Bill Text: CA SB225 | 2023-2024 | Regular Session | Amended

California Senate Bill 225

Bill Title: Community Anti-Displacement and Preservation Program: statewide contract.

Spectrum: Partisan Bill (Democrat 2-0)

Status: (Engrossed) 2023-06-26 - Re-referred to Com. on APPR. pursuant to Assembly Rule 96. [SB225 Detail]

Download: California-2023-SB225-Amended.html

Amended IN Assembly June 22, 2023

Amended IN Senate March 13, 2023

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Senate Bill

No. 225

Introduced by Senator Caballero
(Principal coauthor: Assembly Member Haney)

January 19, 2023

An act to add Chapter 4 (commencing with Section 50570) to Part 2 of Division 31 of the Health and Safety Code, relating to public contracts.

LEGISLATIVE COUNSEL'S DIGEST

SB 225, as amended, Caballero. Community Anti-Displacement and Preservation Program: statewide contract.

Existing law establishes the Department of Housing and Community Development in the Business, Consumer Services, and Housing Agency and makes the department responsible for administering various housing programs throughout the state, including, among others, the Multifamily Housing Program and the California Emergency Solutions Grants Program. Existing law, upon appropriation, authorizes the department to make either or both loans and grants to rehabilitate, capitalize operating subsidy reserves for, and extend the long-term affordability of department-funded housing projects that have an affordability restriction that has expired, that have an affordability restriction with a remaining term of less than 10 years, or are otherwise at risk for conversion, as provided.

This bill would establish the Community Anti-Displacement and Preservation Program for purposes of funding the acquisition and rehabilitation of unrestricted housing units, as defined, and attaching long-term affordability restrictions on the housing units, while safeguarding against the displacement of current residents. The bill would require the department to issue a request for qualification to select a private sector entity or consortium to manage the program for a period of 5 years. The bill would require the program manager to make loans to eligible borrowers, as defined, based on underwriting guidelines approved by the department. The bill would authorize the department to issue grants or loans from program funds to local public entities upon request for purposes of allowing the local public entity to use the moneys to issue loans to eligible borrowers within its jurisdiction in accordance with the bill’s provisions and department regulations. The bill would require the department to adopt regulations for the operation of the program and would exempt the adoption of regulations by the department for these purposes from the Administrative Procedure Act.

This bill would apply specified tenant protections to projects funded by the program and would require the department to develop technical assistance and capacity building for the development and ongoing operation of projects funded pursuant to the program, as specified.

This bill would establish the Community Anti-Displacement and Preservation Fund in the State Treasury. The bill would make moneys available to the department for purposes of the program, upon appropriation by the Legislature. The bill would set forth requirements for the use of moneys in the fund.

Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NO

The people of the State of California do enact as follows:

SECTION 1.

Chapter 4 (commencing with Section 50570) is added to Part 2 of Division 31 of the Health and Safety Code, to read:

CHAPTER 4. Community Anti-Displacement and Preservation Program

50570.

(a) The Community Anti-Displacement and Preservation Program (CAPP) is hereby established for purposes of funding the acquisition and rehabilitation of unrestricted housing units and attaching long-term affordability restrictions on the housing units, while safeguarding against the displacement of current residents.

(b) For purposes of this chapter, the following definitions apply:

(1) “Department” means the Department of Housing and Community Development.

(2) “Eligible borrower” means an entity whose primary mission includes the development or ownership of housing that is affordable to low-income households and that has demonstrated experience in acquiring, rehabilitating, and operating multifamily housing for the benefit of low-income households. “Eligible borrower” includes, but is not limited to, the following:

(A) An eligible nonprofit corporation that has a principal place of business in the state.

(B) A limited partnership in which the managing general partner is an eligible nonprofit corporation that has a principal place of business in the state.

(C) A limited liability company in which the managing member is an eligible nonprofit corporation that has a principal place of business in the state.

(D) A community land trust, as defined in clause (ii) of subparagraph (C) of paragraph (11) of subdivision (a) of Section 402.1 of the Revenue and Taxation Code.

(E) A limited-equity housing cooperative as defined in Section 817 of the Civil Code.

(F) A local public entity.

(3) “Local public entity” means a public entity in the state, including a city, county, city and county, public housing authority, regional housing finance authority, and successor agency to a former redevelopment agency.

(4) “Low-income households” has the same meaning as “lower income households” in Section 50079.5.

(5) “Rehabilitation” means rehabilitation work necessary to meet health, safety, and quality of life needs, as determined by standards established by the department.

(6) “Tenant protections under state law” means the protections provided in Chapter 2 (commencing with Section 1940) of Title 5 of Part 4 of Division 3 of the Civil Code, except for Section 1947.12 of that code, and in the California Fair Employment and Housing Act (Part 2.8 (commencing with Section 12900) of Division 3 of Title 2 of the Government Code).

(7) “Unrestricted housing” means a residential rental development of five units or more that is not currently subject to a recorded deed restriction limiting occupancy to households at specified income levels and rents to levels affordable at those income levels. Mixed-use buildings are eligible if the majority of the building square footage is used for residential purposes.

(c)The department shall adopt regulations for the operation of the program. The adoption of regulations pursuant to this subdivision is hereby exempted from the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).

50571.

(a) (1) The Community Anti-Displacement and Preservation Fund is hereby created as a fund in the State Treasury. All money in the fund shall be available, upon appropriation by the Legislature, to the department for purposes of this chapter.

(2) The administrative expenses of the department shall not exceed ~~five~~ 5 percent of the moneys deposited in the fund for the purposes of this chapter.

(3) Up to an additional ~~five~~ 5 percent of the moneys may be expended to provide technical assistance and capacity building to eligible borrowers pursuant to Section 50576.

(b) The following moneys shall be paid into the fund:

(1) Any moneys appropriated and made available by the Legislature for purposes of the chapter.

(2) Any moneys that the department receives in repayment of loans made from the fund, including interest therefrom.

(3) Any other moneys that may be made available to the department for purposes of this chapter from any other source.

50572.

(a) (1) The department shall issue a request for qualification to select a private sector entity or consortium to manage the program for a period of five years.

(2) The agreement between the department and the private sector entity may be extended in additional five-year increments.

(b) (1) The selected program manager shall be responsible for reviewing and approving loan applications, originating and servicing loans, and, subject to department approval, establishing terms and conditions for loan applications, and reporting to the department to demonstrate compliance with program regulations.

(2) The private sector entity shall meet at least all of the following criteria to be eligible to be selected as a program manager:

(A) Be a nonprofit lender or consortium of nonprofit lenders, including community development financial institutions and credit unions, with experience making similar loans in the state.

(B) Have originated and serviced loans in an aggregate amount of not less than thirty million dollars ($30,000,000) that were used to develop or acquire affordable housing. At least ten million dollars ($10,000,000) or more of the loans shall have been in the form of an acquisition loan.

(1) The provision of loans for the longest possible time, up to 15 years.

(2) The provision of loans on the most competitive terms.

(3) Proposed processes and procedures to ensure timely application review and loan closing.

(4) The ability to work with a variety of borrowers, including, but not limited to, affordable housing developers, community development corporations, community land trusts, limited-equity housing cooperatives, and local public entities.

(5) The ability to work with a variety of stewardship models, including, but not limited to to, rental housing, affordable homeownership, and community land trusts.

50573.

(a) (1) The program manager shall make loans to eligible borrowers based on underwriting guidelines approved by the department.

(2) Loans shall not exceed the cost of acquisition plus the cost of rehabilitation.

(3) With the approval of the department, the program manager may establish a maximum ~~loan to value~~ loan-to-value ratio. Based on underwriting guidelines approved by the department, a portion of the loan to be funded with ~~non-program~~ nonprogram funds may require amortized payments, and a portion funded with department funds shall have deferred interest for the term of the loan.

(4) The department may establish priority uses of funds or establish set asides for specified project types, for specified types of borrowers, based on levels of affordability, or to ensure geographic equity.

(5) Loans shall not be made for projects within the jurisdiction of a local public entity that has received moneys pursuant to Section 50574 to administer a loan program, unless the program manager determines there is insufficient demand for loans in nondelegated jurisdictions and the department approves the loan. For purposes of this paragraph, “nondelegated jurisdiction” means the jurisdiction of any local public entity that has not received moneys pursuant to Section 50574.

(b) (1) (A) Properties that will remain rental housing developments following acquisition or rehabilitation with a loan made pursuant to this chapter shall be subject to a recorded regulatory agreement between the borrower and the department that requires that the units, upon the first turnover of tenancy, remain affordable to, and occupied by, low-income households for a term of 55 years from the date of the loan closing. However, the term required by a local ordinance, by a federal, state, or local grant, by a federal or state tax credit, or by other project financing shall instead apply if that required term is greater than 55 years and the local ordinance, grant, tax credit, or other project financing requires the rental housing development’s units be affordable to and occupied by low-income households for that term.

(B) For projects involving properties described in subparagraph (A), the department may convert, upon the borrower’s request, the deferred portion of a loan provided to fund the project into a grant if the department determines that the project meets standards established by the department in program regulations.

(2) (A) Properties that will be sold to low-income households at an affordable housing cost shall be subject to a recorded deed restriction of 45 years, a community land trust ground lease of 99 years, or a recorded equity sharing agreement.

(B) For projects involving properties described in subparagraph (A), the department may convert, upon the borrower’s request, to convert the deferred portion of the loan, or part of it, into a grant, pursuant to conditions determined by the department and as promulgated in its regulations.

(c) The department shall monitor borrower compliance with the terms of the recorded regulatory agreement or recorded deed restriction, except when the agreement or restriction is related to properties funded by a local public entity pursuant to Section 50574. In those circumstances, the local public entity shall monitor borrower compliance and submit annual reports pursuant to subdivision (b) of Section 50574.

50574.

(a) (1) The department may issue grants or loans from the program funds to local public entities upon request.

(2) (A) A local public entity that receives a grant or loan pursuant to this section shall use the moneys to issue loans to eligible borrowers within its jurisdiction in accordance with this chapter and department regulations.

(B) Notwithstanding subparagraph (A), the department, at its sole discretion, may waive program requirements under this chapter and the department’s regulations with respect to loans issued by a local public entity that receives a grant or loan under this section if the waiver would facilitate integration of state and local funds.

(3) The department shall select local public entities based on the local public entity’s capacity to manage program funds and adequately monitor borrower compliance within their jurisdiction.

(b) A local public entity that receives a grant or loan pursuant to this section shall file annual reports with the department demonstrating that the financed developments are rented in accordance with the applicable recorded regulatory agreement or recorded deed restriction, as described in Section 50573, and properly maintained.

50575.

(a) Notwithstanding any other law, all tenant protections under state law, or a more protective local policy, other than rent stabilization, shall apply to tenants of projects funded pursuant to this chapter.

(b) Notwithstanding any other law, the department shall require, in its regulations and regulatory agreement, standards for annual rent increases, with a goal of ensuring affordability for current and future residents.

(c) Notwithstanding any other law, a household or member of a household that resides in the property at the time of its acquisition shall not be evicted, nor shall their tenancy be terminated on the ground of their income or other eligibility requirements for deed-restricted units in the property.

(d) Notwithstanding any other law, the department shall require, in its regulations and in each regulatory agreement, borrowers to include language that implements the protections of this section in its tenant leases. The just cause protections in Section 1946.2 of the Civil Code or a more protective local policy shall also be incorporated in the lease notwithstanding any basis for exemption in statute or local ordinance.

50576.

(a) The department shall develop technical assistance and capacity building for the development and ongoing operation of projects funded pursuant to this chapter.

(b) (1) The technical assistance and capacity building shall support eligible borrowers in navigating the requirements and processes to apply for a loan pursuant to this chapter.

(2) The technical assistance and capacity building shall support collaboration and peer-to-peer learning amongst eligible borrowers.

(c) The department shall contract with third-party consultants to assist with the development, implementation, and administration of the technical assistance and capacity building. The department shall contract with consultants possessing specific areas of expertise, including, but not limited to:

(1) Resident engagement and education.

(2) Property assessment and due diligence.

(3) Affordable housing operations management.

(4) Financial assistance for projects involving the acquisition and rehabilitation of property.

(5) Construction and property management.

(6) A spectrum of ownership and stewardship models, including rental housing, homeownership, community land trusts, limited-equity housing cooperatives, workforce housing cooperative trusts, and nonprofit affordable housing cooperatives.

(7) Capacity and experience in advancing racial equity.

(d) The department or third-party consultants shall develop technical assistance tools including, but not limited to, all of the following:

(1) Training modules.

(2) Specific financing templates and guidance, such as ~~proformas~~ pro formas and worksheets, relating to the acquisition and rehabilitation of property.

(3) Best practice guides for engaging tenants before and after property acquisition, managing safe and accessible rehabilitation of occupied buildings, facilitating resident ownership, and any other topic deemed appropriate by the department.

(e) The department may integrate the technical assistance and capacity building with technical assistance funded through other department programs that have similar goals and eligible borrowers.