BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     AB 668


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          Date of Hearing:  May 20, 2015


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                                 Jimmy Gomez, Chair


          AB  
          668 (Gomez) - As Amended May 5, 2015


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          |Policy       |Housing and Community          |Vote:|6 - 0        |
          |Committee:   |Development                    |     |             |
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          |             |                               |     |             |
          |-------------+-------------------------------+-----+-------------|
          |             |Revenue and Taxation           |     |9 - 0        |
          |             |                               |     |             |
          |             |                               |     |             |
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          Urgency:  No  State Mandated Local Program:  YesReimbursable:   
          Yes


          SUMMARY:


          This bill requires a county assessor to consider, when valuing  
          real property for tax purposes, a recorded contract (i) executed  
          with a nonprofit corporation that has received a welfare  
          exemption for properties intended to be sold to low-income  
          families who participate in an interest free loan program, and  
          (ii) that restricts the use of the property to affordable  
          housing for at least 30 years.








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          FISCAL EFFECT:


          Unknown reduction in property tax receipts, resulting in GF  
          costs to reimburse counties under the Proposition 98 funding  
          guarantee.


          For example, assuming the average Habitat for Humanity homebuyer  
          earns $33,600 (55% of the 2014 median household income in  
          California, the mid-point of Habitat's eligibility scale), and  
          pays 1/3 of that income towards a mortgage, that buyer could  
          probably afford a mortgage of approximately $190,000.  Further  
          assuming the median home price in California for a 3 bedroom  
          home is approximately $420,000, the difference in assessed value  
          would be $230,000 if the county assessor assessed the value at  
          what the Habitat homeowner effectively paid.


          Habitat for Humanity estimates there are approximately 25 homes  
          built per year that would be affected by this bill.  Assuming  
          the difference in assessed value in the above example, this bill  
          would result in a reduction in property tax receipts statewide  
          of approximately $60,000 in the first year, approximately half  
          of which would be reimbursed from the General Fund.  Over time,  
          the number of homes that enjoy the reduced tax assessment value  
          under this bill, and the amount therefore reimbursed from the  
          General Fund, will increase.


          COMMENTS:


          1)Purpose.  According to the author, this bill promotes  
            affordable housing and creates additional opportunities for  
            affordable home ownership by allowing county assessors to  
            consider certain affordable housing deed restrictions when  








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            valuing a property for tax purposes.  The author claims there  
            is currently a wide variance between jurisdictions with regard  
            to assessing the value of affordable homes, and some assessors  
            continue to assess affordable homes with private deed  
            restrictions at fair market value.  Market rate assessments  
            can have a significant impact on the property tax, and  
            therefore the overall affordability, of those homes. 


            Supporters, including the California Housing Consortium,  
            assert affordable housing rental and ownership units typically  
            have restrictions on the rents and sales, but current law does  
            not give county assessors authority to consider those deed  
            restrictions when valuing the properties for tax purposes.  AB  
            668 allows county assessors to consider private contractual  
            restrictions that maintain affordable cost or rent for at  
            least 30 years when assessing value. 


          2)Private Restrictions, Public Cost.  In opposition, the  
            California Assessors' Association argues current law requires  
            assessors to consider "enforceable governmental" restrictions  
            on property when assessing tax value, but not private  
            restrictions, because governments are in a better position to  
            determine whether the overall benefit to the community  
            justifies the restriction and resulting reduction in tax base.  
             Allowing an organization like Habitat for Humanity to have  
            its privately-contracted covenants affect the tax value of  
            properties allows the organization and homeowners to achieve  
            tax savings without a public process.


          3)Sweat Equity.  Habitat for Humanity works with families who  
            contribute to the construction of their homes, selling the  
            homes to the families at a price based on their ability to  
            pay, and attaching covenants or restrictions limiting resale  
            to ensure the homes remain affordable.  Families that purchase  
            Habitat homes are restricted from spending more than 30% of  
            their total monthly income on mortgages, including property  








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            taxes, insurance, HOA dues, and any deferred maintenance.   
            Habitat for Humanity claims county assessors do not always  
            take affordable housing covenants into consideration when  
            valuing the properties, potentially increasing property taxes  
            and disadvantaging potential buyers.


          4)Assessor Authority to Consider Private Agreements.  Existing  
            law requires assessors to consider the effect of any  
            enforceable restrictions on the use of land when issuing  
            valuations, including zoning restrictions, easements,  
            environmental restrictions, and recorded contracts with  
            government agencies.  As a general rule, private parties  
            cannot reduce the taxable value of real property by imposing  
            private encumbrances.  According to Habitat for Humanity,  
            whether a government contract is recorded with respect to a  
            property varies from project to project, and may often depend  
            upon circumstances unique to each project.  It seems clear,  
            however, that absent this bill, assessors lack clear statutory  
            or other legal authority to consider private contracts when  
            assessing value.





          Analysis Prepared by:Joel Tashjian / APPR. / (916)  
          319-2081



















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