HCD: A County Can't Condition Funding on a RHNA Transfer

You're trying to get an affordable project funded. The county has money on the table — a loan, project-based vouchers, local revenue — and then a condition lands that has nothing to do with your building: to take the money, the city where you're building has to accept a transfer of the county's RHNA. Part of the county's state housing obligation shifts onto the city, and the city has to sign off before your project gets approved.

Here's the thing: that condition may not be enforceable. HCD's position is that conditioning affordable-housing funding on a RHNA transfer conflicts with Housing Element Law — and it said so in writing this August.

What Orange County wrote into its funding rules

HCD reviewed Orange County's 2026 Supportive Housing NOFA. Its Policy 2.08, quoted in the letter, requires:

"The County will require acceptance of the transfer of RHNA share from the County's allocation to the City's allocation or credits toward the County's existing RHNA obligation if the development occurs during the Planning Period (following adoption of a Housing Element), based on total number of County assisted units."

In plain terms: fund a project inside a city, and the county books some of its own housing target over to that city — with the applicant told to obtain the city's sign-off "at the time it approves the development."

This surfaced on a real project — an 85-unit affordable development at the Southeast corner of Berry Street and Mercury Lane in the City of Brea. When Brea saw the RHNA-transfer condition, it asked HCD for technical assistance.

Why HCD says the condition fails

RHNA transfers aren't freelance. Government Code § 65584.07 sets out the only ways a county and a city move RHNA around — the incorporation of a new city, a city annexing county land, or a specific pre-cycle transfer the regional council of governments approves. A funding condition isn't one of them. HCD put it directly:

"The NOFA is in direct conflict with Housing Element Law as the County's mandate requires RHNA transfers for County-funded projects located within incorporated cities and appears to do so for the same planning period during which a project takes place."

And:

"The NOFA, as written, does not follow any of the scenarios authorized pursuant to Government Code Section 65584.07 and therefore must not be a basis to condition funding on RHNA transfers."

Verified against HCD's Technical Assistance Letter to the Orange County Board of Supervisors (August 24, 2026), re: Orange County RHNA Transfer.

The next-cycle version is no better

The county's draft Memorandum of Agreement reached further — into the 2029–2037 planning period, the 7th cycle — asking Brea to agree now to transfer "the nine (lower income) units" once SCAG adopts the next RHNA. HCD's view: that doesn't meet the statute either. A pre-cycle transfer under § 65584.07 has to satisfy a proportionality rule — a county's affordable share may be reduced "only in proportion to the amount by which the county's share of moderate- and above moderate-income housing is reduced." The MOA, HCD found, "does not obligate any identified number of moderate and above moderate-income units to be reduced in proportion to the nine County-assisted units that the County attempts to claim credit for."

There's a funding-leverage angle, too. The project sought a $1.375M loan from OCHA acting as a Housing Successor Agency, and Project Based Vouchers from OCHA as a federally designated Public Housing Authority — and Brea "does not have its own PHA." HCD's concern: using federal housing-program administration as a lever to shed the county's own RHNA. It also flagged Affirmatively Furthering Fair Housing obligations (Gov. Code § 8899.50).

What this means for your project

HCD closed by encouraging the County to move the money, not the obligation:

"HCD recognizes the importance of timely approval for the Project and encourages the County to process the funding application without delay while also not conditioning funding on RHNA transfers, either during the current planning period or the subsequent one."

Keep the posture in view: this is a Letter of Technical Assistance — HCD's enforcement position, not a court ruling — and HCD only reminds the County it "may" refer a noncompliant local government to the Attorney General. So if you're facing a funding condition that asks your city to take on RHNA, measure it against § 65584.07 and raise it — don't assume it binds you just because it's printed in the NOFA. Verify with your jurisdiction and your own counsel before relying on any of this; none of it is legal advice.

What CrossBeam does with it

When the letter lands on your desk, CrossBeam turns it around the same day: what each item is actually asking, the code or law behind it, and a written response you can hand to your team or your attorney — the back-and-forth that used to eat weeks, done in a couple of hours.