Section 37. For the purpose of avoiding, so far as practicable, during the period of public exigency, emergency and distress now existing on account of the acute shortage of housing in many cities and towns of the commonwealth, the making of persons or families homeless as the result of the demolition of dwelling units on land acquired or to be acquired for the purposes of an urban renewal project, or any other public improvement by the commonwealth, a city or town, or any other public body, the commonwealth acting by and through the department may enter into a contract or contracts with a housing authority, or, in the event an urban renewal agency exists within a city or town, with a housing authority upon request of the urban renewal agency, for state financial assistance in the form of a grant by the commonwealth of the development cost of a relocation project or projects. The total amount of grants so contracted for shall not exceed twenty-five million dollars in the aggregate or the actual cost of the construction of two thousand units, whichever amount is the lesser. Each such contract shall contain such limitations as to the development cost of the project and administrative and maintenance costs, as the department may require. Each project shall be based upon a separate application made to the department, which shall include such evidence of need as the department may require including a statement that the local planning board has been informed as to the location and number of dwelling units of the proposed project. The department shall ascertain and certify the need for each project after determining that there exists in such city or town and its vicinity a period of public exigency, emergency and distress occasioned by an acute shortage of housing; provided, that the department may not approve a project or projects in any city or town for a number of dwelling units in excess of fifty per cent of the number of families to be displaced by an urban renewal project or other public improvement.

Contracts for financial assistance entered into under this section may also provide for a guarantee by the commonwealth of notes of a housing authority issued to temporarily finance a relocation project. Such guarantee and such notes shall be made and issued as provided in section thirty-four B and shall be subject to the limitations on period and amount set forth therein. The total amount of notes guaranteed hereunder, exclusive of refunding notes, shall not exceed twenty-five million dollars.

After such date as the department may determine that such acute shortage of housing for displaced persons constituting a public exigency, emergency or distress no longer exists, any relocation project acquired, constructed, moved or rehabilitated may, with the approval of the department, be offered for sale at its fair market value and disposed of as soon as is consistent with sound business judgment; provided, that no such sale shall be for less than the total of the outstanding obligations of the housing authority with respect to such project. If the proceeds of the sale of such a project are in excess of the total of all obligations for the housing authority with respect to such project, such excess shall, after the payment of all notes and other outstanding obligations of the housing authority relating to such project, be paid to the commonwealth as a reimbursement of grants made hereunder, and, after full reimbursement, to the city or town in which such project is located.

Sections one to forty-four, inclusive, except sections thirty-two and thirty-three, shall, as far as apt, be applicable to projects developed under this section and to housing authorities while engaged in developing and administering such projects; provided, that no application for state financial assistance under this section shall be accepted by the department after January the first, nineteen hundred and sixty-five.

An authority shall not acquire land for the site of a relocation project by eminent domain under chapter seventy-nine or chapter eighty A, or by purchase, gift or otherwise, unless such land is entirely or almost entirely unoccupied by inhabited dwellings; provided, however, than an authority may acquire a completed dwelling or a group of dwellings for a relocation project if acquisition of such does not involve their demolition. The total number of dwelling units to be created in any one city or town in connection with relocation projects, for which state assistance may be granted, shall not exceed two per cent of the total of dwelling units in such city or town as reported by the United States census of nineteen hundred and fifty.

Upon the completion or acquisition of a project by a housing authority, it shall be maintained and operated by such authority. In the operation or management of relocation projects, an authority shall at all times observe the following requirements with respect to rentals and tenant selection:—

(1) It shall rent to a tenant dwelling accommodations consisting of the least number of rooms which it deems necessary to provide safe and sanitary accommodations to the proposed occupants thereof without overcrowding, in accordance with a rent schedule approved by the department. Such rent schedule shall be arranged so as to be sufficient, in the opinion of the department, to pay all of the costs of maintaining and operating the project, including a reasonable allowance for depreciation, and may, in the discretion of the department, be sufficient so as also to include each year an allowance for the amortization of all or part of the cost of acquiring and constructing the project not otherwise provided for by grants or otherwise.

(2) A housing authority shall not admit a person or family for occupancy in a relocation project for a period longer than may be from time to time determined by the department. A housing authority shall accept as tenants persons or families who occupied dwellings eliminated by demolition, condemnation and effective closing as part of any public improvement made by the commonwealth, city or town or other body politic and corporate or of any urban renewal, code enforcement or chapter one hundred and twenty-one A project; provided, that to the extent that no displaced persons apply for tenancy in such relocation project the authority may admit as tenants veterans, elderly persons of low income, and families of low income; provided, that no vacancies exist for such elderly persons and families of low income in existing low-rent public housing projects. If a housing authority acquired a completed dwelling or group of dwellings for a relocation project, and the acquisition of such does not involve their demolition, the authority may permit any person or family otherwise eligible under this chapter to continue in occupancy for such period or periods that such dwelling units are not needed for persons or families displaced by any public improvement or urban renewal, code enforcement or chapter one hundred and twenty-one A project.

(3) In any action to recover possession of premises, occupied in a relocation project, the provisions of sections twelve and thirteen of chapter one hundred and eighty-six and section nine of chapter two hundred and thirty-nine shall not apply.

The provisions of this chapter or any other law to the contrary notwithstanding, a housing authority may acquire with the approval of the department for use as a relocation project any existing project owned by it or leased to it by the federal government and may with the approval of the department operate and maintain such project as a relocation project.