SENATE BILL REPORT

SB 5795

BYSenators Lee, Talmadge and Warnke

Minimizing the involuntary displacement of tenants in federally assisted housing.

Senate Committee on Economic Development & Labor

Senate Hearing Date(s):February 21, 1989; March 1, 1989

Majority Report:  That Substitute Senate Bill No. 5795 be substituted therefor, and the substitute bill do pass.

      Signed by Senators Lee, Chairman; McDonald, Murray, Smitherman, Warnke, Williams.

Senate Staff:David Cheal (786-7576)

                  March 2, 1989

AS REPORTED BY COMMITTEE ON ECONOMIC DEVELOPMENT & LABOR, MARCH 1,1989

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 low 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:  (1) direct low-interest rate loans to public and private developers; (2) insurance on mortgages made by private financial institutions to public or private developers; or (3) 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 12-month notice does not prohibit the owner from terminating a rental assistance contract or prepaying the federally assisted mortgage or loan.

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:  (1) the number of tenants in the project: (2) the number and size of units receiving federal assistance; (3) the family size and estimated incomes of the tenants affected by the termination or prepayment; (4) the projected rent increases; and (5) the anticipated termination or prepayment date.

The owner of affected housing may not evict the tenant, raise the rent or change the terms of the rental agreement for 12 months following the required notices, or until expiration of the federal assistance, or prepayment, whichever is later.

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.

EFFECT OF PROPOSED SUBSTITUTE:

Voucher and certificate housing assistance programs are removed from the reporting requirements.  The required report from the Department of Community Development is made a one-time report rather than an annual report.

Appropriation:    none

Revenue:    none

Fiscal Note:      requested February 20, 1989

Senate Committee - Testified: Kurt Creager (pro), Mike Ryherd (pro),Jane Noland (pro), Greg Provenzano (pro), Carla Okigwe (pro), Arnold Livingston (pro), Ken Katahira (pro), Ben Bonkowski