San Diego Municipal Code Div. 10 Affordable Housing Preservation

(“Affordable Housing Preservation” added 2-27-2025 by O–21917 N.S.; effective 3-29-2025.)

The purpose and intent of this Division is to expand on applicable federal and state laws to preserve affordable housing and ensure housing opportunities for very low-, low-, and moderate-income households are not permanently removed from the housing stock. The requirements of this Division are in addition to, and are not intended to preempt, federal and state laws governing the sale of assisted housing developments, including California Government Code sections 65863.10, 65863.11, and 65863.13. (“Purpose and Intent” added 2-27-2025 by O–21917 N.S.; effective 3-29-2025.)

This Division shall not apply to any owner selling an assisted housing development within the five-year period before the expiration of rental restrictions or within the five years of being eligible for prepayment or termination, as described in California Government Code section 65863.11(c). (“Application” added 2-27-2025 by O–21917 N.S.; effective 3-29-2025.)

For purposes of this Division, defined terms appear in italics. The following definitions apply in this Division:

Assisted housing development means a multifamily rental housing development of
five or more dwelling units that receives governmental assistance under any of the
programs listed in California Government Code section 65863.10(a)(3), as may be
amended.

Deliver or delivery means sent by registered or certified mail, return receipt
requested.

Local nonprofit organizations has the same meaning as in California Government
Code section 65863.11(a)(7), as may be amended.

Local public agencies has the same meaning as in California Government Code
section 65863.11(a)(8), as may be amended.

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Owner means a person that holds title to the land on which an assisted housing development is located. If the land on which the assisted housing development is located is the subject of a leasehold interest, owner also means a person that holds a leasehold interest.

Person has the same meaning as in San Diego Municipal Code section 11.0210.

Profit-motivated housing organizations and individuals has the same meaning as in California Government Code section 65863.11(a)(12), as may be amended.

Qualified entity means tenant associations, local nonprofit organizations, local public agencies, regional or national organizations, regional or national public agencies, and profit-motivated housing organizations and individuals, that are certified as qualified purchasers of assisted housing developments on the most recently published list maintained by the California Department of Housing and Community Development or successor entity responsible for the registry of qualified entities under state law.

Regional or national organizations has the same meaning as in California Government Code section 65863.11(a)(9), as may be amended.

Regional or national public agencies has the same meaning as in California Government Code section 65863.11(a)(10), as may be amended.

Sale or sell means any transfer of all or substantially all of an owner’s interest in an assisted housing development.

Tenant association has the same meaning as in California Government Code section 65863.11(a)(4), as may be amended. (“Definitions” added 2-27-2025 by O–21917 N.S.; effective 3-29-2025.)

(a) This Division does not apply to the following transactions involving an assisted housing development:

(1) government acquisition through eminent domain;

(2) forced sale pursuant to foreclosure or other operation of law;

(3) transfer by gift;

(4) transfer to a person included in the table of descent and distribution
when an owner dies intestate or by devise pursuant to the terms of a
will;

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(5) refinancing where the owner remains unchanged;

(6) exit of a limited partner in a tax credit limited partnership year 15
restructuring where there is no sale of the assisted housing
development to a third-party;

(7) sale due to a financial emergency that exists, and the owner certifies,
under the penalty of perjury, the existence of the financial emergency
that requires immediate access to the proceeds of the sale; and

(8) sale to a qualified entity where there is an executed purchase
agreement, regulatory agreements, or other instruments recorded
against the property that impose affordability restrictions on the
maximum rents that may be charged for dwelling units within the
assisted housing development, and the qualified entity satisfies the
requirements imposed on qualified entities under San Diego Municipal
Code section 98.1007(d).

(b) This Division does not apply to properties with affordability restrictions
required by local affordable housing land use programs where 30 percent or
fewer of the dwelling units within the property are restricted as affordable.
(“Exemptions” added 2-27-2025 by O–21917 N.S.; effective 3-29-2025.)

(a) At least three months prior to any offering to sell an assisted housing development, the owner shall deliver a Notice of Intent to Sell to all qualified entities on the most recently published list of qualified entities maintained by the California Department of Housing and Community Development. Offering to sell includes listing a property with a real estate agent. The San Diego Housing Commission shall provide a hyperlink to the most recently published list of qualified entities on its website.

(b) Concurrent with delivery under San Diego Municipal Code
section 98.1005(a), the owner shall post a copy of the Notice of Intent to Sell
in a conspicuous place in the common area of the assisted housing
development to provide notice to its tenants. The San Diego Housing
Commission shall post a copy of the Notice of Intent to Sell on its website.

(c) A Notice of Intent to Sell shall contain the following:

(1) the address of the assisted housing development;

(2) the name and contact information of the owner;

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(3) a statement that the owner intends to sell the assisted housing
development or a portion thereof;

(4) the intended date of offering to sell;

(5) a statement that specifically identifies all regulatory agreements or
other instruments recorded against the property that limits the rent that
may be charged for any of the dwelling units within the assisted
housing development;

(6) a statement that qualified entities shall have an opportunity to purchase
the assisted housing development and have a right of first refusal, as
established in this Division; and

(7) a statement that qualified entities may request, in writing, all of the following information regarding the assisted housing development: itemized lists of monthly operating expenses; capital improvements made within the two preceding calendar years; the amount of project reserves; copies of the two most recent financial and physical inspection reports, if any, filed with federal, state, or local agencies; the most recent rent roll for the property that lists the rent paid for each unit and subsidy, if any, paid by a governmental agency as of the date of the Notice of Intent to Sell; the vacancy rate at the property for each of the two preceding calendar years; and the terms of assumable financing and subsidy contracts, if any. The owner shall provide the requested information within 15 days of receiving a qualified entity’s written request.

(d) Any qualified entity may deliver a Letter of Interest to Acquire Assisted
Housing Development to the owner within 30 days of delivery of the Notice
of Intent to Sell.

(e) If the owner does not receive a Letter of Interest to Acquire Assisted Housing
Development within 30 days of delivering a Notice of Intent to Sell, the
owner may proceed with the intended sale of the assisted housing
development to a third-party and has no further obligations under this
Division.
(“Notice of Intent to Sell” added 2-27-2025 by O–21917 N.S.; effective 3-29-2025.)

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(a) Within 60 days of a qualified entity delivering a Letter of Interest to Acquire Assisted Housing Development, a qualified entity may submit to the owner a bona fide Offer to Purchase the assisted housing development at the market value determined by negotiation and agreement between the parties.

(b) A bona fide Offer to Purchase means an offer to purchase that contains all of
the following:

(1) the name, contact information, and form of organization of the
qualified entity;

(2) the names and titles of the officers, directors, and similar persons in
control of and principal investors in the qualified entity;

(3) a statement that the offeror is a qualified entity within the meaning of
this Division; and

(4) the terms of the offer to purchase, including the purchase price, the
proposed methods and terms of financing, the financing mechanisms
by which the qualified entity will maintain the affordability of the
assisted housing development, and any other terms of purchase.

(c) If the owner receives a bona fide Offer to Purchase from a qualified entity and
wishes to sell, the owner may accept any offer submitted by a qualified entity
that meets the requirements of this Division and execute a purchase agreement
for the assisted housing development within 30 days of offer acceptance. If
multiple qualified entities submit bona fide Offers to Purchase that meet the
requirements of this Division, the owner may accept any such offer.

(d) Once a purchase agreement is executed, the owner and qualified entity have
120 days to close escrow, unless a different timeline is mutually agreed to by
the parties. Prior to the close of escrow, the qualified entity shall satisfy the
requirements imposed on qualified entities under San Diego Municipal Code
section 98.1007(d).

(e) If the owner rejects all bona fide Offers to Purchase received from qualified
entities that meet the requirements of this Division, the owner shall comply
with the right of first refusal requirements in San Diego Municipal Code
section 98.1007.

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(f) If the owner does not receive any bona fide Offers to Purchase from qualified entities, the owner may proceed with the intended sale of the assisted housing development to a third-party and has no further obligations under this Division. (“Qualified Entity Offer to Purchase” added 2-27-2025 by O–21917 N.S.; effective 3-29-2025.)

(a) Upon the owner’s rejection of all bona fide Offers to Purchase received from qualified entities and the owner’s intent to accept a third-party’s offer to purchase the assisted housing development, the owner shall first deliver a Notice of Right of First Refusal to all the qualified entities whose offers were rejected. A qualified entity has seven days from delivery of the Notice of Right of First Refusal to submit a counteroffer to the owner to purchase the assisted housing development on substantially the same terms and conditions as the pending third-party offer to purchase.

(b) A Notice of Right of First Refusal shall contain all of the following:

(1) the address of the assisted housing development;

(2) the name and contact information of the owner;

(3) a statement of the owner’s intention to accept an offer to purchase
from a third-party;

(4) the terms and conditions of the pending third-party offer to purchase
the assisted housing development; and

(5) a statement that the qualified entity has seven days to submit a
counteroffer to purchase the assisted housing development on
substantially the same terms and conditions as the pending third-party
offer.

(c) The owner shall accept a qualified entity’s counteroffer made under section
98.1007 and shall execute a purchase agreement for the assisted housing
development within 30 days of offer acceptance. If multiple qualified entities
submit counteroffers that meet the requirements of section 98.1007, the owner
may accept any such offer.

(d) Once a purchase agreement is executed, the owner and qualified entity have
120 days to close escrow, unless a different timeline is mutually agreed to by
the parties. Prior to the close of escrow, the qualified entity shall:

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(1) Obligate itself and any successors in interest to maintain the existing
affordability of the assisted housing development for very low-, low-,
or moderate-income households on substantially the same terms and
conditions; and

(2) Commit to renew governmental assistance or subsidies, if available
and economically feasible, to maintain the affordability of the assisted
housing development for its remaining useful life; and

(3) Agree to record a deed restriction that documents the maximum rents that may be charged for dwelling units within the assisted housing development and other use restrictions that shall be binding on the qualified entity and its successors in interest and assigns; and

(4) If the qualified entity is a local nonprofit organization or local public
agency, ensure no officers or directors will have a financial interest in
the assisted housing development to be purchased.
(“Qualified Entity Right of First Refusal” added 2-27-2025 by O–21917 N.S.;
effective 3-29-2025.)

Any qualified entity entitled to notice and an opportunity to purchase an assisted housing development under this Division may bring an action for injunctive relief, damages, or any other remedy. In any judicial action brought to enforce this Division, the court may award reasonable attorney’s fees and costs to a qualified entity. (“Enforcement” added 2-27-2025 by O–21917 N.S.; effective 3-29-2025.)

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Article 8: Housing