Date: 03/05/2008
Final
BILL SUMMARY for HB08-1340
HOUSE COMMITTEE ON FINANCE
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01:32 PM -- House Bill 08-1340
Representative Judd, chair, called the meeting back to order. Representative Kefalas, prime sponsor, explained the provisions of HB 08-1340, which refers a measure to voters in November 2008 to approve an increase in the county documentary fee on real estate transactions to provide funding for an affordable housing fund to help fund affordable housing in the state. He explained that 38 states have created affordable housing funds, which can provide a way to leverage money to increase the availability of affordable housing. He noted that his proposal has been well researched and vetted, and that the state needs to create new strategies to provide affordable housing since federal resources have been decreasing. A fact sheet on the bill and the need for more affordable housing in the state was distributed to the committee (Attachment F). He explained how affordable housing projects can be an economic development tool and that a housing fund could be used to leverage other resources for affordable housing projects.
01:41 PM
Representative Kefalas continued by discussing the details of HB 08-1340, including how the housing fund would be administered and funded. He explained that the proposed fee increase is less for commercial transactions than for residential transactions because commercial properties have higher tax burdens than residential properties. He stated that the housing fund would provide grants and loans to help fund a variety of affordable housing-related projects. In response to committee questions, Representative Kefalas discussed the proposed increase in the documentary recording fee as a source of funding affordable housing projects and its impact on the real estate market.
01:50 PM
The committee continued to discuss the impact of a higher documentary recording fee on the real estate market and the potential positive and negative impacts of creating an affordable housing fund. It also discussed the definition of affordable housing in the bill.
Representative Kefalas clarified that resources from the proposed housing fund would not be provided directly to individuals, but to local governments and other entities to help fund affordable housing projects. He thought that the bill would not hurt the real estate market, but help it by helping more people attain housing.
The committee discussed whether there was a nexus between the documentary recording fee and funding affordable housing. It also discussed whether the proposal should be considered a new real estate transfer tax and the proposal's TABOR implications.
02:00 PM
Representative Labuda commented on whether the proposal needed stronger support than indicated in Attachment F before it is voted on.
Representative Bruce appreciated that the bill had a provision for voter approval, but stated that TABOR prohibits any new transfer taxes. Representative Kefalas stated that a separate concurrent resolution would need to be drafted to amend the constitution to allow for the increased fee proposed in the bill. Representative Bruce also stated that the language in the bill referring the proposal to voters needed to be changed so that it was consistent with TABOR.
The committee continued to discuss whether the proposal created a new transfer tax, which is prohibited by the state constitution, and whether such a funding source for affordable housing was good policy.
02:11 PM
Representative Bruce questioned how the proposed housing fund would provide loans for affordable housing and the potential impacts if such loans were to default. Representative Kefalas explained that the loans would be used by entities to lower the per unit costs to help create more affordable housing.
The following people testified on the bill:
02:17 PM -- Mr. Greg Zadel, Colorado Association of Realtors, spoke in opposition to the bill. He stated that he supported affordable housing and discussed the ways in which his association is involved with helping provide more affordable housing. He stated that the biggest impediments for people to afford to buy homes are the down payment and closing costs, which the bill would increase. He explained why the proposal would hurt the real estate market and how it would act as an impediment for lower income individuals who want to buy homes. He suggested that there needed to be an affordable housing needs assessment conducted first before increased fees or taxes were imposed. He indicated that about $700 million annually was already being spent on affordable housing in the state through various programs.
02:28 PM
The committee discussed the implications of the proposal with Mr. Zadel. He thought that the additional money provided by the bill could be effective if it was targeted appropriately.
Representative Kefalas distributed the executive summary of the Colorado Blue Ribbon Panel on Affordable Housing final report and the "2008 Housing Colorado Fact Book," published by Housing Colorado (Attachments G and H).
Mr. Zadel distributed a handout prepared by the Colorado Association of Realtors documenting the expenditures by various organizations relating to affordable housing projects in Colorado in 2006 (Attachment I). He stated that there is an affordable housing issue in the state but that the bill did not provide the most efficient way to solve the problem; each area of the state has unique affordable housing issues that require different solutions.
02:41 PM
The committee discussed how the bill could help increase affordable housing in the state and the current funding sources for affordable housing.
02:46 PM -- Mr. Eric Morgan, Land Title Association of Colorado, spoke in opposition to the bill, citing the same concerns as the Colorado Association of Realtors. He stated that the additional costs on real estate transactions imposed by the bill would place greater hardship on both housing consumers and the struggling housing industry.
Representative Bruce commented that housing prices come down if there is not enough buyers at existing prices.
02:50 PM -- Mr. Daniel Sung, Colorado Apartment Association, spoke in opposition to the bill. He stated that the real estate industry is already disproportionately taxed compared to other industries and that it should not bear the burden of solving the affordable housing issue. He commented on the large fee increase proposed by the bill. He thought that since the bill's fiscal note was based on older data, the cost to consumers would be higher than indicated. He supported increased resources for affordable housing from the state's general fund so that all Coloradans would be helping address the issue, not just the real estate industry.
02:55 PM -- Mr. Bob Moody, National Association of Industrial and Office Properties and the Colorado Competitive Council (C-3), spoke in opposition to the bill. He thought that placing increased costs on the real estate industry was not the appropriate approach to provide more affordable housing. He stated that the commercial market was not a reliable source of revenue and was about to experience a downturn like the residential market has.
02:58 PM -- Mr. Randle Loeb, representing himself, spoke in support of the bill, explaining that the state needed a greater supply of affordable housing to help people without stable homes have more productive lives.
03:01 PM -- Ms. Alana Smart, Housing Colorado, spoke in support of the bill. She distributed a handout providing information on affordable housing needs and funding (Attachment J). She discussed the Colorado Blue Ribbon Panel on Affordable Housing's proceedings and recommendations. She explained that the panel had difficulty agreeing on a funding source for affordable housing. A mediator helped narrow down options for funding sources, one of which was an increase in the documentary recording fee. She discussed the reasons for why there was a need for more stable affordable housing funding in the state. She closed by stating that the bill would help the housing market and would provide an effective and accountable way to increase affordable housing.
03:12 PM
In response to committee questions, Ms. Smart provided her thoughts on why the state was not receiving more funding for affordable housing from the federal government. She thought that the funding formulas were more focused on providing resources to east coast and rust belt cities, but that she would need to do more research on the issue. She also commented that Colorado's most significant affordable housing need is increased rental housing and that the government subsidizes homeownership for all homeowners with the mortgage interest deduction. A document providing information on the tax benefits of owning a home was distributed to the committee (Attachment K). She indicated that the terms, "documentary fee" and "real estate transfer tax" were used synonymously in the blue ribbon panel's proceedings.
Representative Lundberg questioned Ms. Smart's assertion that the government subsidizes homeownership for all homeowners. The committee discussed how to best fund additional affordable housing in the state.
03:25 PM -- Mr. Chris White, Colorado Housing and Finance Authority (CHFA), spoke in support of the bill. He discussed the resources CHFA uses to help increase affordable housing, specifically the federal low income housing tax credit and the federal private activity bonds program. He stated that demand for the tax credit is over four times higher than what is available; demand for the private activity bonds program is also higher than what is available. Both provide more stable financing tools than what has been available from private sources.
Representative Bruce discussed his beliefs that it was inappropriate for government to take money from one group of people to another because they have unmet needs. He also thought that the proposal would unintentionally cause higher housing prices, making homes more unaffordable. Mr. White stated that the unmet need that the proposal is trying to address is more affordable housing for low-income individuals and families. He also indicated that the additional resources provided by the bill could be used to leverage more private activity bonds for affordable housing.
03:32 PM
The committee recessed for a break.
03:40 PM
Representative Benefield, vice-chair, called the meeting back to order.
Mr. Ken Hoagland, Housing Colorado, spoke in support of the bill. He explained his involvement with developing affordable housing and distributed an attachment providing information on the resources needed to develop affordable rental housing (Attachment L). Another handout with a listing of the supporters of an affordable housing fund was distributed (Attachment M). The committee discussed the handout providing information on the resources needed to develop affordable rental housing.
03:49 PM -- Ms. Betty Lacino, Colorado Coalition for the Homeless, spoke in support of the bill. She explained that the rate of homelessness is increasing due to the higher costs of housing, more poverty, and less resources available to help individuals attain housing. She discussed why she thought stable housing was important for a family's welfare.
Representative Bruce discussed the role of personal responsibility in attaining housing. Ms. Lacino indicated that many people needing help attaining housing are working full time.
04:00 PM -- Ms. Misty Padilla, representing herself, spoke in support of the bill. She explained how she had lost a place to live and how an affordable housing program has helped improve her life.
04:02 PM -- Mr. Ray Merenstein, Colorado Housing Investment Fund, spoke in support of the bill. He discussed a survey conducted to measure the level of support on an affordable housing fund and funding it with a documentary fee. He indicated that the survey showed majority support for an affordable housing fund. A document showing the survey results was distributed to the committee (Attachment N).
The committee discussed the survey results and questioned the level of support for an affordable housing fund to be funded with a documentary fee. Mr. Merenstein commented that the survey indicated that there was a need to provide more information to people on an affordable housing fund and how to fund it.
04:14 PM -- Ms. Melanie Davis, Habitat for Humanity, spoke in support of the bill. She told the committee about how she had lost a place to live and how the Habitat for Humanity affordable housing program has helped improve her life.
Representative Lambert thought that the Habitat for Humanity program was a different affordable housing model than the one proposed by the bill. Ms. Davis responded that the bill could help provide more resources for the Habitat for Humanity program.
04:20 PM -- Mr. Eugene Lucero, Lucero Group, a firm that provides resources for affordable housing, spoke in support of the bill. He discussed the need to provide more affordable housing resources. He thought that the proposed documentary fee increase was minimal in relation to the other closing costs that provide a barrier to homeownership.
04:31 PM -- Mr. Brad Wood, Hunger for Justice, spoke in support of the bill. He thought that everyone deserves to have housing and discussed the difficulties low income families encounter due to the high cost of housing.
04:35 PM -- Mr. Troy Gladwell, Medici Communities, an entity involved with helping provide affordable housing, spoke in support of the bill. He discussed federal programs available to help fund affordable housing and stated that the costs for providing affordable housing are increasing. He stated that the bill would help fill the existing gap in resources that are necessary to help make affordable housing projects more feasible. He thought that Colorado citizens should have a chance to vote on the proposal.
04:40 PM -- Mr. Bill Myers, Sierra Club, spoke in support of the bill. He thought that the documentary fee increase proposed by the bill was relatively minimal and is a widely used mechanism to help fund affordable housing. He commented on how workers who provide basic services in mountain resort communities have to commute long distances to work. He thought that the bill provided a step in the right direction for increasing affordable housing in the state.
04:44 PM -- Ms. Kathi Williams, Colorado Division of Housing, indicated that the Governor currently does not support the bill.
04:45 PM
Representative Kefalas made closing remarks on the bill and asked for the committee's support.
Representative Judd took the bill off the table.
04:50 PM
The committee adjourned.