SB 637
Department of Legislative Services
Maryland General Assembly
2021 Session
FISCAL AND POLICY NOTE
Third Reader - Revised
Senate Bill 637 (Senator Hayes)
Education, Health, and Environmental Affairs Environment and Transportation
Community Development Administration - Live Near Your School Program -
Establishment
This bill authorizes the Community Development Administration (CDA) within the
Department of Housing and Community Development (DHCD) to administer the Live
Near Your School Program (LNYS) and a related home buyer assistance program. The
home buyer assistance program is authorized to assist current students and recent
graduates, as defined by the bill, in receiving low-interest loans to purchase homes near
the public institution of higher education attended by the individual. In addition, LNYS is
authorized to administer community development projects that provide current students
and recent graduates with grants to buy homes in sustainable communities that are near the
school attended by the student or graduate. The bill terminates September 30, 2024.
Fiscal Summary
State Effect: General fund expenditures increase by $537,700 in FY 2022, assuming
implementation of the program, to capitalize and administer the loan program; future years
are annualized and reflect ongoing costs and the termination of the program after FY 2024.
Additional general funds may be needed to provide matching grants. Special fund revenues
from loan repayments increase by an indeterminate amount, as discussed below.
(in dollars) FY 2022 FY 2023 FY 2024 FY 2025 FY 2026
SF Revenue - - - - -
GF Expenditure $537,700 $704,700 $706,500 $0 $0
Net Effect ($537,700) ($704,700) ($706,500) - -
Note:() = decrease; GF = general funds; FF = federal funds; SF = special funds; - = indeterminate increase; (-) = indeterminate decrease
Local Effect: Local expenditures increase to the extent that local governments choose to
provide financial assistance, as contemplated by the bill. Local revenues are not affected.
Small Business Effect: Minimal.
Analysis
Bill Summary:
Definitions
“Current student” means an individual who (1) attends a public institution of higher
education in the State and (2) is a degree-seeking, full-time equivalent student in an
undergraduate level, graduate level, or professional degree program.
“Recent graduate” means an individual who, within five years before applying for
assistance under either program, graduated from a public institution of higher education in
the State with at least 120 credits in an undergraduate level program or 30 credits in a
graduate level or professional degree program.
Home Buyer Assistance Program
CDA may administer a home buyer assistance program that (1) assists current students and
recent graduates to receive low-interest mortgage loans, with down payment and closing
cost assistance options, for the purchase of homes near the school attended by the student
or graduate; (2) coordinates with, and matches where appropriate, similar programs offered
by public institutions of higher education, private employers, and county and municipal
governments to maximize the total amount that current students and recent graduates can
receive under the program; (3) authorizes a public institution of higher education to provide
matching funds to a home buyer who receives assistance, as specified; and (4) uses
available funding sources.
CDA may (1) allow home buyers to use the loans for the purchase of newly constructed or
existing homes; (2) require a home purchased under the program to be occupied by the
home buyer as a principal residence; and (3) use available funding sources.
CDA may facilitate the marketing of the program with specified entities and adopt
regulations to carry out the bill’s provisions relating to this program with existing funding
for the marketing of current programs of DHCD, if available. Annually, by December 31,
DHCD must report to the General Assembly on the program.
Live Near Your School Program – Community Development Projects
Under LNYS, CDA may administer community development projects that (1) are in
sustainable communities and (2) provide current students and recent graduates with
financial assistance in the form of grants to buy homes near the school attended by the
student or graduate.
SB 637/ Page 2
A community development project administered under these provisions is not subject to
specified provisions of current law that require part of the housing to be occupied by
families of limited income. CDA must adopt regulations to implement LNYS.
Current Law:
Home Buyer Assistance Program
CDA must administer a home buyer assistance program that (1) assists home buyers to
receive low-interest mortgage loans, with down payment and closing cost assistance
options, for the purchase of homes near their workplace and (2) coordinate with, and match
where appropriate, similar programs offered by private employers and county and
municipal governments so as to maximize the total amount that home buyers can receive
under the program. CDA must (1) allow home buyers to use the loans for the purchase of
newly constructed or existing homes and (2) require a home purchased under the program
to be occupied by the home buyer as a principal residence.
In addition, CDA must facilitate the marketing of the program with private employers,
county and municipal governments, and, where appropriate, other units of State
government and nonprofit organizations. CDA must also adopt regulations to implement
the program.
Live Near Your Work Program – Community Development Projects
CDA must administer community development projects that (1) are in sustainable
communities and (2) provide employees with financial assistance in the form of grants to
buy homes near their workplaces. A community development project administered
pursuant to these provisions is not subject to specified provisions that require that part of
the housing be occupied by families of limited income.
Community Development Projects – Generally
A project qualifies as a community development project if it meets specified housing,
infrastructure, and facilities requirements that promote sound community development. A
project qualifies as a public purpose project if it is undertaken with the financial assistance
of CDA or the assistance of federal low-income housing credits authorized by the
Internal Revenue Code and is (1) eligible wholly or partly for federal low-income housing
credits or (2) in a location designated as a distressed area by the Secretary of Housing and
Community Development. A project qualifies as a rental housing project if (1) its purpose
is to acquire, construct, or rehabilitate real property or all or part of a building or
improvement that will be occupied by households of limited income and (2) a portion of
SB 637/ Page 3
the rental units in the project are set aside for households of lower income for the greater
of 15 years or the number of years required by federal law.
A community development project may include specified public or private facilities that
are not needed to support housing if they are less than a substantial part of the project or if
the Secretary of Housing and Community Development finds that they will promote sound
community development.
Maryland Mortgage Program
The Maryland Mortgage Program (MMP), administered by CDA, provides below-market,
fixed-rate mortgages through private lending institutions to low- and moderate-income
households. The program is financed through the sale of mortgage revenue bonds, targeted
to first-time homebuyers, and includes eligibility limits on both household income and the
cost of the home. MMP has annual income requirements limiting who can apply for a loan
through the program. Income requirements vary by location and whether the home is in a
“targeted area.”
SmartBuy 2.0, a program within MMP, offers qualified homebuyers up to 15% of the home
purchase price for the borrower to pay off their outstanding student debt with a maximum
payoff amount of $30,000. To qualify for the program, homebuyers must have an existing
student debt with a minimum balance of $1,000, and the full outstanding student loan
balance of at least one of the homebuyers must be paid off at the time of purchase.
Sustainable Communities
A sustainable community is defined as a part of a priority funding area that (1) is designated
by the Smart Growth Subcabinet on the recommendation of the Secretary of Housing and
Community Development; (2) has been designated as a Base Realignment and Closure
Revitalization Incentive Zone; or (3) has been designated a transit-oriented development.
Chapter 759 of 1997 established that State spending on certain growth-related activities
must be directed to priority funding areas. Growth-related projects include most State
programs that encourage or support growth and development such as highways, sewer and
water construction, economic development assistance, and State leases or construction of
new office facilities. Priority funding areas include all municipalities that existed in the
State in 1997; areas inside the Washington Beltway and the Baltimore Beltway; and areas
designated as enterprise zones, neighborhood revitalization areas, heritage areas, and
certain industrial areas. Areas that were annexed by a municipality after 1997 may also be
designated priority funding areas, as long as the areas satisfy specified requirements in
statute generally related to density, water and sewer access, and other related factors.
SB 637/ Page 4
State Fiscal Effect: DHCD advises that, consistent with its implementation of the existing
Live Near Your Work Program and related home buyer assistance program, the primary
form of financial assistance it anticipates providing under the bill is low-interest loans
(under the home buyer assistance program) to subsidize down payments and closing costs
for eligible students and recent graduates. LNYS will be used only to match – in the form
of grants – any additional assistance provided by educational institutions, employers, or
local governments. Thus, only LNYS (and not the home buyer assistance program) will be
used to provide matching funds.
Neither DHCD nor the Department of Legislative Services is aware of available funding
sources that may be used for these programs, as authorized by the bill. Therefore,
general funds are assumed to be needed, to the extent that CDA elects to operate the
programs.
Home Buyer Assistance Program – Loans
For the loan program to be viable, DHCD advises that it needs to have at least 100 program
participants each year. DHCD also assumes that loans offered under the program need to
total approximately $6,000 per participant, resulting in $600,000 annually in general fund
expenditures – through fiscal 2024 – to capitalize the loan program. To satisfy the bill’s
requirement for marketing, DHCD advises that, consistent with marketing costs for similar
programs, annual marketing and advertising costs (for printed material and other outreach
efforts) of $50,000 are anticipated to support the program and attract new program
participants. In addition, DHCD needs to hire staff to administer the loan program.
Therefore, general fund expenditures increase by at least $537,698 in fiscal 2022, which
accounts for the bill’s October 1, 2021 effective date. This estimate reflects funds necessary
to capitalize the loan program (for down payment and closing cost assistance) and the cost
of hiring one contractual financial analyst to administer the loan program. It includes, a
salary, fringe benefits, one-time start-up costs, and ongoing operating expenses (including
marketing).
Contractual Position 1.0
Salary and Fringe Benefits $44,617
Loans (Down Payment/Closing Cost Assistance) 450,000
Marketing Expenses 37,500
Other Operating Expenses 5,581
Minimum FY 2022 DHCD Expenditures $537,698
This estimate does not include any health insurance costs that could be incurred for
specified contractual employees under the State’s implementation of the federal Patient
Protection and Affordable Care Act.
SB 637/ Page 5
Future year expenditures reflect (1) a full salary with annual increases and employee
turnover and ongoing operating expenses (including marketing) and (2) the need for
continued capitalization funds ($600,000 annually) in order to provide loans under the
program.
This analysis assumes the termination of the contractual position, capitalization funds, and
marketing expenses after fiscal 2024. This analysis assumes that loans are not made in
fiscal 2025, despite the bill’s September 30, 2024 termination date.
Special fund revenues increase from loan repayments, but a reliable estimate of such
revenues cannot be quantified at this time, as the terms of the loans are unknown, although
loan repayments likely continue beyond the life of the program.
Live Near Your School – Matching Grants
This analysis does not reflect any impact on public institutions of higher education to
provide similar financial assistance under LNYS, which is authorized, but not required,
under the bill. Likewise, because the extent to which any financial assistance will be
provided by public institutions of higher education, local governments, and employers is
unknown, this analysis also does not reflect any costs for DHCD to match those funds. To
the extent that financial assistance is provided by public institutions of higher education,
local governments, and employers under the bill, DHCD may require additional general
funds to match those funds in the form of grants.
It is anticipated that the contractual financial analyst hired under the bill to administer the
home buyer assistance program can also administer the grant program to the extent it
materializes.
Additional Information
Prior Introductions: None.
Designated Cross File: HB 943 (Delegate Bridges) - Environment and Transportation.
Information Source(s): Department of Housing and Community Development;
Department of Commerce; Baltimore City Community College; University System of
Maryland; Morgan State University; Maryland Municipal League; Department of
Legislative Services
SB 637/ Page 6
Fiscal Note History: First Reader - February 18, 2021
rh/mcr Third Reader - April 1, 2021
Revised - Amendment(s) - April 1, 2021
Analysis by: Thomas S. Elder Direct Inquiries to:
(410) 946-5510
(301) 970-5510
SB 637/ Page 7
Statutes affected: Text - First - Community Development Administration - Live Near Your School Program - Establishment: 4-215.1 Housing and Community Development, 4-217 Housing and Community Development, 6-305 Housing and Community Development
Text - Third - Community Development Administration - Live Near Your School Program - Establishment: 4-215.1 Housing and Community Development, 4-217 Housing and Community Development, 6-305 Housing and Community Development