1997-98 Reports

LEGISLATIVE SUMMARY FOR 1997-98

TABLE OF CONTENTS

• COVER PAGE
• LEGISLATIVE SUMMARY
• TABLE OF CONTENTS
• BUILDING STANDARDS
• COMMON INTEREST DEVELOPMENTS
• FARMWORKER HOUSING
• HOUSING DISCRIMINATION
• HOMELESS PROGRAMS
• HOUSING FINANCE
• LAND USE PLANNING
• MOBILEHOMES/MANUFACTURED HOUSING
• NATURAL DISASTER ASSISTANCE &s; PREPAREDNESS
• COMMUNITY REDEVELOPMENT
• RELOCATION ASSISTANCE
• RENT CONTROL
• MISCELLANEOUS
• APPENDIX [Bills in Numerical Order]

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COVER PAGE

ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT

LEGISLATIVE SUMMARY FOR 1997-98

COMMITTEE MEMBERS
TOM TORLAKSON
CHAIR

• Tom McClintock, Vice-Chair Gary Miller
• Dion Aroner Louis J. Papan
• Denise Moreno Ducheny Robert Prenter
• Sally Havice Bernie Richter
• Lynne C. Leach Edward Vincent
• Ted Lempert Roderick Wright

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LEGISLATIVE SUMMARY

1997-98 Session

This summary highlights the work of the Assembly Committee on Housing and Community Development during the 1997-98 session of the California Legislature, and provides background on all major areas of the committee's jurisdiction.

The summary includes a list of legislation heard by the committee, including the final status of that legislation.

While historically one of the least affordable places to live in the United States, California continues to face a mounting housing affordability crisis that makes it difficult for families to find housing and for businesses to attract and retain qualified workers. Under the leadership of Chairman Tom Torlakson, the committee focused on the growing problem of housing affordability in the late 1990's.

The state's role in encouraging the development of affordable housing has never been more important. To that end, the Legislature pursued several methods to reduce the cost of housing, including:

• A $160 million program within the school facilities bond (Proposition 1A) to reduce the effect of school impact fees on new homes and apartments affordable to those with low or moderate incomes.
   

• Budget appropriations to expand the supply of farmworker housing, housing for families transitioning from welfare to work, and self-help housing.

• Budget appropriations and legislation to preserve federal Section 8 housing that will otherwise return to market rate housing over the next five years.

Unfortunately, the Governor vetoed the budget appropriations for housing, except for $1 million for self-help housing.

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BUILDING STANDARDS

Developing building standards requires a balancing act between health and safety concerns and the costs of addressing those concerns. Developers insist that it is difficult to build affordable housing when regulations increase their construction costs; consumer groups, fire departments, and disabled advocates argue for safer, energy-efficient, and accessible buildings. The public policy struggle is in defining the proper balance between the two.

Building standards in California are based upon model codes, such as the Uniform Building Code and the Uniform Mechanical Code. Model codes are published and approved by groups of national and regional experts on structural, mechanical, electrical, plumbing, and fire safety standards. For instance, the Uniform Mechanical Code is published by the International Conference of Building Officials and the International Association of Plumbing and Mechanical Officials.

California building standards are adopted through a process in which state agencies, using the model codes, propose additions or changes to the California Building Standards Code (Code) (also known as Title 24 of the California Administrative Code). The California Building Standards Commission (BSC) then reviews, and adopts or rejects the proposed changes. An updated version of the code is published every three years. Local governments can modify the Code, but those modifications must be more stringent than the statewide standard.

In May 1998, the 2000 Code Partnership was formed to coordinate the next triennial publication of the California Building Standards Code. Over the next two years, the BSC, state agencies, or stakeholders will conduct a large-scale analysis of existing and new model codes. The goal of the partnership is to develop a comprehensive plan that provides for the timely, effective, and complete development of the Code 2001. The target publication date for the Code is January 2, 2001 and it becomes effective July 1, 2001.

The Code applies to all buildings and residential occupancies Some structures, however, such as high-rise commercial buildings and private schools, are not subject to the Code and are governed by the model codes and local ordinances.

Although most building standards are created and adopted in the administrativeprocess, numerous bills are introduced each year that propose new building standards or amendments to existing building standards. These bills are drafted in response to natural disasters, requests by industries, or proposals by consumer groups in reaction to perceived dangers relating to existing building standards.

Major Legislation

In 1997 and 1998, the Committee heard two bills related to the use of chlorinated polyvinyl chloride (CPVC). The bills attempted to address the dilemma created by the 1998 sunsetting of AB 151 (Baca), Chapter 785, Statutes of 1995, which allowed the use of CPVC pipe for two years in certain local jurisdictions that could justify its use because local soil and water conditions that damaged copper piping.

AB 942 (Miller) – Died in the Assembly Committee on Appropriations: Would have eliminated the sunset and allowed the use of CPVC throughout California.

AB 1951 (Baca) As introduced: Would have made the use of CPVC legal throughout California, but also required specified worker safety and inspection requirements favored by labor unions and considered overly stringent and expensive by the plastics industry. The author opted not to move the bill out of the Senate Committee on Local Government.

AB 1951 was amended August 12, 1998 (Hertzberg) to clarify the time period proponents of certain city or district boundary changes have to collect signatures to petition their local agency formation commission, and was signed by the Governor (Chapter 402, Statutes of 1998).

While the Legislature debated these bills, the Department of Housing and Community Development published a long-awaited draft Environmental Impact Report (EIR). The report determined that the approval of CPVC as an alternative building material would not have a significant adverse environmental effect.

Other 1997-98 Building Standards Legislation:

AB 80 (Ducheny) Chapter 646, Statutes of 1998: Denies California income tax deductions taken on housing or vacant property in serious, health, and safety violations of state law or local building codes.

AB 125 (Pacheco) Chapter 633, Statutes of 1997: Allows specified buildings located on the former March Air Force Base to gradually comply with state and local building standards over seven years, instead of the three years authorized under current law.

AB 481 (Kuehl) - Died in the Senate Committee on Judiciary: Would have enacted the Comprehensive Childhood Lead Poisoning Prevention Act of 1997, which establishes statewide standards for lead hazard prevention, identification, and abatement in pre-1978 rental housing.

AB 943 (Washington) Chapter 55, Statutes of 1997: Allows building officials in the City of Los Angeles to demolish vacant, single-family dwellings that are more than 50% deteriorated and for which repair is not economically feasible.

AB 1071 (Cardoza) Chapter 645, Statutes of 1997: Streamlines and clarifies the process for updating and publishing state amendments to national model codes, and makes technical, non-substantive changes to the State Housing Law. Also, allows for graduated compliance with building standards for buildings on military bases converting to non-military uses.

AB 1616 (Lempert) - Died in the Assembly Committee on Appropriations: Would have established a state matching fund program to retrofit existing security window bars without safety release mechanisms. Also, would have required homes to be retrofitted before they could be sold, leased, or rented.

AB 2697 (Ducheny) Chapter 426, Statutes of 1998: Requires the Trade and Commerce Agency to provide an independent economic review of the housing cost impact of a proposed modification of the residential building standards, if the impact review is requested by either the staff of the California Building Standards Commission or other interested parties.

SB 873 (Vasconcellos) Chapter 913, Statutes of 1997: Requires all new and altered public wading pools to have at least two circulation drains per pump located at least three feet apart and to comply with other safety requirements to prevent physical entrapment or suction injury. Expands existing law to require all pre-1975 public swimming pools, including those located in apartment complexes, hotels, and motels, to be retrofitted with ground fault circuit interrupters.

SB 1405 (Polanco) Chapter 730, Statutes of 1998: Creates statewide standards for security window bars governing their installation, quality control, safety release mechanisms, removal of bars without safety release mechanisms, and increased public education.

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COMMON INTEREST DEVELOPMENTS

“Subordination of individual property rights to the collective judgment of the owners' association, together with restrictions on the use of real property, comprise the chief attributes of owning property in a common interest development.”

California Supreme Court, September 2, 1994
Nahrstedt v. Lakeside Village Condominium Association

A common interest development (CID) combines a separate interest in the ownership of a unit with a combined interest in the ownership of the common area. The owners of the separate interests are members of an association created for the purpose of managing the CID. The board of directors of the association is responsible for the day-to-day management and operation of the CID.

Under California law, the Davis-Stirling Act (Act) governs CIDs including community apartment projects, condominium projects, planned developments, and stock cooperatives. The Act provides for association voting requirements, access to records, levying of assessments, conduct of meetings, and liability of officers and directors.

The Department of Real Estate is the governmental entity responsible for approving, with limited exceptions, the public report required before a CID can be established. It is estimated that there are over 25,000 CID associations, the majority less than 10 years old.

Major Issues

The most important legislative issues surrounding CIDs continue to be:

• Disclosure of information to the prospective buyer of a unit located in a CID, especially about the potential for increases in assessments and other financial matters relating to the maintenance of the property.

• Ongoing disclosure to homeowners about issues relating to any construction defects, litigation arising out of defects, or increases in assessments that affect homeowners.

• The rights and privileges of individual homeowners within CID when they conflict with the association's rules or covenants, conditions, and restrictions (CC&R).

1997-98 Legislation

AB 76 (Miller) Chapter 632, Statutes of 1997: Requires sellers to disclose to prospective purchasers, and homeowner associations to disclose to owners, information concerning pending and settled litigation against common interest developments.

AB 1025 (Torlakson) Chapter 181, Statutes of 1997: Permits a common interest development to record the name of an agent responsible for the collection of homeowner assessments.

AB 1268 (Granlund) - Died in the Senate Committee on Local Government: Would have prohibited a common interest development's governing documents from banning residents or homeowners from using motorcycles within the development.

AB 2020 (Thomson) Vetoed: Would have prohibited homeowner associations from prohibiting homeowners from having pets, if such homeowners are disabled or regarded by a licensed physician or psychologist as needing a pet. Also, would have allowed homeowner associations to establish reasonable rules and regulations to be followed by pet owners.

SB 254 (Lee) - Died in the Assembly Committee on Housing and Community Development: Would have required the owner of a common interest development to provide any prospective purchaser with a copy of the “Common Interest Development Brochure.”

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FARMWORKER HOUSING

Affordable, safe, and sanitary housing is virtually nonexistent for the vast majority of California's farmworkers. When a migrant farmworker arrives in a rural agricultural town, he/she has few options: most of the existing housing is occupied; available units often consist of the most dilapidated units in the community; rents are high; and per-person charges are used to capitalize on “doubling up.“ If the migrant fails to arrive in town early enough to get a substandard unit, there are four choices available: double up in an occupied unit; pay rent to live in a shed, barn, garage, or backyard; live in a car; or try to obtain housing in a surrounding community and commute to work. Although there are a number of state-operated farm labor camps and some employer-provided housing, these programs address only a minimal portion of the total housing need.

Several reasons are commonly cited for the lack of farmworker housing. Housing advocates maintain that government has not spent enough money for farmworker housing. The agricultural industry maintains that housing is expensive to provide and investments are rarely recaptured because the housing is only used seasonally. Agricultural interests also contend that governmental regulations and community opposition make farmworker housing difficult to build and maintain. Moreover, the increasing use of farm labor contractors as intermediaries has increased the distance between growers and labor, which blunt workers' attempts to attain better working conditions and benefits directly from growers.

Two state programs and a number of private camps offer a combined total of 5,607 units assisting an estimated 39,374 farmworkers and their families. The federal Rural Economic Development Services Agency (formerly the Farmers Home Administration) provides funding to build low- and moderate-income farmworker housing.

The state housing programs are:

1) Office of Migrant Services (OMS): This program, administered by the Department of Housing and Community Development (HCD), operates 26 migrant centers in 15 counties, annually serving an estimated 12,546 migrant farmworkers in 2,107 units. Thirty percent of the farmworkers come from California, 35 percent from Mexico, and the rest from Arizona, New Mexico, and Texas. The centers generally operate from April through November. Land is provided by the local jurisdiction. The state owns the buildings and equipment and operates the program, usually by contracting with a local housing authority.

2) Farmworker Housing Grant Program: This HCD-administered program offers up to 50% matching grants for the construction and rehabilitation of owner-occupied and rental housing for low-income, year-round farmworkers. This program has assisted 3,500 units and an estimated 14,280 total farmworkers and their families since 1977. In 1998, $4 million has been appropriated to the Farmworker Housing Grant Program through the passage of AB 10 (Ducheny), Chapter 881, Statutes of 1997. All funding has been committed and projects totaling 375 assisted units are being developed.

The federal housing program is Section 514/516 RECDS Housing. This program, funded through the housing program division of the Rural Economic and Community Development Services (RECDS) funds the construction and rehabilitation of low- and moderate-income housing for farmworkers. In 1997, California received approximately $6.2 million from RECDS, funding the construction of 2 new projects totaling 74 units and the rehabilitation of numerous existing units occupied by farmworkers and farmworker families.

Private camps are licensed under the HCD-administered Employee Housing Act (Act). In 1997, a total of 1,685 licensed camps served 38,503 farmworkers and their families.

Recently, HCD enforcement efforts against substandard farmworker housing have improved. In the past, the Act was enforced by a handful of state inspectors who responded to complaints or randomly drove agricultural backroads looking for illegal camps. These methods proved ineffective, resulting in few illegal camps being repaired or closed. More recently, HCD — armed by recent legislation authorizing stiff civil penalties of up to $10,000 per day for substandard housing violations — has concentrated its enforcement efforts through an in-house task force by focusing on selected agricultural areas of the state.

Cracking down on illegal camps, however, can have its down side, resulting in grower fear and frustration. Some growers, complaining of harassment by state and federal officials, have bulldozed their camps rather than repairing or continuing operation. As a result, their farmworkers will be forced to sleep in cars, other illegal camps, or in the open. For these reasons, HCD inspectors attempt to encourage camp operators to repair substandard camps and keep the camps open.

1997-98 Legislation

AB 10 (Ducheny) Chapter 881, Statutes of 1997: Appropriates $4 million from the General Fund to the Farmworker Housing Grant Program. A setaside of $1 million of the $4 million is targeted for innovative demonstration models of farmworker housing using modular and portable designs and stressing ancillary services on-site such as childcare and health services.

AB 358 (House) Vetoed: Would have allowed owners or operators of employee housing operating in more than one county the option of having the housing inspected only by the Department of Housing and Community Development instead of by each county.

AB 359 (House) Chapter 49, Statutes of 1997: Requires every occupant of employee housing

to properly use the facility and comply with maintenance and sanitation provisions of the Employee Housing Act. Also, provides that the Employee Housing Act provisions relating to enforcement of the act will not apply to this bill's provisions.

AB 2653 (Ducheny) - Died in the Senate Committee on Local Government: Would have required the Department of Housing and Community Development to develop a proposal for creating a nonprofit regional foundation with expertise in agricultural land use and farmworker housing issues.

SB 302 (Costa) Chapter 371, Statutes of 1998: Makes technical changes to the provisions of the Farmworker Housing Assistance Program and conforms the definition of eligible costs to federal low-income housing law.

SB 1313 (Leslie) Chapter 104, Statutes of 1997: Establishes a disaster assistance program to provide loans to public entities, nonprofit corporations, or private property owners for farmworker housing damaged or destroyed by a natural disaster, and appropriates $1 million to the Department of Housing and Community Development for loans to replace housing damaged by the 1997 floods.

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HOUSING DISCRIMINATION

Housing discrimination in California is governed by the state Fair Employment and Housing Act, the Unruh Civil Rights Act, and the federal Fair Housing Amendments Act of 1988.

The Fair Employment and Housing Act (FEHA): FEHA prohibits the owner of any housing accommodation from discriminating against any person in the sale or rental of housing accommodations based on race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, marital status, sex, or age. Employers with four or fewer employees and non-profit religious organizations are exempt from FEHA.

The Department of Fair Employment and Housing (DFEH) investigates and adjudicates complaints arising under FEHA. Complaints must be filed within one year of the alleged incident.

Remedies available for housing discrimination include a DFEH order for the landlord to cease and desist and to sell or rent the accommodation to the complainant, the assessment of actual damages, and the assessment of punitive damages of $10,000 for a first offense, $25,000 for a second, and $50,000 for three or more. In addition, the complainant can chose to file a civil action in lieu of or during the DFEH administrative process.

The Unruh Civil Rights Act: The Unruh Act broadly prohibits business establishments from discriminating against people based on their sex, race, color, religion, ancestry, national origin, or disability. The California Supreme Court has opined that the Act also prohibits other arbitrary discrimination by business establishments, such as that based on age (Marina Point Ltd. v. Wolfson (1982) 30 Cal.3d 72) and sexual orientation (Hubert v. Williams (1982) 133 Cal.App.3 Supp.1).

Several California court cases have established the applicability of the Act to the sale or rental of housing. In Marina Point Ltd., the Supreme Court held that the landlord of an apartment complex and the homeowners association in a planned development constituted business establishments, and were therefore prohibited from discriminating in the sale or rental of housing based on age. The Court did, however, carve out an exception for senior housing facilities that include special amenities for seniors. In Park Redlands Covenant Control Committee v. Simon (App. 4 Dist. 1986) 226 Cal.Rptr. 199, 181 Cal.App.3d 87, the court held that a tract housing homeowners association was a business establishment.

DFEH investigates complaints arising under the Unruh Act. In addition, the Attorney General, district attorneys, city attorneys, or any complainant can bring a civil action, with the following remedies allowed: actual damages, punitive damages in an amount equal to three times the actual damages or $1,000, whichever is greater, and attorney's fees.

Fair Housing Amendments Act of 1988 (FHAA): The federal FHAA prohibits discriminatory housing practices based on handicap or familial status. The federal Department of Housing and Urban Development (HUD) has adopted regulations that recognize, as an exception to the prohibition against discrimination, the special needs and status of senior citizens. These regulations permit “seniors only“ developments under specified conditions. The FHAA expressly does not limit the applicability of any reasonable occupancy standards adopted by the state and local governments.

The FHAA specifies that if HUD receives a complaint alleging discrimination in housing, HUD must refer the complaint to a state or local agency for action if the agency has jurisdiction and is certified by HUD as having protections, procedures, and remedies “substantially equivalent“ to HUD in fair housing enforcement.

1997-98 Legislation

AB 257 (Villaraigosa) Vetoed: Would have codified case law that prohibits housing discrimination on the basis of sexual orientation. Would have moved the provisions prohibiting employment discrimination on the basis of sexual orientation from the Labor Code to the Fair Employment and Housing Act (Civil Code).

AB 473 (Oller) As introduced: Allowed Heather Glenn Community Services District to limit residency to older persons, without meeting the guidelines for senior housing under the Unruh Civil Rights Act.

This bill was amended June 22, 1998 to appropriate $147,000 from the General Fund to Alpine, Mariposa, and Trinity Counties, to be allocated proportional to population, and was signed by the Governor, Chapter 1028, Statutes of 1998.

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HOMELESS PROGRAMS

Homelessness is a problem in every major city in California, as well as in many rural areas.

California's streets, malls, beaches, parks, and riverbanks are rife with people who for one reason or another do not have permanent places to live. The homeless problem stems from many sources including high housing costs, unemployment, alcoholism, drug addiction, reduced services for the mentally ill, reduced federal housing funds, and a wave of conversions of federally subsidized housing to market rates--all of which have converged to create the current crisis.

Despite the acknowledgment by many in government, the media, and the private sector of the problems of homelessness, there is neither agreement on how best to attack the problem nor significant public money with which to fight it. In large part, the battle against homelessness is being fought by church groups and other non-profit organizations with volunteers, donations, and a trickle of government funds.

Many cities have enacted stiff anti-camping and panhandling ordinances in response to outraged citizens and business owners who demand a “get-tough“ approach to the problem.

The number of homeless people in California is difficult to estimate. Since a person can be homeless for days, weeks, months, or years, the homeless population is constantly fluctuating. The 1990 census survey counted 48,887 people in shelters and in “visible“ locations. However, according to the latest data from Housing California, a non-profit advocacy group for the homeless, California is meeting only a fraction of the need for emergency shelter. Approximately 200,000 persons are homeless on any given night but there are less than 17,000 permanent shelter beds available in the state.

To address the wide array of needs for the homeless, the state and federal government provides services to the homeless through a byzantine array of agencies, departments, and programs which focus on either emergency shelter and services or narrowly-focused programs that address specific subgroups of the homeless population.

Federal and State Housing Programs

1) Emergency Housing Assistance Program (EHAP): Operated by the state Department of Housing and Community Development. Provides grants to local service providers who offer temporary emergency shelter to the homeless. Grants may be used for the acquisition and renovation or expansion of existing facilities, general maintenance costs, and limited administrative expenses. For the last several years, the Governor's budget has proposed a General Fund appropriation of approximately $1 million for shelter operating expenses under the EHAP. Legislative augmentations for this program have been vetoed by the Governor.

Proposition 84 approved by the voters in June 1988, and Proposition 107, approved in June 1990 provided temporary funding for EHAP. Proposition 84 allocated $25 million and Proposition 107 allocated an additional $10 million in bond proceeds to for “hard costs,“ i.e., development and rehabilitation of shelters. All of these funds have been committed.

2) Federal Emergency Shelter Grant Program: Provides Stewart B. McKinney Homeless Assistance Act of 1987 (McKinney Act) grant funds for rehabilitation of homeless shelters, essential services, operating expenses, homeless prevention, and grant administration. Approximately $1.5 million was allocated to California for this program in 1994, but these funds are expected to decline.

3) Homeless Handicapped Program: Funded by the federal Department of Housing and Urban Development under the McKinney Act. The state program contracts with approximately 30 non-profit housing providers who acquire and rehabilitate single-family homes for use by the handicapped homeless. Currently, the program serves between 250 to 300 people. HUD pays for a percentage of the ongoing costs for up to five years, and the residents (most of whom receive Social Security) contribute 30 percent of their incomes toward household needs and maintenance costs. Over the last five years, the program has received $9.7 million in federal fund; there was no previous state funding. This program receives approximately $186,000 per year in state General Fund money.

1997-98 Legislation

SB 1174 (Vasconcellos) As introduced: Authorized the Department of General Services (DGS) to negotiate a lease of up to 20 years to provide emergency housing via a nonprofit agency on a closed developmental center campus.

This bill was amended May 7, 1998 to make a technical change in voluntary school desegregation programs, and was signed by the Governor (Chapter 117, Statutes of 1998).

SB 1950 (Sher) Vetoed: Would have established criteria for the issuance of forgivable loans to local jurisdictions to acquire, convert, or construct permanent homeless shelters, and appropriated $5 million for this purpose.

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HOUSING FINANCE

California has among the most expensive single-family and multi-family housing markets in the nation, and has extremely low vacancy rates in major urban areas. As a result, Californians, especially those with lower incomes, face a major affordable housing crisis. We need to build 250,000 housing units per year to keep pace with population growth, but only 130,000 are constructed annually. Both homeowners and renters feel the growing impact of this disparity:

• 38% of California households could afford the median-priced home in 1997, compared to 53% nationwide. Homeownership rates in California were 10 % less than the national average in 1997 (55.7% vs. 65.7%), according to the U.S. Census.

• The number of apartments built annually in California has dropped from 100,000 in the mid-1980s to 12,000 in the mid-90s. Half of the units produced today rely on federal and state tax credits. To meet the current needs of low-income families, we would have to build nearly five million apartments would have to be built.

• According to the Center on Budget and Policy Priorities, in California's six largest housing markets, a high percentage of low-income families spend more than 50% of their income on rent: San Jose (77%); Los Angeles (67%); Santa Ana/Anaheim (78%); Riverside/San Bernardino (73%); San Francisco/Oakland (68%); and San Diego (68%). Such families face untenable choices, such as whether to feed or to clothe their children with their remaining funds.

• The gap between income and rents will widen further as a result of a continuing reduction in federal subsidies to the Section 8 rental housing program. Over the next five years, mortgage contracts for over 110,000 units of privately-owned, federally-assisted rental housing units will expire, with the potential loss of over $500 million in federal subsidies. Elderly citizens occupy 44% percent of these units; the annual average income of all occupants is $9,300.

The lack of decent, safe housing has serious repercussions for all Californians. Bay Area companies are unable to recruit new employees because housing simply is not available. Two-income families cannot find housing near their work sites, resulting in long commutes and latchkey children. Children live in deplorable conditions, with open sewer lines running through their play areas.

Government Housing Finance Programs

1) Tax-exempt bond financing: The California Housing Financing Agency (CHFA)

and local housing agencies provide low interest rate mortgage loans through the sale of tax-exempt revenue bonds. These mortgage loans are usually offered to eligible homebuyers through private mortgage brokers.

The Federal Tax Reform Act (TRA) of 1986 limits the amount of tax-exempt bonds that can be issued annually, based on the state's population. In 1998, the state's ceiling was $1.6 billion. The TRA allows the bonds to be used for housing, student loans, industrial development, and exempt facilities.

The California Debt Limit Allocation Committee (CDLAC) allocates the tax-exempt bonds to state and local issuers. Typically, housing projects received the majority of allocations. In 1998, $1.24 billion was reserved for housing, 76.7% of the total available. (For more information about CDLAC's allocation procedures and proposed changes, see the committee's interim hearing report “Doling Out the Bonds: California's Use of Tax-Exempt Bonds for Affordable Housing”.)

2) The Federal HOME Program: The HOME Investment Partnership Act was authorized by the Cranston-Gonzalez National Affordable Housing Act (1989). HOME is a federal block grant program which provides funds to state and local governments which, in turn, make money available for the development or rehabilitation of owner-occupied and rental units, and the provision of first-time homebuyer and rent subsidy programs.

The HOME Program is a unique program among the many programs administered by HCD. Under HOME, applicants may apply for funding for both individual projects and for programs comprising several different types of housing projects.

Under the funding formula, some communities in California are eligible to receive direct allocations from the federal Department of Housing and Urban Development (HUD) while other communities must compete for the general state allocation. However, a community eligible to receive a direct allocation may transfer that allocation to the state and then compete for a portion of the state allocation. This transfer can be very beneficial to a community which has a solid housing program, but needs more money than it would receive under the direct allocation formula. As an example, the City of Redding has transferred its $409,000 direct annual allocation to HCD and is now eligible to apply for up to a $1 million allocation from HCD.

3) Low Income Housing Tax Credits: The Low Income Housing Tax Credit provides a credit against net tax in the personal income, bank and corporation, and insurance gross premiums tax for costs related to qualified low-income housing developments. The credit is 30 percent of costs for the purchase of, or improvements to, low-income housing. The credit is claimed over a four-year period. The state's low-income housing tax credit parallels a similar credit in federal law.

Taxpayers — usually housing developers — apply to the California Tax Credit Allocation Committee for an allocation of both the state and federal credits. The amount of tax credit allocated to a project is based on the amount needed to insure the financial feasibility of the project and a number of criteria that target projects in areas or types of housing where there is significant need. The amount of state credit available is limited to $50 million per year, plus any unallocated and returned balances from prior years, in 1998 and 1999 and $35 million for years 2000 and later.

The low income housing tax credit is unique among state tax provisions. The amount of credit available is capped and project sponsors must apply for an allocation of credits. In most cases, individual taxpayers receive tax credits as members of a limited partnership when the general partner is the project sponsor, and the limited partners receive credits based on their individual financial participation. Investors (i.e., the taxpayer ultimately claiming the credits) typically buy into a project by paying fifty to sixty cents for each dollar of tax credit received.

4) General Obligation Bond Financing: Prior to 1980, the federal government took the lead in financing local, affordable housing projects. Since then, however, federal housing funds have declined precipitously.

To make up a small portion of this shortfall, the Legislature enacted, and the voters approved, Propositions 77 and 84 in 1988 and Proposition 107 in 1990. Proposition 77 provided for a $150 million general bond issue: $80 million for seismic safety and $70 million for general rehabilitation loans. Proposition 84 provided for a $300 million bond issue, including $200 million for financing new construction of rental units. Proposition 107 authorized the sale of $150 million of bonds, including $100 million for the Rental Housing Construction Program. All of these funds have been committed.

5) Mortgage Bond and Loan Insurance: California is one of five states which has its own

“private” mortgage insurance company, the California Housing Loan Insurance Fund (CHLIF). This has enabled Californians to obtain lower financing in areas and under conditions which the Federal Housing Administration (FHA) or private insurers cannot meet. During the severe devaluation of home prices during 1988 to 1989, CHLIF was able to replace the insurance on those CHFA loans issued by private insurance companies that were collapsing and continue homeowner coverage.

The California Housing Loan Insurance Fund was created in 1977 for the purpose of providing reasonably priced bond and loan insurance, reducing the risk factor in providing loans for single-family and rental housing, including privately financed loans, and securing revenue bonds issued by local agencies.

It was not until 1988, however, that CHLIF earned a claims paying credit rating, thereby becoming the state's equivalent of a private mortgage insurance company. Under an agreement with Standard and Poor's and Moody's, from 1988 until 1991 CHLIF operated under certain rating agency restrictions regarding the types of loans it could insure.

Beginning in March 1991, however, these restrictions were no longer applicable, and CHLIF can provide single-family mortgage insurance to developers of affordable housing outside of CHFA's programs, including for-profit and non-profit developers, redevelopment agencies, and local finance agencies.

Major Legislation*

Amid growing awareness of the affordable housing crisis, legislators in 1997 and 1998 advocated for a number of financing measures to alleviate the problem, including:

SB 50 (Karnette) Proposition 1A on the November ballot: Appropriates $160 million over four years for three housing downpayment assistance programs and one rental assistance program. This part of the school bond package is designed to partially offset the school fees that are charged to housing developers and passed through to new homebuyers and renters as part of the price of the home or rent. (This bill was heard by the Conference Committee on SB 50.)

AB 168 (Torlakson) Chapter 9, Statutes of 1998: Increases the state tax credit for building low income housing from $35 million to $50 million per year for the 1998 and 1999 calendar years.

SB 256 (Lee) As introduced: Authorized the issuance of $200 million in general obligation bonds for statewide housing and homeless programs, subject to voter approval.

This bill was amended August 17, 1998 to extend the deadlines for cities and counties to revise their housing elements, in order for the Department of Housing and Community Development to determine each region's share of statewide housing need. It was signed by the Governor. SB 256 (Costa), Chapter 819, Statutes of 1998.

AB 1697 (Torlakson)Vetoed: As introduced, this measure would have provided a permanent source of funding for the Housing Trust Fund by redirecting 2% of the Bank and Corporations Tax into the Fund. The money would have been used to preserve Section 8 rental units for seniors and families and build new units in areas of the state with high job growth. In its final form, AB 1697 redirected $1 million in Self-help housing funding through the Trust Fund, and required the Legislative Analyst's Office to study sources of funding for the Trust Fund. (This bill was heard by the Assembly Revenue and Taxation Committee.)

AB 1656 (Ducheny) 1998-99 Budget Bill: The budget sent by the Legislature to the Governor included $34 million in augmentations for the following housing programs:

• Preservation of Section 8 housing at-risk of becoming market-rate - $15 million
• Families Moving to Work - $10 million
• Farmworker housing - $6 million
• Emergency Housing Assistance Program - $2 million
• Self-help housing - $1 million.

Unfortunately, the Governor vetoed all the augmentations except $1 million for emergency housing.

 *Not all of these measures were heard by the Assembly Housing Committee.

Other 1997-98 Legislation

AB 92 (Figueroa) As introduced: Changed the California Tax Credit Allocation Committee's voting membership and the application and appeals procedures.

This bill was amended August 24, 1998 to require trial courts to contract with county sheriffs to provide security services. It was signed by the Governor. AB 92 (Cardoza), Chapter 764, Statutes of 1998.

AB 108 (Morrow) - Died in the Assembly Committee on Appropriations: Would have allocated an unspecified amount in bond funds for roof replacement loans to homeowners and homeowners associations.

AB 109 (Kaloogian) - Died in the Assembly Committee on Appropriations: Would have provided a tax deduction to homeowners for the cost of replacing existing roofs with roofs with a higher fire resistance rating.

AB 235 (Takasugi) Chapter 466, Statutes of 1997: Increases the maximum debt that the California Housing Finance Agency may issue.

AB 1383 (Aroner) - Died in the Assembly Committee on Banking and Finance: Would have required the California Debt Limit Allocation Committee to allocate at least 85% of the state's tax-exempt bonds for housing and not more than 10% for exempt facilities.

AB 1696 (Alquist) - Died in the Assembly Committee on Appropriations: Would have established a down payment loan assistance program for first-time homebuyers (i.e., persons who purchase housing units they will occupy and have not had an ownership in a principal residence three years prior to the date of the loan execution).

AB 1826 (McClintock) Chapter 173, Statutes of 1998: Repeals the Community Land Chest Law, which permits the creation of corporations that provide low-income housing in rural and suburban areas.

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LAND USE PLANNING

Housing Element Law (HEL) requires every locality to adopt and update a housing element every five years which includes an identification of existing and projected housing needs, an inventory of land suitable for residential development, and a five-year plan to meet those identified needs.

The housing element, as a planning tool, was initially developed to describe how growth would be accommodated using a “best case scenario” approach. A locality was not expected to build the units, but was required to provide appropriate zoning for the development of the housing need identified within its housing element, including the regional need for housing.

Over the years, amendments have been made to HEL which hold local governments responsible for ensuring that housing is actually built, including identifying specific sites, to accommodate a community's lower income housing unit regional allocation.

In 1981, California began a comprehensive program to allocate among local governments the statewide need for low-, moderate- and above moderate-income housing units. For the first time, each community was required to include in the housing element of its general plan a plan to meet its “share” of California's housing need.

Because both the federal and state governments have consistently reduced funding for affordable housing over the last twenty years, many local governments find it difficult to meet regional allocation goals. In addition to a shortage in resources, local governments are also plagued by the ever-increasing phenomenon of NIMBYism or “not-in-my-back-yard” when efforts are made to provide and disperse additional affordable housing in the community.

Furthermore, cash-strapped cities and counties often engage in the “fiscalization of land use” by prioritizing commercial, retail and industrial development--which generate more property tax revenue--over residential development.

In general, it is agreed that something must be done to streamline the housing element approval process, provide a better balance between jobs and housing, and increase first-time homebuyer opportunities.

Housing Element Process

A local jurisdiction's regional housing needs allocation is developed through the following process:

1) Every five years, the Department of Finance projects statewide growth for the next five-year period. From this data the Department of Housing and Community Development (HCD) establishes the existing and projected statewide need for affordable housing by income group.

2) HCD, in consultation with the regional council of governments (COGs), divides the statewide need into regional shares.

3) The COG distributes the regional need to the county(s) and cities within the region.

4) The local government develops its housing element, which includes the local government's regional share.

5) The local government submits its housing element for review to HCD to ensure conformity and consistency with the statewide need for housing.

6) The local government adopts its housing element after considering HCD's comments and revising its element to reflect those comments or adopting findings as to why HCD's comments should be ignored.

Suspension of the Regional Housing Allocation Mandate

Funding for the Councils of Government to develop each local government's share of the regional housing need was not included in the state budget from 1992-97. In response, AB 2172 (Hauser) Chapter 695, Statutes of 1993, changed the deadline for completion of the housing needs assessment from one to three years. SB 1703 (Costa), Chapter 39, Statues of 1996 and SB 320 (Committee on Housing and Land Use), Chapter 580, Statutes of 1997 pushed the deadline back again to by one to three years for each Council of Government.

The 1997-98 Budget Act appropriated $950,000 for the Southern California Association of Governments to complete its regional housing needs assessment. To provide adequate time for this assessment to be completed and to keep all other revision due dates on track, the Legislature also passed and the Governor signed SB 256 (Costa), Chapter 819, Statutes of 1998. This bill extends the due dates of the housing element in the following manner:

1) San Diego Association of Governments (no change)

Third Revision: June 30, 1999
Fourth Revision: June 30, 2004

2) Southern California Association of Governments

Third revision: June 30, 2000
Fourth revision: June 30, 2005

3) Association of Bay Area Governments

Third revision: June 30, 2001
Fourth revision: June 30, 2006

4) Council of Fresno County Governments, Kern County Council of Governments, Sacramento Council of Governments, and the Association of Monterey Bay Area Governments

Third revision: June 30, 2002
Fourth revision: June 30, 2007

5) All other jurisdictions

Third revision: June 30, 2003
Fourth revision: June 30, 2008

1997-98 Legislation

AB 438 (Torlakson) Chapter 796, Statutes of 1998: Allows local jurisdictions to fulfill a portion of their region's affordable housing needs by providing either substantially rehabilitated units, market-rate units converted to affordable units, or federally assisted multi-family units whose affordability has been extended for 40 years.

AB 1615 (Papan) - Died in the Senate Committee on Rules: States the intent of the Legislature to encourage and promote the construction of housing within transit villages.

SB 320 (Senate Committee on Housing and Land Use) Chapter 580, Statutes of 1997: Enacts the Housing and Land Use Omnibus Act of 1997 which combines 29 relatively minor, noncontroversial statutory changes relating to housing, land use, and redevelopment.

SB 1362 (Senate Committee on Housing and Land Use) Chapter 689, Statutes of 1998: Enacts the “Housing and Land Use Omnibus Act of 1998” which makes non-controversial changes to state laws affecting housing and land use issues.

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MOBILEHOMES/MANUFACTURED HOUSING

Mobilehome Parks

Mobilehome parks are a popular source of affordable housing, especially for seniors and low- and moderate-income families. Statewide, there are 5,750 parks, with 464,778 spaces, housing an estimated 800,000 people.

The mobilehome park industry is facing many changes: few parks are being built; park owners and residents are locked in a struggle of accusations, counter-accusations, lawsuits, and counter-lawsuits; residents are buying their parks through the conversion process and becoming park owners; and a growing number of land-lease manufactured home communities are being constructed which offer affordability without the problems of the park owner/resident relationship.

The age and location of many parks create other problems. Older mobilehome parks suffer from significant infrastructure deterioration: sewers, utilities, roads, and common areas need to be upgraded and replaced. As cities expand, the areas surrounding the parks are developed for industrial or commercial use. Park owners are tempted to sell their land to developers for higher profits, thereby displacing long-time residents.

Senior-Only Mobilehome Parks

Prior to 1988, many mobilehome parks were reserved for adults only (age 18 and over). The passage of the 1988 Fair Housing Amendments Act, which prohibits age discrimination in housing except for senior citizen housing, caused a shift in the demographics of mobilehome parks by forcing owners whose parks did not meet the criteria for senior housing to open their parks to families with children. In 1988, 75 percent of mobilehome parks were either senior- or adult-only parks; by 1994, only 25 percent of parks restricted occupancy to seniors.

In 1995, under pressure from senior groups, Congress enacted HR 660, which eliminated the requirement that senior housing provide significant facilities and services requirements. While this change makes it easier to develop senior housing, it is unclear whether family mobilehome parks will be able to convert to senior parks since 80 percent of the spaces must be rented to a person who is age 55 or older.

New Directions For Manufactured Housing

For the last several decades, the manufactured housing industry has been quietly transforming itself--with quality improvements, imaginative designs, and legislative measures on both federal and state levels--from a narrow-niche builder of &8220;trailers” or “mobilehomes” into a broad-band builder of a wide range of housing products. Many of these new housing products compete quality-for-quality and amenity-for-amenity with conventional site-built housing.

Although still the supplier of mobilehome park housing, the industry has been busy creating new markets for its new products. The industry is producing housing for inner-city infill lots; standard single-family subdivision developments; long-term, land-lease manufactured housing communities; and rural property. More than half of all new manufactured homes are being sited outside of mobilehome parks, with approximately 32 percent installed on permanent foundations in urban, suburban, or rural neighborhoods.

The driving force behind the manufactured home industry is the affordability of its products. Through the efficiencies of factory, and savings generated from a shorter construction schedule, manufactured housing is the most affordable type of housing available in California today. Construction costs average $9 less per square foot than site-built construction. In 1995, the average cost per square foot for site-built construction was $50.00, compared to manufactured housing with an average per-foot “installed” cost of $41.00. For an average 1500 square foot home, the savings amount to $13,500.

Major Legislation

This session, the most controversial mobilehome issues were the future of the state-administered mobilehome inspection program and the creation of a mobilehome transfer disclosure process.

SB 485 (Craven) Mobilehome Park Inspection Program (Chapter 773, Statutes of 1998): The Mobilehome Parks Act originally required the Department of Housing and Community Development (HCD) or the local enforcement agency (city or county) to inspect all mobilehome parks and individual mobilehomes at least once every five years. The program is designed to assure that the state's 5,070 mobilehome parks (376,000 spaces) meet state health and safety standards. Mobilehome owners pay an annual $4 fee to fund the inspection program (AB 925 (O'Connell), Chapter 1175, Statutes of 1990). The Legislature extended the inspection cycle to at least once every seven years (SB 1663 (Craven), Chapter 674, Statutes of 1994).

The inspection program was due to expire on January 1, 1999, and SB 485 originally would have extended the program for another seven years. HCD opposed the legislation, as did the Department of Finance, because the program has been operating at a deficit for years and not all parks have been inspected. Park residents opposed an inspection fee increase since many of them are seniors or living on fixed incomes.

To address these conflicts, a task force met throughout the legislative session. Unfortunately, agreement could not be reached on all issues so the final version of the bill signed by the Governor extends the program until January 1, 2000 to allow more time for the negotiation of still unresolved issues.

SB 1988 (Craven) Manufactured and Mobilehome Transfer Disclosure Statements (Chapter 693, Statutes of 1998): For over ten years, the sale of residential real property has been subject to statutorily defined disclosure of specific conditions of the property. SB 1704 (Craven), Chapter 677, Statutes of 1996, subjected personal property mobilehomes to this requirement. SB 1704 had a delayed effective date of January 1, 1999 to allow resolution of the conflict over who should be responsible for disclosing information about the park facilities surrounding the mobilehome - the seller or the seller's agent.

To resolve this conflict, SB 1704 established a joint legislative task force to recommend to the Legislature the specific form for the mobilehome TDS, including the level of disclosure required by the seller about the mobilehome park. The task force met for three months and produced a report in January 1998 detailing its recommendations. However, members of the task force could not agree on the issue of liability in the event of non-disclosure by the seller about material facts regarding the park or park facilities. Another issue about which no agreement could be reached is the responsibility of the park owner for disclosure about the park facilities. To allow further time to negotiate these issues, SB 1988 extends the effective date of SB 1704 from January 1, 1999 to January 1, 2000.

Other 1997-98 Legislation

AB 672 (Honda) Chapter 367, Statutes of 1997: Clarifies the responsibilities of a mobilehome owner to repair a rented mobilehome park space at the time of sale of the mobilehome.

AB 1227 (Granlund) - Died in the Senate Committee on Local Government: Would have required mobilehome park management to assume responsibility for the trimming of all trees within the mobilehome parks and the disposal or removal of those trimmings.

AB 1478 (Sweeney) - Died in the Assembly Committee on Housing and Community Development: Would have provided mobilehome owners the same protection against deficiency judgments given to owners of conventional housing and houseboats.

AB 2016 (Brown) Vetoed: Would have prohibited mobilehome park management from charging mobilehome park residents more than the actual price paid plus a separate monthly charge for the cost of procuring liquid propane, operating, maintaining, and improving the liquid propane distribution system, and the cost of insurance associated with providing liquid propane butane, when residents are not permitted to purchase the propane from any other source. Also, would have required management to post the actual price paid for propane in a visible location.

SB 104 (Craven) Chapter 154, Statutes of 1997: Under the Veterans' Farm and Home Purchase Act of 1974, sets the maximum purchase price at $250,000 for a mobilehome converted to a fixture and improvement to the underlying real property in a mobilehome park that has been converted to a resident-owned park.

SB 259 (Haynes) Chapter 423, Statutes of 1997: Allows manufactured homes, mobilehomes, and commercial coaches installed on a permanent foundation to be considered either as a fixture to real property, or as personal property, and allows dealers of mobilehomes to work with real estate licensees in resale activities.

SB 384 (Craven) Chapter 71, Statutes of 1997: Extends from July 1, 1997 to January 1, 1998 the deadline for a joint legislative advisory task force to report to the legislature on manufactured and mobilehome transfer (resale) disclosure statements.

SB 484 (Craven) Chapter 72, Statutes of 1997: Makes technical clarifications to the Mobilehome Residency Law regarding senior caregiver rights and the rights and responsibilities of residents of “resident-owned” mobilehome parks.

SB 1987 (Craven) Chapter 667, Statutes of 1998: Requires a person responsible for the operation and maintenance of a mobilehome park to be available in person, by telephone, or by other telephonic device, to respond in a timely manner to park emergencies. Also authorizes park management to adopt emergency preparedness plans that include specified plans and procedures.

SB 2095 (Polanco) Chapter 542, Statutes of 1998: Makes several changes to the Mobilehome Residency Law to correct existing inconsistencies and clarify new sections of the law.

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NATURAL DISASTER ASSISTANCE & PREPAREDNESS

“California has four seasons - earthquake, fire, flood, and drought.” At times, that saying appears to be true. In the past, many Californians have accepted these disasters as facts of life that were soon forgotten. But more recent disasters, such as the Loma Prieta and Northridge Earthquakes and the winter floods of 1997 and 1998, may have altered that perception. The reality of school yards brimming with homeless disaster victims, hospital parking lots crowded with patients, and collapsed freeways and bridges made it clear to government officials, policy makers, and the public that California must be better prepared for future disasters.

When a disaster occurs, the state may be requested by a local government to assist in recovery. Post-disaster assistance generally involves directing funds and resources to the disaster site and implementing existing statutory recovery programs such as the California Disaster Assistance Program (CALDAP), which offers an array of housing rehabilitation funds and assistance to disaster victims. These initial efforts are often followed by urgency legislation which contains narrowly drafted tax exemptions, redevelopment authorities, or enterprise zones to assist in long-term recovery. Following that, administrative or legislative hearings may result in an effort to strengthen and upgrade building standards aimed at reducing future disaster damage.

California's Residential Disaster Assistance Program

CALDAP is a permanent disaster assistance program, administered by HCD, which provides “last-resort” financial assistance to repair owner-occupied and rental housing damaged or destroyed by a natural disaster. CALDAP was developed in response to the 1989 Loma Prieta Earthquake. Financial assistance is only provided to applicants who have exhausted all other forms of assistance, including loans from private lenders, insurance, and the federal Small Business Administration. Since its inception, CALDAP has dispersed over $125 million in disaster assistance. The program, however, has withered in recent years because it was not used.

In conjunction with CALDAP, HCD administers several other disaster assistance programs that address specific subcategories of post-disaster needs, including farmworker housing rehabilitation, rental security deposits, emergency shelters, rural infrastructure rehabilitation, and migrant worker centers. Despite their existence, none of these programs have received any funding since the Loma Prieta Earthquake. (The choice to fund these programs after a disaster is the prerogative of the Governor.)

Seismic Safety

Unreinforced masonry buildings (URMs) are a serious danger during earthquakes. Because URMs lack steel reinforcement bars, they have the propensity to collapse during earthquakes. A strong legislative emphasis has been on identifying and retrofitting these structurally unsafe buildings.

In 1990, the voters approved Proposition 122 (SB 1250 (Torres), Chapter 23, Statutes of 1990), a $300 million general obligation bond measure targeted toward retrofitting state and local buildings, with $50 million reserved for local “essential use” facilities. Essential use facilities are those facilities used in the aftermath of an earthquake and include police stations, fire departments, county hospitals, and courts.

Building standards were also improved. AB 1890 (Cortese), Chapter 951, Statutes of 1989, required all new and replacement water heaters after July 1, 1991 to be braced, anchored, or strapped to prevent them from falling over during earthquakes. SB 304 (Rosenthal), Chapter 98, Statues of 1995, took this concept further by requiring home sellers to certify to buyers that the water heaters have been braced. SB 750 (Roberti/Katz) Chapter 240, Statutes of 1994, required new and moved mobilehomes to be installed in a manner that reduces their movement during an earthquake.

Fire Prevention

Numerous wildfires occur every year during the long, rainless California summers. Many fires are suppressed with little or no structural damage; damage by other fires, however, such as the ones in the Oakland Hills and Malibu, have been extremely severe. The Legislature has responded by authorizing local jurisdictions to enact more stringent fire protection standards than those contained in the California Building Standards Code (AB 2666 (Hansen), Chapter 1111, Statutes of 1990).

Statewide fire-safe roofing was also mandated by the Legislature. In addition to requiring extensive fire prevention measures to be performed by property owners in high-risk areas, AB 337 (Bates), Chapter 1188, Statutes of 1992, required the Department of Forestry and Fire Protection to identify very high fire hazard severity zones in local government jurisdictions, and required all new roofs in these high-risk zones to meet at least Class B fire-safe roofing requirements. In addition, AB 2131 (O'Connell), Chapter 553, Statutes of 1992, required all other new roofs in the state to meet at least Class C standards.

In 1994, roofing standards were increased again by AB 3819 (W. Brown), Chapter 843, Statutes of 1994. This bill also requires jurisdictions with designated very high fire hazard severity zones to adopt a model fire prevention ordinance developed by the State Fire Marshal by January 1, 1997 or mandate Class A roofing requirements within these high-risk zones.

AB 747 (V. Brown), Chapter 333, Statutes of 1995, reduced natural weathering test requirements from 10 to five years and required treated wood roof products to meet specified testing criteria by specified dates in order to be sold in California.

Major 1997-98 Legislation

Major floods in the winter of 1997 tied the 1995 floods as the costliest floods in state history; Over $2 billion in damage to homes, land, businesses, and public roads was reported. Much

of the cost to repair this damage was borne by the federal and state governments; FEMA issued $17.7 million in housing assistance, for both temporary housing and home repairs. The state issued $14 million in individual and family grants.

During and after the floods, homeowners with damaged property complained that they had no idea they were located in a flood plain; other Californians questioned why the state allows construction in hazard areas such as flood plains and high fire zones. All of the disaster-related legislation heard by the Assembly Housing Committee addressed these issues.

The primary piece of legislation was AB 6x (Torlakson) Chapter 7, Statutes of the First Extraordinary Session of 1997-98. This measure requires homesellers and their agents to provide prospective buyers a “Natural Hazard Disclosure Statement” disclosing whether the home is located within any of six specified natural hazard zones. With this measure, the author sought to increased homebuyers' knowledge and encourage them to insure against, or take mitigation measures to avoid, potential damage from natural disasters. Such actions would decrease the cost of natural disasters to taxpayers, who fund most disaster recovery.

Additionally, the author hoped that wide-spread knowledge about building in hazardous areas might spur local governments to more carefully consider their zoning decisions.

SB 71 (Kelley), as amended, delays the effective date of AB 6x until June 1, 1998 (Chapter 2, Statutes of 1998).

Due to a drafting error in AB 6x relating to its effective date, the Legislature then enacted AB 1195 (Torlakson) Chapter 65, Statutes of 1998, which made minor changes to the provisions in AB 6x and deleted AB 6x's original provisions from the law.

Finally, AB 941 (Miller) was amended after the enactment of AB 1195 to allow a homeseller or an agent to give a prospective buyer a “Property Disclosure Consultant's Natural Hazard Disclosure Statement” in lieu of the Natural Hazard Disclosure Statement created by AB 1195, if the seller or agent also delivers a report prepared by a licensed engineer, surveyor, geologist, or other expert. The California Association of Realtors sponsored this measure in order to clarify who was providing the disclosure information to the buyer. This bill died in the Senate Committee on Local Government.

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COMMUNITY REDEVELOPMENT

Redevelopment began in 1945 as a post-war blight removal program that used federal urban-renewal grants to clean up blighted urban areas. These first projects were few in number: 27 projects in 1966. Project size was also limited; prior to 1957, most project areas ranged from 10 to 100 acres.

Today, however, due to the use of tax-increment financing authorized by the voters in 1952 and fiscal restrictions imposed upon local governments by Proposition 13, redevelopment has emerged as a key local financing tool. Redevelopment has grown so tremendously that now there is scarcely a jurisdiction that does not have an agency; there are currently 369 cities, 26 counties, and 5 joint city-county agencies. Many project areas encompass thousands of acres.

Redevelopment offers several unique powers to local officials. First, under redevelopment, jurisdictions can issue bonds without a vote of the people; and second, they can use eminent domain authority to take private property for other private development uses.

Redevelopment agencies accumulate their funds by freezing the property tax base within a project area that has been designated as “blighted.“ With the property tax base frozen, all the affected taxing entities that receive property tax — schools, fire departments, police departments, special districts — continue to receive the same share of property tax that they received in the year when the redevelopment plan took effect. For instance, if a school was receiving $100,000 in property tax in 1990, it continues to receive that amount from the project area throughout the life of the redevelopment plan. Any additional property tax generated above the base year goes to the redevelopment agency. But the agency must share a percentage of this money with the affected taxing entities. A statutory formula requires certain percentages of funds to be passed through to the affected taxing entities. The specific percentages increase through the term of the redevelopment project.

A central interest the state has with redevelopment is its significant fiscal impact on the General Fund. These state costs are the result of the state guaranteeing minimum levels of school funding. Schools currently receive approximately 50 percent of local property tax dollars. When a redevelopment project area is declared and the property tax base within that area is “frozen,“ a large portion of the increase in the property tax increment generated within the project area flows to the redevelopment agency. Schools — unlike all the other affected taxing entities that receive property tax within a project area — are then reimbursed by the state for any amounts that they lose to redevelopment.

These high state costs, the lack of clear public scrutiny, proliferation of agencies, and large project areas make redevelopment controversial. Once agencies are started, they gather momentum and are rarely if ever stopped.

City officials and developers tout redevelopment's benefits and advantages to revive down-trodden urban areas; tax watch-dog groups and adversely-affected business owners view redevelopment agencies as administrative behemoths that gobble up scarce tax dollars and engage in grand-scale development deals of dubious value. The suspicious see redevelopment agencies as engaging in games of fiscal sleights of hand with its true powers only understood by attorneys, consultants, and staff.

In many cases, redevelopment powers have been used prudently and have produced good results. Examples are numerous where a run-down urban area is “redeveloped“ and brought back to life again. In other more-controversial cases, these powers have been used to “develop“ as opposed to redevelop. This happens when large areas of vacant land are deemed “blighted,“ and redevelopment agencies issue bonds without a public vote. These funds are then used to build infrastructure to attract development or to engage in bidding wars with surrounding communities to attract auto malls and “big-box“ retailers and other sales-tax generators.

The Legislature sought to limit redevelopment abuses by passing laws, such as AB 1290 (Isenberg), Chapter 942, Statutes of 1993, to attempt to keep redevelopment focused on removing true urban blight.

Redevelopment Reform: AB 1290

The early 1990's were difficult times for redevelopment agencies. Many members of the Legislature were openly criticizing agencies for adopting large project areas with questionable evidence of blight, engaging in bidding wars with other jurisdictions for new commercial developments, and hoarding millions of dollars in unspent housing set aside funds. The cry for reform was in the air. With little sympathy for the pleas of the defenders of redevelopment, the

Legislature raided these perceived “cash cows“ to help balance the state's budget deficit for two years in a row. In response to this negative environment, the California Redevelopment Association sponsored AB 1290 (Isenberg), Chapter 942, Statutes of 1993, which proposed numerous reforms to the existing redevelopment process. The bill focused on issues that had historically caused concerns among redevelopment critics, including the definition of “blight,“ the length of time a redevelopment plan stayed in effect, and mitigation agreements.

In brief, AB 1290:

• Alters the definition of “blight.“
• Specifies term limits for new and previously adopted project areas, i.e., the term of the redevelopment plan, the term of the available flow of tax increment moneys, and the term of the agency's redevelopment powers.
• Increases and modifies penalties for the failure to expend tax increment moneys in an
• agency's Low and Moderate Income Housing Fund. 
• Authorizes the development of affordable housing units outside the project area to count toward an agency's inclusionary requirements. Under the provisions of the bill, an agency must produce two units outside the project area for every one unit owed.
• Prohibits the dedication of sales tax to an agency by its legislative body.
• Authorizes the financing of facilities or capital equipment made in conjunction with the development or rehabilitation of property used for industrial or manufacturing purposes.
• Deletes provisions relating to negotiated mitigation agreements and, instead, provides for a guaranteed statutory pass-through beginning in the first year of a project area for all affected taxing entities.

Redevelopment and Military Base Closures

Military Base Redevelopment Law (MRL) was adopted during the same time that AB 1290 was being considered in the Legislature. Requests by communities for special redevelopment legislation to assist them in base closure recovery entered a hostile climate. Proposals for a uniform redevelopment law that included special powers and exemptions for closed military bases were rejected. Members of the Legislature preferred to move cautiously, by examining each base's request individually.

Existing MRL made it into law as an amendment into SB 915 (Johnston), Chapter 944, Statutes of 1993, which contained special redevelopment legislation for the redevelopment of Mather Air Force Base. By the time it was enacted, the general consensus was that MRL was moot; many of its provisions (mandatory school pass-through formulas that require schools to receive 100 percent their share of property tax within 15 years, and requirements for the establishment of a fiscal review committee) are more stringent than existing Community Redevelopment Law (CRL). Since the enactment of MRL, communities with closed bases continue to be faced with two choices: either use standard CRL or seek special legislation.

Communities representing Norton and George, Castle, Mather, Fort Ord, March, and Mare Island closed military facilities, have each come to the Legislature over the past several years seeking amendments to redevelopment law. No two bills have been the same. Some had special definitions of blight; others did not. Some allowed territory outside the base to be included; others did not. Some had special tax allocation provisions and housing set-aside deferrals and waivers; others did not. Yet, even with this special legislation, some of these bases chose not to use their special legislation because -- after careful analysis -- they realized that the special legislation was more restrictive than standard redevelopment law.

Major Legislation

One of the most contentious issues faced by the committee this session involved the use of redevelopment agencies' housing funds. By law, a redevelopment agency, with a few exceptions, must set-aside 20% of its revenues in a Low and Moderate Income Housing Fund (L&M Fund). The L&M Fund is used to increase and improve the supply of low- and moderate-income housing within the agency's jurisdiction.

L&M Funds are one of the largest sources of affordable housing money in California. However, some communities been unwilling, due to NIMBYism, or unable, due to high land costs, to spend their L&M Funds. To address this, in 1988 the Legislature created the “use it or lose it“ incentive for an agency to spend its L&M funds. Believing this an inadequate incentive, in 1993 the Legislature enacted AB 1290 (Isenberg), which includes the “use it or die“ law, prohibiting an agency with an “excess surplus“ in its L&M Fund from spending any redevelopment funds for any purpose.

Beside forcing a reluctant agency to build housing within its jurisdiction, existing law also allows an agency to transfer up to 20% of its L&M Fund to another city or county every five years, subject to 23 conditions. No agency has used this transfer authority, largely because the conditions are too stringent, according to the California Redevelopment Association (CRA).

Advocates of low-income housing, such as the Western Center on Law and Poverty, generally oppose the transfer of redevelopment housing funds because they believe it allows an agency to escape its statutory duty to use redevelopment to increase housing in the community. They also believe an agency should not transfer away money that could be used to meet its jurisdiction's share of the region's affordable housing need.

Housing advocates' positions reflect the ongoing debate between the twin goals of fair housing and affordable housing. For 30 years, state policy has required each community to accept its fair share of regional housing needs. This underlying policy is reflected in both redevelopment and housing element law. However, state policy also advocates the production of as much affordable housing as possible as reflected in the current L&M Fund transfer law that allows housing money to be spent in communities where housing construction costs are relatively low.

Sometimes these policies clash. Some local officials resist providing their fair share of affordable housing. In other communities, high prices drive up the cost of building housing. Small communities often cannot generate enough L&M money to produce much housing. These communities all want to send their L&M Funds to other lower-cost communities that are willing, and in some cases eager, to build affordable housing. That approach departs from the goal of fair housing, but embraces the goal of producing as much affordable housing as possible.

Believing that the current transfer law favors fair housing at the expense of affordable housing, legislators introduced three bills this session to revise the L&M Fund transfer law.

AB 941 (Miller) was sponsored by the Department of Housing and Community Development that would have allowed redevelopment agencies in a county and in cities contiguous to that county to pool their L&M Funds under a joint powers authority. The following conditions, among others, would have applied:

1) Participating agencies must meet at least 15% of their share of the regional housing need;

2) The units must remain affordable for up to 30 years; and

3) Agencies with excess surplus would be prohibited from participating.

AB 941 passed the Assembly with the understanding that housing advocates, redevelopment agencies, and the department would work toward resolution of outstanding issues. Ultimately, the bill was amended to deal with natural hazard disclosures and died in the Senate Housing and Land Use Committee (see “Natural Disaster Assistance and Preparedness“ section for more information).

SB 71 (Kelley) would have allowed the 10 redevelopment agencies in the Coachella Valley to transfer their L&M funds to other jurisdictions and receive credit for meeting their share of the region's housing need. According to the Coachella Valley Association of Governments, the most affluent cities in the valley have more L&M funds than they need, while the less affluent communities need more affordable housing. Additionally, they said, the cost of land – and therefore housing – was much lower in the less affluent communities, increasing the amount of affordable housing that could be built if the L&M funds were spent in these communities.

Affordable housing advocates, however, saw SB 71 as an attempt by the affluent communities to escape their housing obligations. They also objected to the provisions of the bill allowing agencies to receive credit toward meeting their share of regional housing needs by funding housing in other cities. Advocates viewed this provision as allowing rich communities to buy their way out of providing affordable housing. Agreement could not be reached on the bill's provisions, and it was eventually amended to deal with natural hazard disclosures (see “Natural Disaster Assistance and Preparedness“ section for more information).

SB 488 (Lee) would have allowed an agency to transfer up to 50% of its tax increment annually to build four types of very low income housing, if the agency had met 50% of its regional housing need. The bill also deleted six of the 23 conditions in existing law, and increased the allowable distance between the two jurisdictions from 5 to 15 miles.

Unlike SB 71 and AB 941, affordable housing advocates supported SB 488 because they believed it struck an acceptable balance between fair housing and affordable housing; it eased some restrictions, but added a requirement that HCD approve all transfers. This provision, they believed, would help ensure that the transfers did not create or exacerbate racial or economic segregation. Redevelopment agencies, however, opposed the bill as still “too restrictive“, and it was eventually amended to revise the annual reporting guidelines and auditing standards for redevelopment agencies (Kopp, Chapter 40, Statutes of 1998).

Other 1997-98 Legislation:

AB 639 (Alby) Chapter 952, Statutes of 1998: Enacts the Defense Conversion, Reuse, and Retention Omnibus Act to provide state assistance to communities with base closure and retention efforts.

AB 699 (Migden) Chapter 898, Statutes of 1997: Allows San Francisco's Board of Supervisors to designate the Treasure Island Development Authority as the redevelopment agency for defined property on both Treasure Island and Yerba Buena Island.

AB 923 (McClintock) Died in the Assembly Committee on Housing and Community Development: Would have repealed the Community Redevelopment Law. Also, would have required that local jurisdictions dissolve their redevelopment agencies, and become the successor to the agency for the purpose of satisfying the existing obligations of the agency.

AB 1342 (Napolitano) Chapter 635, Statutes of 1998: Extends the time limits on redevelopment agency debt and project area plans under specified conditions.

AB 1502 (Campbell) Chapter 53, Statutes of 1997: Allows Orange County to transfer a territory within its redevelopment project area to any city that includes such territory.

AB 1677 (McClintock) Died in the Assembly Committee on Housing and Community Development: Would have required that the creation of a redevelopment agency be approved by a majority of voters in a local jurisdiction, and that the issuing of bonds by a redevelopment agency be approved by a two-thirds vote.

SB 257 (Lee) Chapter 42, Statutes of 1997: Establishes a pilot project under which a home purchased by a police officer with assistance from a redevelopment agency is exempt from the requirement that such a unit remain affordable for “the longest feasible time.“

SB 258 (Lee) As introduced: Would have cleaned up and clarified statutes relating to military base redevelopment without changing their substance.

This bill was amended January 6, 1998 (Kopp) to revise redevelopment agencies' annual reporting deadlines and increases penalties for repeated failure to file financial reports, and was signed by the Governor, Chapter 39, Statutes of 1998.

SB 275 (Kopp) Chapter 565, Statutes of 1997: Makes various changes to existing redevelopment law in order to increase the oversight of redevelopment agencies by addressing redevelopment agencies' reporting and notification requirements.

SB 576 (Lee) Vetoed: Would have revised redevelopment agencies' annual reporting deadlines and penalties for failure to file financial reports.. 

SB 1557 (Johnson) Chapter 989, Statutes of 1998: Allows the City of Tustin to assume the State Historic Preservation Officer's (SHPO) federal regulatory duties for purposes of applying the National Historic Preservation Act at the Tustin Marine Corps Air Station redevelopment project, even if the SHPO has not delegated those duties to the city.

SB 1615 (Lockyer) Chapter 586, Statutes of 1998: Extends by 12 months the time local officials have to certify the environmental impact reports for the Alameda Naval Air Station, Hunter's Point Shipyard, and the San Diego Naval Training Center redevelopment plans.

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RELOCATION ASSISTANCE

In 1970, the Legislature adopted the California Relocation Assistance Act, requiring public entities to provide procedural protections and benefits when they displace businesses, homeowners, and tenants in the process of implementing public projects for public benefit. Typical projects that trigger the payment of relocation assistance are a freeway construction project or the redevelopment of a “blighted” area.

The state law was patterned after the federal Uniform Relocation Assistance and Real Property Acquisition Act. The most significant policy implications of relocation law for affordable housing are:

• the short and long-term costs of displacing and relocating tenants in so-called “blighted” areas in the community, and
• the decrease in an inventory of affordable housing stock that is not being replaced as quickly as it is being eliminated.

1997-98 Legislation

AB 450 (Torlakson) Chapter 597, Statutes of 1997: Adjusts the amount of state relocation assistance and the length of time relocation assistance that can be provided to individuals displaced by a public entity acquiring property for a public purpose. These adjustments make the California Relocation Assistance Act more closely conform to comparable federal law.

AB 2089 (Ackerman) Died in the Assembly Committee on Housing and Community Development: Would have conformed state relocation law to recently enacted federal law requiring states to deny relocation assistance to illegal aliens.

SB 1156 (Costa) Chapter 422, Statutes of 1998: Makes various changes to the statute governing temporary relocation benefits.

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RENT CONTROL

Under existing law, in the absence of state or local law to the contrary, rental rates for real property are established by contractual agreement. Over 100 jurisdictions have established, through ordinance or initiative, some form of rent control on multifamily rental housing or mobilehome park spaces.

Proponents of rent control argue that either state regulation or the prohibition of rent control is inappropriate - each community is unique and local circumstances should determine whether rent control is warranted. Rent control protects persons with low incomes from high rents which result from speculation, low vacancy rates, or the desire for higher profits.

Opponents of rent control argue that rent controls deter new construction of rental housing and discourage investment. Further, rent controls that do not offer adequate returns inhibit the proper maintenance and upkeep of residential property. Finally, it is contended that rent control subsidizes rents for persons who can readily afford to pay market rates.

Rent controls may be generally categorized as “severe” or “moderate.” Severe rent control is characterized by the continuing control of rent when a unit becomes vacant and prohibits a rent increase when a new tenant occupies the unit (vacancy control). Moderate rent control does not control the rent on a unit when it becomes vacant and permits the rent to rise to the market rate

when a new tenant moves in. After this new rent is determined, the rent is again controlled (vacancy decontrol).

Fourteen cities have some form of residential rent control and over 100 jurisdictions have enacted mobilehome rent control. Mobilehome rent control applies to about 1,400 parks covering nearly 150,000 mobilehome spaces.

1997-98 Legislation

No rent control bills were heard by the Committee.

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MISCELLANEOUS

AB 666 (Ortiz) Chapter 262, Statutes of 1997: Authorizes the Director of General Services to sell state property to the Capitol Area Development Authority for residential and commercial uses consistent with the Capital Area Plan.

AB 931 (Thomson) Vetoed: Would have created the California Student Cooperative Housing Act and established the California Cooperative Student Housing Fund in the State Treasury.

AB 1701 (Alquist) Chapter 341, Statutes of 1998: Increases from three months to nine months the amount of notice landlords are required to give tenants and local governments before their federal Section 8 housing subsidy contract expires.

AB 1737 (Torlakson) Vetoed: Would have required the state's federally-designated administrative agency to report annually, beginning in January 1999, to the Legislature on the mortgage restructuring activities for federally-assisted multifamily housing mortgages. Also, would have created a housing preservation component for Section 8 housing in an existing program in the Department of Housing and Community Development.

AB 1984 (Miller) Chapter 293, Statutes of 1998: Eliminates the Department of Housing and Community Development inspection program for new and used recreational vehicles (RVs), and requires RVs sold in California to be constructed in accordance with specified standards of the American National Standards Institute.

AB 2421 (Honda) Vetoed: Would have specified that, as a general partner in a general or limited partnership established to administer publicly-funded housing, a nonprofit organization is not required to verify the immigration status of applicants for the housing.

AB 2737 (Aroner) Chapter 808, Statutes of 1998: Places a sunset date of the year 2004 on the Statewide Supportive Housing Initiative and makes the program contingent on an appropriation in the Budget Act.

SB 219 (Rosenthal) Chapter 477, Statutes of 1997: Expands the authority of nonprofit organizations to purchase properties that have been tax defaulted for more than five years to include purchase of multifamily housing. Authorizes nonprofit organizations to rent to, or otherwise use to serve, low-income persons tax-defaulted property they have bought and rehabilitated.

SB 487 (Solis) - Died on the Assembly Inactive File: Would have renamed the Family Housing Demonstration Program as the Families Moving to Work Program and made various, minor changes to update the program.

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APPENDIX

ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
1997-98 LEGISLATIVE SUMMARY

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