BILL ANALYSIS
------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 707|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
UNFINISHED BUSINESS
Bill No: SB 707
Author: Ducheny (D)
Amended: 6/21/07
Vote: 21
SENATE TRANS. & HOUSING COMMITTEE : 7-4, 4/24/07
AYES: Lowenthal, Cedillo, Corbett, Kehoe, Oropeza,
Simitian, Torlakson
NOES: McClintock, Ashburn, Dutton, Harman
SENATE APPROPRIATIONS COMMITTEE : 10-6, 5/31/07
AYES: Torlakson, Cedillo, Corbett, Florez, Kuehl, Oropeza,
Ridley-Thomas, Simitian, Steinberg, Yee
NOES: Cox, Aanestad, Ashburn, Dutton, Runner, Wyland
NO VOTE RECORDED: Battin
SENATE FLOOR : 22-13, 6/6/07
AYES: Alquist, Calderon, Cedillo, Corbett, Ducheny,
Florez, Kehoe, Kuehl, Lowenthal, Machado, Migden, Negrete
McLeod, Padilla, Ridley-Thomas, Romero, Scott, Simitian,
Steinberg, Torlakson, Vincent, Wiggins, Yee
NOES: Aanestad, Ackerman, Ashburn, Cogdill, Cox, Denham,
Dutton, Harman, Hollingsworth, Margett, McClintock,
Runner, Wyland
NO VOTE RECORDED: Battin, Correa, Maldonado, Oropeza,
Perata
ASSEMBLY FLOOR : 51-26, 9/5/07 - See last page for vote
SUBJECT : Expiring state housing loans
CONTINUED
SB 707
Page
2
SOURCE : Department of Housing and Community Development
DIGEST : This bill, beginning July 1, 2008, allows the
Department of Housing and Community Development or the
California Housing Finance Authority when requested by a
borrower, to extend and alter the terms of existing loans
made under specified older financial assistance programs.
Assembly Amendments allow the Department of Housing and
Community Development (HCD), if they determine that the
useful life of the project is less than 55 years, to
extended the loan for the remainder of the projects useful
life, but not less than 30 years, recast language related
to HCD's findings that the project has insufficient income
to maintain fiscal integrity, require the project not only
be affordable to, but also be occupied by, households
earning less than the midlevel target, and allow the
California Housing Finance Authority the same authority
provided to HCD with respect to the Rental Housing
Construction Program.
ANALYSIS : In the late 1970s and early 1980s, the
Legislature appropriated general fund revenues to the
Department of Housing and Community Development (HCD) for a
number of housing assistance programs. These programs
included:
1.The original Rental Housing Construction Program (RCHP),
which financed the new construction of rental housing
that serves very low- and low-income households. Loans
are still outstanding on 49 projects with a total of
1,344 units.
2.The Special User Housing Rehabilitation Program (SUHRP),
which financed the rehabilitation of rental units for
very low- and low-income elderly and disabled households
and the rehabilitation of residential hotels. Loans are
still outstanding on 60 projects housing 1,904
households.
3.The Deferred Payment Rehabilitation Loan Program, which
financed the rehabilitation of owner-occupied and rental
housing units for lower-income households. Under this
SB 707
Page
3
program, HCD made funds available to local governments to
administer locally. Loans are still outstanding on 38
projects with a total of 1,167 units.
The loans made under these three programs are approaching
the maximum loan term of 30 years.
HCD's current program to finance affordable rental housing
is the Multifamily Housing Program (MHP). Created in 1998,
this program is intended to be the department's omnibus
rental housing program, able to finance different types of
rental housing for various populations under a uniform
structure. This program funds the new construction,
rehabilitation, and preservation of affordable rental
housing through loans to local governments, non-profit
developers, and for-profit developers. Affordable units
are those affordable to households earning no more than 60
percent of the area (county) median income (AMI), but HCD
gives heavy priority to projects that serve households at
even lower-income levels. Loans are for a term of 55 years
at an interest rate of three percent simple interest. All
payments are deferred except for a standard annual interest
payment (currently .42 percent) to cover HCD's on-going
monitoring and management duties.
This bill allows HCD, when requested by a borrower, to
extend the terms of existing loans made under the RCHP,
SUHRP, and DPRLP programs. Similar to the MHP Program, the
extended loans carry an interest rate of three percent
simple interest, and all payments are deferred except for a
standard annual interest payment to cover HCD's on-going
monitoring and management duties. Extensions of the loans
are subject to the following conditions:
1.The borrower provides HCD with a complete report showing
existing tenants, their incomes, and the current rents.
2.The borrower agrees to extend the term of the loan by 55
years. If HCD determines that the remaining useful life
of the project is less than 55 years, the loan may be
extended for the remainder of the projects useful life,
but not less than 30 years.
3.The project has, or will have after the rehabilitation
SB 707
Page
4
and repairs, a potential remaining useful life of at
least 30 years and will be financially feasible. The
rate on the extended term shall be three percent simple
interest.
4.The borrower agrees to a rent schedule requiring that all
assisted units be affordable to households earning less
than 60 percent of the area median income and that at
least 35 percent of the assisted units be affordable to,
and occupied by households earning less than the
"midlevel target used by MHP." The "midlevel target" is
defined as an income that:
A. Equals 30 percent of the statewide median income
in counties with incomes less than or equal to 110
percent of the statewide median.
B. Equals 35 percent of the statewide median income
in all other counties. HCD may alter this
requirement as needed to make a project financially
feasible if it finds that the project income is
insufficient to cover specified costs and that the
borrower has exhausted all available sources of rent
subsidies. In such cases, HCD shall ensure that the
largest possible percentage is reserved for
households at the targeted income levels.
5.The borrower agrees to amend the existing regulatory
agreements as needed to conform them to the requirements
of this bill and the Multifamily Housing Program, and
that no tenants are displaced as a result of the
revisions of the regulatory agreement.
This bill allows HCD to subordinate these loans in order
for the borrower to refinance existing debt or to secure
additional financing if the proceeds will be used only for
rehabilitation, repairs, or improvements to the property.
HCD may implement this section through guidelines that are
exempt from the Administrative Procedures Act.
This bill provides the California Housing Finance Authority
the same authority provided to HCD with respect to the
Rental Housing Construction Program.
SB 707
Page
5
This bill becomes operative on July 1, 2008.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee analysis:
Fiscal Impact (in thousands)
Major Provisions 2007-08 2008-09
2009-10 Fund
HCD loan conversions unknown,
potentially over $150
Special*
------see staff comments-----
*Housing Rehabilitation Loan Fund
SUPPORT : (Verified 9/5/07)
Department of Housing and Community Development (source)
California Coalition for Rural Housing
California Housing Finance Authority
California Rural Legal Assistance Foundation
Western Center on Law and Poverty
ARGUMENTS IN SUPPORT : According to the sponsor, HCD,
this bill gives HCD the authority to extend and modernize
the loans in its older portfolio through conversion to the
omnibus Multifamily Housing Program structure. Many of
these loans were awarded in the late 1970s and early 1980s
and are coming close to their term. By extending the loans
on these projects based on the request by the project
sponsor, this bill could preserve numerous affordable
housing units currently in existence. Preserving the
affordability of existing units is much more cost effective
than creating new affordable rental housing units. By
extending the terms of these loans for 55 years and
conforming these loans to an MHP-like structure, this bill
addresses the potential loss of over 4,000 units of
affordable housing.
SB 707
Page
6
ASSEMBLY FLOOR :
AYES: Aghazarian, Arambula, Bass, Beall, Berg, Brownley,
Caballero, Charles Calderon, Carter, Coto, Davis, De La
Torre, De Leon, DeSaulnier, Dymally, Eng, Evans, Feuer,
Fuentes, Galgiani, Garcia, Hancock, Hayashi, Hernandez,
Horton, Huffman, Jones, Karnette, Krekorian, Laird, Leno,
Levine, Lieber, Lieu, Ma, Mendoza, Mullin, Nava, Parra,
Portantino, Price, Ruskin, Salas, Saldana, Solorio, Soto,
Swanson, Torrico, Tran, Wolk, Nunez
NOES: Adams, Anderson, Benoit, Berryhill, Blakeslee, Cook,
DeVore, Duvall, Fuller, Gaines, Garrick, Houston, Huff,
Jeffries, Keene, La Malfa, Maze, Nakanishi, Niello,
Plescia, Sharon Runner, Silva, Smyth, Spitzer, Villines,
Walters
NO VOTE RECORDED: Emmerson, Strickland, Vacancy
JJA:do 9/6/07 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****