Report 2020-108 Recommendations

When an audit is completed and a report is issued, auditees must provide the State Auditor with information regarding their progress in implementing recommendations from our reports at three intervals from the release of the report: 60 days, six months, and one year. Additionally, Senate Bill 1452 (Chapter 452, Statutes of 2006), requires auditees who have not implemented recommendations after one year, to report to us and to the Legislature why they have not implemented them or to state when they intend to implement them. Below, is a listing of each recommendation the State Auditor made in the report referenced and a link to the most recent response from the auditee addressing their progress in implementing the recommendation and the State Auditor's assessment of auditee's response based on our review of the supporting documentation.

Recommendations in Report 2020-108: California's Housing Agencies: The State Must Overhaul Its Approach to Affordable Housing Development to Help Relieve Millions of Californians' Burdensome Housing Costs (Release Date: November 2020)

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Recommendations to Housing and Community Development, Department of
Number Recommendation Status
11

To ensure that all local jurisdictions make sufficient efforts to provide affordable housing, HCD should, by June 2021, develop and implement procedures for actively monitoring local jurisdictions that are not on track to provide the needed lower-income housing units included in their housing plans. Specifically, HCD should identify local jurisdictions with severe underdevelopment of affordable housing and indications of high need for that housing, and it should initiate reviews of those local jurisdictions that include steps to identify why they are not developing needed affordable housing. HCD should then provide technical assistance or take enforcement actions as necessary to help resolve any issues it identifies.

Recommendations to Legislature
Number Recommendation Status
1

To ensure that the State can identify the extent to which its financial resources are supporting its mission to provide a home for all Californians, the Legislature should require HCD to prepare an annual addendum to the State's housing plan and report to the Legislature, beginning January 2022. The addendum should include up-to-date information and identify the following:
- All financial resources for each housing agency for the development of affordable housing.
- The number of affordable units those resources are expected to build annually compared to the annual units needed, including units for individuals experiencing homelessness, those with special needs, seniors, and farmworkers.
- The amount of financial resources the State will need to obtain from other sources, such as federal, local, and private sources, to meet the remaining gap in needed units.
- Where the State's financial resources will have the most impact based on geographic distribution, population, and indicators of need.
- Outcomes to measure how well the State is maximizing the impact of its financial resources to meet the annual units needed, including measuring whether it has reduced cost burden and overcrowding, and increased housing availability.

2

To ensure that the State has sufficient data to determine how much affordable housing it has supported and to maximize the impact of its funds, the Legislature should require HCD to develop the housing data strategy component of its housing plan with input from the Tax Committee and CalHFA. At a minimum, the housing data strategy should include the following:
- A strategy for assigning a unique identifier to state-funded affordable housing projects so that multiple funding sources can be tracked for each project, such as all agencies using a single application process for multifamily housing programs.
- An evaluation of data priorities to measure the distribution and impact of state-awarded funds for affordable housing, such as number of applications, type and amount of funding awarded, number of units created, and project location.

3

To ensure that the State awards financial resources for housing in a more timely and efficient manner, the Legislature should create a workgroup including the Tax Committee, HCD, CalHFA, and other industry representatives such as private lenders and developers, and require it to do the following:
- Develop consistent program requirements for determining eligibility for awarding financial resources to multifamily housing projects, to the extent feasible.
- Align application deadlines for multifamily housing programs.
- Design the requirements and deadlines to best accomplish the goals outlined in the state housing plan and addendum, with the intent to maximize affordable housing built and to remove administrative barriers.
- Update their respective regulations to reference the new program requirements and deadlines.

4

To reduce administrative redundancy and streamline a portion of the funding process, the Legislature should eliminate the Debt Limit Committee and transfer its responsibilities to the Tax Committee, including reviewing applications and allocating bond resources. To ensure a thorough application review process, the Legislature should also require the Tax Committee to develop a sufficient quality control process for reviewing applications for bond resources, including multiple levels of review.

7

To help ensure that all local jurisdictions mitigate key barriers to affordable housing in the near term, the Legislature should amend state law to do the following:
- Increase the existing default densities for affordable housing, currently set at up to 30 units per acre, to a level that ensures that local jurisdictions make every reasonable effort to accommodate needed affordable housing units on sites they identify in their housing plans. Because other standards, such as maximum building height, can also limit density, the Legislature should also require that local jurisdictions' development standards allow developers to build the densities that jurisdictions specify for each potential affordable housing site in their housing plans.
- Require that local jurisdictions allow a streamlined review process with limited discretionary action for affordable housing projects on a site that a local jurisdiction has identified in its housing plan to accommodate affordable housing units.

8

To ensure that local jurisdictions make sufficient efforts to facilitate the development of needed affordable housing in the long term, the Legislature should require HCD to develop and submit to the Legislature specific and objective standards—for example, a maximum number of parking spaces required per housing unit—for how local jurisdictions can mitigate barriers to lower-income housing development across all the potential barriers they control, such as zoning and parking. HCD should tailor these standards to ensure that local jurisdictions implementing them have made it feasible for developers to build the housing necessary to meet lower-income housing goals. The Legislature should also require that HCD consult with local jurisdictions; regional governments; and affordable housing developers, advocates, and researchers in determining these standards. The Legislature should consider this information when developing legislation to mitigate additional affordable housing barriers: for instance, it could require local jurisdictions to adopt the standards for all potential affordable housing sites in their housing plans unless they provide reasonable justifications for using different standards.

9

To facilitate timely and needed affordable housing development in local jurisdictions that are not approving it, the Legislature should amend state law and consider the constitutionality of establishing an effective appeals process for developers of affordable housing projects. For example, it could consider doing the following:
- Create an appeals board within HCD to resolve disputes over affordable housing projects in a timely and fair manner. The Legislature should specify that the appeals board include at least one representative from local jurisdictions.
- Allow a developer of an affordable housing project to appeal to the appeals board if the local jurisdiction in which the developer has proposed the project is not on track to provide its needed lower-income units, if the project would contribute significantly to the local jurisdiction meeting that need, and if the local jurisdiction has unreasonably denied or delayed the project.
- Require the appeals board to render decisions on appeals in a timely manner and to approve an appeal for a project if it meets the criteria above and is consistent with state and local standards.
- Specify parameters for any subsequent litigation that challenges or enforces the state appeals board's decisions so that these decisions are enforceable and developers of affordable projects meeting reasonable standards can build as soon as is feasible.

10

To better leverage local and private resources and develop more affordable housing, the Legislature should consider amending state law to award a significant amount of nonhousing or flexible funds, such as existing transportation funds, to local jurisdictions based on the number of lower-income housing units they have approved relative to their needs allocation.

Recommendations to Tax Credit Allocation Committee, California
Number Recommendation Status
5

To ensure that the allocation of bonds aligns with the State's housing priorities and that its awards process is sufficiently transparent, the Tax Committee should, by May 2021, establish regulations to do the following:
- Consistently allocate bonds based on factors including demand for bond resources, use of previously allocated bonds, documented legislative priorities, and risk of allocated bonds being lost.
- Document and disclose annually in its public meetings and on its website the extent of any bonds lost, the purpose for which the bonds were allocated, and the rationale for the allocation.

6

To ensure that tax credit awards are targeted to areas that require the most support from the State to finance affordable housing, the Tax Committee should immediately identify areas from which it has not received applications or areas with fewer awards per population and use that information to inform regulatory changes to attract more affordable housing developers to those areas.

12

To ensure stronger enforcement that encourages project owners to keep housing affordable and habitable, the Tax Committee should amend its regulations to take more meaningful disciplinary action against housing project owners that show patterns of noncompliance across multiple inspections. These changes may include but are not limited to the following actions:
- Develop clearer guidance for penalizing project owners who have a history of noncompliance when applying for tax credits for future projects; the guidance should establish the specific conditions that would warrant imposing penalties on a housing project.
- Include in its regulations procedures for imposing fines and change guidance to permit the committee to impose fines if a housing project shows a pattern of certain types of noncompliance, regardless of whether the noncompliance is corrected during the correction period.

13

To ensure that it complies with federal law, the Tax Committee should report all instances of noncompliance to the IRS unless federal law or guidance provides an exception.



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