(a) The Legislature finds and declares that the need for decent housing among individuals of very low and low income is great, and that residential hotels are often the only form of housing affordable to these individuals. Many residential hotels are in poor condition and in need of rehabilitation, and many are being demolished or converted to other uses. The state can play an important role in preserving the existence and improving the quality of this housing resource through sponsoring demonstration projects that will enable local sponsors to acquire, rehabilitate, maintain, or otherwise protect and improve residential hotels as a housing resource for persons of very low and low income. The demonstration projects should be undertaken and designed so as to demonstrate the feasibility of innovative methods of protecting and improving residential hotels and of improving their habitability while assuring their continued availability to persons of very low and low income.

(b) The following definitions govern the construction of this section:

(1) “Residential hotel” means any building containing six or more guestrooms or efficiency units, as defined by Section 17958.1, intended or designed to be used, or which are used, rented, or hired out, to be occupied, or which are occupied, for sleeping purposes by guests, which is also the primary residence of those guests, but does not mean any building containing six or more guestrooms or efficiency units, as defined by Section 17958.1, which is primarily used by transient guests who do not occupy that building as their primary residence.

(2) “Sponsor” means a local government or nonprofit housing sponsor.

(3) “Persons of low income” shall have the same meaning as persons of low income as defined in Section 50093 of the Health and Safety Code.

(c) The department, in conjunction with the State Fire Marshal, shall develop a model code for the rehabilitation of residential hotels. The department shall adopt the code on or before January 1, 1981. The code need not be adopted by any city, county, or city and county. However, those entities may adopt all or part of the code as an alternative to the requirements of the State Housing Law, Part 1.5 (commencing with Section 17910) of Division 13, as that law applies to residential hotels.

The purpose of the standards shall be to protect the health, safety, and welfare of the occupants of those residential hotels, to allow the economically feasible rehabilitation of those residential hotels, and to assure to the extent possible the preservation of those residential hotels as housing for very low and low-income persons.

(d) The agency shall develop a program of financing and loan insurance for the purpose of assisting the rehabilitation and acquisition of residential hotels serving the housing needs of very low and low-income persons by appropriate sponsors, and shall implement that program on or before January 1, 1981.

In the event that the agency is unable to implement that program, it shall report to the Legislature on or before July 1, 1981, the reasons for its inability to implement that program, and recommend methods by which the agency could implement that program.

(e) The department shall contract, subject to the availability of federal funds, with selected sponsors to acquire, rehabilitate, maintain, or otherwise protect and improve residential hotels as housing for persons of low income. The contracts may provide for grants or loans at an interest rate which the department determines will facilitate the present and future use of residential hotels as housing for persons of very low and low income. Subject to the availability of funds, the department shall contract for the preservation and improvement of at least one residential hotel in a rural area. Subject to restrictions on funds received, the department shall give first priority to residential hotels financed or acquired with assistance from the agency pursuant to subdivision (d).

(f) In connection with contracts let pursuant to subdivision (e), the department shall fix, and may alter from time to time, a schedule of rents as may be necessary to assure affordable rents for persons of low income in residential hotels assisted by funds made available under subdivision (e), and to the extent consistent with the maintenance of the financial integrity of the sponsor of the project and with the requirements for repayment of any funds loaned as established by the department. No local government or nonprofit housing sponsor receiving funds through the provisions of subdivision (e) shall alter rents without the prior permission of the department, which permission shall be given only if the sponsor demonstrates that the alteration is necessary to defray necessary operating costs and to avoid jeopardizing the fiscal integrity of the sponsor or to maintain affordable rents to the residents in the project. If the department does not act upon a request for a rent increase within 60 days, the increase shall be deemed approved. In connection with contracts authorized by subdivision (e), the department may determine standards for the selection by sponsors of the tenants for units in projects funded by contracts pursuant to subdivision (e). The authority of the department to fix and alter rents pursuant to this subdivision shall apply only to units within residential hotels that receive assistance pursuant to subdivision (e).

(Amended by Stats. 2004, Ch. 193, Sec. 109. Effective January 1, 2005.)