(a)  The department may establish and administer an annuity fund, with respect to rental housing developments assisted under this article or Article 3 (commencing with Section 50755) or Article 4 (commencing with Section 50765) for the purpose of reducing rent levels to ensure occupancy by eligible households pursuant to Sections 50736 and 50739. The annuity funds shall be structured so that the principal and interest accumulated thereon is not depleted prior to the expiration of the agreements or contracts required by Section 50749.

(b)  Payments made by the department pursuant to this section shall not constitute a subsidy under subdivision (b) of Section 50745, and shall not constitute an advance payment within the meaning of state law restricting advance payments under state contracts.

(c)  The department shall require annual reports on the use of annuity funds and such audits as may be required to ensure the proper use of moneys from the annuity fund. The department shall review all complaints received concerning such trust funds and shall have all powers necessary to assure the lawful application of such funds.

(d)  When the amount of moneys made payable from an annuity fund pursuant to this section exceeds the amount necessary to ensure that eligible households in a rental housing development assisted under this chapter are paying affordable rents, or if payments from the annuity fund become unnecessary for such purpose, the department may by contract (1) require that such unneeded moneys be paid into the Rental Housing Construction Incentive Fund or (2) authorize use of such moneys to reduce rents to an affordable level for additional eligible households in the rental development.

(e)  Not less than 20 percent of the moneys appropriated for the purposes of this chapter shall be utilized pursuant to this section. However, moneys transferred to the Rental Housing Construction Fund pursuant to subdivision (d) shall be used for any purpose authorized by this chapter.

(Amended by Stats. 1989, Ch. 1346, Sec. 2. Effective October 2, 1989.)