Housing programs: financing.

Senator Reyes proposes comprehensive changes to California's affordable housing finance programs, expanding the Department of Housing and Community Development's authority to restructure loans and manage housing developments while strengthening tenant protections.

The legislation authorizes HCD to approve early loan payoffs, equity extractions, and tax credit investments for qualifying rental housing projects. These new powers apply across multiple state housing programs, including the Rental Housing Construction Program and Multifamily Housing Program. Projects must demonstrate a remaining useful life at least equal to their regulatory agreement term to qualify for restructuring.

The bill establishes strict tenant safeguards, prohibiting restructuring that would increase rents beyond annual adjustments allowed in regulatory agreements. For existing tenants, rent increases are capped at 5% annually for very low-income households and 10% for others until reaching program limits. Property owners must provide six months' notice of planned increases and 90 days' notice of exact new rent amounts.

New regulatory requirements mandate that HCD publish detailed income and rent data for restructured properties within six months and update it every three years. The department may charge monitoring fees throughout a property's regulatory period and assess transaction fees to cover restructuring costs. Developer fees are limited to California Tax Credit Allocation Committee maximums or 25% of rehabilitation costs where tax credits are not involved.

The legislation also adds a definition of "capitalized operating reserves" to both the Health and Safety Code and Welfare and Institutions Code, standardizing the term across housing programs as funds designated for potential operating deficits, supportive services, and rent subsidies in assisted units.