SB 233-TEACHERS/HEALTH CARE PROFESS HOUSING LOAN    2:16:42 PM CHAIR DAVIS announced consideration of SB 233. She said she did not bring a committee substitute because there were no recommendations for changes. BRYAN BUTCHER, Public Affairs Director, Alaska Housing Finance Corporation, Anchorage, AK, said that SB 233 does two things. Five years ago a program was established at AHFC to allow teachers and registered nurses to purchase a home without a down payment. Communities were having difficulty recruiting and retaining teachers and nurses and one of the biggest hurdles for home ownership for young teachers and nurses was coming up with money for a down payment. A sunset date was established which expires July 2008. The program has been quite successful; 373 teachers and nurses have taken out mortgages in 34 different communities across the state at no additional cost to AHFC or the state. Of the 373, there has only been one foreclosure. AHFC would like to remove the sunset date and make it a permanent program as well as to expand it beyond nurses to include all health care professionals. 2:19:21 PM SENATOR DYSON asked where the homes are. MR. BUTCHER referred to a list of all the communities since the inception of the program. 'E' designates teacher loans and 'H' designates nurses. There have been 100 loans for teachers and 77 loans for nurses in Anchorage. The majority of the loans take place in urban Alaska although there were some in rural Alaska. The program is a partner to the rural teacher and nurse loan program funded through the capital budget. SENATOR DYSON said he didn't know the program would be used on the road network. He said these are good paying professions and wondered why a nurse would need a loan in order to get a house. MR. BUTCHER said that when the program started they had talked to people who said they wouldn't have been able to get a mortgage because they were just out of school and had outstanding student loans. The starting salary for teachers isn't a lot. The normal amount of mortgage insurance requires a 20 percent down payment, but on these loans the requirement is 30 percent in order to cover the corporation in case there are defaults. SENATOR DYSON said this makes the jobs more attractive and it's different than what he anticipated. Housing for professionals in very rural areas off the road system is a huge crisis. He said he's disappointed there isn't more for them. He also asked if there's a similar program for housing for public safety officers slated for the future. MR. BUTCHER said the agency is open to expanding the program to public safety officers in the future but it plans to move slowly. He said that because these are unique programs, they are seen by the rating credit agencies as non-conforming loans. Since the loans don't fit into the normal categories, they are weighed more heavily when looking at the credit rating of the recipients. The agency has created a history over five years to show the success of the program. He said that although the program requires a zero down payment, it does not provide a reduced interest rate. It's not costing AHFC or the state anything. He said he agreed with the concerns about rural Alaska housing and said the specifically rural program from the capital budget is working well. DAN FAUSKE, CEO, Alaska Housing Finance Corporation (AHFC), Anchorage, AK, said there are 221 units in the rural component. That program has leveraged $30 million into $50 million in assets. He said that in most cases in the rural areas with itinerant or transient teachers, there hasn't been that much demand for home ownership. He said the agency supported a loan in Bethel and financed a 22-unit facility for state troopers which helped with recruitment and retainment. He said the program is not generally viewed as a job enticement. He said that with accelerating housing costs in Anchorage, it is difficult for young professionals starting out to buy a home. 2:27:37 PM SENATOR COWDERY asked if the program could be expanded to help construction and labor workers. MR. FAUSKE said he had not heard that request before. SENATOR DYSON suggested that Senator Cowdery was asking if the construction of the facilities had been used as a training tool for apprentices in order to create work opportunities as well as housing. SENATOR COWDERY said that was partly what he meant but he was also asking if housing for these low-income workers was being considered. MR. BUTCHER replied that the agency has been hesitant to expand the program because that would raise costs and could risk their credit rating. MR. FAUSKE said there is an absolute priority on these projects for local hire at the village level. Training raises costs but they have been trying to include it. 2:31:05 PM SENATOR DYSON referred to the 22 units for state troopers built in Bethel and asked if this could be done in other villages in order to address the need for good housing for public safety officers and the transient nature of some of those assignments. MR. FAUSKE replied that the agency always encourages builders to talk to public safety people and others to determine if they might need to build a six-plex instead of a four-plex. This could also bring another viable source of income into the project. SENATOR DYSON asked if the idea to extend the housing option to others would be affected by the legislation before the committee. MR. FAUSKE replied that the rural program would be coming to the committee through the capital budget and said he would arrange for Senator Dyson to get that information. SENATOR DYSON said that he didn't want to find out that rural needs for housing are cut short because too much money has gone to programs on the road network. MR.FAUSKE said he'd like to emphasize that these are loans and gave the example of a building that might cost $1 million but based on the salaries of the community, $700,000 was all they could afford. The agency writes a check for a loan of $300,000, and when the school foundation funding formula is passed, his agency is then able to tap into that resource in the form of salaries and get the best bang for the state dollar. The process also creates private ownership, local support and eliminates the need for the agency to have a direct relationship with the contractors. 2:36:34 PM SENATOR THOMAS said he had looked at these types of loans as incentives for people living and doing service in remote areas and said he was concerned about the urban programs and the higher incomes of those targeted. He said there was discussion at an earlier meeting of setting income limits and he would like to see that explored. The only justification he sees for the program is to encourage people into those occupations which are needed especially in rural areas. It appears now that people in a particular occupation are being favored and it's not necessarily based on need. MR. FAUSKE said five years ago there had been an attempt to address the issue of recruiting and retaining teachers and health professionals. There was an attempt at that time to add on more professions, but it was decided that a test run was in order first. This was the reason for the sunset provision. He said the loan is not attractive to those with higher incomes. The largest problem teachers and health care providers have is the affordability of the down payment. People can't afford to live where they work. For someone starting out at $38,000 per year, the average cost of a new home in Anchorage at $329,000 is not an option. 2:41:13 PM SENATOR COWDERY asked what the salary range is for people who qualify for the program. MR. BUTCHER replied that people that benefit the most from the program are people who don't have the down payment and people who are looking for investment opportunities. This program requires owner occupation so it cannot be used for investment properties. MR. FAUSKE said it's not cost effective for someone who makes $200,000 or even $100,000 per year because they can shop around for a lower interest rate and with enough for a down payment, would not have to pay mortgage insurance. He said he would get more detailed information on salaries for the committee. 2:45:38 PM MELISSA STONE, Director, Behavioral Health, Department of Health and Social Services, Anchorage, AK, said she supported SB 233. She said her department has 29 percent of all estimated vacancies in the state in the health care profession. For behavioral health, that translates to 22 percent vacancies in the rural area and 9.3 percent vacancies in the urban area. CHAIR DAVIS said that including an income limitation provision was discussed at the last meeting, but that her office did not receive any recommendations to prepare a CS. SENATOR THOMAS said he was satisfied that the bill appear to be self limiting. SENATOR COWDERY moved to report SB 233 from committee with individual recommendations and attached fiscal note(s). There being no objection, the motion carried. There being no further business before the committee, CHAIR DAVIS adjourned the meeting at 2:51:48 PM.