State Codes and Statutes

Statutes > California > Hsc > 50771.1-50771.3

HEALTH AND SAFETY CODE
SECTION 50771.1-50771.3



50771.1.  For the purpose of providing deferred payment loans
pursuant to this chapter for the development costs of rental housing
developments utilizing moneys transferred to the Rental Housing
Construction Fund pursuant to paragraph (1) of subdivision (a) of
Section 53130 and paragraph (1) of subdivision (b) of Section 53130,
the following special provisions shall prevail over conflicting
provisions of this chapter:
   (a) (1) Applications for fund commitments shall be accepted by the
department at any time. Fund commitments shall be based on a ranking
of applications which shall occur at least once every three months
until there are insufficient funds available to make commitments
according to the ranking. In making this ranking, notwithstanding
Sections 50737 and 50737.5, priority shall be given to projects which
(A) maximize program benefits to eligible households, as defined in
Section 50105 with the lowest incomes, (B) maximize program benefits
to eligible households needing assisted units with three or more
bedrooms, (C) are located in areas where the housing need is great,
as determined by the department, taking into consideration, among
other factors, variations in local development costs, low vacancy
rates, high market rents, and long waiting lists for subsidized
housing, (D) complement the implementation of an existing housing
program, (E) maximize private, local, and other funding sources, (F)
are economically feasible given local market conditions, and (G)
maximize the number of units which can be assisted under the program,
relative to variances in market conditions for the development of
rental housing. Subparagraph (B) above does not apply to applications
for residential hotels.
   (2) All loans shall be made directly from the department to the
housing sponsor which applies to the department and will own,
operate, and develop the housing development. The sponsor shall
notify the local legislative body of its loan application prior to
the funding award.
   (3) A sponsor may apply for awards for one or more rental housing
developments.
   (4) The department shall evaluate the capability of the sponsor to
own, construct, and manage the rental housing development.
   (b) (1) A rental housing development may utilize any combination
of federal, state, local, and private financial resources necessary
to make the development affordable, for the term of the state's
regulatory agreement, to eligible households.
   (2) (A) Loans to sponsors of housing developments shall be for a
term not less than 40 years. After 30 years from the time the loan is
made, the sponsor shall begin to repay the loan in accordance with a
payment plan, as determined by the department, that will maintain
the rents affordable to eligible households.
   (B) The term of the loan and the time for repayment may be
extended by the department for additional 10-year terms as long as
the rental housing development is operated in a manner consistent
with the regulatory agreement and the sponsor requires an extension
in order to continue to operate in a manner consistent with this
chapter.
   (C) Loans provided under this section shall bear an interest rate
of 3 percent per annum. The department, by regulations, shall
establish the conditions under which the interest may be reduced,
waived, or deferred. At the request of the sponsor, the department
may charge a higher interest rate.
   (3) (A) Development costs shall include reasonable consulting
fees, and other reasonable administrative expenses in connection with
the planning and execution of the rental housing development, as
determined by the department, and initial funding of emergency
reserves, as required by the department. The development costs also
shall further include the acquisition and completion of construction
of a rental housing development where construction has halted due to
financial distress, as determined by the department.
   (B) A rental housing development shall include residential hotels,
as defined in subdivision (b) of Section 50669, and group homes.
   (4) The sponsor shall maintain an emergency reserve to defray
unanticipated cost increases or revenue shortfalls to maintain the
fiscal integrity of the rental housing development and maintain
affordable rents for eligible households.
   (5) The department, by regulation, shall specify minimum equity
requirements not to exceed 10 percent of total project development
costs. This requirement does not apply to proposed projects where
assisted units are less than 80 percent of the total number of units.
   The department, by regulation, shall define "equity" for the
purposes of this section, which shall include, but shall not be
limited to, cash, real property, items of personal property having
monetary value contributed by the sponsor and applied toward project
costs, and the capitalized value of any exemption from local taxes on
real property.
   (6) The department, by regulation, may specify per-unit loan
limits and circumstances under which it may grant exceptions to, or
variances from, these limits. The loan amount shall not exceed either
100 percent of the development costs attributable to the assisted
units or the amount necessary to maintain affordable rents for the
assisted units, as determined by the department.
   (c) (1) Initial rents, including a reasonable utility allowance,
for assisted units reserved for occupancy by very low income
households, and for all assisted units in residential hotels and
group homes, shall not exceed 30 percent of 35 percent of area median
income, adjusted by unit size. Initial rents, including a reasonable
utility allowance, for assisted units reserved for occupancy by
lower income households shall not exceed 30 percent of 60 percent of
area median income, adjusted by unit size. The department, by
regulation, shall specify the method for adjusting rents by unit size
and for computing allowances for utility costs.
   (2) The department shall develop an inflation index reflecting the
annual anticipated changes in rental housing development operating
costs from a base year. The inflation index shall be used by the
sponsor to adjust the initial rent of each unit occupied by an
eligible household to determine the annual rent. Any sponsor may
appeal to the department for a greater adjustment in rents necessary
to ensure the fiscal integrity of the housing development. If the
department does not respond within 60 days, the request shall be
deemed approved. A 30-day written notice shall be given to each
eligible household prior to an adjustment in the amount of rent.
   (3) Upon prior written approval by the department, a sponsor may
set income limits for occupancy of assisted units designated for
lower income households at a level below the limit specified in
Section 50079.5. If a tenant's income exceeds this income limit
established by the sponsor, but does not exceed the limit specified
in Section 50079.5, that fact alone shall neither constitute cause
for the tenant's eviction, nor be a violation of the sponsor's loan
agreement.
   (4) The monthly rent including a reasonable utility allowance may
be reduced by the sponsor, to make the units affordable to the lowest
income household possible as long as the project remains
economically feasible.
   (5) (A) If a household's income exceeds the standard pursuant to
which it was accepted for tenancy, that fact alone shall neither
constitute cause for the household's immediate eviction nor be a
violation of the owner's or sponsor's loan agreement.
   (B) If, after annual income certification, an assisted unit
becomes occupied by a household which does not meet the income limits
specified in Section 50105, that household shall be permitted to
continue to occupy that assisted unit. When there is a vacancy in an
assisted unit formerly occupied by a household which meets the income
limits specified in Section 50079.5, that unit shall be rented to a
household which meets the income limits specified in Section 50105.
   (C) If, after annual income certification, an assisted unit
becomes occupied by a household which does not meet the income limits
specified in Section 50079.5, that household shall be provided a
six-month notice of termination. That period may be extended for an
additional six-month period in high cost rental areas with low
vacancy rates, as determined by the department. That household shall
have first right of refusal to occupy any nonassisted unit which
becomes available during both periods.
   (D) In the case of limited equity housing cooperatives, the
provisions of subparagraph (C) shall apply, except that tenants whose
incomes, upon recertification, exceed the limit specified in Section
50079.5 shall not be required to vacate their units. Instead, and
upon six months' notice, these tenants shall be required to pay rent
in an amount equal to the market rate rent for comparable units, as
determined by the department. When a tenant's income exceeds the
limit specified in Section 50079.5, the next available membership
share for occupancy in a comparable unit shall be sold to a household
with an income at or below this limit.
   (d) (1) The department may contract with the sponsor to pay all or
a portion of the development costs incurred in connection with the
construction of a rental housing development consistent with the
requirements of this article. The department shall include such
provisions in the contract as are necessary to ensure compliance with
the requirements of the program.
   Any rental housing development assisted pursuant to this article
shall be governed by a regulatory agreement between the sponsor and
the department. The regulatory agreement shall be recorded or
referenced in a recorded document in the office of the county
recorder for the county in which the rental housing development is
located. The regulatory agreement shall contain at least all of the
following:
   (A) Restrictions on occupancy of dwelling units within the rental
housing development, to meet the requirements of Section 50736 and
this section for a period of at least 40 years.
   (B) Provisions governing standards for tenant selection to ensure
occupancy by eligible households of very low and low income for the
term of the regulatory agreement.
   (C) Provisions governing occupancy standards and rental
agreements.
   (D) Provisions for setting initial rents and rent increases
consistent with paragraph (1) of subdivision (c) of Section 50771.1.
Prior to the time any rent increase is effective, the sponsor shall
notify every affected tenant, in writing, of the availability of
informal meetings with the sponsor to review the proposed rent
increase. Each tenant, upon request, shall be provided the
information submitted to the department pursuant to this subdivision.
   (E) A requirement that the sponsor submit to the department for
review and approval, annual operating budgets and periodic reports,
which shall at a minimum include information on the fiscal condition
of the rental housing development, the maintenance of the
development, and the number of units occupied by eligible households.
   (F) Provisions limiting distribution of sponsor's earnings as
specified in paragraph (4).
   (G) A provision which specifies the conditions under which the
department and any intended beneficiary may enforce the regulatory
agreement.
   (H) Any other provisions necessary to carry out the purposes and
to exercise the powers granted by this chapter.
   The regulatory agreement shall be recorded against the property
and shall be deemed a covenant running with the land and shall be
binding upon the sponsor and any and all successors in interest in
case of sale or transfer of the rental housing development for the
original term of the loan, and any extensions thereof, regardless of
any prepayment of the loan.
   The department, by regulation, may require such other documents,
instruments, and agreements as are reasonable and necessary to ensure
compliance with the program requirements.
   (2) The contract for the award of development funds to be provided
as construction financing for a rental housing development shall
contain at a minimum the provisions specified in Section 50766,
excluding therefor subdivisions (j), (k), and ( l).
   (3) All state contracts and regulatory or development agreements
subject to this article shall contain provisions requiring that
assisted units remain affordable to eligible households for 40 years
plus any permitted extension.
   (4) A nonprofit sponsor, other than a governmental agency, may
maintain a debt service coverage ratio of not more than 115 percent
and distribute earnings from both assisted and nonassisted units in
an amount no greater than 8 percent of the nonprofit sponsor's actual
investment in the rental housing development. A for-profit sponsor
may choose between the following options:
   (A) It may distribute earnings from both assisted and nonassisted
units in an annual amount no greater than 8 percent of its actual
investment in the rental housing development.
   (B) It may forego distribution of earnings from assisted units,
and not be subject to any limitation on the amount of distributions
it receives from nonassisted units.
   (e) Where loans will be used in conjunction with federal and other
state housing assistance or tax credit and a conflict exists between
the other state and federal program requirements and this chapter
regarding the test for determining a qualified low-income housing
project, the requirements of the Rental Housing Construction Program
may be waived only to the extent necessary to permit the federal or
other state financial participation or eligibility for tax credits.
   (f) (1) The department shall establish specific minimum
development criteria to (A) ensure that the useful life of the rental
housing development is at least equal to the term of the loan; (B)
enhance the physical security of the tenants; (C) minimize long-term
operating and maintenance costs; and (D) ensure that project design
features and amenities are modest.
   (2) No energy standards shall be required of any housing
development in excess of the energy standards required for housing
developments financed by conventional funding sources.
   (3) The department shall employ a licensed architect or an
experienced building inspector, or both, to review plans, inspect,
and monitor construction of, rental housing developments.
   (g) A sponsor of a housing development may receive payments from
the annuity fund pursuant to Section 50738 to the extent that there
are unobligated moneys available in the fund.
   (h) The department shall establish an emergency reserve account in
the Rental Housing Construction Fund established pursuant to Section
50740 equal to 3 percent of the moneys transferred to that fund
pursuant to Section 53130.
   Moneys transferred to the fund pursuant to Section 53130 shall not
be subject to the requirements of Section 50770 or be used to ensure
economic feasibility or enable construction pursuant to Section
50738. Notwithstanding the provisions of Sections 53130 and 53133,
the department may expend moneys in the account to defray
unanticipated cost increases or revenue shortfalls not covered by a
rental housing development emergency reserve to the extent necessary
to maintain the fiscal integrity of a rental housing development and
maintain affordable rents for eligible households.
   Notwithstanding the provisions of Section 53130 which limit the
use of allocated proceeds with respect to project operating costs,
and Section 53133, the department may use any amounts available in
the account for the purpose of curing or avoiding a sponsor's
defaults on the terms of any loan or other obligation which will
jeopardize the financial integrity of a rental housing development or
the department's security in the rental housing development. The
payment or advance of any funds by the department pursuant to this
subdivision shall be solely within the discretion of the department,
and no sponsor shall be entitled to, or have any right to, payment of
these funds. Funds advanced pursuant to this subdivision shall be
added to the loan amount secured by the deed of trust and shall be
payable to the department upon demand.



50771.2.  (a) As an alternative to the loan provisions of paragraph
(2) of subdivision (b) of Section 50771.1 and the regulatory
agreement provisions of subdivision (d) of Section 50771.1, the
department may permit the prepayment of a sponsor's loan anytime on
the basis of net cash flow.
   (b) The department shall develop a prepayment plan in conjunction
with the sponsor which will ensure the maintenance of affordable
rents and the fiscal integrity of the rental housing development. As
an incentive to encourage the prepayment of loans, the department may
permit the sponsor to retain one-half of the net cash flow. The
department shall determine the method for calculating net cash flow,
which may include a factor for excess debt service coverage or a
return on cash investment to the sponsor.




50771.3.  The department may adopt, amend, or repeal emergency
regulations to implement this chapter with respect to loans made with
funds allocated pursuant to Section 53130. The adoption, amendment,
or repeal of these regulations shall be conclusively presumed to be
necessary for the immediate preservation of the public peace, health,
safety, or general welfare within the meaning or purposes of Section
11346.1 of the Government Code. This authority shall remain in
effect only until June 30, 1992.


State Codes and Statutes

Statutes > California > Hsc > 50771.1-50771.3

HEALTH AND SAFETY CODE
SECTION 50771.1-50771.3



50771.1.  For the purpose of providing deferred payment loans
pursuant to this chapter for the development costs of rental housing
developments utilizing moneys transferred to the Rental Housing
Construction Fund pursuant to paragraph (1) of subdivision (a) of
Section 53130 and paragraph (1) of subdivision (b) of Section 53130,
the following special provisions shall prevail over conflicting
provisions of this chapter:
   (a) (1) Applications for fund commitments shall be accepted by the
department at any time. Fund commitments shall be based on a ranking
of applications which shall occur at least once every three months
until there are insufficient funds available to make commitments
according to the ranking. In making this ranking, notwithstanding
Sections 50737 and 50737.5, priority shall be given to projects which
(A) maximize program benefits to eligible households, as defined in
Section 50105 with the lowest incomes, (B) maximize program benefits
to eligible households needing assisted units with three or more
bedrooms, (C) are located in areas where the housing need is great,
as determined by the department, taking into consideration, among
other factors, variations in local development costs, low vacancy
rates, high market rents, and long waiting lists for subsidized
housing, (D) complement the implementation of an existing housing
program, (E) maximize private, local, and other funding sources, (F)
are economically feasible given local market conditions, and (G)
maximize the number of units which can be assisted under the program,
relative to variances in market conditions for the development of
rental housing. Subparagraph (B) above does not apply to applications
for residential hotels.
   (2) All loans shall be made directly from the department to the
housing sponsor which applies to the department and will own,
operate, and develop the housing development. The sponsor shall
notify the local legislative body of its loan application prior to
the funding award.
   (3) A sponsor may apply for awards for one or more rental housing
developments.
   (4) The department shall evaluate the capability of the sponsor to
own, construct, and manage the rental housing development.
   (b) (1) A rental housing development may utilize any combination
of federal, state, local, and private financial resources necessary
to make the development affordable, for the term of the state's
regulatory agreement, to eligible households.
   (2) (A) Loans to sponsors of housing developments shall be for a
term not less than 40 years. After 30 years from the time the loan is
made, the sponsor shall begin to repay the loan in accordance with a
payment plan, as determined by the department, that will maintain
the rents affordable to eligible households.
   (B) The term of the loan and the time for repayment may be
extended by the department for additional 10-year terms as long as
the rental housing development is operated in a manner consistent
with the regulatory agreement and the sponsor requires an extension
in order to continue to operate in a manner consistent with this
chapter.
   (C) Loans provided under this section shall bear an interest rate
of 3 percent per annum. The department, by regulations, shall
establish the conditions under which the interest may be reduced,
waived, or deferred. At the request of the sponsor, the department
may charge a higher interest rate.
   (3) (A) Development costs shall include reasonable consulting
fees, and other reasonable administrative expenses in connection with
the planning and execution of the rental housing development, as
determined by the department, and initial funding of emergency
reserves, as required by the department. The development costs also
shall further include the acquisition and completion of construction
of a rental housing development where construction has halted due to
financial distress, as determined by the department.
   (B) A rental housing development shall include residential hotels,
as defined in subdivision (b) of Section 50669, and group homes.
   (4) The sponsor shall maintain an emergency reserve to defray
unanticipated cost increases or revenue shortfalls to maintain the
fiscal integrity of the rental housing development and maintain
affordable rents for eligible households.
   (5) The department, by regulation, shall specify minimum equity
requirements not to exceed 10 percent of total project development
costs. This requirement does not apply to proposed projects where
assisted units are less than 80 percent of the total number of units.
   The department, by regulation, shall define "equity" for the
purposes of this section, which shall include, but shall not be
limited to, cash, real property, items of personal property having
monetary value contributed by the sponsor and applied toward project
costs, and the capitalized value of any exemption from local taxes on
real property.
   (6) The department, by regulation, may specify per-unit loan
limits and circumstances under which it may grant exceptions to, or
variances from, these limits. The loan amount shall not exceed either
100 percent of the development costs attributable to the assisted
units or the amount necessary to maintain affordable rents for the
assisted units, as determined by the department.
   (c) (1) Initial rents, including a reasonable utility allowance,
for assisted units reserved for occupancy by very low income
households, and for all assisted units in residential hotels and
group homes, shall not exceed 30 percent of 35 percent of area median
income, adjusted by unit size. Initial rents, including a reasonable
utility allowance, for assisted units reserved for occupancy by
lower income households shall not exceed 30 percent of 60 percent of
area median income, adjusted by unit size. The department, by
regulation, shall specify the method for adjusting rents by unit size
and for computing allowances for utility costs.
   (2) The department shall develop an inflation index reflecting the
annual anticipated changes in rental housing development operating
costs from a base year. The inflation index shall be used by the
sponsor to adjust the initial rent of each unit occupied by an
eligible household to determine the annual rent. Any sponsor may
appeal to the department for a greater adjustment in rents necessary
to ensure the fiscal integrity of the housing development. If the
department does not respond within 60 days, the request shall be
deemed approved. A 30-day written notice shall be given to each
eligible household prior to an adjustment in the amount of rent.
   (3) Upon prior written approval by the department, a sponsor may
set income limits for occupancy of assisted units designated for
lower income households at a level below the limit specified in
Section 50079.5. If a tenant's income exceeds this income limit
established by the sponsor, but does not exceed the limit specified
in Section 50079.5, that fact alone shall neither constitute cause
for the tenant's eviction, nor be a violation of the sponsor's loan
agreement.
   (4) The monthly rent including a reasonable utility allowance may
be reduced by the sponsor, to make the units affordable to the lowest
income household possible as long as the project remains
economically feasible.
   (5) (A) If a household's income exceeds the standard pursuant to
which it was accepted for tenancy, that fact alone shall neither
constitute cause for the household's immediate eviction nor be a
violation of the owner's or sponsor's loan agreement.
   (B) If, after annual income certification, an assisted unit
becomes occupied by a household which does not meet the income limits
specified in Section 50105, that household shall be permitted to
continue to occupy that assisted unit. When there is a vacancy in an
assisted unit formerly occupied by a household which meets the income
limits specified in Section 50079.5, that unit shall be rented to a
household which meets the income limits specified in Section 50105.
   (C) If, after annual income certification, an assisted unit
becomes occupied by a household which does not meet the income limits
specified in Section 50079.5, that household shall be provided a
six-month notice of termination. That period may be extended for an
additional six-month period in high cost rental areas with low
vacancy rates, as determined by the department. That household shall
have first right of refusal to occupy any nonassisted unit which
becomes available during both periods.
   (D) In the case of limited equity housing cooperatives, the
provisions of subparagraph (C) shall apply, except that tenants whose
incomes, upon recertification, exceed the limit specified in Section
50079.5 shall not be required to vacate their units. Instead, and
upon six months' notice, these tenants shall be required to pay rent
in an amount equal to the market rate rent for comparable units, as
determined by the department. When a tenant's income exceeds the
limit specified in Section 50079.5, the next available membership
share for occupancy in a comparable unit shall be sold to a household
with an income at or below this limit.
   (d) (1) The department may contract with the sponsor to pay all or
a portion of the development costs incurred in connection with the
construction of a rental housing development consistent with the
requirements of this article. The department shall include such
provisions in the contract as are necessary to ensure compliance with
the requirements of the program.
   Any rental housing development assisted pursuant to this article
shall be governed by a regulatory agreement between the sponsor and
the department. The regulatory agreement shall be recorded or
referenced in a recorded document in the office of the county
recorder for the county in which the rental housing development is
located. The regulatory agreement shall contain at least all of the
following:
   (A) Restrictions on occupancy of dwelling units within the rental
housing development, to meet the requirements of Section 50736 and
this section for a period of at least 40 years.
   (B) Provisions governing standards for tenant selection to ensure
occupancy by eligible households of very low and low income for the
term of the regulatory agreement.
   (C) Provisions governing occupancy standards and rental
agreements.
   (D) Provisions for setting initial rents and rent increases
consistent with paragraph (1) of subdivision (c) of Section 50771.1.
Prior to the time any rent increase is effective, the sponsor shall
notify every affected tenant, in writing, of the availability of
informal meetings with the sponsor to review the proposed rent
increase. Each tenant, upon request, shall be provided the
information submitted to the department pursuant to this subdivision.
   (E) A requirement that the sponsor submit to the department for
review and approval, annual operating budgets and periodic reports,
which shall at a minimum include information on the fiscal condition
of the rental housing development, the maintenance of the
development, and the number of units occupied by eligible households.
   (F) Provisions limiting distribution of sponsor's earnings as
specified in paragraph (4).
   (G) A provision which specifies the conditions under which the
department and any intended beneficiary may enforce the regulatory
agreement.
   (H) Any other provisions necessary to carry out the purposes and
to exercise the powers granted by this chapter.
   The regulatory agreement shall be recorded against the property
and shall be deemed a covenant running with the land and shall be
binding upon the sponsor and any and all successors in interest in
case of sale or transfer of the rental housing development for the
original term of the loan, and any extensions thereof, regardless of
any prepayment of the loan.
   The department, by regulation, may require such other documents,
instruments, and agreements as are reasonable and necessary to ensure
compliance with the program requirements.
   (2) The contract for the award of development funds to be provided
as construction financing for a rental housing development shall
contain at a minimum the provisions specified in Section 50766,
excluding therefor subdivisions (j), (k), and ( l).
   (3) All state contracts and regulatory or development agreements
subject to this article shall contain provisions requiring that
assisted units remain affordable to eligible households for 40 years
plus any permitted extension.
   (4) A nonprofit sponsor, other than a governmental agency, may
maintain a debt service coverage ratio of not more than 115 percent
and distribute earnings from both assisted and nonassisted units in
an amount no greater than 8 percent of the nonprofit sponsor's actual
investment in the rental housing development. A for-profit sponsor
may choose between the following options:
   (A) It may distribute earnings from both assisted and nonassisted
units in an annual amount no greater than 8 percent of its actual
investment in the rental housing development.
   (B) It may forego distribution of earnings from assisted units,
and not be subject to any limitation on the amount of distributions
it receives from nonassisted units.
   (e) Where loans will be used in conjunction with federal and other
state housing assistance or tax credit and a conflict exists between
the other state and federal program requirements and this chapter
regarding the test for determining a qualified low-income housing
project, the requirements of the Rental Housing Construction Program
may be waived only to the extent necessary to permit the federal or
other state financial participation or eligibility for tax credits.
   (f) (1) The department shall establish specific minimum
development criteria to (A) ensure that the useful life of the rental
housing development is at least equal to the term of the loan; (B)
enhance the physical security of the tenants; (C) minimize long-term
operating and maintenance costs; and (D) ensure that project design
features and amenities are modest.
   (2) No energy standards shall be required of any housing
development in excess of the energy standards required for housing
developments financed by conventional funding sources.
   (3) The department shall employ a licensed architect or an
experienced building inspector, or both, to review plans, inspect,
and monitor construction of, rental housing developments.
   (g) A sponsor of a housing development may receive payments from
the annuity fund pursuant to Section 50738 to the extent that there
are unobligated moneys available in the fund.
   (h) The department shall establish an emergency reserve account in
the Rental Housing Construction Fund established pursuant to Section
50740 equal to 3 percent of the moneys transferred to that fund
pursuant to Section 53130.
   Moneys transferred to the fund pursuant to Section 53130 shall not
be subject to the requirements of Section 50770 or be used to ensure
economic feasibility or enable construction pursuant to Section
50738. Notwithstanding the provisions of Sections 53130 and 53133,
the department may expend moneys in the account to defray
unanticipated cost increases or revenue shortfalls not covered by a
rental housing development emergency reserve to the extent necessary
to maintain the fiscal integrity of a rental housing development and
maintain affordable rents for eligible households.
   Notwithstanding the provisions of Section 53130 which limit the
use of allocated proceeds with respect to project operating costs,
and Section 53133, the department may use any amounts available in
the account for the purpose of curing or avoiding a sponsor's
defaults on the terms of any loan or other obligation which will
jeopardize the financial integrity of a rental housing development or
the department's security in the rental housing development. The
payment or advance of any funds by the department pursuant to this
subdivision shall be solely within the discretion of the department,
and no sponsor shall be entitled to, or have any right to, payment of
these funds. Funds advanced pursuant to this subdivision shall be
added to the loan amount secured by the deed of trust and shall be
payable to the department upon demand.



50771.2.  (a) As an alternative to the loan provisions of paragraph
(2) of subdivision (b) of Section 50771.1 and the regulatory
agreement provisions of subdivision (d) of Section 50771.1, the
department may permit the prepayment of a sponsor's loan anytime on
the basis of net cash flow.
   (b) The department shall develop a prepayment plan in conjunction
with the sponsor which will ensure the maintenance of affordable
rents and the fiscal integrity of the rental housing development. As
an incentive to encourage the prepayment of loans, the department may
permit the sponsor to retain one-half of the net cash flow. The
department shall determine the method for calculating net cash flow,
which may include a factor for excess debt service coverage or a
return on cash investment to the sponsor.




50771.3.  The department may adopt, amend, or repeal emergency
regulations to implement this chapter with respect to loans made with
funds allocated pursuant to Section 53130. The adoption, amendment,
or repeal of these regulations shall be conclusively presumed to be
necessary for the immediate preservation of the public peace, health,
safety, or general welfare within the meaning or purposes of Section
11346.1 of the Government Code. This authority shall remain in
effect only until June 30, 1992.



State Codes and Statutes

State Codes and Statutes

Statutes > California > Hsc > 50771.1-50771.3

HEALTH AND SAFETY CODE
SECTION 50771.1-50771.3



50771.1.  For the purpose of providing deferred payment loans
pursuant to this chapter for the development costs of rental housing
developments utilizing moneys transferred to the Rental Housing
Construction Fund pursuant to paragraph (1) of subdivision (a) of
Section 53130 and paragraph (1) of subdivision (b) of Section 53130,
the following special provisions shall prevail over conflicting
provisions of this chapter:
   (a) (1) Applications for fund commitments shall be accepted by the
department at any time. Fund commitments shall be based on a ranking
of applications which shall occur at least once every three months
until there are insufficient funds available to make commitments
according to the ranking. In making this ranking, notwithstanding
Sections 50737 and 50737.5, priority shall be given to projects which
(A) maximize program benefits to eligible households, as defined in
Section 50105 with the lowest incomes, (B) maximize program benefits
to eligible households needing assisted units with three or more
bedrooms, (C) are located in areas where the housing need is great,
as determined by the department, taking into consideration, among
other factors, variations in local development costs, low vacancy
rates, high market rents, and long waiting lists for subsidized
housing, (D) complement the implementation of an existing housing
program, (E) maximize private, local, and other funding sources, (F)
are economically feasible given local market conditions, and (G)
maximize the number of units which can be assisted under the program,
relative to variances in market conditions for the development of
rental housing. Subparagraph (B) above does not apply to applications
for residential hotels.
   (2) All loans shall be made directly from the department to the
housing sponsor which applies to the department and will own,
operate, and develop the housing development. The sponsor shall
notify the local legislative body of its loan application prior to
the funding award.
   (3) A sponsor may apply for awards for one or more rental housing
developments.
   (4) The department shall evaluate the capability of the sponsor to
own, construct, and manage the rental housing development.
   (b) (1) A rental housing development may utilize any combination
of federal, state, local, and private financial resources necessary
to make the development affordable, for the term of the state's
regulatory agreement, to eligible households.
   (2) (A) Loans to sponsors of housing developments shall be for a
term not less than 40 years. After 30 years from the time the loan is
made, the sponsor shall begin to repay the loan in accordance with a
payment plan, as determined by the department, that will maintain
the rents affordable to eligible households.
   (B) The term of the loan and the time for repayment may be
extended by the department for additional 10-year terms as long as
the rental housing development is operated in a manner consistent
with the regulatory agreement and the sponsor requires an extension
in order to continue to operate in a manner consistent with this
chapter.
   (C) Loans provided under this section shall bear an interest rate
of 3 percent per annum. The department, by regulations, shall
establish the conditions under which the interest may be reduced,
waived, or deferred. At the request of the sponsor, the department
may charge a higher interest rate.
   (3) (A) Development costs shall include reasonable consulting
fees, and other reasonable administrative expenses in connection with
the planning and execution of the rental housing development, as
determined by the department, and initial funding of emergency
reserves, as required by the department. The development costs also
shall further include the acquisition and completion of construction
of a rental housing development where construction has halted due to
financial distress, as determined by the department.
   (B) A rental housing development shall include residential hotels,
as defined in subdivision (b) of Section 50669, and group homes.
   (4) The sponsor shall maintain an emergency reserve to defray
unanticipated cost increases or revenue shortfalls to maintain the
fiscal integrity of the rental housing development and maintain
affordable rents for eligible households.
   (5) The department, by regulation, shall specify minimum equity
requirements not to exceed 10 percent of total project development
costs. This requirement does not apply to proposed projects where
assisted units are less than 80 percent of the total number of units.
   The department, by regulation, shall define "equity" for the
purposes of this section, which shall include, but shall not be
limited to, cash, real property, items of personal property having
monetary value contributed by the sponsor and applied toward project
costs, and the capitalized value of any exemption from local taxes on
real property.
   (6) The department, by regulation, may specify per-unit loan
limits and circumstances under which it may grant exceptions to, or
variances from, these limits. The loan amount shall not exceed either
100 percent of the development costs attributable to the assisted
units or the amount necessary to maintain affordable rents for the
assisted units, as determined by the department.
   (c) (1) Initial rents, including a reasonable utility allowance,
for assisted units reserved for occupancy by very low income
households, and for all assisted units in residential hotels and
group homes, shall not exceed 30 percent of 35 percent of area median
income, adjusted by unit size. Initial rents, including a reasonable
utility allowance, for assisted units reserved for occupancy by
lower income households shall not exceed 30 percent of 60 percent of
area median income, adjusted by unit size. The department, by
regulation, shall specify the method for adjusting rents by unit size
and for computing allowances for utility costs.
   (2) The department shall develop an inflation index reflecting the
annual anticipated changes in rental housing development operating
costs from a base year. The inflation index shall be used by the
sponsor to adjust the initial rent of each unit occupied by an
eligible household to determine the annual rent. Any sponsor may
appeal to the department for a greater adjustment in rents necessary
to ensure the fiscal integrity of the housing development. If the
department does not respond within 60 days, the request shall be
deemed approved. A 30-day written notice shall be given to each
eligible household prior to an adjustment in the amount of rent.
   (3) Upon prior written approval by the department, a sponsor may
set income limits for occupancy of assisted units designated for
lower income households at a level below the limit specified in
Section 50079.5. If a tenant's income exceeds this income limit
established by the sponsor, but does not exceed the limit specified
in Section 50079.5, that fact alone shall neither constitute cause
for the tenant's eviction, nor be a violation of the sponsor's loan
agreement.
   (4) The monthly rent including a reasonable utility allowance may
be reduced by the sponsor, to make the units affordable to the lowest
income household possible as long as the project remains
economically feasible.
   (5) (A) If a household's income exceeds the standard pursuant to
which it was accepted for tenancy, that fact alone shall neither
constitute cause for the household's immediate eviction nor be a
violation of the owner's or sponsor's loan agreement.
   (B) If, after annual income certification, an assisted unit
becomes occupied by a household which does not meet the income limits
specified in Section 50105, that household shall be permitted to
continue to occupy that assisted unit. When there is a vacancy in an
assisted unit formerly occupied by a household which meets the income
limits specified in Section 50079.5, that unit shall be rented to a
household which meets the income limits specified in Section 50105.
   (C) If, after annual income certification, an assisted unit
becomes occupied by a household which does not meet the income limits
specified in Section 50079.5, that household shall be provided a
six-month notice of termination. That period may be extended for an
additional six-month period in high cost rental areas with low
vacancy rates, as determined by the department. That household shall
have first right of refusal to occupy any nonassisted unit which
becomes available during both periods.
   (D) In the case of limited equity housing cooperatives, the
provisions of subparagraph (C) shall apply, except that tenants whose
incomes, upon recertification, exceed the limit specified in Section
50079.5 shall not be required to vacate their units. Instead, and
upon six months' notice, these tenants shall be required to pay rent
in an amount equal to the market rate rent for comparable units, as
determined by the department. When a tenant's income exceeds the
limit specified in Section 50079.5, the next available membership
share for occupancy in a comparable unit shall be sold to a household
with an income at or below this limit.
   (d) (1) The department may contract with the sponsor to pay all or
a portion of the development costs incurred in connection with the
construction of a rental housing development consistent with the
requirements of this article. The department shall include such
provisions in the contract as are necessary to ensure compliance with
the requirements of the program.
   Any rental housing development assisted pursuant to this article
shall be governed by a regulatory agreement between the sponsor and
the department. The regulatory agreement shall be recorded or
referenced in a recorded document in the office of the county
recorder for the county in which the rental housing development is
located. The regulatory agreement shall contain at least all of the
following:
   (A) Restrictions on occupancy of dwelling units within the rental
housing development, to meet the requirements of Section 50736 and
this section for a period of at least 40 years.
   (B) Provisions governing standards for tenant selection to ensure
occupancy by eligible households of very low and low income for the
term of the regulatory agreement.
   (C) Provisions governing occupancy standards and rental
agreements.
   (D) Provisions for setting initial rents and rent increases
consistent with paragraph (1) of subdivision (c) of Section 50771.1.
Prior to the time any rent increase is effective, the sponsor shall
notify every affected tenant, in writing, of the availability of
informal meetings with the sponsor to review the proposed rent
increase. Each tenant, upon request, shall be provided the
information submitted to the department pursuant to this subdivision.
   (E) A requirement that the sponsor submit to the department for
review and approval, annual operating budgets and periodic reports,
which shall at a minimum include information on the fiscal condition
of the rental housing development, the maintenance of the
development, and the number of units occupied by eligible households.
   (F) Provisions limiting distribution of sponsor's earnings as
specified in paragraph (4).
   (G) A provision which specifies the conditions under which the
department and any intended beneficiary may enforce the regulatory
agreement.
   (H) Any other provisions necessary to carry out the purposes and
to exercise the powers granted by this chapter.
   The regulatory agreement shall be recorded against the property
and shall be deemed a covenant running with the land and shall be
binding upon the sponsor and any and all successors in interest in
case of sale or transfer of the rental housing development for the
original term of the loan, and any extensions thereof, regardless of
any prepayment of the loan.
   The department, by regulation, may require such other documents,
instruments, and agreements as are reasonable and necessary to ensure
compliance with the program requirements.
   (2) The contract for the award of development funds to be provided
as construction financing for a rental housing development shall
contain at a minimum the provisions specified in Section 50766,
excluding therefor subdivisions (j), (k), and ( l).
   (3) All state contracts and regulatory or development agreements
subject to this article shall contain provisions requiring that
assisted units remain affordable to eligible households for 40 years
plus any permitted extension.
   (4) A nonprofit sponsor, other than a governmental agency, may
maintain a debt service coverage ratio of not more than 115 percent
and distribute earnings from both assisted and nonassisted units in
an amount no greater than 8 percent of the nonprofit sponsor's actual
investment in the rental housing development. A for-profit sponsor
may choose between the following options:
   (A) It may distribute earnings from both assisted and nonassisted
units in an annual amount no greater than 8 percent of its actual
investment in the rental housing development.
   (B) It may forego distribution of earnings from assisted units,
and not be subject to any limitation on the amount of distributions
it receives from nonassisted units.
   (e) Where loans will be used in conjunction with federal and other
state housing assistance or tax credit and a conflict exists between
the other state and federal program requirements and this chapter
regarding the test for determining a qualified low-income housing
project, the requirements of the Rental Housing Construction Program
may be waived only to the extent necessary to permit the federal or
other state financial participation or eligibility for tax credits.
   (f) (1) The department shall establish specific minimum
development criteria to (A) ensure that the useful life of the rental
housing development is at least equal to the term of the loan; (B)
enhance the physical security of the tenants; (C) minimize long-term
operating and maintenance costs; and (D) ensure that project design
features and amenities are modest.
   (2) No energy standards shall be required of any housing
development in excess of the energy standards required for housing
developments financed by conventional funding sources.
   (3) The department shall employ a licensed architect or an
experienced building inspector, or both, to review plans, inspect,
and monitor construction of, rental housing developments.
   (g) A sponsor of a housing development may receive payments from
the annuity fund pursuant to Section 50738 to the extent that there
are unobligated moneys available in the fund.
   (h) The department shall establish an emergency reserve account in
the Rental Housing Construction Fund established pursuant to Section
50740 equal to 3 percent of the moneys transferred to that fund
pursuant to Section 53130.
   Moneys transferred to the fund pursuant to Section 53130 shall not
be subject to the requirements of Section 50770 or be used to ensure
economic feasibility or enable construction pursuant to Section
50738. Notwithstanding the provisions of Sections 53130 and 53133,
the department may expend moneys in the account to defray
unanticipated cost increases or revenue shortfalls not covered by a
rental housing development emergency reserve to the extent necessary
to maintain the fiscal integrity of a rental housing development and
maintain affordable rents for eligible households.
   Notwithstanding the provisions of Section 53130 which limit the
use of allocated proceeds with respect to project operating costs,
and Section 53133, the department may use any amounts available in
the account for the purpose of curing or avoiding a sponsor's
defaults on the terms of any loan or other obligation which will
jeopardize the financial integrity of a rental housing development or
the department's security in the rental housing development. The
payment or advance of any funds by the department pursuant to this
subdivision shall be solely within the discretion of the department,
and no sponsor shall be entitled to, or have any right to, payment of
these funds. Funds advanced pursuant to this subdivision shall be
added to the loan amount secured by the deed of trust and shall be
payable to the department upon demand.



50771.2.  (a) As an alternative to the loan provisions of paragraph
(2) of subdivision (b) of Section 50771.1 and the regulatory
agreement provisions of subdivision (d) of Section 50771.1, the
department may permit the prepayment of a sponsor's loan anytime on
the basis of net cash flow.
   (b) The department shall develop a prepayment plan in conjunction
with the sponsor which will ensure the maintenance of affordable
rents and the fiscal integrity of the rental housing development. As
an incentive to encourage the prepayment of loans, the department may
permit the sponsor to retain one-half of the net cash flow. The
department shall determine the method for calculating net cash flow,
which may include a factor for excess debt service coverage or a
return on cash investment to the sponsor.




50771.3.  The department may adopt, amend, or repeal emergency
regulations to implement this chapter with respect to loans made with
funds allocated pursuant to Section 53130. The adoption, amendment,
or repeal of these regulations shall be conclusively presumed to be
necessary for the immediate preservation of the public peace, health,
safety, or general welfare within the meaning or purposes of Section
11346.1 of the Government Code. This authority shall remain in
effect only until June 30, 1992.