Section 59. The commonwealth, acting by and through the department, may enter into a contract or contracts with an operating agency having powers under this section for state financial assistance in the form of a guarantee by the commonwealth of notes and bonds of such agency issued to finance the acquisition and rehabilitation of dwellings within the limits of an urban renewal project area. The guarantee of the commonwealth of such notes and bonds of such agency shall be executed on each note and bond by the director of housing and community development or such associate director as he may from time to time designate. The amount of notes and bonds guaranteed by the commonwealth under this section shall not exceed twenty million dollars.

In addition to its other powers, an operating agency may plan and undertake the rehabilitation of dwellings within the limits of an urban renewal project area, and structures of mixed residential and commercial use and may acquire by purchase, deed or grant or take by eminent domain, hold, improve, rent, lease for a period not in excess of five years, with options to lessees or tenants to purchase during such five-year period, grant, sell, convey, as condominiums or otherwise, or deliver possession, of such property in accordance with such terms and conditions as it may determine, and shall have the power to make mortgage loans for the purpose of financing the rehabilitation of dwellings and structures of mixed residential and commercial use within an urban renewal project area, subject to such regulations as the department may make as to interest rates, maturity dates and other terms and conditions.

A rehabilitation project shall be any work or undertaking involving the rehabilitation of a dwelling or dwellings including structures of a mixed residential and commercial use in an urban renewal project area so as to provide decent, safe and sanitary housing; such work or undertaking may include buildings, land, equipment, facilities and other real or personal property for necessary, convenient or desirable appurtenances, site preparation or improvement.

Whenever the department determines a public emergency or distress no longer exists in a particular city or town, a rehabilitation project, or a part of any such project with the land appurtenant thereto, rehabilitated or reconstructed under this section, may, at the direction of the department, be sold for the fair market value thereof, as determined by the department, but not for less than the total of the outstanding obligations of the applicable operating agency with respect to such project if the whole is sold, or not for less than that percentage of the total cost which the cost of the part sold bears to the total cost of the entire project if a part is sold. So long as any notes and bonds issued by the operating agency to finance the cost of such project and guaranteed by the commonwealth are outstanding, the proceeds of any sale of such project shall be paid by the operating agency into the Housing Authority Bonds Sinking Fund and shall be expended from time to time by the state treasurer to pay interest and principal of any notes and bonds issued by such operating agency to finance such project.

Owners of dwellings and structures of a mixed residential and commercial use rehabilitated under this section shall, during the period of five years following the completion of such rehabilitation and in any event during the period any mortgage loan made under this section to finance such rehabilitation is outstanding, and subject to such regulations as the department may establish, give preference in the selection of tenants for such dwellings, first to the individuals or families in occupancy thereof last prior to such rehabilitation and second to other residents of the city or town in which such dwellings are located; and who are able to pay rents charged other individuals or families for similar or comparable dwellings in the urban renewal project area.