In California, there are approximately 149,000 units of privately-owned, federally-assisted multifamily rental housing plus additional tax credit and mortgage revenue bond properties, many with project-based rental assistance. These at-risk units are occupied by elderly persons and families with lower-incomes who cannot afford to pay market rate rents and who could be displaced if the projects convert. A large percentage of these units may convert to market rate as subsidy contracts or regulatory agreements expire. Potential conversion of affordable units to market rate units is an ongoing and critical statewide problem. Affordable Rental Housing at Risk of Conversion (Adobe PDF), an excerpt from the Statewide Housing Plan, provides an overview of this issue in California.
California Government Code Section 65863.10 requires owners of specified federally-assisted projects to provide Notices of Intent to prepay a federally-assisted mortgage, terminate mortgage insurance, or terminate rent subsidies or restrictions at twelve and six months, unless the projects are exempted. These Notices of Intent must be sent to all affected tenant households and to affected public agencies. Affected public agencies include the City or County where the project is located, the local Public Housing Authority, and the Department of Housing and Community Development (HCD).
Pursuant to California Government Code Section 65863.11, owners of government-assisted projects cannot terminate subsidy contracts, prepay a federally-assisted mortgage, or discontinue use restrictions without first providing an exclusive Notice of Opportunity to Submit an Offer to Purchase. This Notice is required to be sent to Qualified Entities at least twelve months prior to sale or termination of use restrictions. Qualified Entities are nonprofit or for profit organizations or individuals that agree to maintain the long-term affordability of projects. See HCD’s current list of Qualified Entities, HPD 00-01 (Microsoft Excel).
California Government Code Section 65863.13 was adopted as an urgency measure and became effective July 2001. These provisions exempt certain preservation projects that meet specific criteria from the State Notice requirements. This exemption only applies to projects where an owner is prepaying a federally- assisted mortgage and comparable long-term affordability restrictions on the project will be maintained.
Interested parties should review the actual statutory language of Government Code Sections 65863.10, 65863.11 and 65863.13.
HCD maintains a list of Qualified Entities who are interested in purchasing government-subsidized multifamily housing projects. The current list of Qualified Entities, HPD 00-01 (Microsoft Excel) , is periodically updated. See the Self Certification as a Qualified Entity (Adobe PDF) and Qualified Entity Certification (Adobe PDF) to request placement on the list of Qualified Entities.
It is advisable that owners contemplating prepayment, termination, or restructuring under applicable federal or State programs, or selling affected properties, contact HCD prior to taking any action. Contact our staff, Mario Angel at (916) 263-7442
or the Division of Housing Policy Development at (916) 263-2911 for additional information.
Division of Housing Policy Development
California Department of Housing and Community Development
2020 W. El Camino, Suite 500
Sacramento, CA 95833
P.O. Box 952053
Sacramento CA 94252-2053
Main Line: (916) 263-2911
FAX: (916) 263-7453
The following sample letters, required attachments, certification forms, and technical bulletin should to be used by owners of at-risk multifamily projects contemplating conversion to market rate housing and/or entities certifying as qualified to purchase at-risk properties:
The link below is a list of notices (6 and 12 month) received by the Department pursuant to California's notice requirements (Government Code 65863.10 and 65863.11). Private owners of assisted multifamily rental housing units who are considering no longer providing rental restrictions and converting restricted units to market-rate units must notice the department. The Department makes no representation of the accuracy or compliance with statutory notice provisions.
The following two charts provide a brief overview of State Notice Requirements according to Government Code Section 65863.10 and 65863.11 by type of notice, the parties involved, timelines, and notice contents. All notices are required to be sent in writing by first class mail, postage prepaid (Section 65863.10) or certified mail, return receipt requested (Section 65863.11).
* All inventoried units eligible to prepay, opt-out, or terminate long term use/affordability restrictions during the 10-year time period are considered by HCD as “at-risk” of conversion and should be analyzed for Housing Element Review purposes.