CDCAN Advocacy Without Borders :: One Community

DESCRIPTION:

This bill establishes the Housing Market Stabilization Fund for the purpose of financing the construction, rehabilitation, and preservation of affordable homes.

ANALYSIS:

Current law establishes a number programs administered by the Department of Housing and Community Development (HCD) and other state housing agencies to support the development of affordable homes. These programs serve a wide range of housing needs, including helping first-time homebuyers achieve homeownership, providing affordable apartments to working families, providing transitional and permanent supportive housing to those with special needs, and developing emergency shelters for the homeless.

Historically, the state has primarily funded these programs with the proceeds of general obligation bonds. Recently, the voters approved Proposition 46 in 2002 and Proposition 1C in 2006, which together provided $4.95 billion for a variety of affordable housing programs. HCD has awarded most of the funds available under these bond acts and expects to award almost all of the remaining Proposition 1C funds by the end of 2010.

This bill establishes the Housing Market Stabilization Fund for the purpose of financing the construction, rehabilitation, and preservation of homes affordable to the state's workforce and those with special housing needs, to increase and preserve homeownership, and to assist and provide incentives for increasing the supply of safe, affordable, and sustainable homes.

COMMENTS:

1. Purpose of the bill - According to the author, California's housing market is broken. Even before the current wave of foreclosures, the state's housing production had not kept pace with the state's growth in population, making most major California housing markets the most expensive in the nation. Moreover, during this economic crisis, the high costs of housing are hitting families hard. Some families find that paying rent or a mortgage to stay in their homes leaves little discretionary income available. Other families are not able to pay their rents and mortgages and are, therefore, at risk for homelessness. They may join the tens of thousands of Californians already homeless that can be found sleeping on sidewalks and bus stops on any given night. In order to meet these short-term housing needs and fix the state's long-term shortage of affordable homes, California needs a continued and sustained investment in housing production. This bill creates the Housing Market Stabilization Fund to invest funds from a permanent source or sources of revenue into affordable housing production.
2. Revenue sources and expenditure framework to come - This bill in its current form represents the first step in an effort to establish a permanent source of revenues for state housing programs. At some later date, it is likely that this bill will contain proposed sources of revenue to support the fund and a framework for expenditure of the funds.
3. Ending the boom and bust cycle . While general obligation housing bonds have allowed tens of thousands of California families to afford their homes, bonds create a boom and bust development cycle that is difficult for the state and the private development community to manage. When bond funds are available, HCD and private developers add staff to issue loans and build housing, but ultimately the bond funds are exhausted and that added staff must be laid off unless another bond issue is enacted by the Legislature and approved by voters in advance of the funds running out. This ramping up and ramping down of capacity has costs and leads to inefficiencies as critical staff experience is lost. Moreover, because it is difficult to predict precisely how long bonds funds will be available, it is difficult for developers to plan ahead, which is critical given the multi-year development process.

   By providing a steady stream of funding for the state's housing programs, a permanent source will end this boom and bust cycle and bring much-needed certainty to the financing process for affordable housing. Developers will know that there will be a relatively consistent amount of funding available year in and year out and therefore will be able to hire staff and plan projects accordingly. Likewise, HCD will be able to maintain a consistent staffing level and retain experienced employees.

4. Pay as you go - Creating a dedicated revenue source to support affordable housing programs will reduce the pressure to issue general obligation housing bonds. Treasurer Bill Lockyer recently stated that California's debt service on already-authorized general obligation bonds will likely hit an unprecedented ten percent of annual expenditures by 2014. This bill presents an alternative pay-as-you-go method to fund the state's affordable housing programs.

Support

• Affordable Homes Collaborative
• California Building Industry Association
• California Coalition for Rural Housing
• California Rural Legal Assistance Foundation
• Coachella Valley Housing Coalition
• Housing California
• Mammoth Lakes Housing, Inc.
• Self-Help Enterprises
• Visionary Home Builders of California, Inc.
• Western Center on Law and Poverty

Opposed

None received.