Agenda Summary – Housing Opportunity CommitteeMarriott Hotel, San Carlos Room I Monterey, California January 17, 2007 3:30pm – 5:00pm
Presiding: Heidi Rickerd-Rizzo, Chair Le Francis Arnold, Vice Chair Lynn Rinker, Vice Chair David Barca, Committee Liaison John Wong, N.A.R. RepresentativeC.A.R. Staff: Ron Kingston Matt Roberts Natalie CardenasI. Opening CommentsII. 2007 C.A.R. Sponsored LegislationA. Local Government and Zoning Code Change Disclosure of Ordinance and Regulation Conflicts- C.A.R. will sponsor a bill this year to require local governments to provide a copy of a written staff analysis which is to include conflicts or inconsistencies with law, policies, and regulations concerning applications for subdivisions, conditional use permits, zoning and building code variances, general and specific plan amendments, conditional use permits, and subdivision maps prior to any public hearing to the applicant.B. C.A.R. Sponsored Bill, Regional Impact of Not Meeting Housing Needs of a Community –At the October 2006 Board of Directors Meeting, the following motion was approved: That C.A.R. “SPONSOR” a “spot bill” requiring local governments that reduce the number of proposed lots in a subdivision to adopt findings and declarations demonstrating the impact the reduction has on adjacent communities. An Issues Briefing Paper was written on this subject and is included in the meeting materials. The committee will be asked about specific occurrences within their communities where a reduction in the number of dwelling units in a proposed subdivision has caused a hardship for adjacent cities and counties.III. 2007 Legislation of OthersA. 20-year Land Supply Legislation sponsored by the California Building Industry Association– Last year, the California Building Industry Association (CBIA) sponsored SB 1800 (Ducheny) which would have significantly rewritten housing planning law and reform the California Environmental Quality Act.C.A.R initially adopted an Amend Oppose position on the bill. Amendments were secured to comport with C.A.R. policy. Those amendments included: the elimination of the self certification of the housing element requirement, deletion of the proposed change in law allowing parties to sue a city for violations of housing law,and striking provisions allowing cities to redistribute housing needs. SB 1800 failed passage in the Senate Transportation and Housing Committee due to strong opposition by the Committee Chair. CBIA is to sponsor a bill similar to SB 1800 in 2007. Senator Ducheny has agreed to author this measure.B. Transfer Tax to Pay for Affordable Housing “Son of SB 521”-Due to C.A.R.’smember mobilization efforts, SB 521 (Torlakson) was defeated on the Assembly floor in 2006. SB 521 would have authorized Contra Costa County to impose a document recording fee of $1.00 per page after the first page on the recordation of documents. If adopted, the revenue collected would have been used to fund a local Housing Trust Fund in Contra Costa County to fund affordable housing efforts. C.A.R. has historically viewed document recording feesas a “transfer tax” if they apply to the recording of documents facilitating the transfer of property. Senator Torlakson may introduce a similar bill this year to create a permanent funding source for a local housing trust fund, either through a transfer tax similar to SB 521 or through another funding source.C. Implementation of Proposition 1C, a $2.85 billion statewide housing bond-With the passage of Proposition1C that appeared on November 7, 2006 ballot, additional resources for housing programs will be available Almost half of the housing bond must be appropriated by the Legislature. As a result, the Legislature and the Governor will be involved with the awarding of contracts and implementation of new and ongoing housing programs including over $100 million for first-time homebuyer assistance. C.A.R will be engaged in this process and closely monitor these legislative measures to ensure that implementation results in meaningful housing assistance for homebuyers. C.A.R. will want to ensure that programs are market driven, rather than emphasizing on price controls such as inclusionary zoning or rent control.D. California Building Industry Association sponsored legislation on Infill Projects in Urban Downtown cores– In 2007, the California Building Industry Association (CBIA) is expectedto sponsor legislation to improve and incentivize the development of infill housing projects within urban downtown cores.E. California Building Industry Association sponsored legislation on green buildings– Given the passage of SB 32 (greenhouse gas emission reduction) into law last year, the California Air Resources Board is charged with the development of regulations to reduce the level of greenhouse gas emissions by 25 percent by 2020. This will affect all industry. CBIA has indicated it plans to sponsor legislation regarding green building standards in response to the passage of SB 32.F. Impact of Proposition 90, a failed 2006 statewide ballot measure on eminent domain –In November 2006, California voters rejected Proposition 90, with 52.4% of the electorate voting against the proposition. Proposition 90 would have prohibited the use of eminent domain, unless the property is owned and occupied by a governmental agency. Proposition 90 would have also forced local governments to compensate property owners should a government ordinance or regulation cause “substantial” economic loss to the value of property and pay owners the value for the property at its highest and best use. This would, in effect, have stopped redevelopment in California. In June of 2006, C.A.R.’s Eminent Domain Task Force report was adopted by the Board of Directors. As a consequence, C.A.R. would support changes in law that would: (a.) prohibit the taking of single family property by eminent domain for any use other than for a public use;(b.) substantially tighten the definition of “blight” used by redevelopment agencies proposing to create or expand redevelopment project areas; (c.) require redevelopment agencies to adopt a more quantitative analysis when determining if a parcel is “blighted;” and, or (d.) require redevelopment agencies to include in their appraisal of a parcel to be purchased, the cost of the replacement parcel.In light of this report, traditional and longstanding policy of the Association, and inability to successfully amend the initiative, C.A.R. adopted an “AGAINST” position on Proposition 90.However, proponents and opponents report that additional efforts to amend redevelopment and eminent domain law will continue. For example, the Howard Jarvis Taxpayers Association has submitted title and summary language to the Attorney General for an initiative called the California Property Owners ProtectionAct. This initiative is similar to Proposition 90 except that it would be retroactive, as opposed to Proposition 90, which was prospective. In addition, the League of California Cities, the chief opponent of Proposition 90, plans to introduce legislation in 2007 on eminent domain and redevelopment reform.IV.Advancing C.A.R. Housing Policies before Legislators – Update on C.A.R. Earned Media Campaign– At the June 2006 Board of Directors Meeting, C.A.R. IMPAC funded a request from this committee to create an innovative earned media campaign to educate new members of the California Legislature about C.A.R’s housing policies. This program has been developed and is now “in the field”.V. Tax Credit Allocation Committee –C.A.R. will monitor the California Tax Credit Allocation Committee. The committee allocates approximately $1.5 billion in tax exempt housing bonds to various state and local agencies to provide first-time homebuyer and multi-family housing assistance and other funding for housing related programs statewide.VI. Federal IssuesA. PAYGO One of the promises the Democratic Party made during their campaign to gain a majority in Congress was that they would reinstitute the Pay-As-You-Go (PAYGO) budget rules. The basic idea behind PAYGO is that for any additional spending or tax cut that is created there must be an offset so that the budget deficit is not increased. While this decision should help reduce the large budget deficits that have been seen in the past few years, it also raises some interesting dynamics when it comes to major reforms being discussed, such as the elimination of the Alternative Minimum Tax (AMT) and changes to the Medicare prescription drug coverage. (Please see attached issues briefing paper )B. Mortgage Insurance In the last hours of the 109th Congress, H.R. 6111, the Tax Relief and Health Care Act of 2006, was passed. Inside this tax extenders and Medicare bill, a new tax deduction of mortgage insurance premiums was included. This is a one-year-only provision that would allow some 2007 home buyers to deductthe cost of their mortgage insurance premiums (PMI). In order to qualify, the loan must originate in 2007 and can be applied to private mortgage insurance, FHA insurance, and VA and Rural Housing premiums as well. The new deduction is available to those with less than $100,000 adjusted gross income on a joint or single tax return ($50,000 for married filing separately) and phases out for incomes above $110,000 ($55,000 for married filing separately). Individuals who claim the deduction are not permitted to prepay premiums that are otherwise due after 2007. Currently this provision expires on December 31, 2007 and would have to be renewed during the 110th Congress or it will expire. C. Predatory Lending The issue of Predatory Lending is expected to be addressed by Congress in the 110th Session. Democrats are expected to hold hearings on this issue, though it is unclear if they will make a serious attempt at passing any legislation. Three questions that pose themselves when addressing this issue are, 1) what is “Predatory Lending,” 2) who is best to regulate and oversee it, the states or the federal government, and 3) would consumers and lenders benefit from one national law to regulate the industry instead of 50 different state laws? Chair of the House Financial Services Committee, Congressman Barney Frank (D-MA) has placed passing a predatory lending bill as a high priority. While the subprime market has played an important role in making homeownership available for many Californians who otherwise would not qualify for prime loans, the question of when a loan is more harmful than beneficial to the borrower remains unanswered. D. FHA Reform The Federal Housing Administration (FHA) was created in 1934 as a way to ensure that lenders would supply the home buying market with capital. The FHA helped to expand homeownership to low- and moderate-income home buyers and has since insured over 33 million properties. The FHA is a self-sustaining program in that it charges a premium to cover its risks and operating expenses. The FHA’s current portfolio is comprised of79% first-time home buyers, 35% of which are minorities.In 1999, the FHA insured approximately 127,000 homes bought in California. In 2005 that number dropped to roughly 5,000. Proposed legislation was introduced in the 109th Session of Congress that would have significantly reformed FHA insurance to stop the hemorrhaging of market share, not just in California, but across the country. Additionally, the bill would have attempted to expand the FHA’s ability to compete with the subprime market. The reforms proposed included:
Increasing the FHA insurable limits. Currently, the FHA insures 95% of an area’s median home price with a ceiling of 87% of theconforming loan limit ($362,790) and a floor of 48% of the conforming loan limit. The legislation would increase the FHA limit to 100% of an area’s median home price capped at 100% of the conforming loan limit ($417,000), with a floor of 65%of the conforming loan limit ($271,050).
Making it so that condos are insured in the same manner as single-family homes.
Allowing for the coverage ofzero-down loans. Currently, the FHA may only insure loans with a minimum of three percent down.
Allowing the FHA to insure 40-year mortgages.
Lastly, the bill would haveallowed the FHA to set its insurance premiums by risk. Under current law the FHA is limited to 2.25% upfront and .5% annual renewal premiums (the annual renewal premium is added to the monthly mortgage payment of the home buyer). The FHA currently charges a 1.5% upfront premium and .5% annual renewal premium. Under the bill the FHA would have balanced the mortgage terms and borrower’s finances when calculating the upfront and monthly premiums. This means taking into consideration the income, assets and financial profile of the borrower as well as the loan-to-value (LTV), loan period, fees and amortization schedule of the loan product. Presumably, this should allow the FHA to tailor products to borrowers’ specificfinancial circumstances. An example is a borrower with a small amount of cash to put down on a mortgage, but shows a strong monthly income. For this home buyer, the FHA may charge a lower upfront premium but with a higher annual renewal.This issue will be introduced again in the 110th Session of Congress, most likely by California Congresswoman Maxine Waters.