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EXHIBIT 1 <br />(2) acquisition and conversion of non-residential property to multifamily rental housing <br />units; and <br />(3) new construction of housing units for rental or transitional housing. <br />Affordability Requirements <br />As required by State law, all projects shall be targeted to households earning 80% or less of the <br />area median income, based on the State of California Housing and Community Development <br />income and rent limits. State law also requires that at least thirty percent (30%) shall be <br />expended for rental housing affordable to and occupied by "low-income" households does not <br />exceed thirty percent (30%) of the area median income and no more than twenty percent (20%) <br />affordable to and occupied by households between 60% of the area median income and 80% of <br />the area median income. <br />Units are considered affordable when the rent, less a deduction for a utility allowance, for a <br />"very low-income" household does not exceed thirty percent (30%) of 50% of the area median <br />income; for a "low-income" household does not exceed thirty percent (30%) of 60% of the area <br />median income. <br />Very low-income households are households whose incomes do not exceed 50% of the area <br />median income. Low-income households are households whose income does not exceed 80% of <br />the area median income. The area median income as referenced above is the Orange County <br />area median income figure, adjusted for household size, as published by the California <br />Department of Housing and Community Development (HCD) from time to time. <br />Security <br />The loan or grant shall be secured by a Deed of Trust and Promissory Note which may be <br />subordinated to deeds of trust securing other Federal, State, or City loans, or loans from <br />conventional financing institutions used in conjunction with the Low and Moderate Income <br />Housing Asset Fund loan on the same property. The City must obtain written commitments to <br />protect the City's investment in the event of a default. The City must approve all requests for <br />subordination. <br />The loan or grant shall be further secured by recorded Affordability Covenants and Restrictions, <br />running with the land, to assure that Program funds are used to provide long-term affordable <br />rental housing opportunities for low- and moderate -income households. The Borrower and the <br />City shall execute and record Affordability Covenants and Restrictions regulating project rents, <br />tenant selection procedures, use of project income, management and maintenance, transfer of <br />property, and permitted forms of ownership and use, including a prohibition on conversion of the <br />project to condominium or stock cooperative ownership for the term of the recorded <br />Affordability Covenants and Restrictions. The recorded Affordability Covenants and <br />Restrictions shall provide for the longest feasible time. Notwithstanding the above, the <br />Affordability Covenants and Restrictions would in no event, be shorter than any other term of a <br />Regulatory Agreement or Covenant recorded concurrently with the City's Covenants and <br />Restrictions. The Affordability Covenants and Restrictions shall be recorded with the Deed of <br />Trust. <br />Affordable Housing Funds Policies and Procedures <br />Page 24 <br />