2010 California Code
Health and Safety Code
Chapter 5. Preservation Interim Loan Programs

50600.  The Legislature finds and declares all of the following:
   (a) The federal Housing and Urban Development Department
subsidizes over 147,000 units of California's affordable rental
housing. As the owners' obligations expire, more than 19,000 of these
units have already been converted to market-rate housing, and an
additional 78,000 units are considered at risk of imminent
conversion. In addition, more than 7,600 units financed with state
and federal low-income housing tax credits will face some risk of
conversion as the first generation of tax credit developments reach
the expiration of their income and rent restrictions over the next
five years. These at-risk units will likely convert to market-rate
housing unless they are acquired by organizations that commit to
maintaining their affordable rents.
   (b) The loss of these assisted units represents not only a loss of
precious affordable housing stock and hardship and potential
dislocation for tenants, 40 percent of whom are seniors, but also the
loss of billions of dollars of federal housing assistance to
California each year.
   (c) This looming loss of affordable rental housing is exacerbated
by California's failure to produce more than 50 percent of the new
housing units needed to house the state's population for each of the
last eight years. The shortage is most strongly felt in the areas of
low-cost housing for working families, people moving from welfare to
work, and seniors and disabled people.
   (d) Affordable housing organizations that wish to purchase
properties at risk of converting to market rate housing often do not
have access to the short-term capital needed to purchase the
properties quickly. This lack of short-term capital greatly reduces
the likelihood that these properties will remain affordable.
   (e) The intent of this chapter is to create a short-term capital
loan program to ensure that California's supply of affordable housing
is not depleted by the conversion of existing government-assisted
rental housing to market-rate housing.



50601.  (a) The Preservation Opportunity Fund is hereby created in
the State Treasury. Notwithstanding Section 13340 of the Government
Code, all money in the fund is continuously appropriated to the
department without regard to fiscal years for the purposes of this
chapter and for costs incurred in administering the program. The
combined administrative expenses of the department and the agency
shall not exceed 5 percent of the funds deposited in the fund for the
purposes of this chapter.
   (b) The following shall be paid into the fund:
   (1) Any money appropriated and made available by the Legislature
for purposes of the fund.
   (2) Any money that the department or the agency receives in
repayment of loans from the fund, including interest therefrom,
except as provided in subdivision (f) of Section 50603.
   (3) Any other money that may be made available to the department
for the purposes of this chapter from any other source.



50602.  The definitions contained in Chapter 2 (commencing with
Section 50050) of Part 1 shall apply to this chapter, except as
follows:
   (a) "Assisted housing development" has the same meaning as in
paragraph (3) of subdivision (a) of Section 65863.10 of the
Government Code.
   (b) "Fund" means the Preservation Opportunity Fund created by
Section 50601.



50603.  (a) There is hereby created the Preservation Opportunity
Program.
   (b) The department shall contract with the agency for the
administration of this section, and the agency shall establish the
terms upon which loans may be made consistent with this section.
   (c) A project shall meet all of the following requirements to be
eligible for a loan:
   (1) It shall be an assisted housing development.
   (2) The borrower shall, in conjunction with this loan, receive a
loan from the agency's Preservation Acquisition Program for the
acquisition of this project.
   (3) The borrower shall agree to obligate itself and any successors
in interest to maintain the affordability of the assisted housing
development for households of very low, low, or moderate income for a
term of not less than 30 years. To the extent economically feasible,
the development shall be continuously occupied in the approximate
percentages that those households have occupied that development as
of the date of acquisition by the purchaser or the approximate
percentages specified in existing federal, state, or locally imposed
use restrictions, whichever is higher. This obligation shall be
recorded at the close of escrow in the office of the county recorder
of the county in which the development is located. In addition, the
regulatory agreement shall contain provisions requiring the renewal
of rental subsidies, if they are available and are provided at a
level sufficient to maintain the project's fiscal viability. Nothing
in this paragraph shall be construed to require the future income
restriction of units unrestricted under the new regulatory agreement
required by this subdivision.
   (d) Projects that meet the requirements of subdivision (c) shall
be evaluated for funding based on their ability to address the
following priorities:
   (1) First priority shall be given to projects whose rent
restrictions have expired or are eligible to expire within two years
of application for a loan under this program.
   (2) Second priority shall be given to projects with rent
restrictions expiring within five years.
   (e) The loans for assisted housing developments under this section
shall include the following terms:
   (1) The agency shall determine the term of the loan. A loan may
not exceed a term of two years, unless the agency determines, in its
discretion, that a longer term is required to do both of the
following:
   (A) To preserve the affordability of a project.
   (B) To ensure the financial viability of a project.
   (2) The rate of interest shall not exceed 3 percent per annum on
the unpaid balance for that portion of the loan made with General
Fund or general obligation bond moneys. The rate of interest for
portions of the loan made with non-General Fund, nongeneral
obligation bond moneys shall be established by the agency.
   (3) Simple interest shall accrue but be deferred until loan
maturity or transfer of the property.
   (4) Any other terms and provisions that the agency may deem
proper.
   (f) Notwithstanding paragraph (2) of subdivision (b) of Section
50601, with the exception of five million dollars ($5,000,000), all
money that the agency receives in repayment of loans made with funds
from the Housing and Emergency Shelter Trust Fund Act of 2002 shall
be deposited into the Housing Rehabilitation Loan Fund created by
Section 50661 for use in the Multifamily Housing Program. The five
million dollars ($5,000,000) remaining in the Preservation
Opportunity Fund and subsequent interest payments on loans made from
this five million dollars ($5,000,000) shall be made available for
the purposes of the Preservation Opportunity Program through at least
December 31, 2008, at which time the agency may, based on an
analysis of need, either continue to make these funds available for
the purposes of the Preservation Opportunity Program or transfer all
remaining funds to the Housing Rehabilitation Loan Fund for use in
the Multifamily Housing Program.


50604.  (a) There is hereby created the Interim Repositioning
Program, the purpose of which is to leverage private capital to
increase the funding available to preserve at-risk housing.
   (b) The department shall administer this program and establish the
terms upon which loans may be made consistent with this section.
   (c) The department shall select a single sponsor through a
competitive process. The sponsor shall meet all of the following
criteria:
   (1) Be a not-for-profit corporation based in California.
   (2) Demonstrate sufficient organizational stability and capacity
to carry out the activity for which it is requesting funds, including
the capacity to acquire, renovate, or rehabilitate, asset manage and
property manage a portfolio of assisted housing developments, and,
if applicable, to underwrite, close, and service loans. Capacity may
be demonstrated by substantial successful experience performing
similar activities, or through other means acceptable to the
department.
   (3) Demonstrate a feasible strategy to meet the leveraging
requirements of subdivision (g) within 60 days after being chosen as
the sponsor.
   (4) Demonstrate past experience in the cost-effective use of
public resources.
   (5) Submit a detailed business plan as to how the sponsor intends
to meet the requirements of this section. The business plan shall
include a description of appropriate financial controls, acquisition
procedures, underwriting procedures, and internal controls.
   (d) The department shall give bonus points in the rating and
ranking process to an applicant who can demonstrate letters of intent
from private entities to provide capital to meet the leverage
requirement of this section.
   (e) The department shall make a loan for a term of not more than
five years to the project sponsor for the purposes of subdivision
(i).
   (f) Principal and accumulated interest is due and payable upon
completion of the term of the loan. The loan shall bear simple
interest at a rate of 3 percent per annum on the unpaid principal
balance.
   (g) Before expending any state funds, the sponsor shall raise at
least three dollars ($3) of private capital as equity to match every
dollar of Interim Repositioning Program loan proceeds. To be
considered private capital, outside funds shall be committed for a
term at least equal to the term of the loan made pursuant to this
section and available to be used for the purposes of this section. If
the sponsor is unable to meet these matching requirements within 60
days of selection as the sponsor, the loan shall be repaid with
accumulated interest to the department, deposited in the fund, and
made available to the next highest rated qualified project sponsor
identified pursuant to subdivision (c). If, within 180 days, there is
no remaining qualified project sponsor available, any unexpended
funds shall be made available for the purposes of Section 50603.
   (h) Funds lent to the project sponsor pursuant to this section and
the required private matching funds shall be used to finance up to
20 percent of the cost of acquiring an assisted housing development.
   (i) The sponsor shall use Interim Repositioning Program loan
proceeds and the required private matching funds for the following
purposes:
   (1) To acquire an assisted housing development in California for
which rent restrictions have expired or are eligible to expire within
five years of the date that the department chooses the sponsor.
First priority shall be given to projects for which rent restrictions
have expired or are eligible to expire within two years.
   (2) To make loans not to exceed a term of three years to any
entity described in subdivision (d) of Section 65863.11 of the
Government Code for the acquisition of an assisted housing
development for which rent restrictions have expired or are eligible
to expire within five years of the date the agency chooses the
project sponsor. First priority for loans shall be given to projects
for which rent restrictions have expired or are eligible to expire
within two years. The rate of interest on loans made pursuant to this
paragraph shall be equal to the lowest feasible rate sufficient to
cover the cost of capital to the sponsor.
   (j) The sponsor, in the event he or she directly acquires an
assisted housing development, or the borrower, if he or she has
received a loan from the project sponsor pursuant to this section,
shall agree to obligate himself or herself and any successors in
interest to maintain the affordability of the assisted housing
development for households of very low, low, or moderate income for a
term of not less than 30 years. To the extent economically feasible,
the development shall be continuously occupied in the approximate
percentages that those households who have occupied that development
as of the date of acquisition by the purchaser or the approximate
percentages specified in existing federal, state, or locally imposed
use restrictions, whichever is higher. This obligation shall be
recorded at the close of escrow in the office of the county recorder
of the county in which the development is located. In addition, the
regulatory agreement shall contain provisions requiring the renewal
of rental subsidies, if they are available and provided at a level
sufficient to maintain the project's fiscal viability. Nothing in
this paragraph shall be construed to require the future income
restriction of units unrestricted under the new regulatory agreement
required by this subdivision.
   (k) The department, in its loan agreement with the sponsor, shall
establish a schedule for the timely expenditure of funds by the
sponsor.
   ( l) The department shall select a sponsor for the purposes of
this section within six months of the date funding becomes available.
   (m) The department may, upon consultation with interested parties,
including potential applicants and housing advocates, administer
this program through a notice of funding availability that shall not
be subject to Chapter 3.5 (commencing with Section 11340) of Part 1
of Title 2 of the Government Code.



50605.  The department shall include in its last annual report
submitted to the Legislature, pursuant to Section 50408, on or before
December 31, 2005, all of the following:
   (a) A general description of activities undertaken pursuant to
this chapter.
   (b) For each project assisted pursuant to this chapter, a
description of the expiration date of the project's rent
restrictions; the name and location of the purchaser; the acquisition
price; the number of assisted units preserved; and the level of
affordability maintained.
   (c) If the sponsor for the Interim Repositioning Program
subsequently sells any projects, a description of the name and
location of the purchaser, the purchase price, and the total
transaction costs.
   (d) With respect to the Interim Repositioning Program, an
evaluation of the sponsor's success in leveraging private capital.
   (e) A comparison of the cost of preserving units under the
Preservation Opportunity Program versus the Interim Repositioning
Program.
   (f) If sufficient data exist, a comparison of the cost of
preserving units with rent restrictions that have expired or are
eligible to expire within two years versus units with rent
restrictions that are eligible to expire within three to five years.
   (g) An overall assessment of the effectiveness of the Preservation
Opportunity Program and the Interim Repositioning Program as tools
for preserving affordable housing.