Marriott Hotel San Jose Ballroom San Jose, CA September 22, 2011 8:00 am – 11:30 am
Mission Statement The Housing Committee's mission is to develop C.A.R.'s housing policy. It has original jurisdiction to evaluate legislation and regulation in the following issue areas: Common Interest Developments; Fair Housing/Equal Opportunity; Housing Policy; Manufactured Housing; Multifamily Housing; and Property Management.
Presiding: Allen Okamoto, Chair Allen Chiang, Vice Chair
Issue Chairs (ICs) Janet Halliburton, Common Interest Dev. Lidia Yun, Fair Housing/ Equal Opportunity Sandy Darling, Housing Policy; NAR Liaison (Equal Opportunity & Cultural Diversity) Bruce Bourdon, Manufactured Housing Larry Black, Multi-Family Housing Jay Avirom, Property Management
Executive Committee Liaison: Mike Riley
NAR Liaison: Jim Hamilton (Housing Opportunity)
Staff Coordinator: Dave Milton
Federal Issues Coordinator: Matt Roberts
I. Welcome and Opening Remarks - Allen Okamoto, Chair
II. Reporting Items A. CID - Janet Halliburton, Issues Chair (IC) 1. Sponsored Bills
AB 771 (Butler) HOA Agents and Fees - Home Owner Associations (HOAs) are required by law to provide specific documents to prospective purchasers of homes in common interest developments (CIDs). Current law prohibits HOAs from charging fees in excess of what is "reasonable" based on the actual cost of processing and producing these documents. HOAs are increasingly delegating document preparation to outside third party vendors or contractors who, under a 2007 court decision, are
not subject to this fee limitation. This delegation of responsibility by HOAs sometimes results in home purchasers being forced to pay additional fees for other documents which are "
bundled" with the required documents. AB 771 says that ONLY the fees for the
required documents can be charged upon receipt, effectively prohibiting the "bundling" of fees for other documents with fees for the required documents. The bill also creates a form, which must accompany the documents, detailing the documents that are required. This will eliminate any uncertainty for the prospective purchaser as to exactly which documents are being billed for and provided.
Early in the legislative process, AB 771 was vigorously opposed by such groups as the Community Associations Institute (CAI), California Association of Community Managers (CACM), and the Executive Council of Homeowners (ECHO). Extensive negotiations with these groups by CAR, that included consultants from the Housing and Judiciary Committees of both the Assembly and Senate, led to a consensus of how best to address the problem of "bundled CID Fees". AB 771 was amended in the Assembly to reflect the consensus reached during this process to solve this problem. The amended bill was passed unanimously by the policy committees and on the Floors of both houses of the Legislature. Status: Enrolled to Governor for signature
SB 150 (Correa) CID Right-to-Rent - There has been a trend among some homeowner associations to adopt restrictions that limit the ability of unit owners to rent their dwellings in Common Interest Developments (CIDs). The imposition of these rental restrictions diminishes an owner's property rights by removing options that were available when the unit was purchased. C.A.R. is sponsoring SB 150, a re-introduction of C.A.R.'s AB 2259 (Mullin) of 2008, to protect the right of a CID owner to rent his or her unit, if that right existed at the time the owner purchased the unit.
SB 150 was supported by the California Apartment Association (CAA), ECHO, Western Center on Law & Poverty, and the Center for California Homeowners Association Law (CCHAL). It was opposed by CAI and CACM. Notwithstanding this opposition, SB 150 was passed unanimously in the policy committees and on the Floors of both the Assembly and the Senate. Status: Signed by the Governor on July 8, 2011 (Chapter 62, 2011 Statutes)
2. Bills of Others
AB 805 (Torres) Recodification & Simplification of Davis-Stirling CID Act Sponsored by the State Law Revision Commission, AB 805 proposes to reorganize and recodify the Davis-Stirling Common Interest Development (CID) Act in order to achieve internal clarity and consistency. It regroups related provisions in a logical order within a common part of the Civil Code; divides longer sections into shorter and more readable sections; replaces outdated references to other code sections; and also proposes to standardize terminology and guidelines relating to notices, recorded declarations, and governing documents. It further provides that this recodification of the Davis-Stirling Act would become operative on January 1, 2014, in order to give ample time for transition from the old law to new. There is no opposition to this bill. Status: Passed the Assembly; will be taken up in the Senate in 2012. Position: Favor
SB 561 (Corbett) Delinquent Assessment Collection - The Davis-Stirling Common Interest Development Act regulates the way that a Homeowners Association (HOA) can collect delinquent assessments by allowing them to collect reasonable costs and fees but requiring any assessment payments made by a homeowner to first be applied to any assessment balance and requiring an HOA to contact and work with the homeowner prior to enforcing a lien or foreclosing. Third party debt collectors hired by HOAs to collect delinquent assessments on their behalf are not governed by the same requirements and often convince homeowners to enter into contracts that waive their rights under the Davis-Stirling Act. This measure would require a third party to apply any payments made by a homeowner to any outstanding assessments prior to being applied to any other fees. This will prevent third party debt collectors from applying payments to their own fees first then foreclosing because of a failure to pay. While C.A.R. is supportive of placing regulations on third party debt collectors, it is opposed to this measure because it makes it more difficult for HOAs to collect delinquent assessments that have been defaulted on when owners stopped making their CID unit mortgage payments. HOAs around the state have as much as 50% of their annual budgets impacted by delinquent assessments.
Sponsored jointly by the CA Alliance of Retired Americans (CARA) and CCHAL, it is supported by the CA Advocates for Nursing Reform, Congresswoman Jackie Spier, Consumer Attorneys of CA, and the Older Women's League of CA. In addition to CAR, it is opposed by CAI, CACM and ECHO. Status: Assembly Judiciary Committee; it will not be taken up until January when Policy Committees begin to meet again. Position: Oppose
SB 563 (Transportation and Housing Committee) CID Meeting Notification - Under existing law the Board of Directors governing a Common Interest Development (CID) are required to provide members of the association notice of the time and place of a meeting at least 4 days in advance. SB 563 would change that requirement to two days for meetings held in executive session and would allow a member who gives permission to be notified of the meeting electronically. This measure would also allow an association meeting to be held by teleconference as long as at least one board member is present. C.A.R. had an "oppose unless amended" position on SB 563 until it was amended to eliminate language that restricted the ability of HOA directors to meet separately and discuss pending agenda items. C.A.R. now has a "Favor" position.
It is supported by the California Alliance for Consumer Protection (CACP), CARA, Californians Aware and ECHO. It was opposed by the Association for Common Sense CID Laws, CAI, and CACM, before the final amendments were made. Status: Senate Floor for concurrence Position: Favor
3. Federal Issue FHA Condo Rules Review a) Update- In July, the FHA released
Mortgagee Letter 2011-22: Condominium Approval Process for Single Family Housing - Consolidation and Update of Approval Requirements. The Mortgagee Letter was released along with an
implementation schedule and the
Project Approval and Processing Guide in an effort to clarify, expand, consolidate and update existing guidance. The new guidance provides increased flexibility for FHA to address individual circumstances so that the agency can be more effective at the neighborhood level.
In the new guidance, FHA made permanent the temporary measures from Mortgagee Letter 2011-03. The concentration limit is 50 percent but Homeownership Centers (HOC) may grant exceptions to go beyond 50 percent. FHA requires that 50 percent of units be owner-occupied but FHA will reduce this to 30 percent for new construction. At least 30 percent of units must be sold prior to endorsement of any mortgage by FHA. This pre-sale requirement is not applicable to existing projects or non-gut rehabilitation projects.
One of the more notable changes is in the calculation of delinquent homeownership association (HOA) dues. Previously, FHA permitted no more than 15 percent of units to be in arrears but this did not include bank-owned foreclosures. The new guidance states that the calculation includes all units - occupied, investor, bank-owned, and vacant). FHA did not increase the maximum permitted investor ownership of units or commercial space requirements.
b) Discussion- Does the Committee have any suggestions as to areas FHA should further, or additionally, address as part of this "guidance" effort?
B. Housing Policy - Sandy Darling, IC 1. State Issue
AB 1220 (Alejo) Challenges to Local Planning Decisions - For nearly 25 years there has been a very short window for challenging land use decisions of local governments. Advocates for low and moderate-income households enjoyed an exception to the review process, however, created to recognize that cities and counties have an obligation to ensure that such housing can and will be built. AB 1220, a re-introduction of AB 602 (Feuer) from last year, proposes to clarify this long-standing provision to ensure that local governments follow the law on housing elements, density bonuses and other requirements by limiting to five years the time period in which a challenge can be made to a general plan based on an inadequate housing element. This represents a compromise between the 90-day period established by a recent court case and the almost indefinite period, tied to the duration of the current housing element period, of between 5 and 8 years that existed prior to that case. C.A.R. supports AB 1220 as a positive step towards creating a local regulatory environment for housing that encourages the productions of more affordable housing, contributing positively to the economic recovery.
This measure is jointly sponsored by Housing California and the CA Rural Legal Assistance Foundation. In addition to CAR, it is supported by the CA Building Industry Association (CBIA), as well as 16 local and state housing advocates organizations. It is opposed by the League of Cities and the CA Association of Counties, the Counsel of Engineers, Civil Justice Association of CA (CJAC) and 12 individual cities and counties. Status: Senate Floor Position: Support
2. Federal Issue Disposition of Government REO The Federal Housing Finance Agency (FHFA), the U.S. Department of the Treasury, and the Department of Housing and Urban Development (HUD) have published a Request For Information (RFI), seeking input on new options for selling single-family real estate owned (REO) properties held by Fannie Mae and Freddie Mac (GSEs), and the Federal Housing Administration (FHA).
The FHFA, Treasury and HUD are requesting input on what is essentially a proposal to expedite the disposition of the REO inventory currently on their books, as well as their expected future REOs. The RFI puts forward three different models:
a)The GSEs and FHA partner with a third party to rent out a portion of their existing REO inventory. b) The GSEs and FHA do a bulk sale of a portion of their REO inventory to investors (anywhere from $50 million to $1 billion in size) who would then be obligated to rent those units out. c) The GSEs and FHA do a bulk sale of a portion of their REO inventory to investors with no restriction. This would mean investors could rent and/or sell as many or as little of the properties as they see fit.
The RFI is extremely vague on any details. There is no sunset date, no minimum amount of time that a property must be rented before it can be sold again, no details on what the structure of the partnerships would look like, and no numbers given on how many REOs would be put in this program and how many would continue to be listed individually with REO brokers. In fact the RFI is asking for the industry and interested parties to submit what they believe the answers to these questions should be.
The administration and many others in DC view this as an expedient opportunity to expeditiously eliminate non-performing assets through bulk sales and/or convert non-performing assets into performing ones by transforming them into rental units.
There is great pressure on the administration to take action on the issues surrounding the housing market. Issues this RFI is hoping to address include:
a) Reducing the REO portfolios of the GSEs and FHA in a cost-effective manner, b) Reducing average loan loss severities to the GSEs and FHA relative to individual distressed property sales, c) Addressing property repair and rehabilitation needs, d) Responding to economic and real estate conditions in specific geographies, e) Assisting in neighborhood and home price stabilization efforts, and f) Suggesting analytic approaches to determine the appropriate disposition strategy for individual properties, whether sale, rental or, in certain instances, demolition.
C. Manufactured Housing - Bruce Bourdon, IC SB 376 (Fuller) Financing Personal Property Manufactured Housing - SB 376 proposes to expand the scope of a "real estate broker" license to include individuals who arrange loans secured by manufactured housing. It is sponsored by the Western Manufactured Housing Communities Association (WMA). According to WMA, the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) and newly amended provisions of the federal Truth in Lending Act pose a substantial problem for the state's mobile home parks. Before these federal measures and state legislation implementing the SAFE Act were in place, park owners were making seller carry- back chattel loans on used mobile homes, using their own money to fund the loans. This was necessary because traditional lenders were not willing to make $5,000 to $20,000 chattel loans on used mobile homes that park owners acquired through default, abandonment, or warehouse liens. Park owners were not required to be licensed as lenders by the Department of Corporations, because the makers of these loans were not categorized as "engaged in the business of chattel lending" and did not trigger the need for a finance lender license. WMA believes the S.A.F.E. Act redefined Residential Mortgage Loans to include chattel loans on mobile homes, whether or not they were attached to real property. Thus, park owners who are engaged in making seller carry-back loans on mobile homes are required to be licensed as mortgage loan originators (MLOs) and to be licensed as a consumer finance lender by the Department of Corporations in order to finance homes which they own and self-finance.
This bill allows real estate brokers who are licensed as MLOs to arrange for chattel mobile home loans without requiring them to obtain a license from the Department of Corporations. It would allow manufactured housing dealers to use a mortgage loan originator endorsement on their real estate license to originate financing for personal property mobile homes and avoid the need for an additional licensing requirement for mobile home sales. Status: Assembly Inactive File. DRE has problems with the regulatory oversight of this activity. Sponsor (WMA) will try to work out the DRE issues and move the bill in 2012. Position: Support
D. Multi-Family Housing - Larry Black, IC 1. State Legislative Issues AB 341 (Chesbro) and AB 818 (Blumenfield) Multifamily Complex Recycling Requirements- While C.A.R. supports reasonable recycling programs, C.A.R. opposed AB 818 and AB 341. AB 818 requires ALL multifamily dwellings (5 units and more) to provide appropriate recycling services. As introduced, AB 818 exempted, from these recycling requirements, complexes lacking sufficient space for additional recycling waste bins, unless a building permit was issued on or after September 1, 1994. C.A.R. originally opposed AB 818 because it created a "catch 22" between state and local law. At C.A.R.'s request, AB 818 was amended in July to make the bill's provisions consistent with local recycling ordinance requirements in order to protect multi-family property owners who have complied in good faith with local recycling requirements and to assure that the rules for compliance were not arbitrarily changed after the fact. AB 341, which includes multifamily complexes of five or more units in its definition of "business", mandated local agencies to impose a commercial recycling program on businesses generating more than 4 cubic yards of solid waste and recyclable materials per week. C.A.R. opposed AB 341 because multifamily units with fewer than sixteen units are too small to bear the burden of these new business requirements as they often do not have on-site staff. In light of strong opposition, the author amended AB 341 to instead make the 75% waste reduction target a "goal" instead of a mandate. With these amendments C.A.R. removed its opposition, but continued to follow it closely as a "Not Favor." Because AB 818 and AB 341 amend the same section of law with regards to multi-family property recycling requirements, the authors were required to adopt amendments to assure that there would be no ambiguity within the law should both bills be enacted. If both bills are signed into law, only the provisions in AB 341 will take effect.
AB 818 is sponsored by the CA Refuse and Recycling Council. It is supported by the CA Association of Counties, as well as several individual cities and counties. Once C.A.R.'s concerns were addressed, no opposition remained on this legislation. AB 818 was sent to the Governor for his signature and AB 341 is pending on the Senate Floor. Position: Not Favor (AB 341); Watch (AB 818)
2. Regulatory CA Recycle regulations affecting multi-family rental properties recycling requirements- C.A.R. has participated as an active stakeholder in the development of Mandatory Commercial Recycling requirements, which were authorized by AB 32 (Nunez, Statutes of 2006). The regulations define "business" to include multi-family rental properties of 5 units or more that generate 4 cubic yards of solid waste (excluding recyclables). C.A.R. supports reasonable recycling programs and worked collaboratively with CalRecycle and its staff to develop a workable commercial recycling regulation for multifamily housing. C.A.R.'s amendments permit property owners to require tenants to manually separate their recyclable materials, requires local jurisdictions to consider exempting complexes that lack sufficient space to provide additional recycling bins, and to consider a property owner's "good faith" efforts to comply with recycling requirements. Furthermore, CalRecycle notes in its summary of the regulation that local jurisdictions should focus on complexes of 16 units or more because implementation of recycling responsibilities can be most effectively imposed on residential rental properties with on-site staff who are present and who can over-see this program. (California Administrative Code Title 25, Section 42 requires multifamily residential rental units of 16 units or more to have a manager or other staff person residing on-site.) CalRecycle anticipates the release of its 45-Day language this fall, with the adoption of the final regulations scheduled for January 2012. Should the regulation be adopted in its current form the requirements of the measure will go into effect July 1, 2012.
E. Property Management - Jay Avirom, IC 1. State Issues a) Legislative AB 265 (Ammiano) Unlawful Detainer Notification - Currently, a tenant is guilty of unlawful detainer if they remain in possession of real property after defaulting on the rent payment if the tenant has been provided with a three day notice, in writing, to correct the violation or vacate the premises. C.A.R. opposed AB 265 as introduced because it proposed to increase the notice that landlords are required to provide to delinquent tenants before they can file for unlawful detainer from 3 days to 14. AB 265 was gutted and amended to instead allow a court to release a tenant from an unlawful detainer action if the tenant pays his or her delinquent rents, current rent, as well as the costs of the proceedings. C.A.R. continues to oppose AB 265 because, as amended, it would permit a tenant to indefinitely avoid paying rent when it is due, effectively "gaming the system".
AB 265 is sponsored by Tenants Together and is supported by virtually all "tenants' rights" organizations represented in Sacramento, including the Western Center on Law & Poverty, ACLU, and CA Rural Legal Assistance Foundation. In addition to C.A.R., it is opposed by the CA Business Properties Association, WMA, and 10 other rental property owner or management organizations. Status: Assembly Floor Inactive File- Dead for 2011; must get out of house of origin by January 31, 2012 to stay "alive". Position: Oppose
AB 934 (Feuer) Privileged Communications - Civil actions are privileged communications under existing law, meaning that what is said in litigation cannot be the basis of subsequent lawsuits for defamation, slander or libel against participants in the litigation. AB 934 would exclude from the current definition of a privileged communication any communication related to real property transactions, regulation of rents, termination of tenancy, eviction of residential tenants, or discrimination against tenants. Amendments added to the bill restored only the "defamation" allegations involving real property transactions to the definition of a privileged communication. C.A.R. is opposed to AB 934 because, by eliminating the "litigation privilege" even partially, as now proposed by AB 943, rental property owners pursuing unlawful detainer actions could be repeatedly exposed to vexatious litigation by disaffected tenants.
This legislation brought out all of the "guns" representing landlord organizations on one side and tenant organizations on the other. Supporting the bill are such groups as CA Rural Legal Assistance Foundation, Western Center on Law & Poverty, San Francisco Tenants Union, the L.A. City attorney's Office, and 11 other "tenants' rights" organizations. Joining C.A.R. in opposing AB 934 are such groups as the CA Apartment Association, CA Business Properties Association, San Diego County Apartment Association, Santa Barbara Rental Property Association, and 19 other organizations representing the owners and managers of rental housing. Status: Failed to pass the Assembly Floor; dead for 2011; must get out of house of origin by January 31, 2012 to stay "alive". Position: Oppose unless Amended
SB 184 (Leno) Rent Control - Local legislative bodies are currently allowed to regulate the zoning ordinances within their jurisdictions. Under the Costa-Hawkins Act new construction is exempt from rent control. This measure would effectively repeal that exemption by allowing a county board of supervisors to impose inclusionary zoning as a condition of development. This would require a developer of new housing to include affordable residential units in their development plans. C.A.R. is opposed to this measure because it does not provide any financial incentives for developers to build affordable housing, does not address any of the factors that cause high housing costs, and eliminates the new construction exemption from rent control law.
Much as AB 934, this bill brought out most of the "tenants' rights" groups in support of it and groups representing owners and managers of rental housing against it. CA Rural Legal Assistance Foundation and Western Center on Law & Poverty led 13 other tenant organizations in support of this proposed erosion of the Costa-Hawkins Act. C.A.R. and CAA led the opponents, which numbered more than 14 organizations representing landlords. Status: Failed passage on the Senate Floor; dead for 2011; must get out of house of origin by January 31, 2012 to stay "alive". Position: Oppose
SB 337 (Kehoe) Tenant Noncommercial Signs - SB 337 initially proposed to allow a tenant to affix any noncommercial signs, posters, flags or banners they desire on or within their unit unless the signs violate local, state or federal law, regardless of their landlords wishes to preserve the "quiet enjoyment" of other tenants. C.A.R. was opposed to this measure when it proposed to remove the landlords' ability to control the appearance and atmosphere of their rental property. SB 337 was amended to narrow the bill to only allow tenants to display political signs for a limited period of time, with significant controls left to the rental property's owners or management as to the size and location of the signs. With these amendments C.A.R. removed its opposition, as did CAA
It is supported by the Western Center on Law & Poverty and Tenants Together. Several other apartment associations joined C.A.R. and CAA opposing the measure until its final amendments. Status: Assembly Floor Position: Watch as Amended
FTB changes processing requirements for California withholding forms and payments The following information summarizes a notice issued by the Franchise Tax Board (FTB) issued on 8/29/11 re "out-of-state" withholding requirements for rental property managers:
Beginning August 29, 2011 FTB will no longer process a faxed Form 589, Nonresident Reduced Withholding Request. A Form 589 must be submitted online or by mail. In order to expedite a request, it is recommended that Form 589 be submitted online, which will be processed in 10 business days. Forms received by mail will be processed within 21 business days. Any additional documentation needed to accompany the Form 589 must be faxed to FTB at (916) 845-9512.
Also beginning August 29, 2011, FTB will issue a notice upon receiving Form 592, Form 592F, or Form 593 if there is a mistake, underpayment, or overpayment. The notice will include a description of any errors or balances. If there is a balance due, a separate billing statement indicating the amount due will be mailed by FTB with remitting instructions included.
New guidelines on how to amend a previously submitted Form 592, Form 592F, or Form593 have also been initiated as of August 29, 2011. The new form with the correct information must be submitted.
For further information, call 1-800-353-9032. You will be directed to the department best suited to address your question.
3. Federal Issue Lead Paint Update
On July 13, 2011, the House Appropriations Committee approved the 2012 budget for the Department of Interior and the EPA, sending the bill to the full House for consideration. During the bill's consideration, the Committee voted to add an REALTORS®-supported amendment by Rep. Rehberg (R-MT), to prohibit the implementation of controversial lead paint Renovation, Repair and Painting (RRP) rules until the EPA meets its obligations under the statute and provides the requisite information and equipment for businesses to comply. NAR, along with a broad coalition of regulated industry sectors, sent a letter to the House Appropriations Committee supporting this Amendment.
III. Other Business
Interim Report, Public Policy Reorganization Allen Okamoto, Chair Executive Summary The reorganized public policy committee structure recommended by the task force of 2009 has been in place for approximately 18 months, or 2 cycles of appointed leadership, and the committees of the new structure have met 5 times. The new structure concentrates C.A.R.'s public policy (i.e. legislative and regulatory) discussions in four different policy committees which report their work product to either the state or federal level of government committee for review. Staff also reviewed anecdotal reports and surveyed membership of the six committees.
In general, slightly over 70% of the director-respondents said the structure was adequate, good or excellent, with over 50% grading it as good or excellent. Most members thought they understood the system, but most (90%) also suggested that their colleagues needed additional training in how the system works.
While most were comfortable with the system, the largest minority voices for breaking out an additional issue area into a sub-committee or separate committee were in Housing for property management, and Taxation and Government Finance, where commercial investment issues are placed.
Two interesting trends appeared in responses: 1. Many respondents favored beginning policy committee meetings on Wednesday and through Thursday, if necessary, in order to have all of the committees meet in series, one at a time; rather than in pairs of committees that meet concurrently and finish all the meetings on Thursday. 2. Advance preparation and engagement of the committee members, especially committee leadership, was seen as a necessary improvement, separate from committee structure but important to the quality of the discussions.
Possible Considerations: 1. C.A.R. Board meeting schedules could be rearranged to have the four Public Policy committees meet serially, rather than concurrently, with meetings beginning Wednesday afternoon. 2. Additional staff resources could be devoted to training and "engagement" of committee leadership (especially issues chairs) prior to their service and between meetings. 3. Increase committee member engagement by use of all-committee webinars between meetings (already begun in 2011). 4. Committees could review the organization of issue areas within their purview, especially Land Use & Environmental Committee and Housing Committee to ensure issue areas are properly divided.