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REPORT ON OPERATING RESERVE ACCOUNT
FISCAL YEAR ___________
Contact: ________________ Development name: _________________
Units-Assisted/Total:_______________ Prepared by: ____________
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PROPOSED (A) APPROVED (B)
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1. Beginning Balance --------------------------
2. Deposits --------------------------
3. Withdrawals --------------------------
4.Ending Balance --------------------------
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5. Summary Withdrawals --------------------------
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6. TOTAL WITHDRAWALS --------------------------
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FOOTNOTES:______________________________________________________
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Note: Authority cited: Section 50771.1, Health and Safety Code. Reference: Section 50771.1, Health and Safety Code.
History
1. New section filed 12-29-89 as an emergency; operative 12-29-89 (Register 90, No. 3). A Certificate of Compliance must be transmitted to OAL within 120 days or emergency language will be repealed by operation of law on 4-30-90.
2. New section refiled 4-26-90 as an emergency; operative 4-26-90 (Register 90, No. 23). A Certificate of Compliance must be transmitted to OAL within 120 days or emergency language will be repealed by operation of law on 8-24-90.
3. New section refiled 8-27-90 as an emergency; operative 8-27-90 (Register 90, No. 42). A Certificate of Compliance must be transmitted to OAL by 12- 26-90 or emergency language will be repealed by operation of law on the following day.
4. New section refiled 12-19-90 as an emergency pursuant to Health and Safety Code section 50771.3; operative 12-19-90 (Register 91, No. 4). A Certificate of Compliance must be transmitted to OAL by 4-18-91 or emergency language will be repealed by operation of law on the following day.
5. Certificate of Compliance as to 12-19-90 order transmitted to OAL 1-4-91; disapproved by OAL 2-4-91 (Register 91, No. 13).
6. New section refiled 2-20-91 as an emergency; operative 2-20-91 (Register 91, No. 13). A Certificate of Compliance must be transmitted to OAL by 6-17- 91 or emergency language will be repealed by operation of law on the following day.
7. Certificate of Compliance as to 6-14-91 order including amendment of subsections (a) and (c) and form transmitted to OAL 5-15-91 and filed 6-14-91 (Register 91, No. 38).
REPORT OF VACANCY LOSS AND UNCOLLECTIBLE RENTS
FISCAL YEAR ___________
Contact: ________________ Development name: _________________
Units-Assisted/Total:_______________ Prepared by: ____________
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PROPOSED (A) APPROVED (B)
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Assisted Units:
1. Rent Loss Due to Vacancy --------------------------
2. Uncollectible Rents --------------------------
3. Total Rent Loss-Assisted Units --------------------------
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Nonassisted Units:
4.Rent Loss Due to Vacancy --------------------------
5. Uncollectible Rents --------------------------
6. Total Rent Loss-Nonassisted Units --------------------------
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Commercial Space: --------------------------
4. Rent Loss Due to Vacancy --------------------------
5. Uncollectible Rents --------------------------
6. Total Rent Loss-Commercial Space --------------------------
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7. TOTAL PROJECT RENT LOSS --------------------------
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REPORT OF REPLACEMENT RESERVE ACCOUNT
FISCAL YEAR ___________
Contact: ________________ Development name: _________________
Units-Assisted/Total:_______________ Prepared by: ____________
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PROPOSED (A) APPROVED (B)
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1. Beginning Balance --------------------------
2. Deposits --------------------------
3. Withdrawals --------------------------
4.Ending Balance --------------------------
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5. Summary Withdrawals --------------------------
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------------------------ --------------------------
------------------------ --------------------------
------------------------ --------------------------
6. TOTAL WITHDRAWALS --------------------------
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FOOTNOTES:______________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
Note: Authority cited: Section 50771.1, Health and Safety Code. Reference: Section 50771.1, Health and Safety Code.
s 8102. Operating Budget.
(a) Prior to loan closing, the sponsor shall provide the department an initial operating budget for its approval. Such budget shall show all anticipated income, expenses for management, operations, and maintenance, debt service and reserve deposits for the initial operating year.
(b) Sixty days prior to the end of each fiscal year, the sponsor shall submit to the department a proposed operating budget for its approval. The proposed operating budget shall set forth the sponsor's estimate of the project's operating income, operating expenses, debt service for the upcoming year, and any proposed rent increases pursuant to section 8088.
(c) The initial and subsequent proposed operating budgets shall be subject to the approval of the department based on its determination that the budget line items are reasonable and necessary in light of costs for comparable rental housing developments and prior year budgets. Actual expenditures in excess of the approved budget amount shall be subject to department approval.
(d) The initial operating budget and subsequent proposed operating budgets shall include periodic deposits to:
(1) A replacement reserve account for capital improvements such as replacing structural elements, furniture, fixtures, or equipment of the rental housing development which are reasonably required to preserve the project; and
(2) an operating reserve account in an amount sufficient to offset potential operating shortfalls.
(e) Upon initial occupancy, the amount in the operating reserve account shall be at least one percent of total project development costs.
(f) For projects with nonassisted units or commercial space, all budgets submitted pursuant to this section shall show income and uses of income allocated among assisted units, nonassisted units, and commercial space. The allocation method used for each budget line item shall be subject to department approval, and shall apportion income and expenses in a manner that accurately reflects the particular physical, operational and economic characteristics of the project.
Note: Authority cited: Section 50771.1, Health and Safety Code. Reference: Section 50771.1, Health and Safety Code.
s 8103. Emergency Reserve Account.
(a) The department shall establish an emergency reserve accountmin the fund. Three percent of any allocation made to the fund pursuant to Health and Safety Code section 53130(a) shall be deposited into the account. Excess funds returned to the department pursuant to section 8089(i) shall be deposited into the account to replace the allocated funds in the account on a dollar for dollar basis. Allocated funds so replaced shall become available for loans provided pursuant to this subchapter.
(b) The department shall maintain a default reserve as a portion of the emergency reserve account, in an amount equal to two percent of all allocations to the fund pursuant to Health and Safety Code section 53130(a), for the purpose of avoiding or curing defaults pursuant to section 8099(e).
(c) When funds in the account exceed the two percent default reserve required pursuant to subdivision (b), the department shall advance funds from the account to defray unanticipated cost increases or revenue shortfalls to the extent necessary to preserve fiscal integrity and to maintain rents in accordance with program requirements. All funds so advanced shall be part of the program loan to the sponsor and subject to the same interest rate and terms of repayment.
Note: Authority cited: Section 50771.1, Health and Safety Code. Reference: Sections 50771.1 and 53130, Health and Safety Code.
s 8110. Purpose and Scope.
(a) This subchapter establishes the Proposition 84 Family Housing Demonstration Program and implements and interprets Chapter 15 (commencing with section 50880) of Part 2 of Division 31, Health and Safety Code, added by Chapter 30 of the Statutes of 1988, as amended by Chapter 1103 of the Statutes of 1989, Chapter 1311 of the Statutes of 1990 and Chapter 100 of the Statutes of 1991.
(b) These regulations establish procedures for the award and disbursement of loans and establish policies and procedures for use of funds allocated to the Family Housing Demonstration Program by section 53130(a)(4) of the Health and Safety Code.
Note: Authority cited: Sections 50406(n), 50884 and 50895, Health and Safety Code. Reference: Sections 50880, 50881.5, 50882, 50883.5, 50887, 50888.3, 50888.5, 50888.7, 50889.5, 50891, 50891.5, 50893, 50893.3, 50893.5, 50893.7, 50893.9, 50894, 50895, 53130 and 53133, Health and Safety Code; Chapter 16 (commencing with section 7260), division 7, title 1, Government Code.
s 8111. Definitions.
In addition to the definitions found in Chapter 2 (commencing with section 50050), of Part 1 of Division 31 of the Health and Safety Code and Subchapter 2 (commencing with section 6910) of Chapter 6.5 of this Title, the following definitions shall apply to this subchapter. In the event of a conflict between the following definitions and those recited above, the following definitions prevail for the purposes of this subchapter:
a. "Account" means the Family Housing Demonstration Account.
b. "Affordable rent" means rent for an assisted unit, determined pursuant to section 8122.
c. "Approved eligible costs" are those eligible costs approved by the Department prior to loan closing.
d. "Article XXXIV approval" means the approval by local electors which must be obtained before a low rent housing project can be developed, constructed, or acquired in any city, town or county in California. This approval is required by section 1 of Article XXXIV of the Constitution of California.
e. "Assisted unit" means a dwelling unit in a community housing development or the personal living space in a congregate housing development which may include one or more bedrooms depending on family size and characteristics. An "assisted unit" is affordable to an eligible household as a result of a payment made by the department pursuant to this subchapter and is both designated for occupancy by an eligible household and either available on a priority basis to, or occupied by, an eligible household in accordance with a Regulatory Agreement between the department and the sponsor entered into pursuant to section 8133(c).
f. "Commercial space" means space used for commercial purposes, excluding space used for a child care center operated pursuant to section 8127.
g. "Community Housing Development" means a development of 20 or more rental or cooperative units on one or more sites which includes the supportive service requirements pursuant to section 8127 and the job training and placement program requirements pursuant to section 8128.
h. "Congregate Housing Development" means a new or rehabilitated, multi-bedroom structure with common living areas, large enough to accommodate two to ten households who share child care, cleaning, cooking and other household responsibilities pursuant to a resident management agreement as described in section 8137.
i. "Conversion" means the alteration of nonresidential space within an existing structure to create a rental housing development.
j. "Debt service coverage ratio" means the ratio of (1) operating income less operating expenses to (2) debt service payments, excluding voluntary prepayments.
k. "Department" means the Department of Housing and Community Development.
l. "Development costs" are the costs of planning, funding and constructing the project as approved by the Department prior to loan closing.
m. "Director" means the Director of the Department of Housing and Community Development.
n. "Distributions" means the amount of cash received from the operation of a rental housing development and available to be distributed pursuant to section 8123 to the sponsor of that rental housing development, or any party having a beneficial interest in the sponsor entity. Distributions do not include payments for debt service, voluntary loan prepayments, operations, maintenance, payments to required reserve accounts, land lease payments to parties that do not have a beneficial interest in the sponsor entity, or payments for property management or other services as set forth in the Regulatory Agreement for the rental housing development.
o. "Elderly" means the same as defined in section 50067 of the Health and Safety Code.
p. "Eligible households" means very low-income households or other lower-income households.
q. "FHDP" means Family Housing Demonstration Program.
r. "Fiscal integrity" means that the total of operating income plus funds released from the operating reserve account pursuant to the Regulatory Agreement is sufficient to: (1) pay all current operating expenses, (2) pay all current debt service (excluding deferred interest), (3) fully fund all reserve accounts established pursuant to the Regulatory Agreement (other than the operating reserve account), (4) maintain a debt service coverage ratio, where specified in the Regulatory Agreement, and (5) pay other extraordinary costs permitted by the Regulatory Agreement. The ability to pay any or all of the annual permitted distribution shall not be considered in determining fiscal integrity.
s. "Handicapped" means the same as defined in section 50072 of the Health and Safety Code.
t. "Household income" means the same as "gross income" as defined in section 6914 of this Title.
u. "Housing cooperative" means the same as "stock cooperative" as defined in section 1351(m) of the Civil Code.
v. "Initial operating year" means the initial period of operation of a rental housing development beginning when the local enforcement agency issues a certificate of occupancy and ending on the last day of the fiscal year of that development.
w. "Lower-income household" means a person or family as defined in section 50079.5 of the Health and Safety Code.
x. "Lower-income nonassisted unit" means a dwelling unit other than an assisted unit which is regulated by virtue of participation in the federal tax credit program (section 42, Title 26 U.S.C.) or state tax credit program (Revenue and Taxation Code, sections 17057.5, 17058, 23610.4 and 23610.5), the HUD Section 202 program (section 1701q, Title 12 U.S.C.), the HUD Section 8 program (section 1437f, Title 42 U.S.C.), or other governmental program where the occupancy and rent restrictions and the term of the occupancy and rent restrictions are equal to or greater than the requirements of the federal tax credit program referenced above.
y. "Lower-income unit" means an assisted unit both designated for occupancy by a low-income household and either available on a priority basis to, or occupied by, a lower-income household.
z. "Nonprofit corporation" means the same as defined in section 50091 of the Health and Safety Code.
aa. "Operating expenses" means the amount annually approved by the department as necessary to pay for the recurring expenses of a rental housing development, such as utilities, maintenance, management, taxes, licenses, supportive services provided pursuant to section 8127, and job training and placement programs provided pursuant to section 8128. Operating expenses does not include debt service, distributions, extraordinary expenses permitted by the Regulatory Agreement or required reserve account deposits.
bb. "Operating income" means all income generated on an annual basis in connection with operation of a rental housing development including rental income for assisted and nonassisted units; rental income for commercial space, laundry and equipment rental fees; rental subsidy payments; payments associated with supportive services provided pursuant to 8127; payments associated with job training and placement programs provided pursuant to 8128; and interest on any accounts related to the rental housing development, with the exception of reserve accounts. "Operating income" does not include draws from the operating reserve fund, security and equipment deposits; or payments for direct or supportive tenant services, other than those provided pursuant to section 8127(a) and (b), that tenants are not required to pay for as a condition of occupancy.
cc. "Other lower-income household" means persons or families as defined in subsection 6928(c) of Title 25.
dd. "Prior to loan closing" is that period of time following the notification of approval for funding pursuant to section 8130(c)(2) and prior to the recording of the legal documents on the project property.
ee. "Program" means the Family Housing Demonstration Program.
ff. "Project" means a rental housing development using program funds; the development, new construction or rehabilitation, and operation thereof; and the financing structure and all agreements and documentation approved in connection therewith.
gg. "Reconstruction" means replacing an existing residential structure with a rental housing development of similar type, amenity level, range of unit sizes, and with not less than an equal number of units.
hh. "Rehabilitation" means repairs or 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. Rehabilitation also includes reconstruction or conversion.
ii. "Rehabilitation Standards" means (a) the applicable state or local building or housing standard adopted pursuant to the State Housing Law, Part 1.5 (commencing with section 17910) of Division 13, or continued in effect pursuant thereto, and (b) room additions necessary to prevent overcrowding of lower-income households.
jj. "Rent" means all mandatory charges, other than deposits, paid by the tenant for the use and occupancy of an assisted unit. For housing cooperatives, "rent" includes, but is not limited to, the carrying charges paid by a member of a housing cooperative.
kk. "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.
ll. "Rental housing development" means a community housing development or a congregate housing development.
mm. "Residential structure" means a structure or structures used primarily as the place of permanent or customary abode of a person or persons, including a single family dwelling, a multifamily dwelling, a single room occupancy hotel, a condominium or cooperative housing project, or other form of residential occupancy.
nn. "Rural area" means the same as defined in section 50101 of the Health and Safety Code.
oo. "Seismic rehabilitation improvements" means the same as defined in section 50668.5(b)(5).
pp. "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.
qq. "Unit" means either a dwelling unit in a community housing development or the personal living space in a congregate housing development, which may include one or more bedrooms depending on family size and characteristics.
rr. "Very low-income household" means a person or family as defined in section 50105 of the Health and Safety Code.
ss. "Very low-income nonassisted unit" means a dwelling unit other than an assisted unit, which is regulated by virtue of participation in a federal or state tax credit program, the HUD section 202 program, or other governmental programs where the occupancy and rent restrictions and the term of occupancy and rent restrictions are equal to or greater than the requirements for very low-income units contained in the federal tax credit program.
tt. "Very low-income unit" means an assisted unit both designated for occupancy by a very low-income household and either available on a priority basis to, or occupied by, a very low-income household.
Note: Authority cited: Sections 50406(n) , 50884 and 50895, Health and Safety Code. Reference: Sections 50880, 50881.5, 50882, 50883.5, 50887, 50888.3, 50888.5, 50888.7, 50889.5, 50891, 50891.5, 50893, 50893.3, 50893.5, 50893.7, 50893.9, 50894, 50895, 53130 and 53133, Health and Safety Code; Chapter 16 (commencing with section 7260), division 7, title 1, Government Code.
s 8112. Eligible Project.
(a) To be eligible for funding, a proposed project must
(1) involve either of the following:
(A) the development and construction of a new rental housing development, or
(B) the rehabilitation of (which may include seismic improvements to) one or more of the following structures:
1. a substandard rental housing development;
2. a residential structure eligible for seismic rehabilitation improvements pursuant to section 8129;
3. an existing structure that will undergo a conversion; or
4. an existing substandard residential structure that will undergo reconstruction.
(2) include supportive services pursuant to section 8127 and a job training and placement program pursuant to section 8128.
(b) Except as specified in subdivision (c), proposed rental housing developments are ineligible if construction work has begun prior to the effective date of the Standard Agreement. For the purposes of this subdivision, construction work shall not include the following:
(1) for loans involving new construction, site improvements intended for public dedication; demolition; site preparation; and grading;
(2) for loans involving rehabilitation, work required to correct an emergency situation; work done pursuant to an order of the court or agency having jurisdiction over the project; and regular maintenance of the project.
(c) Where construction work, other than that allowed pursuant to subdivision (b), has begun prior to the effective date of the Standard Agreement, proposed rental housing developments are eligible only under the following circumstances:
(1) construction has been halted, and the project property has been foreclosed upon or is in foreclosure;
(2) construction has been halted, and the project property has been deeded to a lender in lieu of foreclosure;
(3) construction has been halted, and there is a substantial likelihood that a lender will initiate foreclosure due to the inability of the project's developer to complete construction; or
(4) construction on a separate distinct phase of the project has been or will be completed without program loan funds; provided that, when completed, either the separate phase or the project as a whole meets all program requirements.
(d) Proposed projects involving the demolition of residential rental units are eligible only if the sponsor complies with the relocation requirements set forth in section 8125 and only if one of the following circumstances exist:
(1) the units to be demolished are substandard, and not economically feasible to rehabilitate; or
(2) the number of assisted units in the new project is at least twice the total number of units in the demolished structures.
Note: Authority cited: Sections 50406(n), 50884 and 50895, Health and Safety Code. Reference: Section 50881.5, Health and Safety Code.
s 8113. Eligible Sponsor.
(a) A sponsor shall be a nonprofit corporation, housing cooperative, local public entity, or any combination thereof including a limited partnership in which the managing general partner is an eligible nonprofit corporation, which is certified by the department as meeting the requirements of subdivision (b).
(b) In order to be certified as an eligible sponsor, an applicant must be able to:
(1) demonstrate ability or experience relevant to owning, developing, constructing or rehabilitating, and operating rental housing through any combination of the following:
(A) prior ownership, development, construction or rehabilitation, or operation of rental housing;
(B) employing staff with demonstrated ability or experience owning, developing, constructing or rehabilitating, or operating rental housing; or
(C) contracting with a consultant or consultants with demonstrated ability or experience assisting with the owning, developing, rehabilitating or constructing, or operating of rental housing; and
(2) demonstrate ability or experience relevant to the proposed plans for operating supportive service programs described in section 8127 and job training and placement programs described in section 8128 through any combination of the following:
(A) prior operation of such programs;
(B) employing staff with demonstrated ability or experience operating such programs; or
(C) contracting with a consultant or consultants with demonstrated ability or experience operating such program;
(3) have site control of the proposed project property by one of the following:
(A) fee title;
(B) a leasehold interest on the project property pursuant to a lease with provisions that enable the lessee to make improvements on and encumber the property and permit compliance with all program requirements;
(C) an option to purchase or an option to lease pursuant to a lease which meets the requirements of subdivision (B) above;
(D) a disposition and development agreement with a public agency with provisions that enable the applicant to make improvements on and encumber the property and permit compliance with all program requirements;
(E) a land sales contract, or other enforceable agreement for the acquisition of the property.
Note: Authority cited: Sections 50406(n), 50884 and 50895, Health and Safety Code. Reference: Sections 50881.5(h) and 50889.5(b), Health and Safety Code.
s 8114. Eligible Uses of Funds.
(a) Funds shall be used only for approved eligible costs that are incurred with respect to the planning and executing of the project as set forth in this section. In addition, the costs must be necessary and must be consistent with the lowest reasonable cost consistent with the project's scope and area.
(b) Eligible categories of costs for projects involving the new construction of a rental housing development include the following:
(1) land acquisition;
(2) acquisition of projects under construction satisfying the requirements of section 8112(c)(1) through (c)(3);
(3) land lease payments;
(4) construction work, including demolition costs satisfying the requirements of section 8112(d);
(5) offsite improvements, such as sewers, utilities and streets, related to the rental housing development;
(6) onsite improvements related to the rental housing development;
(7) architectural, appraisal, engineering, legal, accounting 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;
(8) administrative expenses pursuant to section 8119;
(9) rent-up costs;
(10) insurance, construction financing fees and interest, taxes, and any other expenses necessary to hold the property while the rental housing development is under construction.
(11) building permits and state and local fees;
(12) initial operating and replacement reserve balances required pursuant to section 8139;
(13) escrow, title insurance, recording and other costs related to the financing of the project;
(14) costs required to assure the completion of construction, such as contractor bond premiums; and
(15) environmental hazard reports, surveys, and investigations.
(c) Eligible categories of costs for projects involving the rehabilitation of a rental housing development 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 lower- and very low-income households in accordance with program requirements, and costs related thereto;
(3) reconstruction costs, when the estimated costs including demolition, construction and related activities are less than the estimated cost of rehabilitation of the rental housing development, and where demolition is consistent with the requirements of section 8112(d);
(4) conversion costs when the estimated total rehabilitation cost is less than the new construction cost of comparable units in the area;
(5) cost of rehabilitation necessary to correct code violations;
(6) general costs required to correct unsafe, unhealthy and unsanitary conditions, including general property improvements when the sponsor can demonstrate that such improvements are integral to the project;
(7) work related to protecting physical security;
(8) work related to reducing long-term maintenance costs;
(9) onsite and offsite improvements;
(10) work related to meeting specialized design criteria described in section 8126;
(11) seismic rehabilitation improvements, and work directly related thereto pursuant to section 8129;
(12) architectural, appraisal, engineering, legal, accounting 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;
(13) administrative expenses pursuant to section 8119;
(14) rent-up costs;
(15) insurance, construction financing fees and interest, and taxes, and any other expenses necessary to hold the property while the rental housing development is under construction;
(16) building permits and state and local fees;
(17) work lawfully required by a governmental entity which is reasonably required to correct unsafe, unhealthy or unsanitary conditions;
(18) relocation benefits and assistance to lower-income residential tenants displaced as a result of acquisition and rehabilitation, or rehabilitation only. All other temporary and permanent relocation benefits specified in section 8125 are not eligible uses of program funds;
(19) escrow, title insurance, recording and other related costs; and
(20) environmental hazard reports, surveys, and investigations.
(d) Except where lawfully required to secure local government approvals essential to completion of the project, costs associated with the following items are ineligible for funding with program loan proceeds, and cannot be paid for from syndication proceeds or loans supported by rents from assisted units:
(1) building and roof shapes, ornamentation, and exterior finish schemes whose costs are in excess of the typical costs of these features in modestly designed rental housing;
(2) fireplaces, tennis courts, and similar amenities not typically found in modestly designed rental housing;
(3) shake and tile roofs, custom-made windows, ceramic tile floors and counters, hardwood floors, and similar features using materials not typically found in modestly designed rental housing, except where such materials have lower replacement costs over the life of the rental housing development due to lower operating, maintenance and replacement costs.
(e) No program funds shall be used for costs associated exclusively with nonassisted units or commercial space. If only a portion of the rental housing development consists of assisted units, the program loan amount shall not exceed the sum of the following:
(1) the costs of all items specified in subdivisions (b) or (c), as applicable, and (d) associated exclusively with the assisted units;
(2) a share of the costs of common areas used primarily by residential tenants; this share shall be in direct proportion to the ratio between the gross floor area of the assisted units and the gross floor area of all residential units; and
(3) a share of the cost of other items, such as roofs, that cannot specifically be allocated to assisted units, nonassisted units, or commercial space; this share shall be in direct proportion to the ratio between the following:
(A) the gross floor area of the assisted units, plus a share of the gross floor area of common areas used primarily by residential tenants in direct proportion to the ratio between the gross floor area of the assisted units and the gross floor area of all units; and
(B) the total gross floor area of the structure or structures.
(f) Notwithstanding subdivision (e)(1), not more than 50 percent of the cost of the child care center may be funded with program funds, except that the cost of all items specified in subdivision (b) or (c), as applicable, and (d) associated with the development of the child care center are eligible for program funding as specified in section 8127(c).
Note: Authority cited: Sections 50406(n), 50884 and 50895, Health and Safety Code. Reference: Section 50881.5(f), 50888.3(e), 50893.3(a) and (b) and 53133, Health and Safety Code.
s 8115. Type and Term of Loan.
(a) Sponsors shall elect to receive program financing as either combination construction and permanent loans or permanent loans only.
(b) For projects involving new construction, the initial term of the loan shall be not less than 40 years, commencing on the date of initial occupancy of an assisted unit. For projects involving rehabilitation and either acquisition or refinancing, the initial loan term shall be not less than 30 years. For projects involving only rehabilitation, the initial loan term shall be not less than 20 years.
(c) Upon request by the sponsor, the department shall approve a loan term longer than that set forth in subdivision (b) provided that such longer term does not exceed the useful life of the rental housing development as determined by the department utilizing assessments provided by professionals from the construction and real estate industries, such as the conclusions of an appraiser or a structural engineer.
(d) Upon receipt of a request from a sponsor for a ten-year extension of the loan term, the department shall determine whether to approve the request based on the following considerations:
(1) Whether the sponsor is in compliance with the Regulatory Agreement and agrees to continue to comply during the extended term;
(2) Whether the extension is necessary to continue operations consistent with program requirements, and
(3) Whether the extended term does not exceed the useful life of the rental housing development, as determined by the department utilizing assessments provided by professionals from the construction and real estate industries, such as the conclusions of an appraiser or a structural engineer.
(e) The department may condition the extension of such terms as it deems necessary to ensure compliance with the requirements of this program.
Note: Authority cited: Sections 50406(n), 50884 and 50895, Health and Safety Code. Reference: Sections 50893, Health and Safety Code.
s 8116. Maximum Loan Amounts.
The loan amount is limited to the total amount of eligible costs required, when considered with other available financing and assistance, in order to achieve all of the following:
(a) to enable the development and construction of the rental housing development;
(b) to ensure that rents for assisted units are in accordance with program requirements;
(c) to operate in compliance with all other program requirements; and
(d) to allow a debt service coverage ratio in an amount sufficient to satisfy the requirements of other lenders providing financing for the rental housing development, but not to exceed 115 percent, except as otherwise required by law.
Note: Authority cited: Sections 50406(n), 50884 and 50895, Health and Safety Code. Reference: Sections 50880 and 50893, Health and Safety Code.
s 8117. Interest Rate and Loan Repayments.
(a) Loans for development costs shall bear simple interest of three percent per annum on the unpaid principal balance. Loans or advances made pursuant to sections 8140 and 8141 shall be the same interest as calculated annually on the Pooled Money Investment Account created under Government Code section 16480. Interest shall accrue from the date that funds are disbursed by the department to or on behalf of the sponsor.
(b) Accrued interest shall be paid from project cash flow. Such interest, to the extent project cash flow is available, shall be paid to the department commencing on the last day of the initial operating year and continuing on each anniversary thereafter until loan interest and principal is paid full. For purposes of this section, "project cash flow" means operating income remaining after payment of approved operating expenses, regularly scheduled debt service on loans other than the program loan which have been approved by the department and which are to be paid prior to payments on the program loan, deposits into department approved project reserve accounts, and sponsor distributions.
(c) Upon request by the sponsor, at the time of application or any time thereafter, the department shall approve the deferral of accrued interest, due but unpaid because of insufficient project cash flow, for such periods and subject to such conditions as are necessary to enable the sponsor to maintain affordable rents and the fiscal integrity of the project, and pay distributions.
(d) Program loan principal shall be payable annually in accordance with all of the following:
(1) Such payments will not jeopardize the fiscal integrity of the project or the sponsor's ability to maintain rents in accordance with program requirements.
(2) Such payments shall be the lesser of
(A) the amount remaining from project cash flow after paying all current and deferred interest pursuant to subdivision (b) and (c); or
(B) the amount required to fully amortize the loan according to the scheduled term of the loan.
(3) Such payments shall be consistent with a written schedule approved by the department at loan closing or any time thereafter which provides that
(A) for loans involving new construction, the first principal payment shall be due on the thirtieth (30th) anniversary of the loan closing; and
(B) for loans involving rehabilitation, the first principal payment shall be on that date proposed by the sponsor and approved by the department prior to loan closing.
(e) In any year that payments of principal and interest are paid in full in accordance with subdivisions (a), (b), (c), and (d), remaining project cash flow shall be used as follows:
(1) The sponsor shall first pay regularly scheduled debt service on loans other than the program loan which were used to finance assisted units and which have been approved by the department and which are to be paid following payments of the program loan;
(2) Thereafter, the sponsor shall pay project cash flow as either:
(A) prepayments on the program loan; or
(B) payments into the Account, to be prorated among the emergency reserve subaccount described in section 8140 and the feasibility subaccount described in section 8141 in a manner which assures that each subaccount is fully funded.
(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 or upon the department's termination of the loan.
Note: Authority cited: Sections 50406(n), 50884 and 50895, Health and Safety Code. Reference: Section 50893, Health and Safety Code.
s 8118. 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 land and improvements 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 8114 and determining actual investment pursuant to section 8123;
(2) To assist with establishing reasonable costs for development cost categories pursuant to section 8114; and
(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: Sections 50406(n), 50884 and 50895, Health and Safety Code. Reference: Section 50880, 50881.5(f) and 50893.7(d), Health and Safety Code.
s 8119. 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 legal services, accounting and auditing relating to the sponsor's operations and obtaining financing for the project;
(2) travel costs and other general overhead costs which are attributable to the project;
(3) expenses for administrative services performed for the sponsor 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 8114(b)(7) and (c)(12).
(c) 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 by the sponsor pursuant to this section.
Maximum Administrative
Approved Program Loan Amount Expenses
Up to $500,000 5% of the approved
program loan amount
$500,000 or more $25,000 plus 1% of
the approved program
loan amount over
$500,000, up to a
maximum of $50,000.
(d) Sponsors seeking program funds for administrative expenses in excess of the limits described in subdivision (c), shall include in their applications 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.
(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, accounting and legal services, which would otherwise qualify for funding as consultant services pursuant to section 8114(b)(7) or (c)(12), as applicable.
Note: Authority cited: Sections 50406(n), 50884 and 50895, Health and Safety Code. Reference: Section 50881.5(f), Health and Safety Code.
s 8120. 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. The department may approve a lesser percentage if it determines that it is not feasible to achieve fiscal integrity with the required percentage.
(b) In each community housing development assisted by the program, and for the full term of the program loan, not less than twenty percent nor more than thirty percent of the assisted units shall be occupied by elderly persons or households. The balance of units shall be available on a priority basis, or occupied by, families with children. For purposes of this section, "families with children" means one or more individuals, who have not attained the age of 18 years, being domiciled with a parent or another person having legal custody of such individual or individuals; or the designee of such parent or other person having such custody with the written permission of such parent or other person. "Families with children" also includes any person who is pregnant or is in the process of securing legal custody of any individual who has not attained the age of 18 years.
(c) In each congregate housing development assisted by the program, and for the full term of the program loan, at least a majority of the units shall be available on a priority basis, or occupied by, families with one or more minor children. The balance of units shall be available on a priority basis, or occupied by elderly persons or households.
(d) For projects involving rehabilitation, a unit in a rental housing development may be designated as an assisted unit if at the time of initial application for the program loan:
(1) the unit is occupied by an eligible household;
(2) the unit is vacant and will be made available to, or occupied by, an eligible household; or
(3) a noneligible household residing in the unit has agreed not to return to the unit after rehabilitation as evidenced by a signed written waiver of the tenant's right to return to the unit pursuant to section 7265.3(d) of the Government Code. Any tenant giving such waiver must have been given the notice specified in section 8125.
(e) For projects involving rehabilitation, the sponsor shall, at a minimum, designate as assisted units the greater of:
(1) number of units reasonably known by the sponsor to be occupied by eligible households at the time of initial application for the program loan, or
(2) thirty percent of all units in the rental housing development.
(f) For projects involving rehabilitation of a community housing development, the size, type, and amenity level of assisted units after rehabilitation shall not differ substantially from the size, type, and amenity level of units known to be occupied by eligible households at the time of initial application for the program loan. Units reconfigured or enlarged to alleviate overcrowding shall not be considered a violation of this provision.
(g) Each community housing development shall include a range of unit sizes, including the provision of three bedroom or larger units.
(h) 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 other 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.
(i) For the full loan term, 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. (continued)