Title
Recommendation to Authorize the Mayor to Sign a Letter of Support for Assembly Bill (AB) 35 Providing Funding for Affordable Housing; and
Recommendation to Authorize the Mayor to Sign a Letter of Support for AB1335, Providing Funding for Affordable Housing. (Community Development 236)
Body
To: Honorable Mayor and Members of the City Council
From: Elizabeth D. Warmerdam, Interim City Manager
Re: Recommendation to Authorize the Mayor to Sign Letters of Support for Assembly Bill (AB) 35 and AB1335, Providing Funding for Affordable Housing
BACKGROUND
Two pieces of State legislation have been recently introduced that are meant to provide significant new resources for the development of affordable and workforce housing. These are Assembly Bill (AB) 35 (co-sponsored by Assembly Speaker Toni Atkins and Assembly Member David Chiu) and AB 1335 (sponsored by Assembly Speaker Atkins).
Staff is requesting that the City Council authorize the Mayor to sign letters of support for this legislation. The draft letters are attached as Exhibit 1.
DISCUSSION
The primary obstacle to developing affordable and workforce housing in the state is the lack of funding resources. Due to the dissolution of redevelopment agencies, the City of Alameda has lost approximately $3 million per year in funds that were used for this purpose. The State periodically issues bonds that provide resources for affordable housing, but demand for the proceeds of these bonds has far outstripped supply. Similarly, the federal Low-Income Housing Tax Credit program (LIHTC) is typically oversubscribed by 3 to 1. That is the equivalent to only one of every three proposed affordable housing projects obtaining the tax credits. However, there are unused tax credits through the federal 4% tax credit program that could be made available for development through changes to the State law that governs the allocation of State credits. These two bills seek to address that allocation process.
AB 35 would increase the California LIHTC by $300 million. The increase in State tax credits would leverage available federal tax credits by as much as $600 million annually. These changes will substantially bolster the State LIHTC and fund additional affordable housing projects.
With respect to housing that seeks to serve the most vulnerable, such as those living with no income or with very low fixed income, the expansion of the LIHTC program alone may not provide sufficient resources to develop units. For these types of projects, an additional source of gap funding is needed. The State Housing Trust Fund was created for this purpose, but the Fund does not have a dedicated source of revenue.
AB 1335 would provide a permanent source of funding to the State Housing Trust Fund. The revenue would be generated by a $75 document recording fee on real estate transactions, but would exclude commercial and residential home sales, and would be capped at $225 per transaction. These funds would be used for the development and preservation of affordable housing of all types, including transitional, permanent, and workforce housing. The funds would also be used for foreclosure prevention and homeownership programs throughout the state. Other projected economic benefits include the creation of approximately 29,000 construction and construction-related jobs annually and the ability to leverage up to $3 billion per year in federal, local, and private investment throughout the state.
In order to be signed into law, each bill will be subject to several Committee votes in both the Assembly and the Senate before being enrolled and sent to the Governor for approval (or veto). Committee hearings are currently underway. Both bills are endorsed by organizations including the League of California Cities, the California Building Industry Association, the California Housing Consortium, California Housing Partnership Corporation as well many trade and business groups.
Legislation creating new funding sources for development of affordable housing is a key concern for the City of Alameda, as well as the State. Studies show that the Bay Area has one of the nation's most workforce housing shortages. In this area, only 15 percent of the total housing stock is affordable for households earning the median family income. This compares with 50 percent to 60 percent in similarly sized metropolitan regions nationwide. Therefore, staff is requesting that the City Council support AB 35 and AB1335.
FINANCIAL IMPACT
There is no financial impact to the City's General Fund to support the proposed legislation described above. There would be a beneficial impact to the City if additional funds were made available for development of affordable housing.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
Support for the provision of a statewide funding mechanism for developing affordable housing is consistent with the Housing Element mandate to ensure housing for residents of all income levels.
ENVIRONMENTAL REVIEW
This action is exempt from the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section 15601(b)(3).
RECOMMENDATION
Authorize the Mayor to sign letters of support for Assembly Bill (AB) 35 and AB 1335, providing funding for affordable housing.
Respectfully submitted,
Debbie Potter, Community Development Department
By,
Victoria Johnson, AHA Housing and Community Development Director
Financial Impact section reviewed,
Elena Adair, Finance Director
Exhibit:
1. Draft letters