Planning and zoning: assisted housing developments: notice of expiration of affordability restrictions.

(1) Existing law, the Planning and Zoning Law, requires an owner of an assisted housing development proposing the termination of a subsidy contract or prepayment of governmental assistance or of an assisted housing development in which there will be the expiration of rental restrictions to provide a notice of the proposed change to each affected tenant household residing in the assisted housing development, as specified. The Planning and Zoning Law defines "assisted housing development" for these purposes to mean a multifamily rental housing development of 5 or more units that receives governmental assistance under any of specified programs, including assistance provided by counties or cities under specified law in exchange for restrictions on the maximum rents, as specified, and on the maximum tenant income, as specified. The Planning and Zoning Law defines a "termination" for these purposes to mean an owner's decision to extend or renew its participation in a federal, state, or local government subsidy program or private, nongovernmental subsidy program for an assisted housing development, as specified. The Planning and Zoning Law defines the "expiration of rental restrictions" for these purposes to mean the expiration of rental restrictions for an assisted housing development, as specified, unless the development has other recorded agreements restricting the rent to the same or lesser levels for at least 50% of the units. This bill would instead impose the above-described notice requirement on an owner prior to the anticipated date of termination of a subsidy contract or expiration of rental restrictions or prepayment on an assisted housing development, as specified. The bill would expand the definition of "assisted housing development" to include a development that receives assistance from counties or cities in exchange for affordability restrictions, as described above, pursuant to the Middle Class Housing Act of 2022; streamlining assistance pursuant to the Affordable Housing and High Road Jobs Act of 2022; specified law providing a streamlined, ministerial approval process for certain housing developments; or the Affordable Housing on Faith and Higher Education Lands Act of 2023. The bill would revise the definition of "termination" for these purposes to instead mean the failure of an owner to extend or renew its participation in the above-described programs, as specified. The bill would also revise the definition of "expiration of rental restrictions" to instead exclude an expiration in a development that has other recorded agreements restricting the rent to the same or lesser levels for at least 50% of the units or the same number of units, as specified, whichever is greater. The Planning and Zoning Law requires an owner to include in the above-described notice certain information, as specified, including among other things, in the event of prepayment, termination, or the expiration of rental restrictions, whether the owner intends to increase rents during the 12 months following prepayment, termination, or the expiration of rental restrictions to a level greater than permitted under a specified provision of the Internal Revenue Code, relating to low-income housing tax credits. At least 6 months prior to the anticipated date of termination of a subsidy contract, expiration of rental restrictions or prepayment on an assisted housing development, the Planning and Zoning Law requires an owner described above to provide a notice of the proposed change to each affected tenant household residing in the assisted housing development at the time the notice is provided and to the affected public entities that includes, among other things, a statement of the owner's intention to participate in any current replacement subsidy program made available to affected tenants. The Planning and Zoning Law requires an owner of an assisted housing development that is within 3 years of a scheduled expiration of rental restrictions to provide notice of the scheduled expiration of rental restrictions to any prospective tenant at the time the prospective tenant is interviewed for eligibility, and to existing tenants, as specified. This bill, for the 12-month notice described above, would instead require an owner in the event of prepayment, termination, or the expiration of rental restrictions, to include in the above-described notice, as specified, whether the owner might increase rents during the 12 months following prepayment, termination, or the expiration of rental restrictions, regardless of whether that increase would be to a level greater than permitted under the above-descried provisions of federal law. The bill would also require that the 6-month notice, as described above, additionally include a statement that the owner shall accept all enhanced Section 8 vouchers if the tenants receive them. The bill would additionally require an owner of an assisted housing development that is within 3 years of a scheduled termination of a subsidy contract to provide notice of the scheduled termination of a subsidy contract to any prospective tenant at the time the prospective tenant is interviewed for eligibility, and to existing tenants, as specified. The Planning and Zoning Law provides for injunctive relief to any specified party who is aggrieved by a violation of these provisions. This bill would specify that the parties who may obtain injunctive relief under these provisions include, but are not limited to, affected tenants that meet the requirements of a legitimate tenant organization, as defined in federal regulations, or a tenant association, as defined. (2) The Planning and Zoning Law requires an owner of an assisted housing development, as defined, to give notice, as specified, prior to the anticipated date of the termination of a subsidy contract, the expiration of rental restrictions, or prepayment on an assisted housing development, to specified entities, except as provided. The Planning and Zoning Law prohibits an owner from terminating a subsidy contract or prepayment of a mortgage unless the owner or its agent has provided specified entities an opportunity to submit an offer to development, as specified. To qualify as a purchaser of an assisted housing development for these purposes, the Planning and Zoning Law requires specified entities to meet certain requirements, including, among other things, to be certified by the Department of Housing and Community Development (department) , as specified. The Planning and Zoning Law requires the department to establish a process for certifying qualified entities and to maintain a list of entities that are certified, as specified. This bill would define a "qualified entity" for these purposes to mean an entity that is a specified entity that meets the requirements described above. The bill would also revise the requirement for the department to establish the above-described certification process to clarify that the department is required to establish a process to certify entities meeting the requirements under existing law to have the opportunity to purchase an assisted housing development. The Planning and Zoning Law requires a qualified entity that elects to purchase an assisted housing development under these provisions to make a bona fide offer, as provided, within 180 days of the owner's notice. If an owner has received a bona fide offer from one or more qualified entities within the first 180 days from the date of an owner's bona fide notice of the opportunity to accept a bona fide offer from a qualified entity, the Planning and Zoning Law requires an owner to notify the department of those offers and either accept a bona fide offer from a qualified entity to purchase or declare under penalty of perjury that, if the property is not sold pursuant to these provisions within 2 180-day periods, the owner will not sell the property for at least 5 years, as specified. When one or more bona fide offers to purchase have been made, as specified, and the owner wishes to sell, the Planning and Zoning Law requires the owners to accept the bona fide offer that meets the requirements of these provisions and execute a purchase agreement within 90 days of receipt of the offer. The Planning and Zoning Law authorizes an owner to accept an offer from a person or an entity that does not qualify as a purchaser of an assisted housing development during the 180-day period following the initial 180-day period, as specified. This bill would extend the period in which a qualified entity may make a bona fide offer under these provisions from 180 days to 270 days. The bill would require that notification to the department of one or more bona fide offers be made within 90 days. The bill would delete the above-described requirement that applies when one or more bona fide offers to purchase have been made and the owner wishes to sell and would, instead, revise the option for the owner to accept the bona fide offer to require that the owner execute a purchase agreement. The bill would delete the option for an owner to declare that it will not sell the property for 5 years, as described above, and would instead authorize the owner to record a new regulatory agreement with a term of at least 30 years, as specified. If an owner does not receive a bona fide offer from one or more qualified entries within 270, or if after the 270 days all bona fide offers are withdrawn, the bill would authorize the owner to do any of specified actions, including selling the property to any buyer. The bill would delete the above-described authorization for an owner to accept an offer from a person or entity that does not qualify as a purchaser after the initial 180-day period. The Planning and Zoning Law requires owners of assisted housing development in which at least 25% of the units on the property are subject to affordability restrictions or a rent or mortgage subsidy contract to certify compliance with these provisions and other applicable law annually, under penalty of perjury, in a form as required by the department. This bill would expand this requirement to apply to owners of an assisted housing development in which at least 5% of the units on the property are subject to affordability restrictions or a rent or mortgage subsidy contract. The bill would make a conforming change in this regard. By expanding the requirement to certify compliance to apply to additional owners of assisted housing developments thereby expanding the scope of the crime of perjury, this bill would impose a state-mandated local program. The Planning and Zoning Law authorizes the enforcement of these provisions by any qualified entity entitled to exercise the opportunity to purchase and right of first refusal, any tenant association at the property, or any affected public entity that has been adversely affected by an owner's failure to comply with these provisions, as specified. The bill would additionally authorize enforcement of these provisions by a group of affected tenants that meets the requirements of a legitimate tenant organization, as specified, and would define tenant organization for this purpose, as specified. (3) The Planning and Zoning law exempts an owner from providing the above-described notices if certain conditions are contained in a regulatory agreement, as specified, including a prohibition against the owner terminating a tenancy of a low-income household at the end of a lease term without demonstrating a breach of the lease. This bill would additionally require that this regulatory agreement include a prohibition against an owner terminating a tenancy of a low-income household due to a planned renovation of the property. (4) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason.