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(continued)
(n) "Limited equity housing cooperative" means an entity defined by section 50076.5 of the Health and Safety Code. All requirements in this subchapter shall be applicable to units and residents of limited equity housing cooperatives unless the context indicates otherwise.
(o) "Local agency" means the same as defined in section 8878.16(d) of the Government Code.
(p) "Lower income household" means persons or families as defined in section 50079.5 of the Health and Safety Code.
(q) "Nonprofit corporation" or "nonprofit sponsor" means the same as "nonprofit corporation" as defined in section 50091 of the Health and Safety Code.
(r) "Operating expenses" means the amount approved by the department that is necessary to pay for the essential recurring expenses of the project, such as utilities, maintenance, management, taxes, and licenses, and mandatory direct or supportive tenant services but not including debt service, required reserve account deposits, or costs for voluntary direct or supportive tenant services.
(s) "Operating income" means all income generated in connection with the operation of the rental housing development including rental income for assisted and non-assisted units, rental income from nonresidential space, laundry and equipment rental fees, rental subsidy payments, and interest on any accounts related to the rental housing development. "Operating income" does not include security and equipment deposits, payments for direct or supportive tenant services that tenants are not required to pay for as a condition of occupancy, or tax benefits received by the sponsor.
(t) "Potentially hazardous building" means the same as defined in section 8875(a) of the Government Code.
(u) "Program" means the California Housing Rehabilitation Program.
(v) "Project" means a rental housing development, the rehabilitation, or rehabilitation and acquisition, and operation thereof, using program funds, and the financing structure and all agreements and documentation approved in connection therewith.
(w) "Reconstruction" means replacing an existing residential structure with a rental housing development of similar type, with not less than an equal number of units and bedrooms and level of amenities.
(x) "Rehabilitation" means repairs and improvements to a substandard rental housing development necessary to correct defects causing it to be a substandard building pursuant to section 17920.3 of the Health and Safety Code, and to meet rehabilitation standards as defined in section 50097 of the Health and Safety Code. Rehabilitation also includes reconstruction or conversion.
(y) "Rent" means all mandatory charges, other than deposits, paid by the tenant for the use and occupancy of an assisted unit and any mandatory charge for direct or supportive tenant services in a rental housing development, whether the units are rented or operated as a limited equity housing cooperative. In a group home, when mandatory charges include direct or supportive tenant services, "rent" means that amount designated for room charges by the Department of Social Services or other agency responsible for services to the designated tenant population.
(z) "Rent-up costs" means costs incurred in connection with marketing and preparing an assisted unit for occupancy while the unit is on the housing market but not rented to its first tenant.
(aa) "Rental housing development" means the same as defined in section 50668.5(h) of the Health and Safety Code and includes housing for the elderly or handicapped as authorized in section 50669 of the Health and Safety Code.
(bb) "Rural area" means the same as defined in section 50101 of the Health and Safety Code.
(cc) "Seismic rehabilitation improvements" means the same as defined in section 50668.5(b)(5) of the Health and Safety Code.
(dd) "Substandard rental housing development" means a structure or structures used or intended to be used as a rental housing development which is a substandard building pursuant to section 17920.3 of the Health and Safety Code.
(ee) "Very low-income household" means persons or families as defined in section 50105 of the Health and Safety Code.
Note: Authority cited: Section 50668.5, Health and Safety Code. Reference: Chapter 6.5 (commencing with section 50660), part 2, division 31, Health and Safety Code; and chapter 12.45 (commencing with section 8878.15), division 1, Title 2, Government Code.
s 7672. Eligible Project.
(a) To be eligible for funding, a proposed project must involve one or more of the following structures:
(1) a substandard rental housing development that will have one or more assisted units;
(2) a rental housing development eligible for seismic rehabilitation improvements pursuant to section 7675;
(3) an existing structure that will undergo a conversion and will have one or more assisted units; or
(4) an existing substandard residential structure that will undergo reconstruction and will have one or more assisted units.
(b) To be eligible for funding, a proposed project must involve either rehabilitation or seismic rehabilitation improvements.
(c) To be eligible for funding, a proposed group home project must have the written support of the local official responsible for services to the designated tenant population in the jurisdiction in which the proposed project is located, such as the Mental Health Director or Regional Center Director, and must be designated by that local official as being an intrinsic part of that agency's established service delivery system.
Note: Authority cited: Section 50668.5, Health and Safety Code. Reference: Sections 8875, 8875.1, 8875.2, 8878.20 and 8878.21, Government Code. Sections 19161, 19162, 19163, 50096, 50097, 50660, 50668.5 and 50670, Health and Safety Code.
s 7673. Eligible Sponsor.
(a) A sponsor shall be any individual, joint venture, partnership, limited partnership, trust, corporation, limited equity housing cooperative, local public entity, duly constituted governing body of an Indian reservation or rancheria, or other legal entity, or any combination thereof meets the requirements of subdivision (c).
(b) A sponsor may be organized on a for-profit, including limited profit, or nonprofit basis.
(c) In order to be eligible for funding, an applicant must be a sponsor who:
(1) demonstrates ability or experience relevant to owning, rehabilitating, and operating rental housing through any of the following:
(A) prior ownership, rehabilitation and operation of rental housing;
(B) staff with demonstrated ability or experience owning, rehabilitating and operating rental housing; or
(C) contracting with a consultant or consultants with demonstrated ability or experience assisting with the owning, rehabilitation and operation of rental housing; and
(2) has site control of the proposed project property by one of the following:
(A) fee title;
(B) a leasehold interest on the project property with provisions that enable the lessee to make improvements on and encumber the property provided that the terms and conditions of any proposed lease shall permit compliance with all program requirements;
(C) an option to purchase or lease;
(D) a disposition and development agreement with a public agency;
(E) a land sales contract, or other enforceable agreement for the acquisition of the property.
Note: Authority cited: Section 50668.5, Health and Safety Code. Reference: Sections 50668.5 and 50669, Health and Safety Code.
s 7674. Eligible Uses of Funds.
(a) Funds may be used only for eligible costs that are incurred on the project as set forth in this section. In addition, the costs must be necessary and must be consistent with the lowest reasonable cost given consistent with the project's scope and area.
(b) Eligible categories of costs include the following:
(1) acquisition of project property, including existing improvements, and costs related to such acquisition;
(2) refinancing of that amount of debt existing at the time of application which is necessary to achieve rents for low- and very-low income tenants in accordance with program requirements and costs related thereto;
(3) reconstruction, when the estimated cost including demolition, construction and related activities is less than the estimated cost of rehabilitation of the rental housing development;
(4) conversion when the resulting units are of modest design and with modest amenities and when the estimated total rehabilitation cost is less than the new construction cost of comparable units in the area;
(5) costs of rehabilitation necessary to correct code violations and those costs directly related to the correction of code violations;
(6) general costs required to correct unsafe, unhealthy and unsanitary conditions, and which are directly related to the project, including the following:
(A) general property improvements when the sponsor can demonstrate that such improvements are integral to the project;
(B) work related to protecting the physical security;
(C) work related to reducing long-term maintenance costs;
(D) other on-site and off-site improvements.
(7) seismic rehabilitation improvements, and work directly related thereto pursuant to section 7675;
(8) architectural, appraisal, engineering, legal and other consulting costs and fees, which are directly related to the planning and execution of the project and which are incurred through third-party contracts;
(9) administrative expenses pursuant to section 7680;
(10) rent-up costs;
(11) carrying costs during construction, including insurance, financing, and taxes;
(12) building permits and state and local fees;
(13) work lawfully required by a governmental entity which is reasonably required as a condition of project approval to correct unsafe, unhealthy or unsanitary conditions;
(14) relocation benefits and assistance to lower income residential tenants displaced as a result of acquisition and/or rehabilitation. All other temporary and permanent relocation benefits specified in section 7685 are not eligible uses of program funds;
(15) escrow, title insurance, recording and other related costs.
(c) If only a portion of the rental housing development consists of assisted units, funds from the fund may be used for the costs of all items specified in subdivision (b) associated exclusively with the assisted units. They may also be used for a share of the cost of such items that cannot specifically be allocated to either assisted units or non-assisted units or nonresidential space. This share shall not exceed an amount in direct proportion to the ratio between the gross floor area of the assisted units and the total gross floor area of the structure. No program funds may be used for costs associated exclusively with non-assisted units or nonresidential space except pursuant to section 7675.
Note: Authority cited: Section 50668.5, Health and Safety Code. Reference: Section 50668.5, Health and Safety Code.
s 7675. Seismic Rehabilitation Improvements.
(a) To be eligible to receive program funds for seismic rehabilitation improvements, a project must:
(1) be located within the jurisdiction of a local agency that has completed an inventory of unreinforced masonry buildings and has adopted a seismic mitigation program or ordinance pursuant to section 8875.2 of the Government Code or section 19163 of the Health and Safety Code;
(2) involve a structure which is identified as a potentially hazardous building by the local agency in which it is located; and
(3) involve a structure that contains, or will contain, at least six dwelling or residential hotel units, where at least 70 percent of all dwelling or residential hotel units will be assisted units and at least 50 percent of the total gross floor area will be used for residential purposes.
(b) Only program funds allocated pursuant to Government Code section 8878.20 may be used for seismic rehabilitation improvements and work directly related thereto.
(c) If only a portion of the rental housing development consists of assisted units, no program funds shall be used with respect to the nonresidential space or non-assisted units unless both of the following apply:
(1) The funds are used for seismic rehabilitation improvements and work directly related thereto; and
(2) The funded activity is integral to the seismic rehabilitation improvements and work related thereto being performed on the assisted units.
(d) Where program funds are used to pay any costs associated with seismic rehabilitation improvements, and work directly related thereto, of nonresidential space, cash distributions for the entire structure shall be limited in accordance with section 7684.
Note: Authority cited: Section 50668.5, Health and Safety Code. Reference: Sections 19161, 19162, 19163 and 50668.5, Health and Safety Code; and Sections 8875.1, 8875.2 and 8878.20, Government Code.
s 7676. Term of Loan.
(a) For projects involving rehabilitation and either acquisition or refinancing, the initial loan term shall be 30 years. For projects involving only rehabilitation, the initial loan term shall be 20 years.
(b) Upon request by the sponsor, the department shall approve an initial loan term longer than those set forth in subdivision (a) provided that such longer term does not exceed the useful life of the rental housing development as determined by the department utilizing general industry standards.
(c) Upon request by the sponsor, the department may approve one or more ten-year extensions of the loan term, if the department determines prior to granting each extension that both of the following are met:
(1) The sponsor is in compliance with the Regulatory Agreement and agrees to continue to comply during the extended term; and
(2) The extension is necessary to continue operations consistent with program requirements.
(d) The department may condition each extension on such terms as it deems necessary to ensure compliance with the requirements of this program.
Note: Authority cited: Section 50668.5, Health and Safety Code. Reference: Sections 50668.5 and 50670, Health and Safety Code.
s 7677. Maximum Loan Amounts.
(a) The maximum loan amounts shall correspond to the loan limits provided in subdivision (a)(1) of section 7460 of this Title. The amounts for a small apartment unit and for a large apartment unit shall be the same as the limits provided for a small unit and for a large unit. The amounts for a single-family house shall be the same as the limits for a single-family dwelling. (The amounts for a residential hotel unit shall be the same as those limits shown for a residential hotel unit.)
(b) The loan amount is limited to the amount required when considered with other available financing, in order to achieve all of the following:
(1) to enable the rehabilitation and either acquisition or refinancing, or rehabilitation only, of the rental housing development;
(2) to ensure that rents for assisted units are in accordance with program requirements; and
(3) to operate in compliance with all other program requirements.
(c) The total maximum loan amount shall not exceed the number of assisted units multiplied by the maximum loan amount for the unit type as set forth in subdivision (a)(1) of section 7460 and subdivision (a) of this section.
(d) The department may approve a higher loan amount per assisted unit if the sponsor is unable to otherwise finance project costs and the department determines that either of the following circumstances exists:
(1) The higher loan amount for any assisted unit or units is consistent with the lowest reasonable cost of similar projects in the same area meeting minimum rehabilitation or seismic code standards, other eligible and necessary costs, and local building and land use requirements; or
(2) The higher loan amount for any assisted unit or units is necessary to correct severe health and safety defects or to meet handicapped accessibility standards.
Note: Authority cited: Section 50668.5, Health and Safety Code. Reference: Sections 50668.5 and 50670, Health and Safety Code.
s 7678. Interest Rate and Loan Repayments.
(a) Loans shall bear simple interest of three percent per annum on the unpaid principal balance. Interest shall accrue from the date that funds are disbursed by the department to an escrow holder on behalf of the sponsor.
(b) Accrued interest shall be payable annually to the department commencing no later than the sixtieth (60th) day after the last day of the initial operating year and continuing no later than that date annually thereafter until the loan is paid in full.
(c) Upon request by the sponsor, the department may permit periodic payments of principal, provided that the resulting additional debt service will not jeopardize the fiscal integrity of the project or the sponsor's ability to maintain rents in accordance with program requirements. The department may approve a repayment plan at loan closing or any time thereafter, subject to the following:
(1) The repayment plan shall be based on actual or projected net cash flow which shall be calculated by subtracting from total operating income the sum of the amounts necessary for project fiscal integrity plus the amount for the allowable distribution to sponsor pursuant to section 7684.
(2) The repayment plan may include provision for an incentive payment to the sponsor not to exceed the proposed repayment to be applied to the principal. Such payment to the sponsor shall be in addition to the sponsor's permitted distribution pursuant to section 7684.
(3) The additional debt service and any payments to sponsor under this subdivision shall not be included in determining compliance with the project's debt service coverage ratio requirements of Health and Safety Code section 50668.5(d).
(d) Upon request by the sponsor, the department may approve, either at loan closing or any time thereafter, the deferral of accrued interest for such periods and subject to such conditions as may enable the sponsor to maintain affordable rents and maintain the fiscal integrity of the project.
(e) The total amount of the outstanding principal and interest, including deferred interest, shall be due and payable in full to the department at the end of the loan term including any extension granted by the department, or upon the department's termination of the loan.
Note: Authority cited: Section 50668.5, Health and Safety Code. Reference: Sections 50662, 50668.5 and 50669, Health and Safety Code.
s 7679. Loan-to-Value Limits.
(a) The ratio of total indebtedness secured by the project property, including the department's loan, to the total after-rehabilitation value of the project property shall not exceed 90 percent, except when the sponsor is a nonprofit sponsor, in which case the ratio shall not exceed 100 percent. In the event there is a transfer of the project between a for-profit sponsor and a nonprofit sponsor, the loan-to-value ratio applicable to the acquiring party shall apply to the project upon transfer.
(b) The after-rehabilitation value shall be based on an appraisal, undertaken at the sponsor's expense, that
(1) is prepared by an individual who:
(A) has the knowledge and experience necessary to appraise income property competently;
(B) is aware of, understand, and correctly employs those recognized methods and techniques that are necessary to produce a credible appraisal;
(C) in reporting the results of the appraisal, communicates each analysis, opinion, and conclusion in a manner that is not misleading as to the true value and condition of the property;
(D) if developing a business appraisal, is aware of, understands, and correctly employs those recognized methods and techniques that are necessary to produce a credible appraisal;
(E) in reporting the results of a business appraisal, communicates each analysis, opinion, and conclusion in a manner that is not misleading as to the true value and condition of the property.
(2) utilizes all of the following methods to determine value:
(A) sales of comparable developments;
(B) capitalization of income;
(C) replacement cost; and
(3) includes the pre-rehabilitation value, if requested by the department.
(c) The department shall not accept any appraisal that does not conform to the provisions of subdivision (b).
(d) The department shall accept the valuation from the replacement cost method as the after-rehabilitation value of the project property when the department determines that such method accurately reflects sufficient value in the project to meet the loan-to-value limits pursuant to this section.
Note: Authority cited: Section 50668.5, Health and Safety Code. Reference: Sections 50662, 50668.5 and 50670, Health and Safety Code.
s 7680. Administrative Expenses.
(a) Administrative expenses are those expenses incurred by the sponsor related to the planning and execution of the project. Such expenses include, but are not limited to the following:
(1) salaries, wages, and related costs of the sponsor's staff engaged in the planning and execution of the project, including general legal services, accounting and auditing relating to the sponsor's operations, and financial packaging;
(2) travel costs and other general overhead costs which are attributable to the project;
(3) expenses for sponsor's administrative services performed and paid for under third-party contracts.
(b) Administrative expenses do not include those legal, architectural, engineering, or financial fees which are directly related to the planning and execution of the project and which are incurred by the sponsor through third-party contracts eligible for funding pursuant to section 7674(b)(8).
(c) Sponsors seeking program funds for administrative expenses shall include in their application a statement of administrative expenses incurred to date, and a budget for anticipated administrative expenses. The statement and budget shall include sufficient detail and explanation to permit the department to determine eligibility and reasonableness of the expenses. The department may include in the loan amount those administrative expenses shown in the statement and anticipated budget provided it determines that those expenses are reasonable and necessary considering the nature and scope of the project.
(d) The department shall not fund administrative expenses in excess of 10 percent of the approved loan amount unless the sponsor can demonstrate to the department's satisfaction that costs in excess of this limitation are the result of expenses such as those incurred for architectural, engineering, and legal services, which would otherwise qualify for funding as consultant services pursuant to section 7674 (b)(8).
Note: Authority cited: Section 50668.5, Health and Safety Code. Reference: Section 50668.5, Health and Safety Code.
s 7681. Occupancy Requirements.
(a) A unit in a rental housing development may be designated as an assisted unit if at the time of initial application:
(1) the unit is occupied by an eligible household;
(2) the unit is vacant and will remain available to an eligible household; or
(3) a noneligible household residing in the unit has agreed not to return to the unit as evidenced by a signed waiver of the tenant's right pursuant to section 7265.3(d) of the Government Code to return to the unit after rehabilitation. Any such waiver must be in writing and meet the notice requirements of section 7685(f).
(b) The sponsor shall designate as assisted units, at a minimum, the same number of units as were reasonably known to be occupied by eligible households residing in the rental housing development at the time of initial application.
(c) All rooms rented in a congregate home, and all rooms designated for use by the client group in a group home shall be designated for occupancy by eligible households.
(d) The size, type and amenity level of assisted units after rehabilitation shall not substantially differ from the size, type, and amenity level of units as were known to be occupied by eligible households residing in the rental housing development at the time of initial application to the program. Units which are reconfigured or enlarged to alleviate overcrowding shall not be considered a violation of this provision.
(e) A proposed project receiving rating points pursuant to section 7689 for serving very low-income households shall reserve at least this number of units for occupancy by very low-income households for the full loan term.
(f) The number, size, type, and amenity level of assisted units, and assisted units designated for very low-income occupancy, shall not be fewer than the number nor substantially different from the size, type and amenity level designated in the Regulatory Agreement for the full loan term.
Note: Authority cited: Section 50668.5, Health and Safety Code. Reference: Sections 50010, 50669 and 50668.5, Health and Safety Code.
s 7682. Tenancy Standards.
(a) Sponsors shall select only eligible households as tenants of assisted units. The sponsor shall develop a tenant selection plan for assisted units which shall be subject to the approval of the department. The plan shall include the following:
(1) an affirmative marketing plan which shall include policies and steps to ensure equal access to all housing units in the rental housing development for all persons in any category protected by federal, state or local laws governing discrimination, and regardless of any other arbitrary factor.
(2) reasonable criteria for selection or rejection which shall not discriminate in violation of any federal, state or local laws governing discrimination, or any other arbitrary factor.
(3) prohibition of local residency requirements.
(4) tenant selection procedures that include the following requirements:
(A) selection of tenants based on order of application, lottery or other reasonable method approved by the department;
(B) notification of tenant applicants of eligibility and, based on turnover history, when a unit may be available;
(C) notification of tenant applicants of ineligibility to occupy an assisted unit and the reason for the ineligibility; and
(D) maintenance of a waiting list of eligible households applying to occupy assisted units and if applicable, which distinguishes between lower and very low-income tenants.
(5) tenant occupancy standards that shall be used by the sponsor upon both initial occupancy and recertification to determine a tenant's unit size, as follows:
Unit Minimum No. of
Size Persons in Household
0-BR 1
1-BR 1
2-BR 2
3-BR 4
4-BR 6
5-BR 8
(A) Flexibility for assignment by a sponsor to a different sized unit is permitted if the sponsor reasonably determines that special circumstances warrant such an assignment and the reasons are documented in the tenant's file.
(B) If at the time of recertification, the tenant's household size has changed and no longer meets the minimum occupancy standards pursuant to this subdivision, tenant household shall be required to move to the next available appropriately sized unit pursuant to this subdivision.
(b) The sponsor shall submit for Department approval the form of the rental agreement for assisted units prior to its use. The form shall include the following:
(1) provisions requiring good cause for termination of tenancy. One or more of the following constitutes "good cause:"
(A) failure by the tenant to maintain eligibility under the program;
(B) material noncompliance by the tenant with the lease, including one or more substantial violations of the lease or habitual minor violations of the lease which
1. adversely affect the health and safety of any person or the right of any tenant to the quiet enjoyment of the leased premises and related project facilities;
2. substantially interfere with the management, maintenance, or operation of the rental housing development;
3. result from the failure or refusal to pay, in a timely fashion, rent or other charges when due. Failure or refusal to pay in a timely fashion is a substantial violation of the lease when there is nonpayment of rent or other financial obligations under the lease after a three-day notice to pay rent or quit, but such failure or refusal to pay in a timely fashion is a minor violation if payment is made during the three-day notice period.
(C) material failure by the tenant to carry out obligations under state or local law;
(D) subletting by the tenant of all or any portion of the assisted unit;
(E) actions or conduct of the tenant constituting significant problems which can be reasonably resolved only by eviction of the tenant and for which the sponsor previously notified the tenant that the conduct in question would be considered cause for eviction. These may include the refusal after written notice, to accept reasonable rules or any reasonable changes in the lease or the refusal to recertify income or household size.
(2) a provision requiring that the facts constituting the grounds for any eviction be set forth in the notice provided to the tenant pursuant to state law;
(3) establishment of grievance procedures for hearing complaints of tenants and appeal of management action;
(4) a requirement that the tenant annually recertify household income and size.
(c) If, upon notification of tenant or at the time of recertification, the tenant's household income extends the upper limit for lower income households, the tenant's lease shall terminate six months after the date of recertification and the tenant shall be required to vacate the assisted unit.
(1) If the tenant provides to the sponsor additional evidence which establishes income eligibility prior to the expiration of the six months, the tenant shall not be required to vacate the assisted unit.
(2) Upon determination by the sponsor that the rental housing development is located in a high cost rental area with low rental vacancy rates as determined by the department, the sponsor may approve one additional six-month extension of the lease.
(3) If the assisted unit is subject to state or federal rules governing low-income housing tax credits, those eligibility provisions shall govern continued eligibility for occupancy.
(4) In a limited equity housing cooperative where the household income of a tenant occupying an assisted unit exceeds the upper limit for lower income households, the tenant shall not be required to vacate the assisted unit.
(A) After recertification and determination of ineligibility, the sponsor shall immediately notify the tenant that the rent will increase to a market rate payment six months after said notification. Market rate payment shall be the rent paid for a comparable unassisted unit, or the rent charged for comparable units in the area. This market rate payment shall be subject to department approval.
(B) The next available membership share for occupancy in a comparable unit shall be sold to an eligible household.
(d) If the income of a household residing in a unit designated for occupancy by very low-income households changes from very low-income to other lower income at the time of recertification, the following shall apply:
(1) The household shall not be required to vacate the unit;
(2) The sponsor shall charge rent that does not exceed the highest current rent allowed for any comparable assisted unit designated for occupancy by lower income households pursuant to section 7683, or where there are no such units, the maximum rent which would be allowed pursuant to section 7683;
(3) The sponsor shall designate the unit as an assisted unit for lower income households until the lower income household vacates the unit; and
(4) The sponsor shall designate the next available comparable assisted unit as an assisted unit for very low-income households units the unit mix required by the Regulatory Agreement is achieved.
(5) In a limited equity housing cooperative, where the tenants in an assisted unit designated as a very low-income unit becomes an other lower-income household, the sponsor shall comply with the provisions of subdivisions (d)(1) through (d)(4).
Note: Authority cited: Section 50668.5, Health and Safety Code. Reference: Sections 50010, 50668.5 and 50670, Health and Safety Code.
s 7683. Rent Standards.
(a) The department shall establish initial rent for assisted units in each project in accordance with the tables in section 6932 and the following:
(1) Rents for units reserved for occupancy by lower income households shall not exceed 30 percent of 60 percent of the monthly area median income for the household size specified in subsection (a)(2) below at the time of initial occupancy.
(2) The household size to be used in calculating maximum rent shall vary based on unit size as follows:
Applicable Household
Size to Determine
Unit Size Income Limit
residential hotel 75 percent of 1 person, which
unit or may be multiplied by
bedroom in a group home 2 for group homes if there are
or congregate home 2 occupants per bedroom
0 bedroom 1 person
1 bedroom 2 person
2 bedrooms 3 person
3 bedrooms 4 persons
4 bedrooms 6 persons
5 bedrooms 8 persons
(3) The maximum rent to be charged to tenants shall be determined by deducting from the maximum amounts calculated pursuant to (a)(1) and (a)(2) a utility allowance (for the appropriate unit size) determined or approved by the United States Department of Housing and Urban Development under section 8 of the United States Housing Act of 1937, section 1437f, Title 42 U.S.C., for the locality in which the rental housing development is located. Where a tenant does not directly pay for utilities, the utility allowance deduction shall be zero.
(4) As used in this section "rent" does not include any payment to a sponsor under section 8 of the United States Housing Act of 1937, section 1437f, Title 42 U.S.C., or any comparable federal or state rental assistance program.
(5) For an assisted unit occupied by an eligible household at the time of initial application to the program, the after-rehabilitation rent may not exceed the greater of (i) the rent charged at the time of initial program application, or (ii) 25% of the subject tenant household's monthly gross income. In no event is the rent to exceed that which could be charged pursuant to subdivision (a)(1), (2), and (3) above.
(b) After the initial operating year, rents in assisted units may be adjusted no more often than annually. The amount of adjustment for assisted units shall be in accordance with the following:
(1) Rents may be increased at a rate not to exceed the most recently published annual average percentage change in the United States Department of Labor, Bureau of Labor Statistics Consumer Price Index, Residential Rent for All Urban Consumers for the West (CPI), multiplied by the ratio of the previous year's budgeted operating expenses plus required reserves to the previous year's operating income attributed to residential units;
(2) In addition to the rent increase allowed pursuant to subdivision (b)(1), rents may be increased by that amount necessary to increase the operating income to cover changes in debt service on an adjustable rate mortgage approved by the department as part of the project;
(3) Notwithstanding the provisions of subdivisions (b)(1) and (b)(2), rents shall be decreased if there are changes in debt service approved by the department after loan closing when such changes improve the financial condition of the project. The rent shall be decreased by an aggregate amount equal to the amount of the monthly payment reduction.
(4) Except as provided in section 7685(e)(1), the first adjustment after the initial operating year shall be prorated based on the allowable rent increase multiplied by the fraction of a full year which constitutes the initial operating year.
(c) The sponsor may request for a greater rent increase if the sponsor can demonstrate, to the department's satisfaction, that the increase is necessary to pay for unusual or unforeseeable increases in costs related to the assisted units and to preserve fiscal integrity. The sponsor may not receive a greater rent increase on the grounds that fiscal integrity is threatened by a shortfall in income, unanticipated expenses or other financial problems attributable to nonresidential space or nonassisted units.
(d) Any allowable rent increase or portion thereof not implemented by the sponsor in any given year may not be accumulated for implementation in subsequent years.
(e) Where the assisted units are rent restricted as a condition of the low-income housing tax credit or other state and federal rent subsidy programs, the initial rent for assisted units and subsequent rent increases shall be the lower of those permitted under subdivisions (a), (b), or (c), or those permitted under the applicable tax credit or other programs.
(f) The sponsor shall submit requests for rent adjustments pursuant to subdivision (c) above as part of the annual operating budget pursuant to section 7696.
Note: Authority cited: Section 50668.5, Health and Safety Code. Reference: Sections 50668.5 and 50670, Health and Safety Code.
s 7684. Limits on Distributions.
(a) A sponsor shall be limited to an annual distribution on the sponsor's actual investment in the project in an amount not to exceed eight percent per annum. A sponsor may not accumulate distributions from year to year.
(1) For a project involving only rehabilitation and no acquisition or refinancing, actual investment is determined as follows: the market value of the rental housing development prior to rehabilitation, as determined in an appraisal, less outstanding debt prior to rehabilitation, plus any cash contributions to the project made by the sponsor.
(2) For a project involving rehabilitation and either acquisition or refinancing, actual investment is the amount of any cash contributions to the project made by the sponsor. Cash contributions do not include government assistant or private donations, other than the sponsor's, to the project.
(b) In its initial operating budget, the sponsor shall demonstrate to the department the amount of the sponsor's actual investment in the residential portion of the project on which the allowable distribution will be calculated. The actual investment amount may be increased in subsequent budgets upon a showing of additional actual investment other than prepayments of principal advanced by the sponsor.
(c) Distributions shall be permitted only after the sponsor submits a complete annual report and operating budget and the department deter mines that the report and budget demonstrate compliance with all program requirements for the applicable year.
(d) Distributions attributed to the nonresidential space shall not be subject to limits pursuant to this section, except where program funds have been used for nonresidential space pursuant to section 7675(c). Where program funds have not been used pursuant to section 7675(c), then for purposes of calculating allowable distributions, operating income and expenses shall not include income or expenses from nonresidential space.
(e) No distributions shall be made in the following circumstances:
(1) when written notice of default has been issued by any entity with an equitable or beneficial interest in the rental housing development;
(2) when the department determines that the sponsor has failed to comply with the department's written notice of any reasonable requirement for proper maintenance or operation of the rental housing development;
(3) if all currently required debt service and operating expenses have not been paid;
(4) if the replacement reserve account or any other reserve accounts are not fully funded pursuant to section 7696 and the Regulatory Agreement.
(f) When operating income is greater than approved operating expenses, debt service, scheduled reserve deposits, approved prepayments, approved annual distributions, and any other disbursements approved by the department, then the sponsor shall pay such excess income into the Residual Receipts Account established pursuant to section 7697. Where program funds have not been used for costs attributable to nonresidential space pursuant to section 7675(c) and for purposes of calculating the amount of excess funds pursuant to this subdivision, operating income and expenses shall not include income or expenses from nonresidential space.
Note: Authority cited: Section 50668.5, Health and Safety Code. Reference: Sections 50668.5 and 50670, Health and Safety Code.
s 7685. Relocation Requirements.
(a) It shall be the sponsor's responsibility to ensure compliance with the relocation provisions set forth in this section. Loan funds may be used for relocation costs attributable to the lower income tenants as a result of the rehabilitation activities, including the payment of benefits required by this section. The department may authorize increases in the sponsor's approved loan amount for the purpose of paying eligible relocation costs attributable to lower income households, which could not be reasonably foreseen by the sponsor at the time of application. Eligibility and relocation benefits shall be determined as set forth in this section, although additional requirements may be imposed by applicable federal, state, or local laws.
(b) All tenants in occupancy in a property who are permanently displaced as a direct result of an acquisition funded in whole or in part with program funds shall be entitled to relocation benefits as provided in chapter 16 (commencing with section 7260) of division 7, Title 1 of the Government Code.
(c) In the case of an acquisition funded in whole or in part with program funds, all existing residential tenants as well as residential tenants who were in occupancy on the date that the sponsor entered into the binding agreement for the purchase of the property shall be provided with a notice as specified herein no later than the date of application to the department for program funds. The notice shall contain all the following information:
(1) a statement that the sponsor has entered into an agreement to purchase the property;
(2) a statement that the sponsor is applying for public funds for the purpose of acquiring and rehabilitating the property;
(3) a statement that if the sponsor's application is funded and the rehabilitation work requires temporary relocation, all residential tenants will be entitled to return to their units; will be entitled to temporary relocation benefits; and if lower and moderate income, will have any rent increases limited to a total rent of no more than 25 percent of their incomes for a period of one year from the completion of the rehabilitation work;
(4) a statement that all residential tenants who are permanently displaced as a direct result of this acquisition may be entitled to financial benefits, which could include moving expenses and rent differential as required by law;
(5) a statement that if the application is funded, the sponsor will be required as a condition of funding to conduct a tenant survey including verification of tenants' incomes. A tenant's failure to provide complete and accurate information may result in the loss of some of the financial benefits described above;
(6) a statement indicating who to contact for further information or to make a claim.
(d) Any residential tenant who was in occupancy at the time of application to the department for funds and who is displaced to accommodate rehabilitation work shall be provided with temporary housing benefits for a period of up to 90 days, and shall be given the option of returning, after rehabilitation, to the unit from which he or she was displaced.
(e) Any residential tenant whose household income is lower or moderate as defined in section 50093 of the Health and Safety Code shall be entitled to the following benefits and shall be subject to the following additional provisions:
(1) After-rehabilitation rents shall not be raised to a level which exceeds 25 percent of that household's income for 12 months subsequent to the completion of rehabilitation. A tenant whose income is lower or moderate, but refuses to provide the income information necessary to establish rents pursuant to this paragraph shall not be eligible for relocation benefits due to an increase in rent in excess of that permitted by this paragraph. Income surveys to ensure compliance with the requirements of this paragraph and applicable relocation laws shall be completed prior to disbursement of program funds.
(2) A residential tenant or household whose income is lower or moderate shall be entitled to all relocation benefits provided pursuant to chapter 16 (commencing with section 7260) of division 7 of Title 1 of the Government Code if such tenant or household is permanently displaced as a direct result of the rehabilitation work.
(3) A residential tenant or household whose income is lower or moderate and whose temporary displacement exceeds 90 days shall be deemed permanently displaced and may elect to receive benefits on a monthly basis while retaining the right to reoccupy the previously occupied unit. When a tenant elects to receive his or her permanent relocation benefits pursuant to this paragraph on a lump sum basis, the tenant shall have waived his or her right to return to the unit upon completion of the rehabilitation.
(f) All residential tenants shall be given a notice which specifies their rights pursuant to this section no later than the time of application to the department for program funds. Any tenant's waiver of a right set forth in this section must be in writing and must specify in detail the relocation rights being waived.
(g) Any nonresidential tenant at the time of application by the sponsor to the department for program funds shall be entitled to relocation assistance and benefits to the extent required by applicable law from funds other than program funds.
(h) The sponsor shall prepare a relocation plan in conformance with the provisions of section 6038(b) of this Title based on the scope of the project and the extent of anticipated displacement. The relocation plan shall be subject to the review and approval of the department prior to the disbursement of program funds.
Note: Authority cited: Section 50668.5, Health and Safety Code. Reference: Sections 7260, et seq., Government Code; and Section 50668.5, Health and Safety Code.
s 7686. Construction Requirements.
(a) The department shall review and underwrite project plans and specifications to ensure the following objectives:
(1) The rental housing development shall have a minimum useful life of 20 years for projects proposing only rehabilitation and 30 years for projects proposing rehabilitation and either acquisition or refinancing; and
(2) Maintenance, repair, and replacement costs shall be minimized during the useful life of the rental housing development.
(b) The sponsor shall ensure that the rehabilitation work for the project all be performed in a competent, professional manner at the lowest reasonable cost consistent with the project's scope and locality and not in excess of the total funds available. The sponsor may demonstrate the reasonableness of the proposed cost by soliciting bids based on a bid package distributed to potential licensed contractors located in the general area of the rental housing development or by the use of other methods which adequately demonstrate to the department's satisfaction that the costs are reasonable. Such bid package or other method shall include at a minimum:
(1) complete plans and specifications for the work; and
(2) a full description of the program requirements for rehabilitation, including the required provisions of the construction contract.
(c) The sponsor shall only enter into written contracts with contractors possessing valid California contractor's licenses. The contract shall be subject to the prior approval of the department to determine compliance with program requirements.
(d) The construction contract shall be a completely integrated agreement containing all the understandings, covenants, conditions and representations between the parties and, at a minimum, contain provisions which:
(1) require that the contractor complete the work in accordance with the approved plans and specifications and applicable local, state and federal laws, regulations and building codes and standards;
(2) require the contractor to proceed with and complete the work in accordance with the approved schedule for work;
(3) specify a total contract price consistent with the approved project budget;
(4) provide for a method of payment to the contract or consistent with program requirements which may include progress payments and retentions;
(5) require that the contractor provide a payment bond securing payment to persons providing goods or services to the project and a performance bond securing faithful completion of the work. Each bond shall be in an amount equal to 50 percent of the total contract price and include the department as a dual obligee. The department may waive the payment and performance bond requirements, or reduce their scope, upon the sponsor's either:
(A) providing alternative security for payment and performance under the construction contract which is substantially equivalent to the bond requirements, or (continued)