BILL ANALYSIS
SB 1572
Page 1
SENATE THIRD READING
SB 1572 (Alarcon)
As Amended August 7, 2000
Majority vote
SENATE VOTE :25-1
HOUSING 8-0 APPROPRIATIONS 14-6
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|Ayes:|Lowenthal, Aroner, Dutra, |Ayes:|Migden, Alquist, Aroner, |
| |Knox, Mazzoni, Runner, | |Cedillo, Corbett, Davis, |
| |Torlakson, Wildman | |Kuehl, Papan, Romero, |
| | | |Shelley, Thomson, Wesson, |
| | | |Wiggins, Wright, Roderick |
| | | | |
|-----+--------------------------+-----+--------------------------|
| | |Nays:|Campbell, Ackerman, |
| | | |Ashburn, Brewer, Runner, |
| | | |Zettel |
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SUMMARY : Revises state notice requirements that apartment
owners must give when they opt-out of federal housing assistance
programs, prepay federal loans, or terminate rental restrictions
on federally assisted housing developments (AHDs).
Specifically, this bill :
) Requires an owner to provide tenants and affected government
entities with a preliminary notice 12 months prior to the
anticipated date of an opt-out or prepayment and allows the
owner to satisfy this requirement by fulfilling federal notice
requirements.
2)Allows the owner to satisfy the 12 month notice requirement by
submitting a copy of the federal notification forms to the
Department of Housing and Community Development (HCD).
3)Requires an owner at six months prior to the date of an
opt-out or prepayment, rather than the current nine months, to
provide tenants and affected government entities with the more
detailed notice required under existing state law.
4)Provides that a property owner that complies with the
provisions of law in existence prior to January 1, 2001 shall
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be deemed in compliance with this section when it takes
effect.
5)Requires an owner to notify the tenants and affected
government agencies of any significant changes to the six
month notice within seven business days.
6)Requires an owner that decides to terminate a subsidy contract
or prepay a federal mortgage on an AHD to give notice of the
opportunity to purchase the property to qualified entities on
the list maintained by HCD.
7)Prohibits an owner of an AHD from terminating a subsidy
contract or prepaying a federal mortgage without providing
specified entities with an opportunity to submit an offer to
purchase the development.
8)Prohibits an owner of an AHD from selling or disposing of the
development in a manner that would discontinue its use as an
assisted development or terminate its low-income use
restrictions without providing specified entities with an
opportunity to submit an offer to purchase the development.
9)Deletes the January 1, 2002 sunset date on current state law.
10)Provides a January 1, 2011 sunset date on this law.
11)Grandfathers in any bona fide purchase offer that an owner
has accepted prior to the date that the bill takes effect on
January 1, 2001.
12)Clarifies that injunctive relief is available to any party
aggrieved by a violation of this section.
13)Requires the Director of HCD to approve notice forms to be
used by owners to comply with this section, and requires
owners to use these forms once they have been approved.
14)Applies the notice provisions contained in this bill to
housing developments subsidized by tax credits.
15)Requires qualified entities to continue accepting federal
assistance if offered at a level that preserves the fiscal
viability of the project.
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16)Extends the exclusive negotiating period for tenant
associations making an offer to purchase the development from
120 to 180 days.
17)Increases from 15 to 30 days the time that a qualified entity
has to match an offer from a non-qualified entity.
18)Clarifies that in order to become a qualified purchaser of an
AHD, an entity shall not have officers or board members with a
financial interest in assisted housing that has terminated a
subsidy contract or prepaid a mortgage on a development
without continuing the low-income restrictions.
EXISTING LAW extends the existing statute that is scheduled to
sunset on January 1, 2002. (Please refer to the policy
committee analysis for a detailed summary of existing law.)
FISCAL EFFECT : Unknown
COMMENTS : In the coming years, California is expected to lose
almost 100,000 units of low-income housing subsidized by the
United States Department of Housing and Urban Development (HUD)
that will convert to market-rate rents.
There are two kinds of federally subsidized housing at risk, FHA
mortgage insured properties that have regulatory agreements and
project-based Section 8. Projects built under FHA mortgage
insurance offered property owners low interest 40-year loans in
exchange for a commitment to provide affordable rent to
low-income persons. FHA mortgage insured properties allowed the
owner to prepay the mortgage after 20 years and remove the
affordability restrictions upon prepayment. The second type of
subsidy is known as project-based Section 8. In this case, the
affordability of rents is achieved by the government providing
rent subsidy through a contract with the property owner. By
2001, it is expected that 60% of all Section 8 contracts will
reach maturity and the owners will have the opportunity to
"opt-out" of the program at that time.
Whether the owner prepays his/her FHA mortgage, or opts out of
the project-based Section 8 program, the tenants benefiting from
housing assistance will be faced with the loss of
project-assisted rent subsidies, and will face either paying
market rents or using federal housing vouchers or certificates.
Generally, in these situations, a tenant receives federal
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Section 8 vouchers that are valid for one year, they are,
nonetheless displaced by conversion and may experience extreme
hardship trying to use their vouchers or locate alternative
housing in today's low-vacancy housing markets.
Federal law requires a 12-month notice to tenants upon
termination of project-based Section 8 and if an owner prepays
the federally subsidized mortgage. This bill would harmonize
California's notice requirements with the federal requirements,
and provides for an additional notice six months before the
property converts.
The goal of this bill is to make the notification process more
user-friendly for owners without sacrificing the flow of
information that helps tenants understand and deal with their
situation and that helps state and local governments address the
loss of affordable housing stock.
Analysis Prepared by : Chereesse Thymes / H. & C.D. / (916)
319-2085
FN: 0005794