(a) At the time of application for assistance, the sponsor shall provide evidence to the Department that it has or will have the capability to rehabilitate, own and/or manage the rental housing development. In determining the capability of a sponsor, the Department shall consider the extent to which the sponsor is or will be:

(b) If the sponsor is a local public entity (including a city; county and county; housing authority; redevelopment agency; community development commission; or any other local agency established by, or whose members are the same as, or appointed by, the legislative body of a city, county, or city and county), as a condition of eligibility to apply for funds pursuant to this subchapter, the city, county, or city and county with jurisdiction over the proposed project shall have submitted a housing element which is in accordance with the requirements of Article 10.6 (commencing with Section 65580) of Chapter 3 of Division 1 of Title 7 of the Government Code to the Department. However, no application for funds shall be denied because of the content of the housing element or because of the findings made by the Department pursuant to Section 65585 of the Government code.