Code Section Group

Health and Safety Code - HSC

DIVISION 31. HOUSING AND HOME FINANCE [50000 - 54034]

  ( Division 31 repealed and added by Stats. 1977, Ch. 610. )

PART 2. DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT [50400 - 50899.7]

  ( Heading of Part 2 amended by Stats. 1981, Ch. 996. )

CHAPTER 6.7. Multifamily Housing Program [50675 - 50675.14]
  ( Chapter 6.7 added by Stats. 1999, Ch. 637, Sec. 2. )

50675.
  

The Legislature finds and declares all of the following:

(a)  Large numbers of California’s renters face excessive housing costs and live in overcrowded or substandard units. Many of these renters also have special housing needs arising from their employment status, age, or disability, and live in communities suffering from a lack of investment.

(b)  In previous years, the state has attempted to address the needs of California renters through a series of small programs operated by the Department of Housing and Community Development, each offering financing targeted at a specific population or building type. These programs were typically highly successful in addressing local housing and community development needs. However, because each individual program came with a unique set of rules, the programs were often costly and time consuming to administer, for both the state and program users.

(c)  A more efficient method to address renter housing needs would be to operate one omnibus multifamily housing program modeled upon an existing successful program. This omnibus program would provide a standardized set of program rules and features applicable to all housing types. As particular needs are identified, it may be easily and quickly customized to meet those needs.

(d)  It is the intent of the Legislature that the Multifamily Housing Program created by this chapter constitute this omnibus multifamily housing program, and that it be based on the department’s existing California Housing Rehabilitation Program as established and described in Subchapter 8 (commencing with Section 7670) of Chapter 7 of Part 1 of Title 25 of the California Code of Regulations.

(e)  The Multifamily Housing Program is intended to take the place of the following department programs:

(1)  The Deferred-Payment Rehabilitation Loan Program established by Chapter 6.5 (commencing with Section 50660).

(2)  The Rental Housing Construction Program established by Chapter 9 (commencing with Section 50735).

(3)  The Family Housing Demonstration Program established by Section 5 of Chapter 30 of the Statutes of 1988.

Repeal of the statutes establishing these programs would be administratively problematic because the department still administers a portfolio of loans from these programs. Therefore, in lieu of repeal, it is the Legislature’s intent that no further allocation of funds be made to these programs and that any and all future funds that would have been appropriated to these programs shall be appropriated instead to the Multifamily Housing Program.

(Added by Stats. 1999, Ch. 637, Sec. 2. Effective January 1, 2000.)

50675.1.
  

(a) This chapter shall be known and may be cited as the Multifamily Housing Program.

(b) Assistance provided to a project pursuant to this chapter shall be provided in the form of a deferred payment loan to pay for the eligible costs of development as hereafter described.

(c) Except as provided in paragraph (3), on and after January 1, 2008, of the total assistance provided under this chapter, the percentage that is awarded for units restricted to senior citizens, as defined in paragraph (1) of subdivision (b) of Section 51.3 of the Civil Code, shall be proportional to the percentage of lower income renter households in the state that are lower income elderly renter households, as reported by the federal Department of Housing and Urban Development on the basis of the most recent decennial census conducted by the United States Census Bureau.

(1) The department shall be deemed to have met its obligation under this subdivision if the assistance awarded is not less than 1 percent below the proportional share.

(2) This subdivision does not require the department to provide loans to projects that fail to meet minimum threshold requirements under subdivision (b) of Section 50675.7.

(3) Assistance for projects meeting the definitions in paragraphs (2) and (3) of subdivision (e) of Section 11139.3 of the Government Code and subdivisions (c) and (d) of Section 53260 shall be excluded from the total assistance calculation under this subdivision.

(4) The department shall determine the time period over which it will measure compliance with this section, but that period shall not be less than one year or two funding cycles, whichever period is longer.

(5) If, at the end of the time period determined by the department, the total amount of funding for which sponsors have submitted qualified applications is lower than the proportional share, the department may award the remaining funds to units that are not restricted to senior citizens.

(6) The department’s annual report to the Legislature submitted under Section 50408 shall include a breakdown of funding awards between units restricted to senior citizens and units that are not age-restricted.

(d) This chapter shall be administered by the department and the department shall establish the terms upon which loans may be made consistent with the provisions of this chapter.

(Amended by Stats. 2009, Ch. 533, Sec. 1. (AB 1459) Effective January 1, 2010.)

50675.2.
  

The definitions of this section shall apply to all activities conducted pursuant to this chapter. Except as otherwise provided in this chapter, or unless the context requires otherwise, the definitions contained in Chapter 2 (commencing with Section 50050) of Part 1 shall also apply to this chapter.

(a)  “Affordable rent” shall be established by the department to be consistent with the rent limitations imposed by the Low Income Housing Tax Credit Program, as administered by the California Tax Credit Allocation Committee.

(b)  “Assisted unit” means a unit that is affordable to a lower income household as a result of a loan provided pursuant to this chapter. In order to ensure consistency with the Low Income Housing Tax Credit Program, occupancy of assisted units shall be limited to households whose income does not exceed the limits specified by the California Tax Credit Allocation Committee.

(c)  “Maintain affordable rent levels” means rents may be increased by the sponsor on an annual basis in the amount that would be allowed if the project was subject to the requirements of the Low Income Housing Tax Credit Program established pursuant to Section 42 of the federal Internal Revenue Code.

(d)  “Rental housing development” means a structure or set of structures with common financing, ownership, and management, and which collectively contain five or more dwelling units, including efficiency units. No more than one of the dwelling units may be occupied as a primary residence by a person or household who is the owner of the structure or structures.

(e)  “Rehabilitation,” in addition to the meaning set forth in Section 50096, includes improvements and repairs made to a residential structure acquired for the purpose of preserving its affordability.

(f)  “Rent-up costs” means costs incurred while a unit is on the housing market but not rented to its first tenant.

(g)  “Sponsor” has the same meaning as defined in subdivision (c) of Section 50669, and also includes a limited partnership in which the sponsor or an affiliate of the sponsor is a general partner.

(h)  “Transitional housing” and “transitional housing development” means buildings configured as rental housing developments, but operated under program requirements that call for the termination of assistance and recirculation of the assisted unit to another eligible program recipient at some predetermined future point in time, which shall be no less than six months.

(Added by Stats. 1999, Ch. 637, Sec. 2. Effective January 1, 2000.)

50675.3.
  

Any moneys appropriated and made available by the Legislature for the purposes of this chapter and all moneys received by the department in repayment of loans made pursuant to this chapter, including interest and payments in advance in lieu of future interest, shall be deposited in the Housing Rehabilitation Loan Fund established by Section 50661. These moneys shall be used for the purposes of this chapter, including the implementation and operation of the program created by this chapter, and the administrative expenses of the department shall not exceed 5 percent of the funds appropriated by the Legislature for the purposes of this chapter.

(Added by Stats. 1999, Ch. 637, Sec. 2. Effective January 1, 2000.)

50675.4.
  

(a)  To be eligible to receive a loan, a proposed project shall involve one or more of the following activities:

(1)  The development and construction of a new transitional or rental housing development.

(2)  The rehabilitation, or acquisition and rehabilitation, of a transitional or rental housing development.

(3)  The conversion of a nonresidential structure to a transitional or rental housing development.

(b)  In the case of rehabilitation projects, to be eligible to receive a loan, the loan shall be necessary to avoid increases in monthly debt service that have either of the following effects:

(1)  Result in rent increases causing permanent displacement of persons of lower income residing in the development prior to rehabilitation.

(2)  Make it economically infeasible to accept subsidies available to provide affordable rents to persons of lower income, if the sponsor agrees to accept the subsidies.

(c)  To be eligible to receive a loan, the sponsor shall agree to both of the following:

(1)  To set and maintain affordable rent levels for assisted units.

(2)  To the payment of prevailing wage rates with respect to construction assisted through the program. In implementing this paragraph, it is the intent of the Legislature that this requirement apply to construction work that is dependent on the commitment of program funds in order for construction to proceed. Notwithstanding any other provision of law, the department’s enforcement responsibilities shall be limited to the imposition of this requirement through the lending documents. The department shall require, as a condition of loan closing, a signed certificate that prevailing wages have been, or will be, paid in conformance with the requirements of Chapter 1 (commencing with Section 1720) of Part 7 of the Labor Code and that labor records shall be made available to any enforcement agency upon request. The requirements of this paragraph shall not apply to projects for which program funds are used exclusively to achieve lower rents and to pay associated administrative costs.

(Amended by Stats. 2000, Ch. 957, Sec. 1. Effective January 1, 2001.)

50675.5.
  

(a)  Eligible costs shall include the cost of developing dwelling units, transitional housing, and child care, and after school care and social service facilities integrally linked to the assisted dwelling units.

(b)  Eligible cost categories shall include all of the following:

(1)  Real property acquisition, including refinancing of existing debt to the extent necessary to reduce debt service to a level consistent with the provision of affordable rents and the fiscal integrity of the project.

(2)  New construction or rehabilitation, including the conversion of nonresidential structures to residential use.

(3)  General property improvements that are necessary to correct unsafe, unhealthy, or unsanitary conditions, including renovations and remodeling, including, but not limited to, remodeling of kitchens and bathrooms, installation of new appliances, landscaping, and purchase or installation of central air conditioning.

(4)  Necessary and related onsite and offsite improvements.

(5)  Reasonable developer fees.

(6)  Reasonable consulting costs.

(7)  Initial operating costs for housing units.

(8)  Capitalized reserves for replacement and operation. The department may allow capitalized operating reserves to be used for rent subsidies for assisted units reserved for occupancy by households with incomes below limits determined by the department, which shall not exceed the income limit for very low income households.

(9)  Any other costs of rehabilitation or new construction authorized by the department.

(Added by Stats. 1999, Ch. 637, Sec. 2. Effective January 1, 2000.)

50675.6.
  

(a)  A sponsor may apply for loans for one or more rental or transitional housing developments. A housing development may utilize any combination of federal, state, local, and private financial resources necessary to make the development affordable, for the term of the state’s regulatory agreement, to the eligible households.

(b)  (1)  Loans made pursuant to subdivision (f) of Section 50675.7 to sponsors by a local public entity as part of its code enforcement efforts for rental housing developments involving rehabilitation shall only be for terms of not less than 20 years. All other loans shall be for a term of not less than 55 years.

(2) For loans made pursuant to this chapter, the department may approve an extension of an existing loan, the subordination of an existing loan to new debt, or an investment of tax credit equity, as long as the rental housing development is being operated in a manner consistent with the regulatory agreement and the development requires an extension in order to continue to operate in a manner consistent with this chapter. Each extension shall be for a period of not less than 10 years and each extension shall not exceed 55 years or, if needed to match the term of tax credit restrictions, exceed 58 years. The interest rate for the extension shall be 3 percent simple interest, or such interest rate as authorized by the department pursuant to Section 50406.7. All loan payments shall be deferred for the full term of the loan, except for residual receipts payments. These residual receipts payments shall be structured to avoid reducing the amount of payments on local public agency loans resulting solely from changes in the payment terms on the department’s loan, and not resulting from fees or other payments to the borrower, and shall otherwise be consistent with the department’s uniform multifamily regulations (Subchapter 19 (commencing with Section 8300) of Chapter 7 of Division 1 of Title 25 of the California Code of Regulations) or successor regulations. The department may charge a transaction fee to cover its costs for processing such restructuring transactions. The department may waive or defer some or all of this fee, if it determines that a particular development or class of developments does not have the ability to make these payments.

(c)  Principal and accumulated interest is due and payable upon completion of the term of the loan. The loan shall bear simple interest at the rate of 3 percent per annum on the unpaid principal balance. The department may forgive that portion of that loan that is used to cover costs of developing child care facilities. The department shall require annual loan payments in the minimum amount necessary to cover the costs of project monitoring. For the first 30 years of the loan term, the amount of the required loan payments shall not exceed forty-two hundredths of 1 percent (.42%) per annum.

(d)  The department may establish maximum loan-to-value requirements for some or all of the types of projects that are eligible for funding under this chapter.

(e)  The department shall establish per-unit and per-project loan limits for all project types.

(Amended by Stats. 2017, Ch. 418, Sec. 8. (AB 1714) Effective January 1, 2018.)

50675.7.
  

Loans shall be provided using a project selection process established by the department that meets all of the following requirements:

(a)  To the extent feasible, this process shall be coordinated with the processes of other major housing funding sources, including that of the California Tax Credit Allocation Committee, and shall ensure a reasonable geographic distribution of funds.

(b)  The process shall require that applications for projects meet minimum threshold requirements, including, but not limited to, all of the following:

(1)  The proposed project shall be located within reasonable proximity to public transportation and services.

(2)  Development costs for the proposed project shall be reasonable compared to costs of comparable projects in the local area.

(3)  The proposed project shall be feasible.

(4)  The sponsor shall have the capacity to own and develop the proposed project.

(c)  Projects that meet threshold requirements shall be evaluated for funding based on weighted underwriting and evaluative criteria that give consideration to projects that meet the following criteria:

(1)  Serve households at the lowest income levels, consistent with long-term feasibility, considering regional variations.

(2)  Address the most serious identified local housing needs.

(3)  Will be developed and owned by entities with substantial and successful experience.

(4)  Contain a significant percentage of units for families or special needs populations.

(5)  Leverage other funds in those jurisdictions where they are available.

(d)  The department may establish alternate project selection processes, threshold requirements, and priorities for funds appropriated for special purposes. These alternate processes, requirements, and priorities shall be tied to the specific needs and objectives for which the funds have been appropriated.

(e)  Loans for rental housing developments and transitional housing may be reviewed, approved, and funded by the department directly to the sponsor. The department shall ensure that the sponsor notifies the local legislative body of the sponsor’s loan application prior to application submission.

(f)  The department may make grants to local public entities using funds reserved by the Legislature for rehabilitation, or acquisition and rehabilitation, in support of code enforcement. The local entities shall then make the funds available as loans, and they may be allowed to collect and retain loan repayments, provided that these repayments are reloaned in accordance with the requirements of this chapter, as it relates to funds used in support of code enforcement.

(Added by Stats. 1999, Ch. 637, Sec. 2. Effective January 1, 2000.)

50675.8.
  

(a)  Prior to disbursement of any funds for loans to rental housing developments made pursuant to this chapter, the department shall enter into a regulatory agreement with the sponsor that provides for all of the following:

(1)  Sets standards for tenant selection to ensure occupancy of assisted units by eligible households of very low and low income for the term of the agreement.

(2)  Governs the terms of occupancy agreements.

(3)  Contains provisions to maintain affordable rent levels to serve eligible households.

(4)  Provides for periodic inspections and review of yearend fiscal audits and related reports by the department.

(5)  Permits a sponsor to distribute earnings in an amount established by the department and based on the number of units in the rental housing development.

(6)  Has a term for not less than the original term of the loan.

(7)  Contains any other provisions necessary to carry out the purposes of this chapter.

(b)  The agreement shall be binding upon the sponsor and successors in interest upon sale or transfer of the rental housing development regardless of any prepayment of the loan.

(c)  The agreement shall be recorded in the office of the county recorder in the county in which the real property subject to the agreement is located.

(Added by Stats. 1999, Ch. 637, Sec. 2. Effective January 1, 2000.)

50675.9.
  

Where the requirements of federal funding for a project, or the requirements of the low-income housing tax credits used in a project, would cause a violation of the requirements of this chapter, the requirements of this chapter may be modified as necessary to ensure program compatibility. Where the requirements of federal funding or tax credits create what are deemed to be minor inconsistencies as determined by the director of the department, the department may waive the requirements of this chapter as deemed necessary to avoid an unnecessary administrative burden.

(Added by Stats. 1999, Ch. 637, Sec. 2. Effective January 1, 2000.)

50675.10.
  

(a) The department may designate an amount not to exceed 1.5 percent of funds appropriated for use pursuant to this chapter for the purposes of curing or averting a default on the terms of any loan or other obligation by the recipient of financial assistance, or bidding at any foreclosure sale where the default or foreclosure sale would jeopardize the department’s security in the rental housing development assisted pursuant to this chapter. The funds so designated shall be known as the “default reserve.”

(b) The department may use default reserve funds made available pursuant to this section to repair or maintain any rental housing development assisted pursuant to this chapter that was acquired to protect the department’s security interest.

(c) The payment or advance of funds by the department pursuant to this section shall be exclusively within the department’s discretion, and no person shall be deemed to have any entitlement to the payment or advance of those funds. The amount of any funds expended by the department for the purposes of curing or averting a default shall be added to the loan amount secured by the rental housing development and shall be payable to the department upon demand.

(Amended by Stats. 2018, Ch. 37, Sec. 41. (AB 1817) Effective June 27, 2018.)

50675.11.
  

If an appropriation is made by the Legislature for the purposes of this chapter in an amount of twenty million dollars ($20,000,000) or less, the department may administer the funds with guidelines that shall not be subject to the requirements of Chapter 3.5 (commencing with Section 11340) of Part 1 of Title 2 of the Government Code. If an appropriation exceeds twenty million dollars ($20,000,000), the department may administer the funds with guidelines for 15 months, during which time the guidelines shall not be subject to the requirements of Chapter 3.5 (commencing with Section 11340) of Part 1 of Title 2 of the Government Code.

(Added by Stats. 1999, Ch. 637, Sec. 2. Effective January 1, 2000.)

50675.12.
  

(a)  The department shall include in the annual report required by Section 50408 information that describes all of the following:

(1)  The number of projects assisted through the program.

(2)  The types of units assisted through the program.

(3)  The location and geographical distribution of the projects and units assisted.

(4)  The average cost per project, and cost per unit.

(5)  The number of projects and units that have been assisted that serve special needs populations and information related to the types of special needs populations served.

(b)  After each Notice of Funding Availability issued for the distribution of funds pursuant to the program, the department shall evaluate the ability of projects that serve families or special needs populations to competitively access the program. Based on its analysis, if the department determines that those projects are not able to apply for or to successfully compete for funding, the department shall make the adjustments it deems appropriate to ensure that these populations are adequately served in subsequent Notices of Funding Availability. These adjustments may include, but are not limited to, making adjustments to threshold requirements, evaluative criteria, or the timing of the issuance of Notices of Funding Availability to ensure that reasonable funding remains available for more complex projects that include the supportive services necessary to serve families and special needs populations.

(Added by Stats. 2000, Ch. 667, Sec. 1. Effective January 1, 2001.)

50675.13.
  

(a) With respect to funds made available under this chapter, the department shall award reasonable priority points for projects to prioritize any of the following:

(1) Infill development.

(2) Adaptive reuse in existing developed areas served with public infrastructure.

(3) Projects in proximity to public transit, public schools, parks and recreational facilities, or job centers.

(4) Sustainable building methods that are either of the following:

(A) Established in accordance with the criteria listed under paragraph (8) of subdivision (c) of Section 10325 of Title 4 of the California Code of Regulations, or any successor regulation.

(B) Established by the department, in consultation with the California Building Standards Commission for the purposes of funding developments subject to this section and are more stringent than those in subparagraph (A).

(b) The department may utilize other factors in rural areas to promote infill development.

(Amended by Stats. 2007, Ch. 710, Sec. 1. Effective January 1, 2008.)

50675.14.
  

(a) This section shall apply only to projects funded with funds appropriated for supportive housing projects.

(b) For purposes of this section the following terms have the following meanings:

(1) “May restrict occupancy to persons with veteran status” means that the sponsor may limit occupancy to persons meeting the criteria of paragraphs (1) and (2) of subdivision (j) with respect to either of the following:

(A) Any unit in the development that has not been previously occupied.

(B) Any unit in the development that subsequently becomes vacant, for a period of not more than 120 days following the vacancy.

(2) “Supportive housing” means housing with no limit on length of stay, that is occupied by the target population, and that is linked to onsite or offsite services that assist the supportive housing resident in retaining the housing, improving his or her health status, and maximizing his or her ability to live and, when possible, work in the community.

(3) (A) “Target population” means persons, including persons with disabilities, and families who are “homeless,” as that term is defined by Section 11302 of Title 42 of the United States Code, or who are “homeless youth,” as that term is defined by paragraph (2) of subdivision (e) of Section 11139.3 of the Government Code.

(B) Individuals and families currently residing in supportive housing meet the definition of “target population” if the individual or family was “homeless,” as that term is defined by Section 11302 of Title 42 of the United States Code, when approved for tenancy in the supportive housing project in which they currently reside.

(c) (1) The department shall ensure that at least 40 percent of the units in each development funded under the supportive housing program are targeted to one or more of the following populations:

(A) Individuals or families experiencing “chronic homelessness,” as defined by the United States Department of Housing and Urban Development’s Super Notice of Funding Availability for Continuum of Care or Collaborative Applicant Program.

(B) “Homeless youth,” as that term is defined by paragraph (2) of subdivision (e) of Section 11139.3 of the Government Code.

(C) Individuals exiting institutional settings, including, but not limited to, jails, hospitals, prisons, and institutes of mental disease, who were homeless when entering the institutional setting, who have a disability, and who resided in that setting for a period of not less than 15 days.

(2) The department may decrease the number of units required to meet the criteria identified in paragraph (1) if the department determines that the program is undersubscribed after issuing at least one Notice of Funding Availability.

(3) Individuals and families currently residing in supportive housing meet the qualifications under this subdivision if the individual or family met any of the criteria specified in subparagraph (A), (B), or (C) of paragraph (1) when approved for tenancy in the supportive housing project in which they currently reside.

(d) Supportive housing projects shall provide or demonstrate collaboration with programs that provide services that meet the needs of the supportive housing residents.

(e) The criteria, established by the department, for selecting supportive housing projects shall give priority to supportive housing projects that include a focus on measurable outcomes and a plan for evaluation, which evaluation shall be submitted by the borrowers, annually, to the department.

(f) The department may provide higher per-unit loan limits as reasonably necessary to provide and maintain rents that are affordable to the target population.

(g) In an evaluation or ranking of a borrower’s development and ownership experience, the department shall consider experience acquired in the prior 10 years.

(h) (1) A borrower shall, beginning the second year after supportive housing project occupancy, include the following data in his or her annual report to the department. However, a borrower who submits an annual evaluation pursuant to subdivision (c) may, instead, include this information in the evaluation:

(A) The length of occupancy by each supportive housing resident for the period covered by the report and, if the resident has moved, the reason for the move and the type of housing to which the resident moved, if known.

(B) Changes in each supportive housing resident’s employment status during the previous year.

(C) Changes in each supportive housing resident’s source and amount of income during the previous year.

(D) The tenant’s housing status prior to occupancy, including the term of the tenant’s homelessness.

(2) The department shall include aggregate data with respect to the supportive housing projects described in this section in the report that it submits to the Legislature pursuant to Section 50675.12.

(i) The department shall consider, commencing in the second year of the funding, the feasibility and appropriateness of modifying its regulations to increase the use of funds by small projects. In doing this, the department shall consider its operational needs and prior history of funding supportive housing facilities.

(j) Notwithstanding any other provision of law, the sponsor of a supportive housing development may restrict occupancy to persons with veteran status if all the following conditions apply:

(1) The veterans possess significant barriers to social reintegration and employment that require specialized treatment and services that are due to a physical or mental disability, substance abuse, or the effects of long-term homelessness.

(2) The veterans are otherwise eligible to reside in an assisted unit.

(3) The sponsor also provides, or assists in providing, the specialized treatment and services.

(Amended by Stats. 2013, Ch. 183, Sec. 22. (SB 745) Effective January 1, 2014.)

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