HCD seeks statutory authority to unlock excess equity from existing projects to fund new affordable housing

The Department of Housing and Community Development asked the subcommittee to approve trailer bill language that would let HCD create an "excess equity" policy to extract cash from existing HCD‑funded projects and reuse it for preservation, rehabilitation or development of additional affordable housing.

HCD deputy director Jennifer Seeger told the committee the department currently lacks statutory authority to allow developers to extract equity gains from projects funded by HCD. She said, if authorized, the policy could create a revolving source of funds to support preservation and new projects.

What the LAO said: Paul Steenhausen of the Legislative Analyst's Office told members that initial conversations with developers and HCD indicate the authority could unlock "tens of millions" of dollars from properties with excess equity. LAO noted that the current trailer bill draft leaves policy details to HCD guidelines, which the department says is intentional to preserve flexibility. The LAO suggested an alternative: approve the authority but require HCD to consult stakeholders and report back to the Legislature with proposed criteria so the Legislature can codify guardrails if desired.

Legislative comments: Committee members said they broadly supported the concept but urged careful drafting to avoid creating procedural barriers or unintended restrictions that would discourage use of the authority. Members asked about geographic restrictions and whether funds would remain regionally or locally revolving; HCD staff said the department envisioned a revolving source of funds and planned rapid outreach to interested sponsors if the authority were enacted.

Public comment: Housing organizations at the microphone registered support for the trailer bill concept and urged the Legislature to adopt language that enabled practical use of the tool. HCD staff told the committee the department had been in contact with potential project sponsors and that the scale of interest suggests a substantial potential new funding stream.

Ending: Committee members asked HCD to refine language and report back as part of budget negotiations. LAO recommended statutory reporting or a return‑to‑the‑Legislature step if the Legislature wants to preserve formal guardrails over eligible uses.