Adopted Guidelines
- LPR Guidelines (Adopted 6/9/2026)
- Amended LPR Guidelines — Final Redline (Adopted vs. 2019 Guidelines)
- Final Statement of Reasons
- Summary of Comments Received and Department Responses
- Initial Statement of Reasons
- Notice of Proposed Action / Notice of Modification to Text of Proposed Action
The amendments were adopted following a public comment period. HCD considered all comments received and made modifications to the proposed guidelines, as detailed in the Final Statement of Reasons.
Extracted Equity Provisions (Section 109)
The Amended LPR Guidelines implement AB 130 (Health and Safety Code Section 50406.4) by establishing the framework for Extracted Equity transactions. Extracted Equity means adding new debt to a Department-regulated Project, through a Restructuring, beyond what is needed for rehabilitation, debt payoff, reserves, and other Department-approved project-level uses. The project from which Extracted Equity is derived is the Donor Project; the project receiving Extracted Equity is the Donee Project.
Permissible uses of Extracted Equity (Section 109(a)(1)–(6)) include:
- Rehabilitation of, and reserves for, the Donee Project, including capitalized operating and replacement reserves
- Limited partner buyout and exit taxes on a tax credit Donor Project, with a July 1, 2025 lookback
- Reimbursement of documented Sponsor or related-party advances for predevelopment costs, capital improvements, or operating deficits (60-month lookback for Notices of Acceptance issued on or before December 31, 2028; 36 months thereafter)
- Repayment of qualifying deferred developer fees on the Donor Project
- Sponsor organizational activities, capped at 10% of the qualifying uses under (1) through (4), limited to verifiable and reasonably necessary costs including payroll and staff training, and excluding discretionary bonuses
- Other uses as approved by the Department. These uses require full repayment of the Original Program loan(s) with all accrued interest, and are subject to a housing reinvestment fee.
For “other uses” approved under Section 109(a)(6), a housing reinvestment fee equal to 50% of the Extracted Equity for that use is payable to the Department (with the remaining 50% retained by the Sponsor). Fees collected are reinvested by the Department in other State affordable housing projects.
SB 21 / SRO Conversions (Section 108)
For projects rehabilitating or replacing single-room occupancy (SRO) units, rents must comply with Government Code Section 66300.6.5 and Health and Safety Code Section 50406.6, in addition to the standard rent restrictions in Section 108. Key requirements include:
- SRO Exception: Up to a 25% reduction in units is allowed when modernizing SRO buildings into larger units with private bathrooms and kitchens, subject to a tenant right of return and a 55-year affordability covenant.
- Offsite Replacement Allowed: Any unit loss beyond 25% must be replaced one-for-one at another site within the same jurisdiction — built by the Sponsor or a designated partner — at the same affordability level.
- Tenant Protections: Displaced tenants receive a first right of refusal, and the initial rent increase may not exceed 5% regardless of the household’s AMI level.