allow individuals without a direct
interest in a housing project to bring suit against the
property owner for failure to comply with the covenants and
restrictions attached to that property.
I cannot support increasing the legal standing of persons
who have no direct involvement in a matter.
AB 987 (JONES) Page 5
I encourage the author to work with local agencies to
ensure they are forcefully enforcing the law so that
low-income housing built with taxpayer dollars is being
used for its intended purpose.
The author points out that this year's bill is different from
AB 2922 in that it applies the new recording requirement
prospectively only and narrows the standing requirement so
that only persons directly affected by the violation of an
affordability covenant will have standing to enforce the
covenant.
5.Double referral . This Senate Rules Committee referred this
bill to both the Transportation and Housing Committee and the
Judiciary Committee. If the committee wishes to approve this
measure, the appropriate motion is to pass and re-refer to the
Judiciary Committee.
6.Author amendment . The author intends to offer an amendment in
committee to keep the address and parcel number of housing for
domestic violence victims out of the database but require the
agency to provide a contact name and phone number at the
agency for further information.
7.Technical amendments .
On page 5, line 3 after "Fund" insert "on or"
On page 5, strike lines 12-15 and insert "document. If"
On page 13, line 14 strike "unit was built" and insert
"construction or substantial rehabilitation of the unit was
completed"
On page 13, line 24 strike "department" and insert
"Department of Housing and Community Development"
Assembly Votes:
Floor: 44-29
H&CD: 5-2
Jud: 8-2
POSITIONS: (Communicated to the Committee before noon on
Wednesday,
June 6, 2007)
SUPPORT: Western Center on Law and Poverty (sponsor)
California Rural Legal Assistance Foundation
AB 987 (JONES) Page 6
(sponsor)
Affordable Housing Advocates of Santa Cruz County
Affordable Housing Clearinghouse
Aging Services of California
American Federation of State, County, and
Municipal Employees
Bet Tzedek Legal Services
Beyond Shelter
Cabrillo Economic Development Corporation
California ACORN
California Affordable Housing Law Project
California Alliance for Retired Americans
California Church Impact
California Labor Federation, AFL-CIO
California Legislative Council for Older
Americans
California Redevelopment Association
Chicano Consortium
Civic Center Barrio Housing Corporation
Coalition for Economic Survival
Community Interface Services
Corporation for Supportive Housing
DCM Properties, Inc.
East Bay Asian Local Development Corp.
East Bay Community Law Center
EPACT Education Fund
Fair Housing Council of Orange County
Fair Housing Foundation
Fair Housing of Marin
Friends Committee on Legislation
Gray Panthers
Gubb & Barshay LLP
Housing California
Housing Leadership Council of San Mateo County
Housing Rights Center
Housing Rights Committee of San Francisco
Independent Living Center of Southern California
JERICHO
Just Cause - Oakland
Life Steps Foundation
Loaves & Fishes
Los Angeles Center for Law and Justice
Los Angeles Community Action Network
Older Women's League of California
ONE Company
Orange County Community Housing Corporation
AB 987 (JONES) Page 7
Peoples' Self-Help Housing Corporation
Protection & Advocacy Inc.
Public Advocates
Public Counsel
Rural Communities Housing Development Corporation
Sacramento Self-Help Housing
San Francisco Tenants Union
Senior Action Network
Senior Housing Action Committee
Sentinel Fair Housing
Shelter Partnership, Inc.
Skid Row Housing Trust
Society of St. Vincent De Paul, Council of Los
Angeles
Southern California Association of Non-Profit
Housing
Southern California Indian Center
Strategic Actions for a Just Economy
Venice Community Housing Corporation
OPPOSED: None received.