2026 Supportive Housing

NOTICE OF FUNDING AVAILABILITY

OC Housing and Community Development 1501 E. St. Andrew Place

Santa Ana, CA 92705 OCHCD.NOFA@occr.ocgov.com

Julia Bidwell, Director, OC Housing and Community Development

Michelle Zdeba, Housing Development Manager Sherluna Vien, Housing Development Administrator

Star Johnson, Housing Development Analyst

March 6, 2026 mailto:OCHCD.NOFA@occr.ocgov.com

OC Housing and Community Development 1501 E. St. Andrew Place

Santa Ana, CA 92705

Julia Bidwell, Director, OC Housing and Community Development

Michelle Zdeba, Housing Development Manager Sherluna Vien, Housing Development Administrator

Star Johnson, Housing Development Analyst

TABLE of CONTENTS

Section I Introduction, Application & Selection Process

Section II Program Description Funds Available Eligible Activities Lending Policies by Project Location Affordability Requirements Loan Terms & Conditions Match Requirements Maximum Loan Amount/Subsidy Limit Exceptions and Other Requirements

Section III Special Programs: Orange County Housing Authority Project-Based Vouchers 20

Section IV Application & Threshold Requirements Description of the NOFA Exhibits

Section V Requirements of Funding Requirements Prior to Funding

APPLICATION

Submission Requirements

Application Checklist 34 Exhibits 4.01 – 4.43 36 – 134

APPLICATION ATTACHMENTS

A. 2025 Orange County Income & Rent Limits ____________________________________________ 135 B. Maximum Development Costs and Minimum Square Footage ______________________________ 136 C. Permanent Supportive Housing Guidelines and Definitions ______________________________________ 137 D. Mental Health Services Act/Behavioral Health Services Act Term Sheet ___________________________ 139 E. Property Management Plan – Guidelines ____________________________________________________ 147 F. Insurance Requirements ________________________________________________________________ 153 G. Sample Housing and Community Development Commitment Letter ______________________________ 156 H. Apartment Development Revenue Bond Application ______________________________________ 165 I. Relocation Plan Instructions _____________________________________________________________ 166 J. Affordable Housing Opportunity Overlay Zone Eligible Sites ________________________________ 171 K. Loan Closing Checklist _____________________________________________________________ 172 L. Monitoring Policy _________________________________________________________________ 176 M. Contracting with Minority, Women-Owned and Disadvantaged Business ______________________ 177 N. Sample Loan Documents (N1 – N14) _________________________________________________ 182-439

2026 SUPPORTIVE HOUSING

NOTICE OF FUNDING AVAILABILITY

OpenGov NOFA 2026-01 March 6, 2026

SECTION I - INTRODUCTION, APPLICATION & SELECTION PROCESS

As authorized at the February 10, 2026, County of Orange (County), Board of Supervisors (Board) meeting, the 2026 Supportive Housing Notice of Funding Availability (NOFA) announces the availability of up to $20.9 million of Federal HOME Investment Partnerships Program (HOME), HOME American Rescue Plan Program (HOME-ARP), Mental Health Services Act (MHSA)/Behavioral Health Services Act (BHSA), 15G Reserves and Housing Successor Agency (HSA) funds to promote the acquisition, new construction, and acquisition/rehabilitation of Supportive Housing, as defined in Attachment C of this NOFA, affordable for Orange County’s extremely low-income households who are experiencing homelessness by providing below market rate financing. The NOFA also makes available up to 100 Housing Choice, Mainstream and/or Veterans Affairs Supportive Housing (VASH) Project Based Vouchers (PBVs) for extremely low-income households who are experiencing homelessness in Orange County, for projects that meet the requirements of this NOFA (regardless of whether or not capital funding is requested under this NOFA).

OC Housing and Community Development (HCD) requires that units assisted under this NOFA be filled with tenants who are prioritized through the County’s Coordinated Entry System (CES). Interested and qualified applicants/developers who can successfully demonstrate their ability to acquire, build or substantially rehabilitate, and operate Permanent Supportive Housing are encouraged to submit proposals.

To encourage applicants/developers to leverage available funding sources for development of supportive housing. HCD will accept applications based on a tier system:

• Days 1-60 from the release of the NOFA: HCD will accept applications for developments located in unincorporated Orange County and Urban County Participating Cities.

• From days 61-90 after the release of the NOFA, HCD will accept applications for any developments located in unincorporated Orange County, Urban County Participating Cities and Entitlement Cities, except in the cities of Santa Ana, Anaheim and Garden Grove.

• Ninety-one (91) days after the release of the NOFA, applications for any development eligible under this NOFA throughout the County (except generally for project-based voucher requests in the cities of Santa Ana, Anaheim, and Garden Grove) will be accepted based on the remaining eligible funding, vouchers and lending policies.

Applications for project-based vouchers will only be accepted for developments located in the Orange County Housing Authority (OCHA) jurisdiction. Case-by-case exception may be made for developments on County owned or County developed property.

Homekey+ projects in conjunction with review and approval of the County’s Request for Information (RFI) need not comply with the preferences and timeframes above. Applicants seeking only MHSA/BHSA, 15G Reserves, or HSA Fund (and not another source or PBVs) under this NOFA will also be accepted upon the release of the 2026 NOFA.

On a case-by-case basis and upon release of the 2026 NOFA, HCD may accept applications requesting only additional capital funding for developments previously approved by the Board.

Timeframe Eligible Development Eligible Locations Day 1 – 60 March 6 – May 4

Any development eligible under this NOFA (except for project-based vouchers requests in the cities of Santa Ana, Anaheim, and Garden Grove)

Unincorporated Orange County, Urban County Participating Cities* (List of Urban County Participating Cities in Section 2.08.01)

Day 61- 90 May 5 – June 3

Any development eligible under this NOFA (except for project-based vouchers requests in the cities of Santa Ana, Anaheim, and Garden Grove)

Unincorporated Orange County, Urban County Participating Cities and Entitlement Cities*

Day 91 and after June 4

Any development eligible under this NOFA will be accepted based on the remaining eligible funding and lending policies (except generally for project-based vouchers requests in the cities of Santa Ana, Anaheim, and Garden Grove)

Throughout the County

* Applications for PBVs will only be accepted for developments located in the OCHA’s jurisdiction. Case-by-case exception may be made for developments on County-owned or County developed property.

The level of the County’s financial participation will depend on the location of the development and the source of funds utilized. Applicants are encouraged to design projects that utilize these funds to fill a financial gap in a project’s financial feasibility, after other available sources of housing development funds are utilized. Such funds may include bank loans, equity from the sale of low-income housing tax credits (LIHTCs), owner equity, sale of tax-exempt bonds, state and federal funding, grants and donations, and other public and private sources of funds.

Acceptance of a proposal does not constitute a contract and does not obligate HCD to award funds and/or PBVs. Funding and PBVs are available until the NOFA closes, is replaced by a new NOFA, or until all available funds are committed via Board action, whichever occurs first. HCD reserves the right to suspend acceptance of proposals at any time. HCD reserves the right to increase or decrease available resources in this NOFA subsequent to Board approval. Notification of NOFA closure will be provided to interested parties through a posting of a public notice on the HCD website.

1.01 Application Process

The NOFA will be available on the HCD web site at: https://www.ochcd.org/housing-development/developer/notice-funding-availability. The NOFA documents are in Word and Excel format.

Please note that the application and spreadsheets may have been revised from previous NOFAs.

Applicants must use the forms contained in this NOFA.

The NOFA is an open application process. Proposals for funding will be considered on a first-come, first-served basis based on the preference, availability of resources and underwriting criteria set forth in this NOFA. HCD will consider projects based on the applicant’s ability to meet the application and threshold requirements set forth herein; the applicant’s ability to successfully demonstrate their experience in acquiring, constructing, rehabilitating, and operating affordable housing; the quality of the proposed project; the need for financial assistance; the quality of the proposed project including consideration of alignment with existing federal policies for environmental justice (24 CFR 58.5[j]) and deconcentration of poverty and expanding housing and economic opportunities (24 CFR 983.57).

Within each tier, the County will prioritize projects that have secured a building permit and/or can begin construction within 180 days of receiving the County’s funding commitment.

Applications must be complete. Incomplete applications may not be processed. However, HCD reserves the right to waive minor technical deficiencies in the application and to request minor, non-substantive corrections or clarifications.

https://www.ochcd.org/housing-development/developer/notice-funding-availability https://www.ochcd.org/housing-development/developer/notice-funding-availability

For a submission/application that will trigger the National Environmental Policy Act (NEPA) process, the Applicant shall pay all actual consultant fees and other fees incurred in connection with the preparation and finalization of the federally required environmental review process for the proposal. Payment of all fees must be made before the County loan is funded. The Applicant may directly hire an environmental consultant from the County’s Qualified Consultant List to draft a substantially complete NEPA for the County’s review and approval.

Upon submittal of an application, the Applicant shall not undertake in any activity utilizing federal or non-federal funds that would result in Choice Limiting Action under 24 CFR 58.22(a), including but not limited to real property acquisition, demolition, disposition, rehabilitation, repair, new construction, site preparation or clearance, ground disturbance and leasing, until satisfactory completion of the NEPA environmental review and receipt of an approval of the Request of Release of Funds (RROF) and certification from the HUD under 24 CFR Part 58. Failure to comply with this requirement may result in a violation of HUD regulations and could render the project ineligible for federal funding. A waiver may be considered in accordance with the Orange County Housing Authority (OCHA) Administrative Plan for developments proposed within a master planned community.

Submittals must be complete and organized in accordance with the Application Checklist and shall be submitted electronically during normal business hours (Monday through Friday, 8:00am to 5:00pm). To submit an application, applicants must email a download link to the full and complete application to OCHCD.NOFA@occr.ocgov.com with “2026 NOFA – [Project Name]” in the Subject Line of the email.

If HCD staff cannot download the application using the link provided, the applicant will be notified of a returned application and will need to re-submit their application. This process will ensure that applications are received on a first-come, first-serve basis.

Timeframe for Awards: Applicants should allow a minimum of eight (8) months from submission of a complete application to the County for review and approval of such application. Incomplete applications, or substantial changes in submitted applications, may result in delays in review and processing of such applications.

Submission: Upon receipt, HCD staff will review each application for compliance with application, threshold requirements. HCD shall endeavor to review all complete applications for threshold completion within fifteen (15) working days of submission. HCD staff will notify the applicant in writing of any deficiencies in meeting these requirements (“Threshold Requirement Review”). A developer/applicant interview may also be scheduled at this time. Applicants will be required to respond to all deficiencies, in writing, within five (5) working days. Except a 30-day written response will be permitted for deficiencies found in the following areas:

• Exhibit 4.13: Audited Financial Statements

• Exhibit 4.21: Appraisal

Threshold: Following receipt of the application and the Threshold Requirement Review, as discussed in Section IV – Application & Threshold Requirements, HCD staff will make a recommendation to the Project Review Advisory Panel (PRAP), an advisory group to the Director of HCD (Director), that the project either met the NOFA threshold requirements and may proceed to the underwriting phase or that the project did not meet the NOFA threshold requirements and that the project not be further evaluated by staff. Once both staff and PRAP evaluation is complete, the project, will proceed to the Director for final consideration.

Applicants will be notified as to whether they 1) passed Threshold Requirement Review and that staff will begin the underwriting, or 2) that the applicant has failed the Threshold Requirement Review and that the applicant may re-apply at a later date.

If application has passed Threshold Requirement Review, staff will work with the Applicant and local jurisdiction responsible for completing the California Environmental Quality Act (CEQA) to commence the NEPA process. The Applicant shall furnish any and all required documentation, reports and studies necessary to complete the Environmental Assessment.

mailto:OCHCD.NOFA@occr.ocgov.com

Underwriting: After completion of the Threshold Requirement Review with no objection by the PRAP, HCD staff will underwrite the project and prepare a final funding recommendation to the PRAP.

Underwriting will be based on the information provided by the applicant and/or the results of the developer/applicant interview. Staff recommendations regarding the funding and/or voucher request will be presented to PRAP for final consideration, before being presented to the Director.

Board Approval: Following a positive recommendation from the Director, taking into consideration the staff recommendations with no objection from PRAP, the Director will bring forward the project to the Board for consideration.

Financial Commitment Letter: If approved by the Board, HCD staff will issue a conditional commitment letter describing the approved project and committing to reserve funds for the approved project for a determinate amount of time not to exceed twenty-four (24) months (“Financial Commitment Letter”). If an applicant does not secure all project funding within the 24 months, HCD reserves the right to extend or withdraw the County funding commitment if the project is not proceeding satisfactorily toward the proposed activity, as indicated in the submitted Project Timeline found in Exhibit

4.01. The Financial Commitment Letter will outline the terms of the loan and conditions precedent to closing. Conditions include the project receiving the other financial commitments from all other identified private, city, state or federal funds, as described in the project application and meeting the program guidelines, as set forth in this NOFA.

Borrowers will be required to execute a loan agreement, promissory note, deed of trust, regulatory agreement, assignment of leases and other related loan documents, substantially compliant with the HCD approved form loan documents at construction loan closing. Please refer to Attachment N for the HCD form loan documents, which are subject to change based on project specifics and funding source(s).

Disbursement of loan funds will be made in accordance with County loan documents at acquisition/construction loan closing and/or permanent loan conversion, as applicable, based on previously negotiated deal terms and as approved by the Board. All expenses incurred prior to an HCD Environmental Clearance will not be eligible for reimbursement.

1.02 DISCLOSURES

The applicant shall notify HCD within thirty (30) days of substantial changes to the development including but not limited to:

• Changes in the funding sources or amounts that reflect a different financial scenario than represented in the NOFA Application

• Requirements imposed by other financing sources that conflict with this NOFA (i.e. marketing requirements, local preferences and tenant selection procedures or criteria imposed by the financing source)

• Changes to the Ownership/Partnership structure

• Changes in the Development Team including the Property Management Company and/or the General

Contractor

• Disclosure of an actual or potential bankruptcy, default or foreclosure

• Misrepresentation of the proposed project

Material changes made to the project’s configuration, financial structure or future operation that are subsequent to the submittal of the application and approval by the Board must receive written approval from either the Director, or designee if authorized or by the Board, depending on the nature of the change. Failure to disclose any of the aforementioned events after the loan commitment is made may result in the withdrawal of HCD financial commitment to the project.

Acceptance of a proposal does not constitute a contract and does not obligate HCD to award funds. By the act of submitting a proposal, applicants acknowledge and agree to the terms and conditions of this NOFA and to the accuracy of the information submitted. All proposals become the property of HCD. HCD reserves the right to withdraw this NOFA without prior notice. Applications may be required to be disclosed under the Public Records Act in accordance with the applicable terms of the Public Records Act.

In the event that the County is unable to provide the Loan or PBVs due to any change in federal or state law or regulations, the Applicant and the County agree and acknowledge that the County’s commitment shall be terminated, and the County shall have no obligation to provide the Loan or the PBVs and shall be released by Applicant from all further liability pertaining thereto.

1.03 APPEAL PROCESS

The applicant may appeal funding recommendations by writing to Director, OC Housing and Community Development, 1501 E. St. Andrew Place, First Floor, Santa Ana, CA 92705.

If the recommendation to deny funds is upheld by the Director, the applicant may make an appeal, in writing, to the Housing and Community Development Commission (HCD Commission) at the same address to appeal directly to the HCD Commission.

The recommendations made by the Director and the HCD Commission will be based upon the applicant’s original submission and the results of the applicant/developer interview. Appeals will be limited to addressing the proposal as originally submitted. Applicants may not use the appeal process to introduce new information and/or make changes to the proposal.

1.04 TERMS AND CONDITIONS

The County reserves the right to retain all submitted applications and the applications shall become the property of the County. Applications are subject to disclosure under the Public Records Act. Any Department or Agency of the County shall have the right to use any or all ideas presented in applications submitted in response to this NOFA without any change or limitation. Selection or rejection of an application does not alter these rights.

The County reserves the right to communicate with lenders, providers, cities, grantors and other participants associated with the application to obtain additional clarification on design of program, or organization fiscal and programmatic capacities, and to utilize this information in the evaluation process.

The County reserves the right to conduct site visits of an applicant’s proposed project site.

The County reserves the right to reject any or all applications received in answer to this NOFA and/or County underwriting guidelines if it is deemed inappropriate or incomplete or is not in the best interest of the County.

The County reserves the right to withdraw this NOFA at any time without prior notice. Further, the County makes no representation that any funding will be awarded to any applicant responding to this

NOFA.

An applicant may not be recommended for funding, regardless of the merits of the application submitted, if it has a history of (a) contract non-compliance with the County, (b) a termination for cause by any other funding source, (c) or disallowed costs with the County or any other funding source.

The County reserves the right to verify information submitted in the application.

SECTION II - PROGRAM DESCRIPTION

2.01 FUNDS AVAILABLE

Up to $20.9 million in HOME, HOME-ARP, MHSA/BHSA, 15G Reserves and HSA funds will be issued as loans for the acquisition, new construction, and acquisition/rehabilitation of Permanent Supportive Housing, as defined in Attachment C of this NOFA, affordable for Orange County’s extremely low-income households who are experiencing homelessness by providing below market rate financing under this 2026 NOFA. Funds are available on a first-come, first-served basis, based on the preference and underwriting criteria set forth in this NOFA, until the NOFA is replaced by a new NOFA, or until funds are committed, whichever occurs first. HCD reserves the right to determine first-come, first-served based on meeting all conditions of the NOFA, in the case of simultaneous receipt of applications. HCD reserves the right to increase or decrease the amount in this NOFA subsequent to Board approval.

MENTAL HEALTH SERVICES ACT (MHSA)/BEHAVIORAL HEALTH SERVICES ACT (BHSA) FUNDS

MHSA/BHSA funds are provided to assist in the development of housing for residents experiencing homelessness who have a documented serious mental disorder. This program is intended to provide services that combine prevention services with a full range of integrated services to treat the whole person, with the goal of self-sufficiency through affordable, quality housing. With these goals in mind, in addition to the other terms and conditions set forth within this NOFA, the requirements for MHSA/BHSA funded units are set forth in Attachment D.

CAPITALIZED OPERATING SUBSIDY RESERVE (COSR) PROGRAM

The County may implement a COSR Program utilizing MHSA/BHSA funds, as set forth in Attachment D, if no project-based rental assistance vouchers or other rental subsidies are available through the County and/or participating city, to address operational deficits attributable to restricted MHSA/BHSA supportive housing units. COSR funding, if approved, will be part of the total financial assistance awarded by the County and subject to any determination of maximum eligible gap financing to be made available by the County to a proposed supportive housing development. The County will consider COSR funding only for MHSA/BHSA units within a development, and will provide the funding as a zero interest, forgivable loan over a maximum of twenty (20) years.

2.02 PROGRAM DESCRIPTION

This section provides a description of the underwriting policies and lending practices of HCD, as approved by the Board for the NOFA. All the policies and processes outlined in this section are applicable to acquisition/construction and permanent loans.

Acquisition/Construction Loan: HCD will generally make capital funds for acquisition/construction loans available for disbursement on a draw-down or reimbursement basis, upon satisfaction of conditions placed on the loan and in the HCD Financial Commitment letter, closing of the loan and commencement of construction. Disbursement of funds for payment of hard costs during construction will be on a drawdown basis. Disbursement of funds for payment of soft costs during construction will be on a reimbursement basis and requires evidence of prior payment of each soft cost before payment is released. Processing time may take up to 6 weeks for disbursement of funds for reoccurring draws.

Developers shall factor in the processing time when considering requesting funds for construction loans.

For HOME funds requested at construction or permanent loan closing, the Developer shall submit the draw request at least 15 business days in advance of the estimated closing date.

Permanent Loan: For “take-out” financing, HCD will make funds available to the development after construction has been completed, a Certificate of Occupancy has been issued by the governing jurisdiction and other conditions placed on the loan have been satisfied as set forth herein, and in the HCD Financial Commitment letter. Funds will be available at the conversion to permanent financing of construction loans.

2.03 ELIGIBLE APPLICANTS

Proposals will be accepted from non-profit and for-profit organizations, joint ventures, or partnerships that serve the identified purpose of this NOFA.

2.04 ELIGIBLE ACTIVITIES FOR CONSTRUCTION AND/OR PERMANENT FINANCING

Funds shall be used to support development of supportive rental housing through new construction, acquisition/rehabilitation, including small-scale housing that meets NOFA criteria and the guiding principles in the Commission to Address Homelessness Small-Scale Housing Unit Report received and filed by the Board of Supervisors on January 28, 2025, and conversion of commercial and light industrial to residential use on a case-by-case basis.

2.05 ELIGIBLE PROJECTS

Projects must include a minimum of five (5) units which are assisted under this NOFA and will provide permanent housing restricted to extremely low-income households who are experiencing homelessness.

Proposals must include a plan for provision of supportive services appropriate to the needs of the designated population.

In light of the funding limitations of the Emergency Housing Voucher (EHV) program and changes to the Continuum of Care (CoC) funded permanent supportive housing program, households participating in any special-purpose voucher or CoC funded permanent supportive housing program – who are at risk of homelessness and/or at risk of losing rental assistance because of funding limitations, program changes, or shifts in eligibility requirements may be considered as eligible target populations, consistent with the Coordinated Entry System prioritization policy.

Projects including MHSA/BHSA units in their proposals are required to provide additional evidence of supportive services from the Orange County Health Care Agency (HCA). Additional MHSA/BHSA requirements are found in Attachment D.

2.06 ELIGIBLE COSTS

Under this NOFA, funds may be used for the following: “hard” costs of construction or rehabilitation of housing, “soft” costs associated with acquisition, financing, and/or rehabilitation. “Soft” costs include marketing costs (not to exceed $1,500 per unit), appraisals, architectural and engineering fees, other lender required third-party reports (market study, capital needs assessment), individual apartment furnishings, certain common area furnishings (not to exceed $1,000 per unit), building permit fees, credit reports, developer fees, environmental assessments, impact fees, legal and accounting costs, private lender origination fees, recording fees, surety fees, and title insurance, cost of property insurance during development, relocation costs and costs relating to payment of loans (construction principal and interest), if it is consistent with the eligible costs specified in this section. An overall cost limitation of fourteen percent (14%) of the cost of construction shall apply to builder overhead, profit, and general requirements, excluding builder’s general liability insurance. For purposes of builder overhead and profit, the cost of construction includes site work, structures, prevailing wages, and general requirements. For purposes of general requirements, the cost of construction includes offsite improvements, demolition and site work structures and prevailing wages. Certain eligible costs shall be limited to those incurred and paid not more than twenty-four (24) months before the date of a written legally binding agreement for HOME funds, consistent with 24 CFR 92.206.

Applicants/developers are encouraged to provide units that are pre-wired for high technology and Internet access, have ENERGY STAR® rated appliances and use renewable building supplies. For newly constructed or substantially rehabilitated buildings with more than four (4) rental units selected or rehabilitated while under a Housing Assistance Payment (HAP) contract after January 19, 2017, broadband infrastructure will be installed, or an exception must be documented and approved by the County (24 C.F.R. § 983.157).

A minimum capitalized operating reserve shall equal the amount required to pay three (3) months of operating expenses and three (3) months of mandatory debt service under stabilized occupancy.

Capitalized replacement reserves for rehabilitation projects shall be based on a capital needs assessment. Minimum annual deposits to replacement reserves shall equal $250 per unit per annum for new construction and $300 per unit per annum for rehabilitation. Annual deposits to replacement reserves shall not exceed $400 per unit per annum or $500 per unit per annum for MHSA/BHSA restricted units. Exceptions may be considered where required for continued feasibility of projects with short-term rent subsidy commitments, or when required by other funding agencies.

Any reserves (e.g. security reserve, furnishing reserves) beyond the County’s operating reserve, replacement reserve, and/or transition reserve requirements shall be reviewed and approved by the County.

Project expenses may include developer fee. See Section 2.11 for more details. NOFA funds may not be used for certain development costs and activities, including acquisition of property owned by the participating jurisdiction, except for property acquired in anticipation of carrying out a project;

emergency housing; additional funding to a HOME-assisted project more than one (1) year after the project's completion; emergency repairs; the commercial side of a mixed-use project; and, refinancing of existing debt.

Eligible costs under MHSA/BHSA funding are included in Attachment D.

2.07 RESIDENCY PREFERENCES

Persons and households that live and/or work in Orange County will be given a preference for occupancy in County assisted units funded under this NOFA. For certain developments, including but not limited to those receiving PBVs from the Cities of Anaheim, Garden Grove or Santa Ana, or are subject to special zoning ordinances requiring preference for City residents, further documentation from the applicant will be required demonstrating that residents throughout the County will have equal opportunity at obtaining units in the development.

Where consistent with the California Fair Employment Housing Act and California Senate Bill (SB) 649 (Local governments: affordable housing: local tenant preference) and also where the proposed affordable housing development is funded by the state’s LIHTC and tax-exempt bond program and County HOME funds, the County will allow local resident occupancy preferences in Urban County Participating Cities. Applicant must submit a letter of compliance from the legal counsel of the local government agency where the development will be located that certifies it has adopted a local tenant preference policy consistent with the requirements of SB 649 and has done so subject to the duty of public agencies to affirmatively further fair housing. The local government compliance letter must confirm that the local government has also created a webpage on its current website containing the ordinance and its supporting materials. Local resident preferences, certified as consistent with state regulations by the local government agency’s legal counsel, will be prioritized through the CES.

Housing vouchers provided by public housing authorities that are not funded through the Continuum of Care (CoC), such as PBVs, shall be prioritized by CES in compliance with the administrative plan for the Public Housing Authority (PHA) providing the housing voucher. No local residency occupancy preference will be permitted unless it is specified in the PHA’s administrative plan and certified as consistent with state regulations by the local government agency’s legal counsel. Prioritization and case conferencing will be used to refer individuals and families who are the most appropriate referral to the available resources.

2.08 REGIONAL HOUSING NEEDS ALLOCATION (RHNA) TRANSFERS

The following Regional Housing Needs Allocation (RHNA) transfer or credit policies are applicable to developments applying for capital funding, COSR and/or PBVs (including VASH). RHNA allocation transfers are subject to Government Code Section 65584.07.

• Require RHNA transfers or credits for developments funded with County local revenue and regional revenue, such as General Funds, Housing Successor Agency funds, 15G Reserves funds, Mental Health Services Act/Behavioral Health Services Act funds (capital and COSR), federal Urban County funds, including Federal HOME Investment Partnership Programs (HOME), and PBVs.

The County will require acceptance of the transfer of RHNA share from the County’s allocation to the City’s allocation or credits toward the County’s existing RHNA obligation if the development occurs during the Planning Period (following adoption of a Housing Element), based on total number of County assisted units. The number of RHNA transfer or credit will be calculated on a pro-rata basis of County funds to City funds invested in the total number of County assisted units.

For this calculation, the County’s capital and valuation of the PBVs will be included. The Applicant is responsible for conveying to and obtaining proof of the acquiescence of this policy via approval by the governing board of the jurisdiction in which the project will be located at the time it approves the development.

2.08.01 Urban County Participating Cities

The following is a list of Urban County Participating Cities: Brea, Cypress, Dana Point, Laguna Beach, Laguna Hills, Laguna Woods, La Palma, Los Alamitos, Placentia (Metro City), San Juan Capistrano, Seal Beach, Stanton, Villa Park and Yorba Linda (Metro City).

HCD will accept applications for projects on a first-come first- served basis. HCD reserves the right to suspend acceptance of proposals at any time. Projects located in the unincorporated areas may be eligible for “by-right” development as an eligible site under the Orange County Affordable Housing Opportunity Manual. Refer to Attachment J of this NOFA for information on the Orange County Affordable Housing Opportunity Manual and a list of eligible sites.

2.08.02 Entitlement Cities

The following is a list of Entitlement Cities: Aliso Viejo, Anaheim, Buena Park, Costa Mesa, Fountain Valley, Fullerton, Garden Grove, Huntington Beach, Irvine, La Habra, Laguna Niguel, Lake Forest, Mission Viejo, Newport Beach, Orange, Rancho Santa Margarita, San Clemente, Santa Ana, Tustin, and Westminster.

2.09 OCCUPANCY LIMITS

Developments must meet the County’s occupancy limits outlined below and be consistent with OCHA’s Administrative Plan, if requesting PBVs. Applicants shall be required to utilize the assumed household size for the purposes of calculating affordable rents for County restricted units.

2.10 AFFORDABILITY REQUIREMENTS

All units assisted with HCD funding through this NOFA will be required to be restricted to households whose income does not exceed thirty percent (30%) of Area Median Income (AMI), as adjusted for household size with rents that are affordable to such households. Affordability levels will be enforced through a Regulatory Agreement between the borrower and the County that will be recorded against the fee interest of the property and will run with the land. Restricted units must remain affordable for the remaining life of the project, which is presumed to be a minimum of fifty-five (55) years from the Qualified Project Period, the period beginning upon the Conversion Date. Owners are required to examine tenant incomes annually to ensure that tenants meet the income and occupancy requirements.

Where consistent with the California Assembly Bill (AB) 1386 (Veterans housing: tenant referrals) and/or State HCD’s Homekey/Homekey+ Program and where the proposed affordable housing development is funded with VASH, the County will allow units to be filled with Secondary Tenants, as defined in California Military and Veterans Code section 987.003, up to 60% AMI, pursuant to California Military and Veterans Code section 987.000.

2.11 DEVELOPER FEES

Developer fees shall be allowed for LIHTC projects as defined by California Tax Credit Allocation Committee (TCAC) adopted regulations. Allowable developer fees for projects not utilizing LIHTCs shall be determined on a case-by-case basis. Projects utilizing PBVs are also subject to a subsidy layering review pursuant to the U.S. Department of Housing and Urban Development (HUD) Administrative Guidelines for Subsidy Layering Review for Project-Based Vouchers, which utilizes a maximum safe harbor of twelve percent (12%) depending on the project type and of the total development cost of the project.

Unit Size Maximum Household Size for Occupancy

Assumed Household Size for Rent Calculations

SRO 1 1

Studio 2 1

1-BR 4 1

2-BR 6 2

3-BR 8 4

4-BR 10 6

5-BR 12 8

2.12 AFFORDABILITY COVENANT

Restricted units must remain affordable for the remaining life of the project, which is presumed to be a minimum of fifty-five (55) years from the Qualified Project Period. A restrictive covenant will be recorded against the property to ensure affordability during the term of the agreement. Except as approved by HCD, all projects shall be required to agree to maintain the project’s affordability for the term of the restrictive covenant, regardless of whether the loan is fully repaid.

The annual reporting requirements will be outlined in the Regulatory Agreement and Declaration of Restrictive Covenants. Projects receiving funds from the County shall report quarterly and/or annually certifying that they are in compliance with the occupancy and affordability requirements of the Regulatory Agreement.

Program Compliance shall utilize a two-step monitoring process that provides for monitoring of all affordable housing developments financed with funds from the County. Monitoring of each development will occur in two phases: Phase 1: In-house review of quarterly and/or annual reports and Phase 2: On-site monitoring visit, which shall include monitoring of tenant files in accordance with the affordability and income restrictions of the restrictive covenant and a Housing Quality Standards (HQS) inspection as well as review of the Affirmative Fair Housing Marketing Plan and Tenant Selection Plan/Resident Selection Criteria.

2.13 SELECTION OF FUNDING SOURCE

The applicant may request that a specific type of funds be used for their project; however, HCD will make the final determination of the type of funds awarded. When determining the type of funds, the following will be considered: (1) the availability of funds, (2) program regulations, (3) the location of the project and (4) the compatibility of the funds with other funding sources.

2.14 LOAN TERMS & CONDITIONS

2.14.01 Acquisition/Construction Loan: Loan funds will be made available for disbursement on a draw-down or reimbursement basis, upon satisfaction of conditions placed on the loan and in the HCD Financial Commitment letter, closing of the loan and commencement of construction. See Attachment N 1-12 for sample loan documents.

2.14.02 Permanent Loan: Loan documents will get dry recorded at acquisition/construction loan closing. Funds will be made available at completion of construction, issuance of a Certificate of Occupancy, and conversion to permanent financing. See Attachment N 1- 9 for sample loan documents.

2.14.03 Interest Rate: Loans will bear an interest rate of three percent (3%) simple interest. Interest will be calculated based on a 360-day year and the actual number of days elapsed. HCD reserves the right to renegotiate this rate for the benefit of the County and the project.

2.14.04 Term: Loans will be for a term of fifty-five (55) years, except as otherwise approved by HCD.

2.14.05 Loan Repayment: The County loan will be typically structured as a residual receipts loan, except as otherwise approved by HCD.

2.14.06 Amortized Loans: HCD reserves the right to require a fully amortizing loan with monthly or annual payments or to defer loan payments, where doing so would provide a benefit to the County and/or the project.

For units assisted under this NOFA that receive PBVs through the OCHA, HCD reserves the right to require all or a portion of the increase in Net Operating Income (NOI) which is generated by these PBVs be utilized to fund the cost of providing social services to these residents.

2.14.07 Residual Receipts Loans: The following is the definition of a residual receipts loan, which will be used by the County to underwrite projects:

The loan for the project will be repaid from the NOI, if any, from the project as calculated ninety

(90) days after the close of each fiscal year. NOI shall mean all of the rental revenue from the residential portion of the project (the “Annual Project Revenue”) less (i) operating expenses of the project as approved by the County (the “Annual Operating Expenses”) in an annual audit submitted by the applicant/developer and approved by the County; (ii) obligated debt service payments on the Project as approved by the County; (iii) scheduled deposits to reserves, as approved by the County; (iv) deferred developer fees, as approved by the County; and (v) partnership management or asset management fees as approved by the County.

Annual Project Revenue shall not include tenant security deposits, capital contributions, insurance or condemnation proceeds, income received for the purpose of completing the project, or funding received for the purpose of social services to the residents.

(i) Exclusions to NOI: It is the policy of the County that the following costs, fees, charges, penalties, judgments and the like shall not be deducted from the Annual Project Revenue by the applicant/developer thereby reducing the amount of NOI available to pay the County’s loan, including those arising out of: (i) a breach or default of the County’s loan or any other mortgage loan on the project, (ii) the fraud, negligence or willful misconduct of applicant/developer, (iii) the failure to make timely payments under any loan secured by the project, (iv) the breach or default by applicant/developer under any other contract, lease or agreement pertaining to the project; and (v) any other cost, expense, fee or the like which is not first approved by the County. The approved Operating Expenses of the project shall also not include other expenses such as intra-partnership or other internal loans of the operating entity, depreciation, amortization, accrued principal and interest expense on the deferred payment debt and capital improvement expenditures unless approved by the County. Customary investor capital contributions, and approved repayment of documented operating deficit advances permitted under the Partnership Agreement, shall not be deemed “internal loans” for purposes of this section.

(ii) Repayment of Residual Receipts Loans: An amount equal to fifty percent (50%) of the net cash flow, if any, will be paid to the County and other public agencies (if any) providing residual receipts loans, and fifty percent (50%) to the developer. The fifty percent (50%) of cash flow payable to public agencies shall be shared by agencies in an amount proportional to the loan provided by such agencies. The fifty percent (50%) of cash flow payable to the developer shall cover any intra-partnership or other internal loans of the operating entity, including the GP loan.

2.14.08 Security: The loan shall be evidenced by a promissory note and secured by a deed of trust.

2.14.09 Subordination:

Affordability Covenants Unit affordability levels will be enforced through a Regulatory Agreement and Declaration of Restrictive Covenants (the “Regulatory Agreement”) between the borrower and the County that will generally be recorded against the property in first lien position recording order and will run with the land, except where a municipal financing authority issuing bond debt and the State of California Department of Housing and Community Development (State HCD), require their Regulatory Agreement be in senior position.

Security Instruments Lien priority will be based on amount of financial assistance provided by the County. The calculation of the financial assistance provided by the County will include the County-contributed capital, COSR and the initial 20-year value of long-term rental subsidies OCHA is contributing toward the development. Recording order must be negotiated and finalized by the applicant and other non-County funders of the development prior to Board approval to commit funding to the development. Exceptions to include the value of long-term rental subsidies in the financial assistance calculation apply to State HCD funds, consistent with the State’s Uniform Multifamily Regulations (UMR).

Financial Assistance from Cities The Security Instruments and Affordability Covenants for financial contributions from cities must be subordinated to the County’s security instruments and the Regulatory Agreement. Exceptions may be made where the amount of a city’s financial contribution exceeds the amount of financial assistance provided by the County. When calculating both the County-contributed capital and value of long-term rental subsidies OCHA is contributing toward the development.

When applicable, the County will evaluate the value of land donations and fee waivers as part of the City financial assistance to the development. Where the city is a lender and has land use authority, the County may consider allowing their land use restrictive covenant and/or affordable housing agreement to be recorded against the property so long as the use and affordability restrictions are not in conflict with the Regulatory Agreement.

The applicant’s financial assumptions must include the County policy regarding its Affordability Requirements and Subordination Policy and must include and disclose this assumption and this policy to other potential funders when seeking additional financing for their development. The County strongly encourages the applicant to notify the County on any issues it encounters with this requirement and policy as soon as possible. Failure to adhere to this policy may result in loss of funding.

Subordination to Construction and Permanent Senior Financing The County may, at its sole discretion, agree to subordinate its financing to the construction and/or permanent deed of trust if the senior loan is increased after the County’s initial funding commitment, provided that the revised financing terms are reviewed and approved by the County and will not adversely affect the project’s financial feasibility or the County’s affordability requirements and security position. An appraisal at construction loan closing or at permanent closing (if required by another lender due to a higher permanent loan) may be used to determine if the additional increase in senior loan will affect the project’s financial feasibility.

Specifically, the County shall not enter into a subordination agreement unless the following conditions are met:

a. The County retains the right to exercise its remedies under the Regulatory Agreement;

b. The proposed subordination to the senior loan will not adversely affect the project’s financial feasibility and complies with Section 4.04 of this NOFA. Subordination requests must meet County’s underwriting policies. Concurrent with the request to subordinate, the request must include the proposed loan terms, sources and uses, and an updated proforma for County review;

c. The affordability requirements are consistent under Section 2.12 of this NOFA; and

d. The County’s security position is consistent with the provisions titled Security Instrument and Financial Assistance from Cities in this NOFA.

2.14.10 Rent Increases: Increases in rent may be allowed annually as determined by increases in the HUD AMI.

2.14.11 Monitoring Fees: Unless prohibited by federal, state or local law, borrowers shall pay a monitoring fee. Monitoring fees will be incorporated into the operating proforma.

Monitoring fees shall include a total initial set-up of $500 to be included in the Total Development Cost Budget, plus a flat annual fee of $3,795 and a per unit fee of $22 to be included in the Annual Operating Budget. HCD will make the final determination if regulations governing the funding source permit monitoring fees. Annual monitoring fees will be applied during the Qualified Project Period under the Regulatory Agreement.

2.14.12 Furnishing: All units assisted under this NOFA should be furnished with standard furnishings applicable to the unit type, such as bed, living area furniture, table and chairs for eating area.

2.15 MAXIMUM LOAN AMOUNTS/SUBSIDY LIMITS:

The maximum loan/subsidy amounts shall be calculated on the basis of the number of units assisted by the County and shall vary by unit size and location of the proposed development.