The California Department of Housing and Community Development (HCD) released its Transition Reserve Policy Administrative Memo, which implements statutory changes.
The policy applies to all HCD-awarded rental housing projects, which have federally originated rental assistance or operating subsidies, or rental subsidies operated by the City and County of San Francisco and the City of Los Angeles, which will close permanent financing on or after Jan. 1, 2023. The pooled transition reserve fund received $5 million from the state legislature and will be further funded a closing fee sized to 15 percent of either the first year’s maximum subsidy amount or total subsidy.
HCD expects that, “by eliminating project-funded transition reserves, these funds will be available to further the state’s goal of increasing the availability of multifamily housing for low- and extremely low-income residents. It will also eliminate the requirement to hold these reserves, which are rarely drawn upon, for the term of the HCD loan, which sidelines millions of dollars for several decades.”
