AN ACT Relating to the classification and valuation of multiple-unit buildings devoted primarily to low-income housing at current use value; adding a new chapter to Title 84 RCW; and providing a contingent effective date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature hereby declares that:

(1) There is a shortage in the supply of decent, safe, and sanitary housing for persons of low income in this state. Far too many people live in overcrowded dwellings, in buildings that are not safe, sanitary, and protected from the elements, in temporary shelters, or even without any form of decent shelter.

(2) The shortage of safe, sanitary, decent housing for persons of low income harms the general health and safety. It deprives many persons of low income of proper shelter and protections from unreasonable risks of fire, crime, personal injury, and from overcrowded and deteriorated living conditions. It harms the general public by contributing to the use of storefronts, public parks, and sidewalks as shelter by the homeless and by contributing to slums and blight in urban areas.

(3) Public agencies acting alone do not have sufficient resources to supply housing for persons of low income. Federal cutbacks have made it even more difficult for public agencies to respond to the dwindling supply of low-income housing. The assistance of private capital and free enterprise is essential to reduce the shortage of housing for persons of low income, and organizations and individuals should be encouraged to preserve and develop low-income housing.

(4) Valuing and taxing property primarily devoted to low-income housing at its current use will provide an economic incentive for preservation and development of low-income housing and a disincentive to elimination of such housing for purely economic reasons. Such an incentive may delay the deterioration and demolition of existing low-income housing in higher density areas where competition from higher uses threatens this less competitive use, and it may encourage the development of additional low-income housing.

(5) This chapter will implement an amendment to Article VII, section 11, of the Washington state Constitution submitted to the electorate of the state of Washington at the general election on November 5, 1985.

NEW SECTION. Sec. 2. The definitions set forth in this section apply throughout this chapter unless the context clearly requires otherwise.

(1) "Devoted primarily to low-income housing" means that at least fifty percent of the rentable floor area of the building is occupied for residential purposes by persons of low income at rents set below market rates for comparable residences.

(2) "Owner" means the party or parties with the fee ownership in the land, a lessee with a lease covering the premises for the years when current use classification is in effect, and the contract vendee where land is subject to a real estate contract.

(3) "Persons of low income" means an individual or family whose current income does not exceed fifty percent of the median income, scaled by family size, for the area in which the building is located. Median income is measured by the most recent statistics published by the United States department of labor for counties within a standard metropolitan statistical area, and for other areas, by estimates prepared and filed by the state department of community development with the code revisers for publication in the Washington state register.

(4) "Rents set below market rates" means rents that are:

(a) Set in accordance with an agreement with the United States department of housing and urban development or other federal agency, or a local housing authority, to carry out a government program to provide housing for persons of low income, and that are equal to or less than the fair rental rate promulgated for such low-income housing by the United States or the housing authority; or

(b) Equal to or less than fifteen percent of the median income, scaled by using the occupancy for the unit authorized by the local building code for family size, for the area in which the building is located.

NEW SECTION. Sec. 3. (1) Any property occupied by a building that meets the following criteria may be classified as "devoted primarily to low-income housing," and valued and taxed at its current use value unless disqualified under subsection (3) of this section:

(a) At least fifty percent of the rentable floor area of the building shall be occupied at all times for residential purposes by persons of low income. The remainder of the building may be occupied as residences paying higher rents or by the owner or the owner's manager or agents, may be devoted to commercial tenants and generating commercial income may be committed to other uses, or may be vacant for up to six months, as long as the remainder does not impair the habitability of the units rented for housing to persons of low income;

(b) At least five dwelling units in the building must be leased to or occupied by persons of low income;

(d) The building and the dwelling units rented to persons of low income must comply with local health and safety standards.

(2) A classification of a property occupied by a building devoted primarily to low-income housing applies to the entire parcel, including ancillary areas used for parking, lawn, garden, or landscaping.

(3) The following properties are not eligible for classification as property "devoted primarily for low-income housing":

(a) Slums: (i) Property with a residential building under a municipal or judicial order for abatement; (ii) property with a building that the local jurisdiction has found to violate local health and safety standards and on which compliance has not been completed or satisfactory progress shown within sixty days after notice; and (iii) property that is repeatedly cited for a substantial violation of a local code standard.

(b) Institutional housing: (i) Residential units that serve an institution, when payments for health care, education, or other institutional services are made by or for the occupants to the owner in addition to rent for the dwelling; and (ii) privately-owned student housing, including fraternities and sororities, and resorts for recreational purposes. This subsection (b) does not exclude from eligibility housing that is devoted to persons of low income under contract to a governmental organization or private nonprofit health care organization.

(c) Employee housing: Property used primarily for industrial, commercial, institutional, farm, or agricultural purposes or as timber land in which the dwelling units identified as devoted to use by persons of low income are occupied by employees of the owner, contract workers for the owner, or relatives of the owner.

(d) Any acreage beyond five acres: That portion of a parcel or tract that exceeds five acres, the maximum acreage eligible for classification in any particular parcel or tract.

(4) The classification established under this section shall be in effect for taxes payable for the year for which the application is approved and for each subsequent year until (a) withdrawn by the owner or (b) found ineligible by the assessor.

NEW SECTION. Sec. 4. (1) An owner may apply to the county assessor for classification of a parcel as "devoted primarily to low-income housing" at any time. Applications made on or before the last day of December shall be processed for taxes payable the following year.

(2) When practical, applications shall be made upon forms prepared by the state department of revenue and supplied by the county assessor. A document that contains the essential information requested by the state form shall be processed as an application whenever the approved forms are not available. The application shall contain a verification or statement under penalty of perjury that the information supplied is true and correct. The application shall require the applicant to inform the county assessor if there is a substantial change in circumstances that would affect the continuing validity of information supplied in the application. The county assessor shall provide reasonable assistance to applicants in completing the form.

(3) When the property lies in an incorporated area, the county assessor shall send a copy of the application to the chief executive officer of the city or town or to a subordinate municipal officer designated by him for review. When the property lies in an unincorporated area, the county assessor shall transmit a copy of the application for review to the official who administers the county building codes unless the county legislative authority designates another official. When a municipal boundary bisects property subject to an application, officials of each affected municipality shall receive a copy of the application. Before a reviewing official recommends denial of an application, the reviewer shall inform the owner of the proposed revision and allow the owner an opportunity to submit additional information.

(4) Processing of forms shall respect the right of privacy of persons of low income and shall not disclose their names or data about them unless absolutely necessary. The processing shall also preserve the confidentiality of financial information supplied by the owner.

(5) The county or city legislative authority may require a reasonable application fee, which fee shall accompany the application.

(6) A county assessor may delegate the performance of any or all of the activities specified by this section to the municipal officials of the jurisdiction in which the property is located.

NEW SECTION. Sec. 5. (1) The reviewing municipal official shall report to the county assessor whether or not the property qualifies for the classification. The reviewing official may contact the applicant, examine documents and records, interview occupants, and enter and inspect the premises during reasonable business hours to determine compliance with the requirements of this chapter. The report shall be filed with the county assessor within forty-five days after the application was received. A reviewing official may request additional time, if needed, on account of delays in securing information from an applicant.

(2) The county assessor shall grant the classification if the report of the reviewing official recommends approval of the application and shall deny the application if the report recommends denial.

(3) If no timely report is received from a reviewing official, the county assessor shall inform the applicant. An applicant may then apply to the county board of equalization for relief. The board may grant the classification, order the classification granted unless the reviewing official shows cause for a denial by a date contained in the order, or deny the application on the record already made.

(4) Property classified as "devoted primarily to low-income housing" shall be so designated on the assessment list and tax rolls and notice of that classification shall be given on the property tax statement sent to the owner.

NEW SECTION. Sec. 6. The true and fair value of property classified as "devoted primarily for low-income housing" shall be the lesser of its value based on its current use and its value if it were assessed without regard to its classification. In computing its value based on its current use, the assessor shall disregard potential uses that might return a higher income, rents that might be charged were the owner to maximize returns, and values of the property that suppose either the land or the improvements were unencumbered by its current commitment to low-income housing.

NEW SECTION. Sec. 7. To be sure that the classification is intended to remain in effect each year, a county assessor may require the owner to certify information about the building's occupancy by persons of low income and the rents paid.

NEW SECTION. Sec. 8. An owner shall notify the assessor of any change in use or other change in circumstances rendering the property ineligible for classification as "devoted primarily for low-income housing."

NEW SECTION. Sec. 9. The assessor shall remove the classification of the property as "devoted primarily to low-income housing" whenever the property, a change of use, citations for code violations, rents charged, or other circumstances render it ineligible under section 3 of this act. A redesignation shall be subject to the additional tax due under section 10 of this act.

Any person who has information that the property no longer qualifies for the classification may supply the information to the county assessor. Upon receipt of such information, the county assessor shall promptly refer the matter to the reviewing official for a report and recommendation on whether the property should be redesignated. The reviewing official shall give the owner notice and an opportunity to be heard before recommending redesignation of the property. The assessor shall redesignate the property if the reviewing officer so recommends.

NEW SECTION. Sec. 10. If property is withdrawn from or redesignated from the classification as "devoted primarily to low-income housing," the following additional tax, penalty, and interest shall be a lien on the land as of January 1st of the year in which the additional amounts are imposed:

(1) An additional tax equal to the difference in taxes payable under the current use classification during the current year and the tax that would have been paid during the current year had it been assessed at its highest and best use;

(2) If the assessor finds that the property was also ineligible for the classification in earlier years, the difference in taxes payable during the previous years and the tax that would have been paid had it been assessed at its highest and best use;

(3) A penalty equal to twenty-five percent of the additional amount if the withdrawal or redesignation occurs during the first year of such classification or if due to improper classification taxes for three or more years are affected; and

(4) Interest upon the amount of such additional tax and penalty at the same statutory rate charged on delinquent property taxes from the dates on which such additional tax could have been paid without penalty if the land had been assessed at its highest and best use.

A lien for additional amounts due has priority and shall be collected in the same manner as property taxes. When the change of classification results from a cause listed in section 11 of this act, the additional tax due, if any, shall be prorated in proportion to the duration the property was eligible for classification as "devoted primarily to low-income housing."

NEW SECTION. Sec. 11. The additional payments identified in section 10 of this act do not apply when the withdrawal or redesignation of the property from its classification as "devoted primarily to low-income housing" is due to any of the following causes:

(1) A taking under exercise of the power of eminent domain or a transfer to a condemning authority under threat of an exercise of the power of eminent domain;

(2) A transfer to a use that is exempt from property taxes;

(3) A change in the law or land use regulations that precludes use of the property for low income housing;

(4) Destruction of the property, or such severe damage as to render the premises untenantable, through a natural disaster, such as flood, landslide, or earthquake, or a calamity beyond the owner's control, such as fire.

NEW SECTION. Sec. 12. An aggrieved owner, municipality, and the state department of revenue may appeal an action granting or denying a classification to the classification of "devoted primarily to low-income housing" or granting or denying a redesignation from such a classification to the county board of equalization. The appeal shall be filed within thirty days by serving a copy upon the reviewing officer and the county board of equalization. The appeal shall be processed in the same manner as appeals from property valuations. Any party with a right to appeal may intervene in an appeal filed by another party. The decision of the county board of equalization is final, subject to judicial review.

NEW SECTION. Sec. 13. The state department of revenue may adopt rules to implement this chapter.

The department of community development may prepare and publish data on median income to implement this chapter. The agency may make its estimates for areas outside federal standard metropolitan statistical areas on the basis of the nearest area with such data.

NEW SECTION. Sec. 14. This chapter shall be liberally construed to accomplish its purposes. This chapter shall also be interpreted as granting reviewing officials designated by a city or county the authority to carry out the functions contemplated by section 5 of this act.

NEW SECTION. Sec. 15. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 16. Sections 1 through 15 of this act shall constitute a new chapter in Title 84 RCW.

NEW SECTION. Sec. 17. This act shall take effect upon the effective date of an amendment to Article VII, section 11 of the Washington state Constitution to authorize current use valuation of property with buildings that meet health and safety standards and are devoted primarily to low-income housing, and contain five or more low-income dwelling units. If such amendment is not validly submitted to and approved by the voters at the general election of November 5, 1985, this act shall be null and void in its entirety.