Item 39 - Affordable Housing Project at 2530 & 2534 Westminster Avenue

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5 Unit shall be re-rented to a tenant pursuant to the terms, covenants and conditions of these Restrictions. 3.4. Loss of Project-Based Voucher Subsidy. It is anticipated that during the Term of Agreement the Project will maintain not less than 26 Project-Based Voucher (“PBV”) Restricted Units(“PBV Restricted Units”), supported by Project-Based Section 8 rental subsidy payments ("Rental Subsidy"). If, during the Term of Agreement, there is a reduction, termination or nonrenewal of the Rental Subsidy through no fault of Developer, such that the Rental Subsidy shown on the Project Budget is no longer available (or available in a lesser amount), 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 extremely-low income 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 PBV Restricted Units, to rents that are affordable to households with an adjusted income that does not exceed sixty percent (60%) of AMI, adjusted for household size appropriate for the PBV Restricted Unit. 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; (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 loss or reduction of the Rental Subsidy; (c) a proposed operating budget reflecting the rent increases (the “Operating Budget”); and (d) a description of efforts to obtain alternate sources of rent. The number of PBV 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, upon a reduction, termination or nonrenewal of the Rental Subsidy as described above, 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 progress reports on efforts to obtain alternative sources of rental subsidies that would allow the rents to be reduced. Upon receipt of any alternative rental subsidies, Developer shall reduce the rents back to the original restrictions to the extent that the alternative rental subsidies provide sufficient income to cover the operating costs, required replacement reserves and debt service of the Project as shown on the Operating Budget. (b) Developer shall provide tenants in the PBV Restricted Units with notice of any rent increase pursuant to this Section 3.4, and shall notify the tenant that if they have received a tenant-based voucher from the Housing Authority of the City of Santa Ana they may use the tenant-based voucher for their PBV Restricted Unit. (c) All rent increases for the PBV Restricted Units are subject to City EXHIBIT 3