Health & Saf. Code, § 50702

(a) To the extent that funds are available for this purpose, the department shall determine a base grant amount to be provided under this chapter to any city, county, or city and county that meets all of the following criteria:

(1) On or before the end of the period covered by the Notice of Funding Availability required under subdivision (b), the jurisdiction has adopted a housing element that the department, pursuant to Section 65585 of the Government Code, has found to be in substantial compliance with the requirements of Article 10.6 (commencing with Section 65580) of Chapter 3 of Division 1 of Title 7 of the Government Code, and the jurisdiction submitted to the department the annual progress report required under Section 65400 of the Government Code for the preceding 12-month calendar year.

(2) The jurisdiction can document either of the following:

(A) The issuance of building permits for new housing units that are affordable to very low or low-income households within the designated time period and that meet either of the following criteria:

(i) In the case of rental units, the development is subject to a regulatory agreement recorded against the property that obligates the owner to maintain rents on the restricted units at levels affordable to very low or low-income households for at least 55 years.

(ii) In the case of ownership housing, units in the development are initially sold to households of very low or low income at an affordable housing cost. If public funds are used to achieve an affordable housing cost, then upon the sale of an assisted unit to a very low or low-income household, the public entity shall ensure the repayment of the public funds and reuse of those funds for affordable housing for a period of at least 20 years. The proposed mechanism for restrictions of ownership units shall be consistent with criteria established by the department and specified in the Notice of Funding Availability.

(B) The issuance of a certificate of occupancy or other evidence of readiness for occupancy within the designated time period for units that meet the requirements of paragraph (2) of subdivision (c) of Section 65583.1 of the Government Code, except that the city, county, or city and county may have committed assistance at any time during the projection period.

(b) For each year that funds are available, the department shall issue a Notice of Funding Availability for building permits issued during the designated time period. The department shall accept applications at the close of the designated period. Grant amounts shall be based on a per-bedroom incentive for each unit restricted for very low and low-income households. For the purposes of this section, single-room occupancies and studio apartments shall be considered one-bedroom units.

(c) If eligibility for funds exceeds the amount of funding available for the program, the department shall reduce all grants proportionally.