I wanted to take a moment to share some thoughts with you following the Department of Housing and Community Development’s release of the proposed amended Loan Portfolio Restructuring (LPR) Guidelines—developed in response to AB 130 and SB 686. Many of you know that CCAH drove the changes through legislation that allow for the extraction of equity from performing projects under certain conditions.
These changes, if administered in the spirit under which the author and working group envisioned them, represent a major shift in how affordable housing owners can manage long-term assets, reinvest in their portfolios, and help move new projects forward. CCAH has been tracking this process closely, and I recently spoke at the public workshop to make sure our members’ perspectives were clearly heard.
Below are my full remarks, which outline both our strong support for key components of the guidelines and our serious concerns about others.
“My name is Jenna Abbott and I’m the executive director for the California Council for Affordable Housing.
I want to begin by thanking the Department and staff for the extensive work that went into developing the amended Loan Portfolio Restructuring Guidelines. These guidelines reflect a significant effort to implement new statutory authority and to modernize the LPR program in a way that responds to today’s affordable housing financing realities.
- We strongly support the Department’s authorization to allow the extraction of equity from performing affordable housing properties.
- Allowing equity to be reinvested into new affordable housing developments or used for rehabilitation and capital needs is a critically important policy change, particularly given ongoing construction cost increases and limited public resources.
- We appreciate that the guidelines
- Maintain strong tenant protections, including prohibitions on rent increases resulting from equity extraction.
- Ensure that extracted equity is used for clearly defined, affordable-housing-related purposes, including rehabilitation, preservation, and new production.
- Provide flexibility for sponsors to better manage long-term asset health while keeping properties affordable.
- Overall, the equity extraction provisions represent a thoughtful and overdue tool to unlock value in well-performing assets and redeploy it to meet California’s affordable housing goals.
At the same time, we have serious concerns about the level and number of fees proposed in the guidelines.
- The combination of transaction fees, ongoing monitoring fees that feel out of scale and additional restructuring-related charges may significantly reduce the financial feasibility of equity extraction, particularly for smaller and mid-sized nonprofit or mission-driven sponsors.
- Further, we are concerned that high or layered fees could unintentionally discourage participation, thereby limiting the very outcomes—rehabilitation, preservation, and new production—that the guidelines are intended to promote.
- We are also concerned about the overall complexity of the proposed regulations.
- The number of required analyses, approvals, and ongoing compliance obligations may make the program difficult to navigate, especially for properties with smaller equity positions or urgent rehabilitation needs.
- We encourage the Department to continue exploring opportunities to
- Simplify processes where possible,
- Improve clarity and predictability in underwriting and approval criteria, and
- Ensure that the program is accessible to a broad range of affordable housing owners—not just those with extensive legal and financial resources.
In closing, we appreciate the Department’s leadership and its willingness to create new tools to preserve and expand affordable housing. We look forward to continued collaboration to refine the fee structure and streamline implementation, so that these guidelines can fully achieve their intended impact. We will be submitting written public comment that further explains our perspective on these proposed guidelines and makes suggestions to improve some of the issues areas.”
Today we also submitted written public comments and a full copy of our letter can be found here. If you have questions, concerns, or examples from your own portfolio that you need help with, please reach out—I want to make sure the Department understands the real-world challenges our members face and that the LPRs serve the purpose of providing affordable housing for Californians.
In partnership and growth,
Executive Director, California Council for Affordable Housing