California Housing Finance and Credit Act.

Senator Cortese's California Housing Finance and Credit Act establishes a state-backed credit enhancement program to stimulate private investment in affordable housing construction. The program, administered by the California Housing Finance Agency, would provide loan insurance and credit enhancements for both construction and permanent financing of affordable housing developments starting January 2027.

The legislation creates the California Housing Finance and Credit Fund to support these credit enhancements through premium charges of up to 2% on insured loans. The fund would operate without direct state cost, with monies continuously appropriated for insurance activities and administrative expenses. To maintain fiscal stability, the Governor must set annual limits on the agency's loan insurance authority through the budget process.

Under the program, developers seeking credit enhancements must meet specific eligibility criteria, including maintaining long-term affordability through regulatory agreements or equivalent commitments. The agency holds broad authority to manage defaults through property acquisition, loan modification, or direct intervention to cure borrower defaults. All debentures issued under the program carry the state's full faith and credit guarantee and rank equally with general obligation bonds.

The bill requires annual agency reporting on program operations and biannual effectiveness evaluations by the Legislative Analyst's Office. Implementation depends on voter approval of a related constitutional amendment in the 2025-26 session. The measure aims to address California's affordable housing shortfall, with legislative findings noting that only 20% of needed very low-income units and 30% of low-income units were permitted in the most recent housing element cycle.