NORTH BROADWAY HOUSING PARTNERS LP (2)

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(b) Non -Qualifying Adjusted Income. Subject to the applicable requirements and provisions of, and changes to, the HOME -ARP Program, and Section 42 and 142(d) of the Internal Revenue Code of 1986, as amended (the "Code"), if, upon recertification of the income of a tenant of a Restricted Unit, the Developer determines that a tenant has an adjusted income exceeding 30% of the applicable Median Income for the Area in each case, adjusted for household size as provided in Section 5.2 above, such tenant may be permitted to continue to occupy the Restricted Unit at the rental rate as provided for in Section 5.2 above, until the tenant chooses to vacate the Restricted Unit. After the Restricted Unit is vacated, the Restricted Unit shall be re -rented to a tenant pursuant to the terms, covenants and conditions of these Restrictions. 5.4. Maintaining Financial Stability. It is anticipated that during a portion of the Term of Agreement the Project will be supported by a PBV Rental Subsidy for not less than twenty-five (25) of the Restricted Units, and the HOME -ARP Subsidy Reserve for the sixteen (16) HOME -ARP Units. These subsidies will not overlap on the same units. If, during the Term of Agreement and through no fault of Developer, (a) the HOME -ARP Subsidy Reserve is depleted, (b) there is a reduction, termination or nonrenewal of the PBV Rental Subsidy, or (c) the Project generates insufficient income to cover its operating costs, required deposits to replacement reserves, and debt service on approved financing as shown on the Operating Budget, and as is necessary to maintain the financial stability of the Project, with the exception of the HOME -ARP Units during the HOME -ARP Compliance Period, Developer may request approval of the City (a) to allow households with adjusted incomes that do not exceed sixty percent (60%) of AMI, adjusted for actual household size, to occupy the Restricted Units (i.e., a unit previously restricted to households with adjusted incomes that do not exceed 30% of AMI), and (b) to increase the rent on one or more of the Restricted Units to rents that are affordable to households with an adjusted income that does not exceed sixty percent (60%) of AMI, adjusted for actual household size . The rent increase is subject to the following requirements: (a) concurrently with the request, Developer shall provide the City with evidence of the anticipated reduction, termination, or nonrenewal of the Rental Subsidy and/or depletion of the HOME -ARP Subsidy Reserve and/or evidence that the Project is not operating at a financially stable level, (b) a Management Plan (as defined in Section 6.1(d) of the Loan Agreement) for the Project for the City's approval pursuant to Sections 6.1(d) and Exhibit G of the Loan Agreement, showing the impact of the depletion of the HOME -ARP Subsidy Reserve and/or loss, termination, or reduction of the Rental Subsidy; (c) a proposed operating budget reflecting the requested rent increases (the "Operating Budget"); and (d) a description of efforts to obtain alternate sources of rental subsidy and/or maintain financial stability. The number of the Restricted Units subject to the rent increase and the amount of the proposed increase may not be greater than the number or amount required to ensure that the Project generates sufficient income to cover its operating costs, required deposits to replacement reserves, and debt service on approved financing as shown on the Operating Budget, and as is necessary to maintain the financial stability of the Project. In addition , Developer hereby agrees to the following: (a) Developer shall use good faith commercially reasonable efforts to obtain alternative sources of rental subsidies and shall provide the City with annual 7 WISEPlace Perunanent Supportive Housing City HOME -ARP Affordability Restrictions on Transfer of Property