SENATE BILL REPORT

EHB 2051

BYRepresentative Locke

Minimizing the involuntary displacement of tenants in federally assisted housing.

House Committe on Housing

Senate Committee on Economic Development & Labor

Senate Hearing Date(s):March 29, 1989; March 31, 1989

Majority Report:  Do pass.

      Signed by Senators Lee, Chairman; Anderson, Vice Chairman; McDonald, McMullen, Murray, Saling, Smitherman, Warnke, Williams.

Senate Staff:David Cheal (786-7576)

                  March 31, 1989

AS REPORTED BY COMMITTEE ON ECONOMIC DEVELOPMENT & LABOR, MARCH 31, 1989

BACKGROUND:

In the 1970's the federal government developed a variety of programs to assist in the construction or rehabilitation of rental housing that would be available to lower income persons at affordable rents.  The programs administered by the U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of Agriculture's Farmers Home Administration (FmHA) provided: (a) direct low-interest rate loans to public and private developers; (b) insurance on mortgages made by private financial institutions to public or private developers; or (c) rental subsidies to tenants.

The contracts for many of these programs have provisions that allow owners of the multifamily housing development to terminate or prepay the subsidy after a specified time.  With the termination or prepayment of the subsidy, the obligation to remain in the specific program is eliminated.  Many of the multifamily housing developments assisted in the 1970's have or are reaching the specified time when the owner can terminate or prepay the mortgage or subsidy, thereby being relieved of the program's rent obligation.

In response to this problem, the federal Housing and Community Development Act of 1987 requires owners of federally assisted multifamily housing developments to provide a "notice of intent" to prepay and "plan of action" to the federal government and appropriate state and local governmental bodies.  The federal provisions are scheduled to expire November 1, 1989.

The existing Landlord-Tenant Act does not require owners of a multifamily rental housing development, constructed or rehabilitated through a HUD or FmHA subsidy program, to provide special notice to the tenants or local governing bodies prior to termination or prepayment of the federal subsidy.

SUMMARY:

The Landlord-Tenant Act is revised to require a 12 month advance notice to the tenants and governmental bodies when a multifamily rental housing development assisted through a U.S. Department of Housing and Urban Development or Farmers Home Administration subsidy program is to be terminated or prepaid by the owner.  The owner is not prohibited from terminating a rental assistance contract or prepaying the federally assisted mortgage or loan.

Notification Requirements

The owner must provide a written notification to each tenant, the clerk of the local governing body, and the state Department of Community Development.  The notification to the tenant shall state the date of the proposed termination or prepayment and impacts of the termination or prepayment upon the tenant.

The notification to the state and local government shall state: (a) the number of tenants in the project; (b) the number and size of units receiving federal assistance; (c) the family size and estimated incomes of the tenants affected by the termination or prepayment; (d) the projected rent increases; and (e) the anticipated termination or prepayment date.

Other Requirements

For 12 months after notification to the tenants and governmental bodies or, if it occurs later, until the rental assistance contract, mortgage, or loan expires or is prepaid, the owner of the affected housing may not: (a) evict or demand possession of the unit; (b) increase the rent of the unit; or (c) change the terms of the rental agreement of a federally assisted housing unit unless authorized by the federal assistance program applicable to the project.

If proper notification of expiration or prepayment of the rental assistance contract, mortgage or loan was not provided, the owner is liable for damages suffered by tenants, plus reasonable attorneys fees.

The Department of Community Development is required to prepare an annual report on the preservation and loss of federally assisted housing in the state.  The report is to include recommendations for preserving federally assisted housing and for minimizing involuntary displacement.  The report and recommendations are to be submitted to the appropriate committees of the Legislature.

Appropriation:    none

Revenue:    none

Fiscal Note:      requested February 20, 1989

Senate Committee - Testified: Gregory Provenzano (pro); Mike Ryherd (pro); Mary Murphy (pro)