HOUSING REFORM

California needs more millions of more housing units. However no one wants to build affordable housing because rent control limits the return on the investment that most investors want to see so as to be compensated for the risk in building the housing. My housing reform centers around reducing the risk financially in getting started. I propose extending the concept of the Small business Administration and creating a Housing Development Administration which is tasked with the responsibility similar to that of the Small Business Administration of giving loan guarantees for good projects involving the construction of additional affordable housing and assuring a reasonable return to the borrowers if certain requirements on renting are met 

Surprisingly this is not a new idea. But its implementation would be new when applied to housing reform . California already has an agency IBANK which is authorized to make small business loans but not of the type or amounts which would be needed to redevelop the housing market of California 

My HDA will guarantee building loans for apartments with state guarantees thus making the loans easier to get as lower down payments or perhaps none at all will be required. State bank would be required to participate in the loans if they wants state funds deposited into their banks and a list if participating banks would be posted on the web so people can know if their bank supporting housing development in California. 

In order to get the loan guarantees the builders, would have to agree to rent the premises at lower rate than current fair market value because their direct investment was less and thus their financial risk will be lower and yet their return of actual investment is higher . A win for all 

In addition since the loan is coming from state guarantees, local and state employees would have first preference on the housing as a way for helping to keep such employees. 

It would also be agreed that rent increases would be reasonable not to exceed a set percentage for the community, for example 8 percent a year. Except for those terms, the owners would be free to run their rental housing in accordance with all other existing laws. The rental terms would would last through the term of the loan and even if paid off early would still continue to the end of the original loan date 

These housing loan guarantees could also be obtainable by home owners who wanted to add a rental housing unit to their homes if permitted by local zoning. Under the program units have to be

rented. Making the payments alone on the loan will not cancel the obligation. If a loan is taken but never rented and even if the loan is paid off the rental obligation will continue until it is rented thus putting a lien against the property. 

These HDA Loan Guarantees will generate funds in the private sector for the construction of affordable homes which will generate reasonable profits to the borrowers without interference of rent control As the funds are guaranteed by the state, the bowwow has less at financial risk at stake so he can charge less on the rents and still make a profit. Without the guarantee, the risk or down payment might be too high to justify doing the project or the return on actual investment too low for the amount of money actually invested. These are business decision which exist with any deal but the HDA loan guarantee lessens those risks for the borrower and in the end helps the State, the borrower and tenant in getting affordable housing. The state is not putting money out at all unless a loan fails and it must foreclose. With the high demand for housing, such an eventuality may still happen but it will be occasional and infrequent.