Loading (50 kb)...'

(continued)
(b) Accrued interest shall be payable out of operating income remaining after payment of approved operating expenses, debt service on other loans, reserve deposits, and sponsor distributions. Such interest, to the extent it is available, shall be payable to the department commencing on the last day of the initial operating year and continuing on each anniversary date thereafter until the loan is paid in full.
(c) Upon request by the sponsor, at the time of application or any time thereafter, the department shall approve the deferral of accrued interest for such periods and subject to such conditions as are necessary to enable the sponsor to maintain affordable rents, maintain the fiscal integrity of the project and pay allowable distributions pursuant to section 8089.
(d) Upon request by the sponsor, the department shall permit payments of a portion of the program loan principal annually following approval of the annual report required pursuant to section 8101, 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 shall approve a schedule for such principal payments at loan closing or any time thereafter, subject to the following:
(1) The schedule shall be based on actual or projected net cash flow which shall be calculated by subtracting from operating income the sum of the amounts necessary for project fiscal integrity plus the amount of allowable distributions pursuant to section 8089.

(2) The schedule may include provision for incentive payments to the sponsor. Such payments to the sponsor shall be in addition to the sponsor's permitted distribution pursuant to section 8089, and shall be allowed only after payment in full of all interest, including deferred interest, accrued on the program loan. The amount of such payments to the sponsor for a particular year shall not exceed the lesser of
(A) the amount of payments applied to the program loan principal for that year; or
(B) twice the amount of sponsor distributions allowed pursuant to section 8089(b)(1), where this subdivision is applicable, or twenty-four percent of the sponsor's actual investment in the assisted units, where it is not.
(e) Commencing thirty years from the date of the loan, the sponsor shall make annual payments of interest and principal as follows:
(1) If the loan term, including any extensions, is fifty years or more, the amount of such payments shall not be less than one-half of net cash flow until the loan is paid in full. Net cash flow shall be calculated as described in subsection (d)(1).
(2) If the loan term, including any extensions, is less than fifty years, the amount of such payments shall be the lesser of
(A) the full amount of net cash flow, calculated as described in subsection (e)(1); or
(B) that amount required to fully amortize the loan during its remaining term.
(f) All program loan payments shall be applied first to interest and second to principal.
(g) 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.
(h) Upon request by the sponsor, and providing that any additional resulting 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 establish an interest rate for the program loan exceeding three percent.
(i) For purposes of this section only, and for projects where distributions from nonassisted units are not limited, in accordance with section 8089(b)(2), operating income shall not include income attributable to nonassisted units or commercial space, and fiscal integrity shall be evaluated without consideration of income or expenses attributed to nonassisted units or commercial space.


Note: Authority cited: Sections 50771.1 and 50771.2, Health and Safety Code. Reference: Sections 50771.1 and 50771.2, Health and Safety Code.








s 8083. Appraisal and Market Study Requirements.
(a) As a condition of funding, the department shall require an appraisal or market study, or both, where required to achieve the following objectives:
(1) To establish a market value for the land to be purchased or leased as part of the project for purposes of evaluating the reasonableness of the purchase price or lease terms pursuant to section 8079 and determining sponsor equity pursuant to section 8084.

(2) To assist with establishing reasonable costs for other development cost categories pursuant to section 8079.
(3) To assess fiscal integrity.
(b) Any appraisal required by the department shall be prepared at the sponsor's expense by an individual who
(1) has the knowledge and experience necessary to appraise income property competently;
(2) is aware of, understands, and correctly employs those recognized methods and techniques that are necessary to produce a credible appraisal; and
(3) 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.
(c) Any market study required by the department shall be prepared at the sponsor's expense by an individual who:

(1) has the knowledge and experience necessary to conduct a market study for rental property competently;
(2) is aware of, understands, and correctly employs those recognized methods and techniques that are necessary to produce a credible market study; and
(3) in reporting the results of the market study, communicates each analysis, opinion and conclusion in a manner that is not misleading as to the true value and condition of the property.


Note: Authority cited: Section 50771.1, Health and Safety Code. Reference: Section 50771.1, Health and Safety Code.








s 8084. Minimum Equity Requirements.
(a) Sponsors of projects where more than 80 percent of all units are assisted units must provide equity in an amount not less than ten percent of total development costs, excluding costs of syndication. Sponsors of other projects shall not be subject to any minimum equity requirement.
(b) Equity, for purposes of this subdivision, includes cash and land, whether contributed by the sponsor from its own resources or granted to the sponsor by another party. Equity also includes other items of monetary value contributed by the sponsor and applied towards project costs, including
(1) personal property;
(2) the capitalized value of any exemption from local taxes on real property. The amount of the exemption shall be established by the department prior to loan closing based on its estimate of the probable assessed value of the rental housing development and its interpretation of state law governing eligibility for exemptions, as set forth in Revenue and Taxation Code section 214, et seq.; and
(3) the value of any administrative expenses not funded by the program, but which would have been eligible for funding pursuant to section 8085(d).


Note: Authority cited: Section 50771.1, Health and Safety Code. Reference: Section 50771.1, Health and Safety Code.








s 8085. Administrative Expenses.
(a) Administrative expenses are those expenses incurred by the sponsor related to the planning and execution of the project prior to initial occupancy. 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 8079(b)(7).
(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 shall 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) Administrative expenses in amounts equal to or less than the maximum amounts shown in the following schedule shall be deemed reasonable and necessary upon certification by the sponsor that they have been incurred.

Approved Program Loan Amount Maximum Administrative Expenses
Up to $500,000 5% of the approved program loan amount
Over $500,000 $25,000 plus 1% of the approved program
loan amount over $500,000, up to a
maximum of $50,000


(e) 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 for architectural, engineering, and legal services, which would otherwise qualify for funding as consultant services pursuant to section 8079(b)(7).


Note: Authority cited: Section 50771.1, Health and Safety Code. Reference: Section 50771.1, Health and Safety Code.








s 8086. Occupancy Requirements.
(a) In each rental housing development assisted by the program, and for the full term of the program loan, the following requirements shall apply:
(1) Not less than thirty percent of all units shall be assisted units.
(2) Not less than two-thirds of the assisted units shall be very low- income units.
(b) Assisted units shall not differ substantially in size or amenity level from nonassisted units with the same number of bedrooms, and lower income units shall not differ from very low-income units. Assisted units shall not be segregated from nonassisted units, and very low-income units shall not be segregated from lower income units. Within these limits, sponsors may change the designation of a particular unit from assisted to nonassisted, or lower income to very low-income, and vice versa, over time.
(c) The number, size, type, and amenity level of lower income and very low-income units shall not be fewer than the number nor different from the size, type and amenity level described in the Regulatory Agreement for the full loan term.


Note: Authority cited: Section 50771.1, Health and Safety Code. Reference: Sections 50736 and 50771.1, Health and Safety Code.








s 8087. Tenancy Standards.
(a) Sponsors shall select only eligible households as tenants of assisted units, and shall annually verify household income and size to determine continued eligibility. As part of the management plan required by section 8100(d), the sponsor shall develop a tenant selection plan for assisted units which shall be subject to the approval of the department. Any change to the plan shall be subject to the approval of the department. The plan shall include the following:

(1) an affirmative marketing plan for eligible households 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. Where a significant number of persons in the area of the rental housing development have limited fluency in English, the plan shall require that publications implementing the affirmative marketing plan be provided in the native language of those persons.
(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 to tenant applicants of eligibility for residency and, based on turnover history, for units in the rental housing development, and the approximate date 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 their right to appeal this determination pursuant to section 8087(e); and
(D) maintenance of a waiting list of eligible households applying to occupy assisted units and if applicable, distinguish between lower- and very low-income applicants.
(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 No. of Persons in Household
Size Minimum Maximum
SRO 1 2
0-BR 1 2
1-BR 1 3
2-BR 2 5

3-BR 4 7
4-BR 6 9
5-BR 8 11


(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 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) Upon prior written approval by the department, the sponsor may set income limits for lower income units at a level below the upper limit for lower-income households.
(c) In limited equity housing cooperatives, share purchase terms for assisted-units shall be limited as follows:

(1) the total share purchase price for the initial occupant shall be not less than two months carrying costs and not more than five percent of the prorated development cost of the unit.
(2) share appreciation upon resale shall be at a rate approved by the department not to exceed eight percent of the paid-in portion of the share purchase price per annum.
(3) for lower-income households, the required cash contribution to be applied towards the total share purchase price upon initial occupancy shall not exceed 2.5 percent of the prorated development cost of the unit, plus allowed appreciation. For very low-income households, the required cash contribution shall not exceed ten percent of the household's income over the twelve months prior to occupancy.
(4) the sponsor may loan members of the cooperative the difference between the total share purchase price and the member's initial cash contribution. The terms and conditions of such loans shall be subject to department approval.
(d) The sponsor shall submit for department approval the form of the rental or occupancy 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 permitted charges when due. 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; or
(D) subletting, by the tenant, of all or any portion of the assisted unit;
(E) any other action or conduct of the tenant constituting significant problems which can be reasonably resolved only by eviction of the tenant, provided that the sponsor has previously notified the tenant that the conduct or action in questions would be considered cause for eviction. Examples of action or conduct in this category include the refusal of a tenant, 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) notice of grievance procedures for hearing complaints of tenants and appeal of management action; and

(4) a requirement that the tenant annually recertify household income and size.
(e) The sponsor shall adopt an appeal and grievance procedure to resolve grievances filed by tenants and appeals of actions taken by sponsors with respect to tenants' occupancy in the rental housing development and prospective tenants' applications for occupancy.
(1) the appeal and grievance procedure shall be included in the sponsor's management plan described in section 8100(d) and shall, at a minimum, include the following:
(A) a requirement for delivery to each tenant and applicant of a written copy of the appeal and grievance procedure;
(B) procedures for informal dispute resolution;
(C) a right to a hearing before an impartial body, which shall consist of one or more persons, with the power to render a final decision on the appeal or grievance;
(D) procedures for the conduct of such hearing and the appointment of the impartial hearing body. The procedures shall include the right to present evidence without regard to formal rules of evidence, the right to be represented by any other person and the right to a written decision from the hearing body. The decision of the hearing body shall be based solely on evidence presented at the hearing; and
(E) a requirement that the sponsor extend any time period imposed pursuant to a formal eviction procedure, including any filing in a court of competent jurisdiction, during the pendency of the hearing.
(2) Neither utilization of nor participation in any of the appeal and grievance procedures shall constitute a waiver of or affect the rights of the tenant, prospective tenant, or sponsor to a trial de novo or judicial review in any judicial proceeding which may thereafter be brought in the matter.
(f) If, at the time of recertification, the tenant's household income exceeds the upper limit for lower-income households, the tenant's lease for the unit as an assisted unit shall terminate six months after the date of recertification.
(1) In rental housing developments containing nonassisted units, the tenant shall have the right of first refusal for any available nonassisted unit of a size consistent with the occupancy standards set forth in section 8087(a)(5). This right shall begin upon recertification and shall expire upon termination of the tenant's lease of the assisted unit.
(2) If the tenant provides to the sponsor additional evidence which establishes income eligibility prior to the expiration of the tenant's lease, the tenant's lease shall not be terminated.
(3) The sponsor may approve one additional six-month extension of the lease if the project:
(A) is located in a market area where the vacancy rate for rental housing is less than five percent; and
(B) is located is an area where the Fair Market Rent exceeds the average of the Fair Market Rents for all metropolitan statistical areas in California. For purposes of this subsection, "Fair Market Rent" means the most current fair market rent for existing housing for two-bedroom units, as published annually in the "Federal Register" by the U.S. Department of Housing and Urban Development pursuant to section 8(c)(1) of the United States Housing Act of 1937.

(4) If the assisted unit is subject to state or federal rules governing low-income housing tax credits, as referenced in section 10300, title 4, California Code of Regulations, those eligibility provisions shall govern continued eligibility for occupancy.
(5) In a limited equity housing cooperative where the household income of a cooperative member occupying an assisted unit exceeds the upper limit for lower income households, the member shall not be required to vacate the assisted unit.
(A) After recertification and determination of ineligibility, the sponsor shall immediately notify the member that the carrying charge will increase to a market rate payment six months after said notification. Market rate payment shall be the carrying charge paid for a comparable nonassisted unit, without an allowance for utilities, or where there are no comparable nonassisted units, 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 until the mix between lower- and very low-income units required by the Regulatory Agreement is achieved.
(6) If the tenant's income exceeds the limit for lower-income units established by the sponsor pursuant to subdivision (b), but remains below the lower-income limit, that fact alone shall not be cause for termination of the tenant's lease or for requiring the tenant to vacate their unit.
(g) If the income of a household residing in a very low-income unit 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 current rent allowed for any comparable lower-income unit pursuant to section 8088, or where there are no such units, the maximum rent which would be allowed pursuant to section 8088;
(3) The sponsor shall designate the unit as a lower-income unit; and
(4) The sponsor shall designate the next available comparable assisted unit as a very low-income unit until the mix between lower-income and very low-income units required by the Regulatory Agreement is achieved.
(5) In a limited equity housing cooperative, where the tenant member in a very low-income unit becomes an other lower-income household, the sponsor shall comply with the provisions of subdivisions (g)(1) through (g)(4).


Note: Authority cited: Section 50771.1, Health and Safety Code. Reference: Sections 33007.5, 50010, 50736, 50079.5, 50771.1 and 50894, Health and Safety Code.








s 8088. Rent Standards.
(a) The department shall establish initial rents for assisted units in each project in accordance with the tables in section 6932 and the following:
(1) At the time of the initial occupancy of a unit, rents for very low- income units, and for units in residential hotels and group homes, shall not exceed 30 percent of 35 percent of area median income, divided by 12, adjusted by unit size pursuant to subdivision (a)(3), and with an allowance for utility costs pursuant to subdivision (a)(4). The unit size adjustment in subdivision (a)(3) is employed by identifying the size of the unit for which rent must be determined and reading across to determine the applicable household size for that unit. Area median income is determined by selecting from the tables provided in section 6932 for the county in which the unit is located, the amount of income provided as the very low-income standard for the "number of persons in the family," which equates with the "applicable household size" identified in subdivision (a)(3).
(2) Except for residential hotel units and rooms in group homes, at the time of the initial occupancy of a unit, rents for lower-income units shall not exceed 30 percent of 60 percent of area median income, divided by 12, adjusted by unit size pursuant to subdivision (a)(3), and with an allowance for utility costs pursuant to subdivision (a)(4). The unit size adjustment in subdivision (a)(3) is employed by identifying the size of the unit for which rent must be determined and reading across to determine the applicable household size for that unit. Area median income is determined by selecting from the tables provided in section 6932 for the county in which the unit is located, the amount of income provided as the lower-income standard for the "number of persons in the family," which equates with the "applicable household size" identified in subdivision (a)(3).

(3) Maximum rent calculated pursuant to (a)(1) and (a)(2) above shall be adjusted by unit size as follows:

Unit Size Applicable Household Size
to Determine Rent Limit
residential hotel unit or 0 bedroom 1 person
group home bedroom with one occupant 1 person
group home bedroom with two occupants 1 person
(Maximum rent shall be
twice the maximum rent
for bedrooms with one occupant.)
1 bedroom 2 persons
2 bedrooms 3 persons
3 bedrooms 4 persons
4 bedrooms 6 persons
5 bedrooms 8 persons


(4) The maximum rent to be charged to tenants shall be determined by deducting from the maximum amounts calculated pursuant to (a)(1), (a)(2) and (a)(3) a utility allowance for the appropriate unit size. Where a tenant does not directly pay for utilities, the utility allowance deduction shall be zero. The utility allowance shall be the allowance for monthly utility costs made or approved by the U.S. Department of Housing and Urban Development pursuant to 24 CFR section 813.102. In order to obtain the current utility allowances for cities and unincorporated areas located in the following counties, please contact the Department of Housing and Community Development, Attention: Housing Assistance Program, Post Office Box 952054, Sacramento, CA 95252-2054 or phone (916) 324-7696:

Amador Modoc
Calaveras Mono
Colusa Nevada
El Dorado Placer
Glenn Sierra
Inyo Siskiyou
Lassen Trinity
Lake Tuolumne
Mendocino



Utility allowances for the balance of cities and unincorporated areas in California not located in the above noted counties may be obtained by contacting the Housing Authority established for that county pursuant to section 34240 of the Health and Safety Code.
(5) Upon demonstration by the sponsor that the amount of utility costs per unit anticipated for the proposed project differs from the amount of the utility allowance per unit derived pursuant to the preceding subdivision, the department shall allow as a utility allowance use of the utility cost per unit demonstrated by the sponsor. The demonstration by the sponsor shall consist of the submittal of actual utility usage cost data per unit for an existing project constructed within the last five years; of the same type of construction as the proposed project; and with the same type of tenant population as the proposed project.
(6) 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 or any comparable federal or state rental assistance program.
(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 recent annual average percentage change in the Western Region for residential rents for all urban consumers as published by the United States Department of Labor, Bureau of Labor Statistics in the monthly publication, "CPI Detailed Report," multiplied by the ratio of the previous year's budgeted operating expenses attributed to assisted units plus required reserves attributed to assisted units to the previous year's budgeted operating income attributed to assisted units.
(2) In addition to the rent increase allowed pursuant to subdivision (b)(1), rents shall be increased by an amount not to exceed the amount necessary to increase the operating income to cover changes in debt service:
(A) on an adjustable rate mortgage approved by the department as part of the project; or
(B) resulting from a refinancing approved by the department and required to maintain fiscal integrity.

(3) Notwithstanding the provisions of subdivisions (b)(1) and (b)(2), rents shall be decreased, or the amount of the otherwise allowable increase reduced, if there is a reduction in the amount of required payments on an adjustable rate mortgage on the project due to a decrease in the interest rate for that mortgage. The aggregate monthly amount of this rent decrease, or reduction in an otherwise allowable increase, shall be equal to the amount of the monthly payment reduction attributable to assisted units;
(4) Any rent adjustment at the end of the initial operating year shall be prorated based on the length of the initial operating year.
(c) The sponsor shall be allowed to implement 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 shall 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 commercial space or nonassisted units.
(d) Any allowable rent increase or portion thereof not implemented by the sponsor in any given year shall 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 8102.


Note: Authority cited: Section 50771.1, Health and Safety Code. Reference: Section 50771.1, Health and Safety Code.








s 8089. Limits on Distribution.
(a) A nonprofit corporation shall be limited to an annual distribution on the sponsor's actual investment in the entire project in an amount not to exceed eight percent per annum.
(b) A for-profit sponsor shall elect, prior to loan closing, to be limited in accordance with one of the following options:
(1) The sponsor shall be limited to an annual distribution on the sponsor's actual investment in the entire project in an amount not to exceed eight percent per annum; or
(2) The sponsor shall receive no distribution from assisted units, and shall not be subject to any limitations on the amount of the distribution it receives from nonassisted units.
(c) A sponsor may not accumulate distributions from year to year. A sponsor may deposit all or a portion of the amount permitted for distributions into a project account for distribution in subsequent years. Such future distributions shall not reduce the otherwise permitted distribution in those subsequent years.
(d) Actual investment, for the purposes of this section, includes cash and the market value of property contributed to the project by the sponsor. For projects receiving state or federal low-income housing tax credits, the amount of actual investment recognized by the department for the purpose of calculating allowable distributions shall not exceed fifteen percent of total project development costs. Actual investment does not include any payments of project funds to the sponsor. In syndicated projects, actual investment shall be calculated net of the costs of syndication, such as the syndicator's fee and syndication-related legal expenses.
(e) In its initial operating budget, the sponsor shall demonstrate to the department the amount of the sponsor's actual investment on which the allowable distribution will be calculated. The actual investment amount shall be increased in subsequent budgets upon a showing of additional actual investment advanced by the sponsor.
(f) Distributions shall be permitted only after the sponsor submits a complete annual report and operating budget and the department determines that the report and budget demonstrate compliance with all program requirements for the applicable year. Circumstances under which no distributions shall be made include:
(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 8102 and the Regulatory Agreement.
(h) Distributions attributed to income from commercial space shall not be subject to limits pursuant to this section.
(i) 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 department shall require that such excess be paid into the Emergency Reserve Account established pursuant to section 8103. For purposes of calculating the amount of excess funds pursuant to this subdivision, operating income and expenses shall not include income or expenses from commercial space, or, where the sponsor elects to have their return limited pursuant to subdivision (b)(2), from nonassisted units.


Note: Authority cited: Section 50771.1, Health and Safety Code. Reference: Section 50771.1, Health and Safety Code.








s 8090. Syndication.
(a) In the event that the project is syndicated during the term of the program loan for the purpose of receiving federal or state low income housing tax credits, the total amount of syndication proceeds retained by the sponsor, or any affiliates of the sponsor, in the form of fees or payments of any kind, shall not exceed 25 percent of net syndication proceeds. Net syndication proceeds shall be calculated by deducting from gross syndication proceeds all reasonable and ordinary costs of syndication, including accounting, printing, financial consultant, legal, interest and fees on gap financing used to pay development costs approved by the department, syndicator fee, and government fees associated with creating a limited partnership and securing tax credit allocations.
(b) Not less than 75 percent of any available net syndication proceeds shall be applied toward project development costs approved by the department, exclusive of any fees or payments retained by the sponsor or its affiliates, and, then, to the extent that funds are available, toward payment of program loan interest and principal.
(c) Upon demand by local public agencies that have contributed or loaned funds towards project development costs, net syndication proceeds that would otherwise be applied towards program loan payments may be allocated among these agencies and the department in amounts in direct proportion to the ratio between the amount of their contributions or loans and the amount of the program loan.


Note: Authority cited: Section 50771.1, Health and Safety Code. Reference: Section 50771.1, Health and Safety Code.










s 8091. Relocation Requirements.
(a) The sponsor of a project resulting in displacement of residential tenants shall be solely responsible for providing the assistance and benefits set forth in this section, and shall agree to indemnify and hold harmless the department from any liabilities or claims for relocation related costs.
(b) All tenants in occupancy in a property who are permanently displaced as a direct result of the development of the project shall be entitled to relocation benefits and assistance as provided in sections 7260, 7261, 7262, 7264, 7264.5, 7269, 7269.1, 7272 and 7272.3 of the Government Code. Displaced tenants who are not eligible households under this program shall be provided relocation benefits and assistance from funds other than program funds.
(c) 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.
(d) All eligible households who are permanently displaced as a direct result of the development of the project shall be entitled, upon initial occupancy of the rental housing development, to occupy assisted units meeting the tenant occupancy standards set forth in section 8087.
(e) All ineligible households who are permanently displaced as a direct result of the development of the project shall be entitled, upon initial occupancy of the rental housing development, to occupy any available nonassisted units.
(f) Notwithstanding the preceding subdivisions, tenants who are notified in writing prior to their occupancy of an existing unit that such unit may be demolished as a result of funding provided under the program shall not be eligible for relocation benefits and assistance under this section. The form of any notices used for this purpose shall be subject to department approval.


Note: Authority cited: Section 50771.1, Health and Safety Code. Reference: Sections 7260, 7261, 7262, 7264, 7264.5, 7269, 7269.1, 7272 and 7272.3, Government Code, and Sections 50771.1 and 53133, Health and Safety Code.








s 8092. 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 at least equal to term of the loan;
(2) Maintenance, repair, and replacement costs shall be minimized during the useful life of the rental housing development through use of durable, low maintenance materials and equipment and design features that minimize wear and tear.
(3) Operating costs shall be minimized during the useful life of the rental housing development.
(4) Tenant security shall be enhanced through features such as those designed to prevent or discourage unauthorized access and to allow for ready monitoring of public areas.
(5) Unit sizes, amenities, and general design features shall not exceed the standard for new developments rented at or below the market rent in the area of the project, and unit density shall not be substantially less than the average for new developments with such units.
(b) The sponsor shall ensure that the construction work for the project shall be performed in a competent, professional manner at the lowest reasonable cost consistent with the project's scope, design and locality and not in excess of the total funds available. The sponsor may demonstrate the reasonableness of the proposed cost by soliciting written bids based on a bid package distributed to potential 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 construction, including the required provisions of the construction contract.
(c) The sponsor shall enter into a written contract with the selected contractor. 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 plans and specifications approved by the department 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 schedule for work approved by the department;
(3) specify a total contract price consistent with the project budget approved by the department;
(4) provide for a method of payment to the contractor consistent with program requirements which shall 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 100 percent of the total contract price and include the department as a dual obligee. The department shall 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
(B) demonstrating that the bonds, or the full amount thereof, are not necessary to protect the interests of the department and ensure completion of the work;
(6) permit the sponsor and the department and their designated agents and employees the right to inspect the project site and all books, records and documents maintained by the contractor in connection with work;
(7) require the contractor to provide insurance coverage consistent with the program requirements and other applicable law;
(8) obligate the contractor to warrant the work for a period not less than one year;
(9) require that the contractor pay all amounts when due for labor, work performed under subcontract, or materials, supplies and equipment provided to the project;
(10) provide for the assignment of the construction contract to the department upon sponsor's breach of the Development Agreement;
(11) require that the contractor comply with state prevailing wage law, as set forth in Labor Code section 1720 et seq., where program funds are provided as construction financing.
(12) include such special conditions applicable to the construction contract as may have been imposed in connection with the department's approval of the project for funding.


Note: Authority cited: Section 50771.1, Health and Safety Code. Reference: Section 50771.1, Health and Safety Code.








s 8093. Application Process.
(a) The department shall issue a Notice of Funding Availability (NOFA) which specifies the schedule for rating and ranking applications and awarding funds every two months, the amount of funds available in each bimonthly cycle, application requirements, the allocation of rating points, and the general terms and conditions of funding commitments. Applications in response to each NOFA will be accepted on a continuous basis.
(b) Within 45 days of the receipt of an application, the department shall provide the applicant with written notice indicating whether the application is complete pursuant to section 8094 and eligible for rating and ranking pursuant to section 8095(a).
(1) If the application is not complete, but has not been determined to be ineligible for rating and ranking, the notice shall specify the information or documentation necessary to complete the application. Within 15 days of the receipt of any additional information or documentation from the applicant, the department shall provide the applicant with written notice indicating whether the additional information or documentation is sufficient to determine that the application is complete.
(2) If the application is not eligible for rating and ranking, the notice shall provide an explanation of the reasons for this determination.
(c) Funding decisions shall be based on a bimonthly rating and ranking of applications determined to be eligible for rating and ranking pursuant to subdivision (b).
(1) An application must be received by the department and determined to be complete and eligible for rating and ranking at least 45 days prior to the completion of the next scheduled rating and ranking to be assured of consideration in that rating and ranking.
(2) Within 15 days following the completion of each bimonthly rating and ranking, the department shall provide each applicant with a written notice indicating whether their application has been approved for funding. If an application is not approved, the notice shall include an explanation of the rating and ranking and the reasons for the disapproval.
(d) Projects selected for funding shall be approved at loan amounts, terms, and conditions specified by the department.
(e) In each fiscal year, not less than 20 percent of all program funds loaned shall be allocated to rural areas. In each fiscal year, elderly or physically handicapped households shall be allocated not less than 20 percent, nor more than 30 percent, of the assisted units provided by program funds. If necessary to satisfy these distribution requirements, the department shall do the following:
(1) issue a special NOFA for rural projects, or for projects with units available for occupancy by elderly or physically handicapped households;

(2) award bonus points to rural projects, or for projects with units available for occupancy by elderly or physically handicapped households;
(3) reserve a portion of funds specified in the NOFA for rural projects, or for projects with units available for occupancy by elderly or physically handicapped households.


Note: Authority cited: Section 50771.1, Health and Safety Code. Reference: Sections 50736 and 50771.1, Health and Safety Code.








s 8094. Application Requirements.
(a) Application shall be made on form HCD 800, "Loan Application Rental Housing Construction Program," dated 12/90, as set forth in subsection (b). This form is provided by the department.
(b) HCD 800, "Loan Application Rental Housing Construction Program," dated 12/90:


















































LOAN APPLICATION

RENTAL HOUSING CONSTRUCTION PROGRAM


Project Name ____________________________
Project Location ____________________________
Applicant [FNa1] ____________________________
Address___________________ County___________________
Contact Person ____________________________
-------------------------------------
Applicant Telephone ( )_____________ FAX NO. ( )_________________
__________________ (if available)
Consultant/Application Preparer
Consultant Telephone ( )____________ FAX NO. ( )_________________
(If available)

[FNa1] The applicant must be a currently organized legal entity.
General Instructions: Fill out the application completely. If an attachment is included with the application, check the "yes" column in the checklist below. If an attachment is not included, check "no" and note the reason on the "comments" line.
Please use labeled tabs for all attachments, organized according to this checklist, with attachments placed at the end of the complete application.

YES NO COMMENTS
A. Project Summary
No attachments
B. Applicant
Attachment B1a Partnership Agreement ____ ____ ________
Attachment B1b Financial Statements ____ ____ ________
Attachment B1c Resolution ____ ____ ________
Attachment B3 Applicant's Staff ____ ____ ________
Attachment B4 Development ____ ____ ________
Attachment B5 Property Management ____ ____ ________
Attachment B6c Funding of Services ____ ____ ________
Attachment B7 Local Official Support ____ ____ ________

Attachment B8 Project Experience ____ ____ ________
C. Project Cash Flow Analysis
Attachment C2 Operating Expenses ____ ____ ________
D. Development Budget
No Attachments


YES NO COMMENTS
E. Project Financing
Attachment E1 Sources and Uses ____ ____ ________
Attachment E2a Loan Commitments ____ ____ ________
Attachment E2b Grant Commitments ____ ____ ________
Attachment E2c Owner Contributions ____ ____ ________
Attachment E2d Syndication ____ ____ ________
F. Site Information
Attachment F2 Site Control ____ ____ ________
Attachment F3 Preliminary Title Report ____ ____ ________

Attachment F4 Land Sales Comparables ____ ____ ________
Attachment F6 Vicinity Map ____ ____ ________
Attachment F9 Toxics ____ ____ ________
Attachment F10 Utilities ____ ____ ________ (continued)