A watered-down version of a California bill that would have allowed the state's credit to support affordable housing bonds is advancing in the legislature.
Amendments to the bill mean efforts to apply California's full faith and credit to provide credit enhancement for affordable housing debt will be deferred.
Sen. Dave Cortese, D-San Jose introduced Senate Bill 750 last year. The original bill would have created a state-backed credit enhancement program administered by the California Housing Finance Agency to guarantee loans and wrap municipal bonds for affordable housing.
The amended version the Assembly passed Thursday would just require the CalHFA to conduct a comprehensive assessment of potential credit enhancement mechanisms.
The bill
The amended version requires the California Housing Finance Agency to conduct an assessment of potential credit enhancement mechanisms designed to reduce borrowing costs for housing projects receiving state financial assistance by July 1, 2028.
The bill requires CalHFA to submit an interim assessment to the Legislature and the Department of Finance by January 1, 2028, and the final assessment by July 1, 2028.
The assessment, according to the bill language, should include a review of credit enhancement structures applicable to both construction phase and permanent financing, with a primary emphasis on construction phase risk and strategies to reduce construction loan interest rates and financing volatility.
Some of the areas the bill says the study should include are mechanisms to reduce construction and permanent loan interest rates, provide credit enhancement options for state-funded projects that do not use available federal mortgage insurance or risk-sharing programs, and provide credit enhancement to complement local and regional bond projects.
Since 2017, state lawmakers and
"The Legislature has also created streamlined development approval processes and reduced opportunities for local governments to disapprove of quality permanent housing projects and homeless shelters, which have sped-up the approval of these processes and reduced costs associated with unreasonable project delay," according to the analysis.
The analysis also alluded to Gov. Gavin Newsom's and the Legislature's efforts to hold local governments accountable for planning additional housing in exchange for the billions in dollars it has allocated to encourage more housing.
The state's "affordable housing pipeline includes projects that could provide rental housing for up to 559,944 low to moderate-income households. Given the state's current budget climate, we are in desperate need of a mechanism to unlock affordable housing with minimal cost to our general fund," Cortese said in a statement attached to the Senate analysis.
The original legislation was modeled after the Cal Mortgage Program at the Department of Healthcare Access and Information, which Cortese said provides a clear precedent for using the state's credit to attract private capital to projects the state desperately needs.
"For over 50 years, that program has insured loans totaling $9 billion without an ongoing cost to the general fund," Cortese said. "It's time to do the same for housing."
A voter-approved constitutional amendment would have been required to implement the original version of SB750 by authorizing the use of the state's full faith and credit.
