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AB-1850 Public housing: unrestricted multifamily housing. (2021-2022)

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Date Published: 06/23/2022 09:00 PM
AB1850:v95#DOCUMENT

Amended  IN  Senate  June 23, 2022
Amended  IN  Senate  June 06, 2022
Amended  IN  Assembly  April 25, 2022
Amended  IN  Assembly  March 29, 2022

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Assembly Bill
No. 1850

Introduced by Assembly Member Ward

February 08, 2022

An act to add Part 2.8 (commencing with Section 18970) to Division 13 of the Health and Safety Code, relating to housing.


LEGISLATIVE COUNSEL'S DIGEST


AB 1850, as amended, Ward. Public housing: unrestricted multifamily housing.
Existing law, the Planning and Zoning Law, requires each county and city to adopt a comprehensive, long-term general plan for the physical development of the county or city, and specified land outside boundaries, that includes, among other mandatory elements, a housing element.
Existing law provides for the establishment of various special districts that may support and finance housing development, including affordable housing special beneficiary districts that are authorized to promote affordable housing development with certain property tax revenues that a city or county would otherwise be entitled to receive.
This bill would prohibit a city, county, city and county, joint powers authority, or any other political subdivision of a state or local government from acquiring unrestricted multifamily housing, as defined, unless the development meets specified criteria, including, among other things, that the aggregate initial rent for all units postconversion is at least 10% less than the average aggregate monthly rent charged for all units over the 12-month period prior to conversion and at least 20% less than the small area fair market rent for at least half of the units, units are subject to a long-term recorded regulatory agreement with a public entity that requires the unit to be affordable to, and occupied by, low- or moderate-income persons and families for a term of 55 years, and the public entity agrees to make certain reports and data public on its internet website all financial and monitoring reports applicable to the development within 120 days of receipt. website. The bill would specify that those provisions do not apply to a development that is or will be subject to a regulatory agreement with the California Tax Credit Allocation Committee or Committee, the Department of Housing and Community Development, or is located in a flood plain or sea level rise vulnerability zone, as specified. a public entity that restricts use of the development to serve specified lower income individuals, or when a public entity purchases unrestricted multifamily housing that within one year will be removed from the housing market.
The bill would include findings include, among other findings, that changes proposed by this bill address a matter of statewide concern rather than a municipal affair and, therefore, apply to all cities, including charter cities.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NO   Local Program: NO  

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


SECTION 1.

 Part 2.8 (commencing with Section 18970) is added to Division 13 of the Health and Safety Code, to read:

PART 2.8. UNRESTRICTED MULTIFAMILY HOUSING

18970.
 (a) A public entity shall not acquire unrestricted multifamily housing unless the development meets all of the following criteria:
(1) (A) Each unit, exclusive of manager units, is subject to a long-term recorded regulatory agreement with a public entity that requires the unit to be affordable to, and occupied by, low- or moderate-income persons and families for a term of 55 years.
(B) Notwithstanding subparagraph (A), existing households whose income at the time of acquisition exceeds the income limit for moderate-income households shall be allowed to remain in residency and such units may be rented at market rents until turnover to a new household.
(C) For purposes of this paragraph, paragraph and paragraph (2), rent limits shall be consistent with rent limits published by the California Tax Credit Allocation Committee, extrapolated from the 100 percent area median income rent for any income levels not directly stated by the committee. committee, and include an allowance for utilities consistent with Tax Credit Allocation Committee regulations.
(2) (A) The (i) Within 12 months of conversion, the aggregate initial monthly rents for all units postconversion are will be at least 10 percent less than the average aggregate monthly rent charged for all units over the 12-month six-month period prior to conversion. This For purposes of calculating the prior to conversion rents, all of the following shall apply:
(I) Units that have been vacant for six months or less shall be included at the last rent charged prior to vacancy.
(II) Units that have been vacant more than six months shall be included at the average rent for occupied units of a similar bedroom count and size.
(III) Units subject to temporary rent concessions of three months or less shall be included at the contract rent amount exclusive of the concession.
(IV) Units that have received in the six months prior to conversion or receive in the year after conversion at least fifteen thousand dollars ($15,000) in hard rehabilitation expenditures shall be included at 110 percent of the prior to conversion rents, as otherwise adjusted by subclauses (I) to (III), inclusive.
(V) Units that have received in the six months prior to conversion or receive in the year after conversion at least sixty thousand dollars ($60,000) in hard rehabilitation expenditures shall be included at 120 percent of the prior to conversion rents, as otherwise adjusted by subclauses (I) to (III), inclusive.
(ii) This subparagraph shall not apply if the unrestricted multifamily housing prior to conversion is was subject to a local ordinance or charter that controls or establishes a system of controls on the price at which residential rental units may be offered for rent or lease, any form of rent or price control through a local public entity’s valid exercise of its police power, provided that increases in rents upon vacancy do not exceed the limits of subparagraph (C).
(B) The initial rents for at least 50 percent one-third of the units are at least 20 percent less than do not exceed the lesser of the rents affordable to a household at 80 percent of the area median income or the small area fair market rent, as determined by the United States Department of Housing and Urban Development, for the ZIP Code in which the development is located and the number of bedrooms in the unit. These units shall be distributed proportionally across all unit sizes.
(C) Increases to the initial first-year rents postconversion shall be limited per year to the lesser of the annual increase in the area median income for the county, as determined by the Department of Housing and Community Development, or 3 percent. Development, except that the public entity may require a lower limit.
(D) Notwithstanding subparagraphs (A), (B), and (C), a project owner may shift rent restrictions on units within a given property so long as the overall distribution of regulated rents remain the same. same across unit sizes.

(E)All rent limits referenced in this section shall include an allowance for utilities consistent with Tax Credit Allocation Committee regulations.

(3) Each unit is in decent, safe, and sanitary condition at the time of occupancy following the conversion.
(4) Each unit was not acquired by eminent domain as part of the conversion.

(5)The public entity, if not a city or county, shall contract with the city in which the property is located, or the county for a property in an unincorporated area, or a state housing entity to monitor the property for compliance with the regulatory agreement for the term of the regulatory agreement. If a city or county is the contracted monitor, the city or county shall monitor the development in a manner consistent with the monitoring standards and protocols of the California Tax Credit Allocation Committee.

(6)The first year net operating income, based on postconversion rents, is adequate to repay all debt, except public soft debt, amortized on a level debt service basis over a period not to exceed 40 years. For purposes of this paragraph, “public soft debt” means debt provided by a public entity or the federal government for which all principal and interest payments, excluding residual receipts payments and interest payments not to exceed 0.42 percent per year to cover monitoring costs, are deferred for a term of at least 55 years and for which the simple interest rate does exceed the applicable federal rate published by the Internal Revenue Service or 3 percent, whichever is greater.

(5) The public entity monitors the development to ensure compliance with the regulatory agreement, including, but not limited to, annually certifying compliance with rent restrictions and at least once every three years inspecting the initial income certification in at least 20% of tenant files and conducting a physical inspection of the common areas and at least 20% of units in accordance with the Uniform Physical Condition Standards or subsequent standards established by the federal Department of Housing and Urban Development. If different from the public entity, the host city or county for an incorporated area, shall have the right to conduct its own monitoring or audit the monitoring of the public entity.
(6) The project reserves an average of five hundred dollars ($500) per unit per year for replacement costs over the term of the financing.
(7) Except as provided in subdivision (b), a public entity shall approve all debt on the property and hold an assignable right to purchase the development, any interest in the development, or any interest in a partnership that owns the development for a price that does not exceed the principal amount of outstanding indebtedness secured by the building.
(8) The public entity agrees to give priority in leasing of units to applicants with housing choice vouchers.
(9) (A) The public entity agrees to comply with the standards and procedures for basic applicant and tenant rights, including good cause eviction, tenant selection, and leases, required pursuant to the Department of Housing and Community Development’s uniform multifamily regulations (Subchapter 19 (commencing with Section 8300) of Chapter 7 of Division 1 of Title 25 of the California Code of Regulations) or successor regulations, and such regulations. Such selection standards shall additionally be demonstrably related to an applicant’s ability to perform the obligations of an affordable housing tenancy. For
(B) For purposes of this subparagraph, paragraph, good cause to evict evict, as set forth under Section 8307 of Title 25 of the California Code of Regulations, shall be required during the lease and at the end of a lease term, and good cause shall not exist solely where a tenant was qualified at initial occupancy and their income subsequently exceeds the applicable income limitation or due to an incident of domestic violence, dating violence, sexual assault, or stalking against a tenant or criminal activity directly related to the domestic violence, dating violence, sexual assault, or stalking committed against a tenant.
(10) (A) No public entity levies a fee or other charge to the development except as follows:
(i) The city in which the property is located, or the county for a property in an unincorporated area, may charge a fee not to exceed fifty dollars ($50) per unit per year to offset specific costs solely attributable to the contracted monitoring services required by performed pursuant to paragraph (5).
(ii) The public entity issuing bonds to acquire the property may charge a one-time administrative fee no greater than 0.5 percent of the acquisition price, price plus rehabilitation expenditures, not to exceed five hundred thousand dollars ($500,000), and annual fees not to exceed the costs solely attributable to the monitoring requirements of paragraph (5) plus 5 percent of those monitoring costs. one hundred thousand dollars ($100,000).
(B) The dollar amounts listed in this paragraph shall be adjusted for annual changes in the consumer price index.
(C) This paragraph shall not apply to fees or charges levied by a city, county, or city and county and generally applied to all housing developments.
(11) (A) Compensation to third-party project administrators shall not exceed the following:
(i) A fee at the time of acquisition no greater than 1 percent of the acquisition price plus rehabilitation expenditures or two million five hundred thousand dollars ($2,500,000), whichever is less.
(ii) An annual fee no greater than one two hundred thousand dollars ($100,000). ($200,000). These payments shall terminate in the event of termination of a third-party as project administrator.
(iii) Payments (I) Except as provided in subclause (II), payment from one or more subordinate cash flow cashflow bonds that in aggregate shall not exceed 2 percent of the acquisition price plus rehabilitation expenditures or five million dollars ($5,000,000), whichever is less, with an interest rate not to exceed the blended, weighted interest rate on the development’s nonsubordinate debt. These payments shall terminate or be transferred to a new project administrator in the event of termination of a third-party as project administrator. administrator due to material breach of the regulatory agreement, fraud, or gross negligence.
(II) This clause shall not apply if the project administrator purchases the subordinate cash flow bonds for market value in a public sale.
(B) The dollar amounts listed in this paragraph shall be adjusted for annual changes in the consumer price index.
(12) A third-party project administrator is required to reimburse tenants for overpayments and is subject to a penalty of fifteen thousand dollars ($15,000) per unit for any year 12-month period in which the rents charged are not in on any given unit are consistently and materially out of compliance with paragraphs (1) and (2) and the terms of the regulatory agreement, payable to the city in which the property is located, or the county for a property in an unincorporated area.
(13) The public entity and city in which the property is located, or the county for a property in an unincorporated area, agree to utilize all annual cash flow, cashflow, sale proceeds, and penalty payments solely for one of the following purposes:
(A) The development and preservation of housing affordable to and occupied by lower-income lower income persons and families, including deposit into a regional or local housing trust fund or a Low and Moderate Income Housing Asset Fund described in Section 34176.
(B) To distribute to all property taxing entities in proportion to each entity’s share of property taxes that would apply to the parcel or parcels if the property were subject to taxation.
(C) Programs that protect tenants from displacement, including, but not limited to, emergency rental assistance, preeviction and eviction legal services, and relocation assistance.
(14) The public entity agrees to make public on its internet website all financial and monitoring reports applicable to the development within 120 days of receipt. receipt and to post annually on its internet website the number and percentage of units occupied by Housing Choice Voucher holders.
(15) The public entity has adopted and is implementing a policy to prevent multiple project administrators from making purchase offers on properties.

(15)

(16) The requirements of this section shall be included in the property’s regulatory agreement and made expressly enforceable by tenants, eligible applicants, the city in which the property is located, or the county for a property in an unincorporated area, or a state housing entity.
(b) This section shall not apply in either of the following cases:
(1) When a development is or will be subject to a regulatory agreement with the California Tax Credit Allocation Committee or the Department of Housing and Community Development.
(2) When a development is or will be subject to a regulatory agreement with a public entity that restricts use of the development to serve individuals and families who are formerly homeless, at risk of homelessness, extremely low income, or very low income, with an average affordability not to exceed 40 percent of the area median income.

(2)

(3) When a public entity purchases unrestricted multifamily housing that is either located within the local jurisdiction’s flood plain zone, or is located within the local jurisdiction’s sea level rise vulnerability zone line, the public entity has determined that the property faces related environmental hazards such as flooding, emergent groundwater, or liquefaction, and the public entity removes the existing structure within one year will be removed from the housing market.
(c) For the purposes of this section:
(1) “Consumer price index” means the last Consumer Price Index for All Urban Consumers published by the United States Department of Labor.
(2) “Public entity” shall mean a city, county, city and county, joint powers authority, or any other political subdivision of a state or local government.
(3) “Unrestricted multifamily housing” shall mean a development consisting of five or more residential units that is not subject to a deed restriction limiting rents or the incomes of occupants.
(d) (1) The Legislature finds and declares that ensuring housing, especially publicly owned housing, is affordable and safe is a matter of statewide concern and is not a municipal affair as that term is used in Section 5 of Article XI of the California Constitution. Therefore, this section applies to all cities, including charter cities.
(2) The Legislature finds and declares that public entity acquisition of unrestricted multifamily housing in compliance with this section achieves an important public purpose.
(e) It is the intent of the Legislature to enact subsequent legislation to empower a state housing agency to do all of the following:
(1) Designate in each region and for terms of five years one or more public entities to serve as the sole entities authorized to acquire unrestricted multifamily housing pursuant to this section.
(2) Establish underwriting and governance standards for public entity acquisition of unrestricted multifamily housing that ensure long-term feasibility and continued affordability.