Several California housing agencies announced big changes to the oversight process for projects in the state. To streamline inspections and administrative work, three agencies signed a Memorandum of Understanding (MOU) that has been in the works for almost three years.
The MOU went into effect Jan. 1, while the agencies officially announced details July 21. The memorandum stems from a bill, AB 2006, signed by Gov. Newsom in 2022. The bill required three state agencies—the California Housing and Finance Agency (CalHFA), the California Tax Credit Allocation Committee (CTCAC) and the Department of Housing and Community Development (HCD)—to enter into an MOU and end duplicated efforts in their monitoring process.
The agencies coordinated and developed new processes for nearly two years before the changes became effective Jan. 1, 2025. The July announcement included major changes to five distinct areas of oversight: physical inspections, reserve draws, ownership changes, property management changes and operating budgets.
The changes only affect development projects that are co-regulated, meaning they work with two or more state agencies. Projects working with a single agency will continue to follow existing processes.
The agencies fulfilled many promises from AB 2006 but pivoted from a comprehensive overhaul to five specific areas targeted for improvement. The first area, involving physical inspections, created efficiency gains immediately after going into effect. Instead of each agency conducting separate yearly inspections, the MOU created a single-inspection process for developments.
CalHFA performs these inspections if they hold a permanent loan or first lien on the project. Otherwise, a different state agency is designated as the lead each year. The lead agency performs the inspections and shares relevant information with the other agencies involved.
The second area addresses reserve draws, which are requests developers make to access funds set aside for property repairs and improvements. Previously, projects funded by both HCD and CalHFA required separate submissions and approvals from each agency, creating duplicate paperwork and extended timelines.
Under the new system, developers submit a single request using a combined form to CalHFA while copying HCD. CalHFA reviews the request and notifies both the developer and HCD of approval decisions. If either agency has questions, they communicate directly with the developer while keeping the other agency informed.
The third area targets ownership and control party changes, which include sales, transfers and changes to partners. These transactions previously required separate submissions to each involved agency, often creating confusion about approval timelines and requirements.
The MOU designates CalHFA as the lead agency for developments where CalHFA holds regulatory agreements, while HCD leads for projects involving only HCD and CTCAC. Developers now submit a single request using a newly created form that lists required documents for each agency. Each agency still conducts independent reviews, but the lead agency communicates final approval to the developer.
The final two areas address smaller administrative tasks that developers face. Property management changes now flow through HCD as the lead agency for all co-regulated developments, eliminating separate submissions to multiple agencies.
Operating budgets received similar treatment. HCD and CalHFA developed a combined form for all developments under both agencies’ regulatory agreements. While each agency still reviews budgets independently, developers no longer need to prepare separate budget documents or navigate different submission requirements for essentially the same financial information.
While these changes are already in effect, more improvements are planned. Future efforts include an IT solution for easier electronic document submission and training sessions for developers to help them navigate the new streamlined processes.
Photo by D Goug from Pexels
