Affordable housing law expected to prevent foreclosures

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(The Center Square) – A new law taking effect next year will give affordable housing owners more options in avoiding foreclosure.

Assembly Bill 2020, authored by Assemblymember Jesse Gabriel, D-Encino, will allow the California Department of Housing and Community Development to permit owners to transfer money produced by their affordable housing units to another property to prevent the latter's foreclosure.

The law is meant to keep affordable housing units on the market in California and protect taxpayers’ investment in the state’s affordable housing market, according to the bill analysis.

“California’s affordable housing developments currently operate on razor-thin margins,” Gabriel told The Center Square via email on Tuesday. “We cannot afford to lose units that took years and significant public investment to create – especially to a foreclosure that could have been prevented. Preserving what we’ve built is far more cost-effective than starting over.”

According to supporting statements submitted as part of the bill analysis, affordable housing developments in California operated with very narrow margins, and they're dependent on carefully structured financial reserves and operating income to stay viable. Insurance costs, the cost of maintaining the property and other operating expenses created financial strains for many of these properties, according to supporters of AB 2020.

“When these developments experience operating deficits, the risk of financial distress or foreclosure increases, putting critical affordable housing units, and the residents who call them home, at risk,” Enterprise Community Partners Inc. wrote in comments supporting the bill earlier this year. “This flexibility enables developers to stabilize struggling properties using existing portfolio resources, helping ensure the long-term viability of affordable housing developments.″

There was no opposition to AB 2020, according to the last version of the bill analysis. The state’s bill tracking tool shows that no legislator voted against the bill, either in committee hearings or on the Assembly and Senate floors.

According to a housing report published by California Housing Partnership, an organization formed to preserve affordable and sustainable homes, California’s taxpayers paid for the construction of 23,000 new affordable housing units in 2025. But the organization said that only amounts to 20% of what the state needs to pay to meet its affordable housing goals.

No one from California Housing Partnership responded to The Center Square's request for comment on Tuesday.

Wayne Winegarden, an economist at Pasadena-based Pacific Research Institute, told The Center Square on Tuesday that while he thinks AB 2020 is a good bill, he believes a better solution to addressing the state's affordable housing problems involves reducing regulatory delays and costs. 

"I think it's a Band-Aid on a bullet wound when you talk about housing affordability issues," Winegarden said. "While this is helpful, it's not getting to the crux of the problem. It's a good bill; he should sign it.  It will help some people, but we shouldn't be thinking this is the solution."