California Affordable Housing Authority Bill Signed Into Law

Public Finance Alert

California Assembly Bill 1598 (Mullin) (“AB 1598”), signed into law by the Governor on October 13, 2017, authorizes cities and counties to create new affordable housing authorities for the purpose of financing low- and moderate-income housing within their city or county boundaries. 

Cities and counties have long had the ability under California’s Health and Safety Code to create housing authorities tasked with the broader responsibility of investing in lower-income areas and revitalizing lower-income communities.  The new housing authorities to be created under AB 1598 (each an “Authority”) will be limited to the narrower purpose of financing low- and moderate-income housing within the boundaries of the cities and counties that create them. AB 1598 directs that an Authority will create a special, separate fund to accomplish its purposes and, after holding a public hearing, adopt a plan to develop low- and moderate-income housing projects for its communities. Sponsor cities and counties are authorized by the legislation to pledge to these statutorily required funds some or all of their share of property tax increment revenues. The Authorities may, in turn, be able to finance projects by issuing bonds payable from these pledged property tax increment revenues. Sponsor cities and counties may also pledge some or all of certain other tax revenues, such as revenues derived from the Bradley-Burns sales and use taxes, provided that the purposes of these taxes are consistent with providing low- and moderate-income housing.

While AB 1598 gives local governments an additional tool for financing lower-income housing projects, the bonding authority may require clarification through subsequent legislation. Moreover, the law may be met with legal opposition from groups opposed to allocating revenues derived from general taxes, which only require approval from a majority of voters, to specific purposes such as lower-income housing. The opposition may argue that sponsoring cities and counties need a two-thirds approval from voters before allocating such tax revenues to lower-income housing projects. AB 1598 will go into effect on January 1, 2018.