Agenda Summary – Housing Opportunity CommitteeMarriott Hotel
Anaheim, California
Grand Ballroom Salon A/B
Wednesday, October 10 2007
2:30 pm – 4:00 pmPresiding:
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:
Dave Milton
Matthew Roberts
Natalie CardenasI. Opening Comments
II. Introduction of 2008 LeadershipA. LeFrancis Arnold, Chair
B. Sandy Kaplan, Vice-Chair
C. Randall Traw, Vice-Chair
D. Steve White, Committee LiaisonIII. C.A.R Sponsored LegislationA. SB 343 (Negrete McLeod) Pre-Hearing Availability of Local AgencyStaff Reports - With Senator Negrete McLeod’s support and encouragement, her staff  worked with C.A.R. to bring all of the stakeholders together to help us achieve better public availability of agenda documents distributed to the members of local legislative bodies in preparation for their open, public sessions.
C.A.R. held a meeting in the Sacramento office on May 11, hosted jointly by C.A.R., as sponsors, and Senate Local Government Committee Staff.  Attending the meeting were representatives of Californians Aware, Association of California Water Agencies, League of California Cities, California Special Districts Association, California Sanitation Agencies, California County Clerks Association, California School Boards Association,Regional Council of Rural Counties, California State Association of Counties, and the California Newspaper Publishers Association. C.A.R. took a number of suggestions from this meeting that, along with requests from Members of the Senate Local GovernmentCommittee, was reflected in the version of the bill sent to the Governor.
This bill will improve the public hearing process by amending the Brown Act, which governs the conduct of local agencies’ public meetings.  SB 343 addresses virtually all of the concerns expressed by local agency representatives while steadfastly adhering to Senator Negrete McLeod’s goal, and that of C.A.R., of providing greater public transparency for agenda-related writings that are distributed shortly before an open meeting of local legislative bodies. Specifically, the enrolled bill:
1) Clearly defines the types of writings to which it applies- Any writing that relates to an agenda item for an open session of a regular local agency meeting that is distributed by staff to a majority of the members of a local legislative body within 72 hours of a public local agency meeting.
2) Provides guidelines for making such writings available for public inspection including, but not requiring, the use of internet posting.
C.A.R. Position: Sponsor  Status: Governor’s DeskB. AB 1366 (Portantino) Regional Housing Decisions and the Annual Housing Element Report - AB 1366 proposes to amend the housing element report provisions of the Government Code to strengthen this annual reporting process governing local housing actions and to provide a reporting structure that will better assist local governments’ focus on the regional impact of their respective housing decisions. It encourages local agencies to include more specific descriptions of the planning that is being conducted as to meeting its share of regional housing needs. This information will assist efforts to better recognize those jurisdictions that are meeting or exceeding their regional housing goals.
Such additional information in the annual Housing Element report submitted to the Department of Housing & Community Development (HCD) will also enhance HCD’s ability to evaluate regional housing production. C.A.R. hasrequested AB 1366-type revisions to the proposed form HCD is promulgating to facilitate submission of the annual Housing Element Report. This recommendation is currently under consideration by HCD.
C.A.R.  Position: Sponsor  Status: Senate Transportation & Housing CommitteeIV. 2007 Legislation of OthersA. General Housing Issues
AB 239 (DeSaulnier) Recording Fees- Contra Costa and San Mateo Counties- This bill can be called the “Son of 2006’s SB 521” (Torlakson), which proposed to allow Contra Costa County to increase real estate document recording fees by $1 per page to fund affordable housing development. This measure, sponsored by Contra Costa County, proposes to allow the Contra Costa County Board of Supervisors and the San Mateo County Board of Supervisors to charge an additional $25 for each recorded real estate document in excess of one page. The funds raised by this assessment are required to be utilized to help finance the construction, rehabilitation, or purchase of housing affordable to extremely low-, very low-, low- and moderate- income households, and for any local matching contributions required by federal law. C.A.R. has historically viewed document recording fees as “transfer taxes” if they apply to the recording of documents facilitating the transfer of property. C.A.R. opposes AB 239 because it imposes a document recording fee without exempting documents already subject to the documentary transfer tax, and because the funds generated by the document recording fee would be used for purposes which bear no relation to document recording. C.A.R.’s opposition, coupled with that of the CA Land Title Association (CLTA), Howard Jarvis Taxpayers’ Association, Stop Hidden TaxesCoalition, CA Chamber of Commerce, and the County Recorders’ Association of CA, stalled the bill after it came out of the Assembly and it became a two-year bill. The Author has expressed his intent to try and move it again in January.
C.A.R. Position: Oppose  Status: Senate Local Government CommitteeAB 382 (Assembly Housing Committee) 2007 Omnibus Housing Act- This is a technical, non-substantive “clean-up” bill to correct a number of Housing-related code sections or delete sections that are no longer needed. It makes the following changes to housing law:
1) Creates a 15-year affordability requirement for self-help housing.
2) Deletes the sunset date authorizing Alameda County Redevelopment Agency to count the new construction of units in the Mt. Eden Sub-Area of the Eden Area of the Eden Area Redevelopment Project Area. 
3) Deletes the existing cap for the Building Equity and Growth in Neighborhoods (BEGIN) program and allows HCD to set the caps on loan amounts in each Notice of Funding Availability (NOFA).  
4) Requires an anti-entrapment cover to be installed whenever a building permit is issued for a remodel or re-modification of a swimming pool, correcting a drafting error in 2006 legislation that required such installation when a permit was issued generally for any work on a single family home.          
5) Clarifies that bonds issued for affordable housing developments must comply with tenant protection requirements.
6) Clarifies that cities and counties are required as part of their housing element to both analyze and, where possible, remove constraints on the development of housing for persons with disabilities.
7)Repeals a redundant and obsolete section of law regarding meeting regional housing needs that sunsetted on January 1, 2000. 
8) Allows cities and counties to require newly installed burglar bars to meet current building standards.
9) Repeals the Manufactured Housing Communities Act, which was never implemented, and adds the definition of "manufactured housing community" to the Mobile Home Parks Act. 
10) Repeals an obsolete provision regarding installation of seismic gas shutoffvalves or excess flow gas shutoff devices in dwellings.
11) Repeals an outdated provision that prohibits a local government from preventing the use of stove, refrigerator, and sink combinations units in senior housing financed by the state or federalgovernment.
12) Repeals unused provisions regarding "renewal areas" that were similar to redevelopment project areas but were never used.
13) Repeals provisions creating "area housing councils" for the purpose of adopting joint housing elementswhich have never been used.
14) Repeals unused provisions that allow for the creation of "limited dividend housing corporations".
15) Defines farm worker program "eligible costs" as equivalent to "eligible basis" under the low-income housing tax credit program, and conforms allowable developer fees.
16) Clarifies that an owner of an assisted housing development is exempt from providing certain notice requirements if a regulatory agreement with certain conditions is recorded against the property at the close of escrow and the owner 
complies with a set of requirements during escrow.
17) Authorizes a housing authority to contract with any city or county for staff services required by the housing authority.
18)  Establishes a screening process for determining if a specific project is "rural", through the use of the United States Census Bureau web site. 
19) Deletes a reference to the Kelley Blue Book Official Manufactured Housing Guide which is no longer published.
20)  Corrects an omission, ensuring that all repayments from Proposition 46 under the Local Housing Trust Fund Matching Grant Program accrue to the Multifamily Housing Program.
21)  Corrects a cross-referencing error and renumbers existing statutes.
C.A.R. Position- Watch  Status- Governor’s Desk
          
AB 414 (Jones) Local Planning of Residential Development- Current law permits local agenciesto meet their housing element requirements by relying on sites that are primarily zoned for commercial development, but are also authorized for residential use. AB 414 will prevent these “double-zoned” sites from being used to accommodate a city or county’s share of the Regional Housing Needs Allocation. It sets an absolute cap of 50% on counting “double-zoned” sites towards the jurisdiction’s lower-income housing needs. C.A.R. supports AB 414 because it will discourage local agencies from using double-zoned sites to meet their share of the regional housing need will encourage affordable housing development.
C.A.R. Position: Support  Status: Governor’s DeskAB 641 (Torrico) Developer Fees- AB 641 would defer local government development fees until occupancy permits are issued for housing developments with at least 49% of the total units reserved for occupancy by lower income households. C.A.R. supports AB 641 because it proposes to enhance the financial feasibility of constructing affordable housing.
C.A.R. Position: Support Status: Governor’s DeskSB 303 (Ducheny) 2007 Affordable Housing Act- Sponsored by the California Major Builders Council, this bill attempts to address the housing shortage in California by requiring every city’s general plan to encompass a planning and projection period of 20 years and set aside enough land with appropriate zoning to supply housing at all income levels. The bill attempts to accelerate the meeting of housing needs by expediting a number of local government review processes and identification of potential housing sites. C.A.R. supports SB 303 because it seeks to encourage increasing the supply of housing by fostering more certainty in, and streamlining of, the local government housing planning process. SB 303 was vehemently opposed by the League of Cities and stalled in the Assembly. It is now a two-year bill that the sponsor will attempt to move in January.
C.A.R. Position: Support  Status: Assembly Local Government CommitteeB. Density Bonus Bills
AB 1256 (Caballero) Density Bonus Exemption for Inclusionary Zoning Jurisdictions- The League of California Cities is sponsoring this bill to exempt local agencies that have inclusionary housing ordinances from meeting the requirements of the state Density Bonus Law. C.A.R. opposes this measure because it will create a significant incentive for local agencies to enact inclusionary zoning ordinances. This bill and AB 1449, below,have been made into 2-year bills as the sponsors create a Density Bonus Law Working Group, consisting of practitioners and stakeholders, to attempt to reach a consensus on the structure, language and impact of state law in theses areas.
C.A.R. Position: Oppose  Status: Assembly Local Government CommitteeAB 1449 (Saldana) Density Bonus Reform - This bill would revise the eligibility requirements for the construction of moderate- income housing units by requiring them to conform to the existing requirements for low- and very low income housing units. AB 1449 would result in punitive and financially problematic burdens for moderate income first time homebuyers that purchase density bonus units by “lumping” moderate income housingwith low and very low income housing that is developed under the density bonus law. C.A.R. opposes this bill because homeowners will have no incentive to maintain and improve their property. Furthermore, AB 1449 appears to dilute the density bonus law bysetting up a process by which local agencies can opt out of the density bonus program.
C.A.R. Position: Oppose  Status: Assembly Local Government CommitteeC. Proposition 1C Bills (aka: “How many ways can we spend the Bond Funds?”)
Each of the bills listed below propose to expend funds from the Housing and Emergency Shelter Trust Fund Act of 2006 (Proposition 1C). They have survived the legislative “weeding out” process that narrowed the number of bills proposingto spend 1C Funds from 14 to 4. It is anticipated that the measures authored by the legislative leaders, SB 46 (authored by the President Pro Tem of the Senate, Don Perata) and AB 1053 (authored by the Speaker of the Assembly, Fabian Nunez), will, at a minimum, be two of the vehicles creating programs that expend some of these funds.AB 1053 (Nunez) Strategic Plan regarding expenditure of 1C funds- Amends SB 86 (Committee on Budget and Fiscal Review), a "trailer bill" to the 2007-08 Budget Act. It permitsBusiness Improvement Districts (BIDs) to be an "eligible joint applicant" for receipt of funds provided under the $850 million Regional Planning, Housing, and Infill Incentive Account, created by Proposition 1C. It requires, prior to receiving funds, butafter a grant award, that joint applicants submit to the Department of Housing and Community Development (HCD) documentation that the actual number of permitted housing units is equal to, or greater than, the number of units in the grant application.
C.A.R. Position- Watch       Status- Governor’s DeskAB 1091 (Bass) Transit-Oriented Development (TOD) Implementation Program- Proposition 1C establishes a $300 million program for grants and loans to projects that make improvements related to higher density uses within close proximity to a transit station.The current proximity limit for projects seeking funding is one quarter-mile. Studies increasingly show that pedestrians are willing to take transit, provided that the station is located within one quarter to one half mile and the route is safe, direct and convenient. AB 1091 increases the proximity limit to one mile.  It is anticipated that providing a slightly  wider radius would likely allow more communities to qualify under this program.
This bill also provides that, to be eligible for a loan from these funds, at least 15% of the units in a proposed housing development shall be made available at an affordable rent or at an affordable housing cost to persons of very low or low income for at least 55 years. This inclusionary requirement is contrary to C.A.R. policy and earned a “Not Favor” position from C.A.R.
C.A.R. Position- Not Favor Status- Governor’s DeskSB 46 (Perata) - Regional Planning, Housing, and Infill Incentive Account-
This bill provides statutory framework for expenditure of the $850 million in Proposition 1C's Regional Planning, Housing, and Infill Incentive Account.  Specifically, it requires theDepartment of Housing and Community Development 
(HCD) to administer a competitive program to provide capital outlay grants for infill housing development and for related infrastructure that is an integral part of infill housing development.
C.A.R. Position- Watch  Status- Assembly Appropriations CommitteeSB586 (Dutton) California Affordable Housing Revolving Development and Acquisition Program-This bill allocates the $100 million in the Affordable Housing Innovation Fund of Proposition 1C, as follows:
1) Provides $50 million for the Affordable Housing Revolving Development and Acquisition Program (Program) established by this bill. Of that amount, $25 million is  made available to the "Loan Fund" and $25 million is made available to the "Practitioner Fund."
2) Allows HCD to administer the program for 24 months after adoption of guidelines and regulations.
3) Provides that the Loan Fund is created for the purpose of providing loans to purchase real property for the development or preservation of housing affordable to lower-income households.
4) Requires HCD to select, by competitive application, a private sector entity to manage the Loan Fund for five years with options for extending the agreement in fiveyear increments.
C.A.R. Position- Watch  Status- Governor’s DeskV. Department of Housing & Community Development (HCD) “2008 Housing Game Plan”
On Tuesday, August 7, at her request, C.A.R met with the Director ofthe Department of Housing and Community Development (HCD), the Honorable Lynn Jacobs, to discuss her “housing game plan” for 2008. Alex Creel, Natalie Cardenas and Dave Milton met with Ms Jacobs to discuss her visions for HCD’s 2008 policy plans.  We welcomed the opportunity to spend some quality time with the Director and her Deputy Director for Legislation, Jolena Voorhis. It provided very positive C.A.R. exposure to them and provided Alex an opportunity to fold in a bit of legislative history on the issues the Director has decided to focus upon next year. The three areas mentioned by the Director are:A. Demonstrate to Local Government the Economic Benefits of Approving New Housing Development
She proposes to seek authorization of a joint HCD, DRE and Cal HFA Study, funded by the banking industry and conducted by the National Policy Institute of Washington D.C., to demonstrate to local government the economic benefits of approving new housing development. The goal would be to seek good economic data on the value of housing to the local economy, designed to encourage housing rather than commercial development, and facilitating more supply. They anticipate developing local-specific data.  Alex mentioned the economic impact, or as we have called it the “ripple” effect, of resale housing on the economy. The Director noted that point as both significant and legitimate considerations for this discussion as well.B. Permanent Source of Funding for Housing
The Director specifically mentioned putting together a stakeholder group to look at the issue of establishing a permanent source of funding for housing. She did observe that it is her impression that all the groups who have been trying to getthis “permanent source” have been looking at just one thing (the unspoken “source”- transfer tax – public or private) which doesn’t ever get anywhere (C.A.R., though the only opponent, has stopped it consistently.).  While she said, in response to our inquiry, that nothing would be “off the table”, it was clear she has pretty much concluded that a transfer tax “…is not the answer”.
C. Model Housing Element
The goalwould be to promulgate a Model Housing Element to provide a template for local government agencies to help facilitate compliance with housing element and Regional Housing Needs Assessment (RHNA) mandates. HCD will be directing its policy staff to developsuch a “Model Housing Element”.  While C.A.R. continues to seek ways to strengthen the housing element, as with our AB 1366 of this legislative session, such a Model Housing Element Template could be a positive move in the direction of facilitating the creation of more workable housing elements at the local level and maybe even beginning to push the planning of increased housing supply more effectively. VI. Options for Generating Funds to Address the Affordable Housing Problem (See attached IBP.)

State policy-makers and housing advocates have yet to find an acceptable solution to finding a permanent source of funding with which to address the affordable housing problem.  Legislative attempts to establish a permanent source of funding continue unabated.  Undoubtedly, such attempts will continue until policy makers believe that sufficient funds are being devoted to the problem.  Given the continuing focus on the funding problem by policy makers, should C.A.R.advance its own solution to the affordable housing funding problem – one that may serve to pre-empt the adoption of a permanent funding source that is unacceptable to REALTORS®?  To that end, this issue briefing paper outlines a number ofpotential permanent funding sources with which to address the affordable housing problem.VII. Report from C.A.R. Foreclosure/Troubled Mortgage Task Force- Greg Galli, ChairA. Real Estate Finance Committee Motion Creating the Task Force: 
That C.A.R. create a Task Force to examine what incentives may be created for lenders to work with borrowers and their agents in order to avoid foreclosure when mitigating circumstances warrant.B. The Problem:
There is concern that the portfolio managers and (foreclosed) asset managers of lenders are not sufficiently motivated to help worthy but troubled borrowers “work out” their mortgage payment difficulties, particularly in situations where non-traditional loan products areresulting in dramatic payment amounts.C. The Mission:
The Task Force will explore how REALTORS® can work in conjunction with lenders and others to help provide additional incentives for lenders and their employees to work together withworthy borrowers to help borrowers avoid foreclosure. The Task Force will report its final recommendations to the Board of Directors in January 2008.VIII. Federal IssuesA. Subprime and Predatory Lending
C.A.R. Policy:  C.A.R. has addressed subprime and predatory lending issues multiple times, as well as the opposition to federal preemption of state laws and the creation of a separate mortgage brokerage license requirement.  Additionally, C.A.R. supports strong consumer protection laws, but those laws must not be so stifling as to hinder the flow of capital to the markets.While subprime legislation will originate from the House Financial Services Committee or the Senate Banking, the Housing and Urban Affairs Committee and a number of Congressional Committees and Subcommittees have held hearing pertaining to subprime lending, predatory lending, and the rise in foreclosures.  A number of legislative ideas were discussed; including federal preemption of state subprime and predatory lending laws, bail out of home owners, refinance assistance for homeowners, a one page outline of loan terms, and others.It is still too early to know what final legislation will look like. While both the Senate and the House are likely to pass bills, it is unclear whether they will be able to agree on a final bill to send to the President’s desk.Congressman Barney Frank, Chair of the House Financial Services Committee, and Senator Christopher Dodd, Chair of the Senate Banking, Housing, and UrbanAffairs Committee, are in the process of drafting individual bills.B. Federal Financial Regulatory Agencies’ Final Statement on Subprime Mortgage Lending
Describing “prudent safety and soundness and consumer protection standardsthat institutions should follow to ensure borrowers obtain loans they can afford to repay,” the regulatory agencies issued their final Statement on Subprime Mortgage Lending.  The agencies hope the Statement will address issues in the subprime market dealing with adjustable-rate mortgage (ARM) products.  These issues include:• Underwriting the borrower at a fully indexed, fully amortized interest rate,
• Avoiding stated income and reduced documentation loans (commonly known as “liar loans”), unless mitigating factors reduce the need to verify the borrower’s repayment capacity,
• “Clear and balanced” information for the consumer on the loan product, and
• Limiting prepayment penalties so borrowers may refinance into new products BEFORE the interest rate resets.Because this is a “Statement” as opposed to a rule, many members of Congress, along with consumer groups,have been critical of the agencies’ response to problems in the subprime market.  Regulators have preferred to let the market play out and address predatory lending and unsafe and unsound practices in a reactionary manner.  But continuousproblems in the subprime market and steady rising foreclosure rates may force their hand to do more or risk intervention from Congress.This statement was a joint statement by the Office of the Comptroller of the Currency, Federal Reserve System, Federal Deposit Insurance Corporation, Office of Thrift Supervision, and National Credit Union Administration.C. FHA Reform
C.A.R. Policy: C.A.R. supports increasing FHA’s loan limit to 100% of the conforming loan limit or above, allowing zero-down mortgages, allowing FHA to set insurance premium using risk-based pricing, and allowing FHA to insure zero-down mortgages.On March 29, 2007, Maxine Waters introduced H.R. 1852, the expanding American Homeownership Act.  The bill will attempt toexpand the FHA’s ability to compete with the subprime market and regain market share.  The reforms proposed include:
• Increasing the FHA insurable limits.  Currently, the FHA insures 95% of an area’s median home price with a ceiling of 87% of the conforming loan limit ($362,790) and a floor of 48% of the conforming loan limit.  Originally, the legislation would have increased 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).  But, on September 18, California Congressmen Gary Miller and Dennis Cardoza introduced an amendment to increase the FHA loan limit to 125% of an area’s median home price, capped at $729,750.
• Making it so that condos are insured in the same manner as single-family homes. 
• Allowing for the coverage of zero-down loans.  Currently, the FHA may only insure loans with a minimum of three percent down.
• Allowing the FHA to set its insurance premiums by risk. On September 18, the House passed H.R. 1852 by a vote of 348 – 72.  On September 19, the Senate Banking, Housing, and Urban Affairs Committee marked up their version of FHA reform.  The Senate version differs from the House version in a few ways; a requirement for at least 1.5% down; and increasing the conforming loan limit to 100% of conforming, $417,000.D. FHA Manufactured Housing
On June 25, 2007, the House of Representatives passed H.R. 2139, the FHA Manufactured Housing Loan Modernization Act, by a voice vote.  The purpose of this bill is to, among other things:
• Allow lenders to do moreFHA insured manufactured loans,
• Raise the loan limits from $48,000 to $69,678,
• Index this limit for inflation on an annual basis, and
• Increase the up front FHA insurance premium to ensure the programis sufficiently financed.The Senate version of this bill is included in the Senate’s FHA Reform bill that passed out of Committee in September.E. VA Loan Limits
C.A.R. Policy: C.A.R. supports increasing the VA loan limit, especially inhigh-cost areas, to allow veterans better access to affordable home loans.On May 16, 2007, Senator Hillary Clinton (D-NY) and Congressman Patrick Murphy (D-PA) introduced companion bills in both the House and the Senate.  The purpose of these bills,S. 1409 and H.R. 2385, the 21st Century GI Bill of Rights Act, is to extend and improve access to a number of benefits designed for veterans.  This includes exempting, “Veterans from paying loan fees and expand opportunities for veterans to purchase, build, repair or improve a home by increasing access to low interest loans through the Veterans Affairs Home Loan Guaranty Loan Program for homes valued up to $625,000. The current program requires loan fees and is capped at the conforming loan rate of $417,000.”F. National Affordable Housing Trust Fund
C.A.R. Policy:  C.A.R. has historically supported affordable housing efforts.California representatives Maxine Waters and Gary Miller have co-introduced, along with Chairman Barney Frank (D-MA), H.R. 2895, the National Affordable Housing Trust Fund Act.  The bill, which was introduced in June, 2007, and reported out of Committee in July, would establish the National Affordable Housing Trust Fund (NAHTF) to issue grantsfor the purpose of construction, rehabilitation, and preservation of affordable housing.  The NAHTF would be funded by a portion of the profits generated by the GSE Reform bill (HR 1427), the FHA Reform bill (HR 1852) and any other sources subsequently identified.  The money will be given out to states and local governments to be utilized and further dispersed.  All NAHTF money must be used for low-income families (below 80% of state or local-median income) and 75% will go to extremely low-income families (below 30% of median income or national poverty level). Eligible recipients will be any “organization, agency, or other entity, including for-profits, nonprofits, and faith-based organizations, that have demonstrated the experience and the capacity to carry out the proposed Trust Fund Activity.” State, local and private recipients of NAHTF grants will have to match $1 for every $2 received.  Unless they utilize federal money to match the NAHTF grant, then it is$1 for $1. H.R. 2895 was marked up out of the House Financial Services Committee and awaits a floor vote.IX. Other

 X. Adjournment