California Legislature—2013–14 Regular Session

Assembly Bill No. 1109

Introduced by Assembly Member Bonilla

February 22, 2013

An act to amend Section 50515.2 of the Health and Safety Code, relating to housing.

LEGISLATIVE COUNSEL’S DIGEST

AB 1109, as introduced, Bonilla. Affordable housing.

Existing law authorizes the Department of Housing and Community Development to provide technical assistance to groups and persons with various housing needs and to administer various housing loan programs, including the Joe Serna, Jr. Farmworker Housing Grant Program.

This bill would make technical, nonsubstantive changes to a provision of the Joe Serna, Jr. Farmworker Housing Grant Program.

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 50515.2 of the Health and Safety Code
is amended to read:

50515.2.  

(a) Notwithstanding any other law, the department
may extend the term of an existing multifamily housing loan made
by the department under the original Rental Housing Construction
Program established by Chapter 9 (commencing with Section
50735), the Special User Housing Rehabilitation Program
established by Section 50670, or the Deferred Payment
Rehabilitation Loan Program established by Chapter 6.5
(commencing with Section 50660) upon the request of any
borrower subject to the following conditions:

(1) The borrower shall provide to the department a complete
report showing all existing tenants, their incomes, as reported in
the most recent annual income certification, and the rents currently
charged to each tenant.

(2) The borrower shall agree to an extension of the term of the
loan by an additional 55 years from the date of departmental
approval. If the department determines that the remaining useful
life of a project is less than 55 years, the loan may be extended for
the remaining useful life of the project, but not less than 30 years.
The department may convert the existing outstanding principal
and any accrued interest into the new loan amount. The interest
rate on the extended term shall be 3 percent simple interest. All
future payments of principal and interest may be deferred except
for a percentage of interest equal to the percentage charged in the
Multifamily Housing Program (Chapter 6.7 (commencing with
Section 50675)) for the department’s ongoing monitoring and
management responsibilities.

(3) The borrower shall agree to amend or replace the existing
regulatory agreement to include terms generally equivalent to those
used in the Multifamily Housing Program. In addition, the borrower
shall agree to replace, amend, or revise any other loan document
as necessary to accomplish the purposes of this section.

(4) (A) The borrower shall agree to a rent schedule that ensures
that all assisted units are affordable to households earning no more
than 60 percent of the area median income and that at least 35
percent of all assisted units shall be reserved for, affordable to,
and occupied by, households earning less than or equal to the
midlevel target used by the Multifamily Housing Program, unless
the department finds both of the following:

(i) That the project income is insufficient to maintain fiscal
integrity, as that term is used in the Multifamily Housing Program,
and is insufficient to maintain the rents required under this
subparagraph pursuant to the terms of the Uniform Multifamily
Regulations, or any successor regulations, except that commercial
vacancy loss shall be projected based on the operating history of
the project, commercial vacancy rates in the neighborhood, and
similar factors typically used by commercial lenders.

(ii) That the borrower has exhausted all available potential
sources of rental subsidies, including, but not limited to, federal,
state, and local funds.

(B) If the department finds that a reduction in the percentage
of assisted units to less than 35 percent of assisted units is justified,
it shall ensure that the largest possible percentage is reserved for
the targeted households.

(C) For the purposes of this paragraph, “midlevel target used
by the Multifamily Housing Program” begin delete shall mean end delete begin insert means end insert the
following:

(i) For counties with an area median income of 110 percent or
less of the state median income, begin delete it shall mean end delete households earning
30 percent of state median income, expressed as a percentage of
area median income.

(ii) For counties with an area median income that exceeds 110
percent of the state median income, begin delete it shall mean end delete households
earning less than 35 percent of state median income, expressed as
a percentage of area median income.

(5)  begin delete No end delete begin insert A end insert tenant residing in a project at the time of an extension
authorized by this section may begin insert not end insert be displaced as a result of the
regulatory revisions authorized by this section, and, for the initial
operating year after approval of the extension, that tenant may not
have his or her rent increased above the amounts specified in his
or her preexisting regulatory agreements, except that no tenant
may pay less than 30 percent of his or her income, calculated
pursuant to the Multifamily Housing Program criteria. If a rent
increase authorized under this section would exceed a 10 percent
increase in payment for a lower income tenant, the project owner
shall phase in the increase so that it does not exceed 10 percent
per year. After the initial operating year after the extension
authorized under this section, the rents for all regulated units that
are subject to the new agreement may be adjusted in the percentage
calculated pursuant to the Multifamily Housing Program criteria,
plus the amount necessary to bring an individual tenant up to the
30-percent-of-income standard, provided that the total annual
increase does not exceed 10 percent. Rent adjustments for all
tenants occupying assisted units at the time of the extension shall
be based on the tenant’s initial rent established under this
paragraph. Upon vacancy of an assisted unit occupied at the time
of the extension, the new base rent for that unit shall be established
consistent with the standards used in the Multifamily Housing
Program for the regulated income band, subject to the reservation
of units required under paragraph (4).

(b) The department may approve an extension of a loan made
by the department if it determines that the project has, or will have begin insert , end insert
after rehabilitation or repairs, a potential remaining useful life of
at least 30 years and that the project is deemed financially feasible
pursuant to the terms of its Uniform Multifamily Regulations or
successor regulations.

(c) The department may subordinate its loan or loans to refinance
existing senior debt and to additional permanent financing if that
additional senior debt is used only for rehabilitation, repairs, or
improvements, or both, including related soft costs, that are modest
in size, scope, and cost, as determined by the department and
necessary to maintain and extend the useful life of the project.

(d) (1) For the purposes of this subdivision, the “agency
projects” are the 26 projects assisted through the original Rental
Housing Construction Program with funds administered by the
California Housing Finance Agency.

(2) Upon the request of a borrower the agency may extend the
term of an existing loan for an agency project by a period that is
equal to the remaining useful life of the project, as determined by
the agency, but not more than 55 years and not less than 30 years
from the date of agency approval, under terms that are substantially
consistent with the purposes of this section, if all of the following
conditions are met:

(A) The borrower shall provide to the agency the report
described in paragraph (1) of subdivision (a).

(B) The extension shall be subject to the conditions set forth in
paragraph (2) of subdivision (a).

(C) The rent levels and tenant protections described in
paragraphs (4) and (5) of subdivision (a) shall be satisfied, except
that the agency, not the department, shall make the determination
required under clause (i) of subparagraph (A) of paragraph (4) of
subdivision (a) that the project income is insufficient to meet the
agency’s affordable multifamily lending program requirements.

(3) Any determination or approval under this section regarding
the agency projects shall be by the agency rather than the
department.

(4) The borrower and the agency shall amend, replace, or revise
any other loan documents or agreements governing the loans for
the agency projects as necessary to accomplish the purposes of
this section.

(5) All funds received by the agency for the agency projects,
whether by loan repayment, foreclosure, accrued interest, or
otherwise, shall be used to provide assistance to existing or future
projects financed by or through the agency pursuant to terms
consistent with the agency’s affordable multifamily lending
programs.

(e) It is the intent of the Legislature in enacting this section that
the department should manage its reserves for the original Rental
Housing Construction Program in a manner that will allow for the
continuation of current benefits to current low-income tenants for
the longest period of time possible. Accordingly, rent subsidies
shall be continued only for units occupied by lower income tenants
who were in residence at the time of the extension authorized under
this section.

(f) It is the intent of the Legislature in enacting this section to
provide to the department the flexibility necessary to preserve the
affordable rental units for which the state has already made a
significant public investment. Accordingly, the department may
implement this section through guidelines that shall not be subject
to Chapter 2.5 (commencing with Section 11340) of Part 1 of Title
2 of the Government Code.

(g) This section shall become operative on July 1, 2008.

(h) This section shall not apply to loan extensions and senior
debt subordinations executed by the department and recorded after
the effective date of the guidelines adopted by the department
pursuant to subdivision (h) of Section 50560.