(a) Upon application to the department, any city, county, city and county, or combination thereof acting jointly, or the duly constituted governing body of an Indian reservation or rancheria shall be certified as a local housing agency by the department if the department determines that the applicant meets the criteria specified in subdivision (b). If a local housing agency consists of more than one city, county, or city and county, each such entity shall individually meet the criteria of subdivision (b). All applications of prospective housing sponsors for loans or grants authorized by this part for housing developments shall be reviewed by the local housing agent, if any, for the area in which the housing development is to be financed. The local housing agent shall approve an application for a loan or grant for a housing development unless it expressly finds that the application does not meet one or more of the following criteria:

1. (1) The proposed housing development conforms with a housing element that meets the requirements of subdivision (b).
2. (2) The proposed housing development is consistent with the provision of a full range of housing opportunities within the jurisdiction of the local housing agent.

3. (3) The proposed housing development would be in compliance with applicable federal, state, and local laws, including laws prohibiting discrimination in housing.

   An application shall be deemed approved if the local housing agent fails to approve or reject it within 40 days following the date of submission.

(b) A local housing agent shall meet all of the following criteria:

1. (1) The local housing agent shall have adopted a housing element, as required by subdivision (c) of Section 65302 of the Government Code, and an affirmative housing plan, if required by Section 65008 of the Government Code. The housing element shall not conflict with any housing assistance plan submitted to the federal government as part of an application to obtain funds for community development or housing.
2. (2) The housing element of the local agency shall make adequate provision for all economic and racial segments of the community in new and rehabilitated housing throughout its jurisdiction.
3. (3) The local housing agent shall develop or specify a procedure, which shall be identified in its application to the agency, to expedite the processing of zoning changes, use permits, building permits, environmental clearance, and any other type of permit, approval, or clearance which may be required by the city, county, or city and county or by any other local public entity or governmental agency prior to construction or rehabilitation of a housing development.