BILL REQ. #:  H-4245.1 

Read first time 01/19/2006.   Referred to Committee on Housing.

     AN ACT Relating to increasing nonprofit housing development capacity; amending RCW 43.180.160, 43.180.080, and 43.180.050; adding new sections to chapter 43.180 RCW; adding a new section to chapter 43.63A RCW; creating a new section; and making an appropriation.

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

NEW SECTION.  Sec. 1   A new section is added to chapter 43.180 RCW to read as follows:
     The legislature finds that nonprofit organizations that develop affordable housing for low-income households are critical in addressing the growing affordable housing crisis in Washington state. Nonprofit housing developers are mission-driven entities that prioritize the needs and interests of residents over maximizing profits and, therefore, have a vested interest in developing, maintaining, and preserving safe, quality, and affordable housing options for low-income and indigent individuals and families.
     The state also finds, however, that organizational capacity and housing development experience among nonprofit organizations is inconsistent across the state. This inconsistency is reflected in the relative lack of nonprofit housing developers that exist in rural areas of the state.
     The legislature finds that many nonprofit housing developers choose not to develop condominiums and other multiunit residential buildings because private market insurance rates to cover the construction liability insurance required for such projects by many lenders is unaffordable. Construction liability insurance costs are particularly cost prohibitive for nonprofit organizations that, rather than selling or reselling individual units when construction is complete and thereby recouping the cost of the construction insurance, typically retain ownership of units for the purpose of maintaining affordability for low-income or indigent households.
     Given the nonprofit status and focus on serving low-income and indigent households over the long term, nonprofit housing developers are unique and critical to ensuring that low-income and indigent households have the opportunity to obtain and retain stable housing in Washington.
     Therefore, it is the intent of the legislature to establish policies and provide incentives that will increase the number of nonprofit housing developers that create affordable housing opportunities for low-income and indigent households, and which will simultaneously increase the ability of existing nonprofit housing developers to expand housing development programs and to sustain the resulting affordable housing units over the long term.

Sec. 2   RCW 43.180.160 and 1999 c 131 s 2 are each amended to read as follows:
     The total amount of outstanding indebtedness of the commission may not exceed ((three)) five billion dollars at any time. The calculation of outstanding indebtedness shall include the initial principal amount of an issue and shall not include interest that is either currently payable or that accrues as a part of the face amount of an issue payable at maturity or earlier redemption. Outstanding indebtedness shall not include notes or bonds as to which the obligation of the commission has been satisfied and discharged by refunding or for which payment has been provided by reserves or otherwise.

NEW SECTION.  Sec. 3   A new section is added to chapter 43.63A RCW to read as follows:
     The department of community, trade, and economic development shall establish a multiunit residential building construction liability revolving fund program for nonprofit organizations that construct or rehabilitate condominiums or other multiunit residential buildings, as defined in RCW 64.55.010.
     (1) The multiunit residential building construction liability revolving fund program shall:
     (a) Be available to an organization that meets the following criteria:
     (i) The organization must be defined as a nonprofit organization under section 501(c)(3) of the internal revenue code or similar successor provisions;
     (ii) The organization must have developed or be in the process or planning stages of developing a multiunit residential building;
     (iii) The organization must have a building permit for the construction or rehabilitative reconstruction of a multiunit residential building; and
     (iv) The organization must meet criteria for eligibility and membership established in subsection (3) of this section;
     (b) Pay for a claim made by a member of the revolving fund program to cover all liability associated with the construction of a multiunit residential building and to cover construction defects that arise within seven years after the completion date of the multiunit residential building, excluding any liability during and after construction that is covered by a revolving fund program member's general liability or corporate and property liability insurance policy;
     (c) Assess a premium on each member of the revolving fund program for each multiunit residential building unit for which coverage for construction liability is sought through the revolving fund program. The formula and schedule for premiums assessed through the revolving fund program shall be developed by the department, except that the cost of the premium per unit shall not exceed two hundred fifty dollars.
     (2) If a member of the revolving fund program does not make a claim for payment from the revolving fund program for seven years after the completion date of a multiunit residential building covered by the revolving fund program, all premiums assessed on the member by the revolving fund program that are associated with the multiunit residential building shall be refunded to the member no later than six months after the seventh year anniversary of the completion date of the multiunit residential building.
     (3) The department shall develop criteria to determine eligibility, membership, scope of coverage, and other policies and operating procedures for the revolving fund program established by this act. The department may contract with an underwriter to develop these policies. The department may consult with the office of financial management's risk management office for the development and administration of this program.
     (4) Premiums collected under this act shall be deposited into the multiunit residential building construction liability revolving fund program account created in section 4 of this act.

NEW SECTION.  Sec. 4   A new section is added to chapter 43.180 RCW to read as follows:
     The multiunit residential building construction liability revolving fund program account is created in the custody of the state treasurer. All receipts from appropriations and transfers made in sections 5 and 6 of this act as well as premiums collected by members of the multiunit residential building construction liability revolving fund program must be deposited in the account. Expenditures from the account may be used only to pay claims associated with a multiunit residential building covered by the multiunit residential building construction liability revolving fund program. Only the director of the department of community, trade, and economic development, or the director's designee may authorize expenditures from the account. The account is subject to the allotment procedures under chapter 43.88 RCW, but an appropriation is not required for expenditures.

NEW SECTION.  Sec. 5   The sum of one million dollars, or as much thereof as may be necessary, is appropriated for the fiscal year ending June 30, 2007, from the housing trust fund account to the multiunit residential building construction liability revolving fund program account for the purposes of this act.

NEW SECTION.  Sec. 6   The housing finance commission shall transfer the sum of one million dollars for the fiscal year ending June 30, 2007, to the multiunit residential building construction liability revolving fund program account for the purposes of this act.

Sec. 7   RCW 43.180.080 and 1997 c 163 s 1 are each amended to read as follows:
     In addition to other powers and duties specified in this chapter, the commission may:
     (1) Establish in resolutions relating to any issuance of bonds, or in any financing documents relating to such issuance, such standards and requirements applicable to the purchase of mortgages and mortgage loans or the making of loans to mortgage lenders as the commission deems necessary or desirable, including but not limited to: (a) The time within which mortgage lenders must make commitments and disbursements for mortgages or mortgage loans; (b) the location and other characteristics of single-family housing or multifamily housing to be financed by mortgages and mortgage loans; (c) the terms and conditions of mortgages and mortgage loans to be acquired; (d) the amounts and types of insurance coverage required on mortgages, mortgage loans, and bonds; (e) the representations and warranties of mortgage lenders confirming compliance with such standards and requirements; (f) restrictions as to interest rate and other terms of mortgages or mortgage loans or the return realized therefrom by mortgage lenders; (g) the type and amount of collateral security to be provided to assure repayment of any loans from the commission and to assure repayment of bonds; and (h) any other matters related to the purchase of mortgages or mortgage loans or the making of loans to lending institutions as shall be deemed relevant by the commission;
     (2) Sue and be sued in its own name;
     (3) Make and execute contracts and all other instruments necessary or convenient for the exercise of its purposes or powers, including but not limited to contracts or agreements for the origination, servicing, and administration of mortgages or mortgage loans, and the borrowing of money;
     (4) Procure such insurance, including but not limited to insurance: (a) Against any loss in connection with its property and other assets, including but not limited to mortgages or mortgage loans, in such amounts and from such insurers as the commission deems desirable, and (b) to indemnify members of the commission for acts done in the course of their duties;
     (5) Provide for the investment of any funds, including funds held in reserve, not required for immediate disbursement, and provide for the selection of investments;
     (6) Fix, revise, and collect fees and charges in connection with the investigation and financing of housing or in connection with assignments, contracts, purchases of mortgages or mortgage loans, or any other actions permitted under this chapter or by the commission; and receive grants and contributions;
     (7) Make such expenditures as are appropriate for paying the administrative costs of the commission and for carrying out the provisions of this chapter. For the fiscal year ending June 30, 2007, an appropriate expenditure shall include a transfer of funds to the multiunit residential building construction liability revolving fund program account created in section 4 of this act. These expenditures may be made only from funds consisting of the commission's receipts from fees and charges, grants and contributions, the proceeds of bonds issued by the commission, and other revenues; these expenditures shall not be made from funds of the state of Washington;
     (8) Establish such special funds, and controls on deposits to and disbursements from them, as it finds convenient for the implementation of this chapter;
     (9) Conduct such investigations and feasibility studies as it deems appropriate;
     (10) Proceed with foreclosure actions or accept deeds in lieu of foreclosure together with the assignments of leases and rentals incidental thereto. Any properties acquired by the commission through such actions shall be sold as soon as practicable through persons licensed under chapter 18.85 RCW or at public auction, or by transfer to a public agency. In preparation for the disposition of the properties, the commission may own, lease, clear, construct, reconstruct, rehabilitate, repair, maintain, manage, operate, assign, or encumber the properties;
     (11) Take assignments of leases and rentals;
     (12) Subject to any provisions of the commission's contracts with the holders of obligations of the commission, consent to any modification with respect to rate of interest, time, and payment of any installment of principal or interest or any other term of any contract, mortgage, mortgage loan, mortgage loan commitment, contract, or agreement of any kind;
     (13) Subject to provisions of the commission's contracts with the holders of bonds, permit the reduction of rental or carrying charges to persons unable to pay the regular rent or schedule of charges if, by reason of other income of the commission or by reason of payment by any department, agency, or instrumentality of the United States or of this state, the reduction can be made without jeopardizing the economic stability of the housing being financed;
     (14) Sell, at public or private sale, with or without public bidding, any mortgage, mortgage loan, or other instrument or asset held by the commission;
     (15) Employ, contract with, or engage engineers, architects, attorneys, financial advisors, bond underwriters, mortgage lenders, mortgage administrators, housing construction or financing experts, other technical or professional assistants, and such other personnel as are necessary. The commission may delegate to the appropriate persons the power to execute legal instruments on its behalf;
     (16) Receive contributions or grants from any source unless otherwise prohibited;
     (17) Impose covenants running with the land in order to satisfy and enforce the requirements of applicable state and federal law and commission policy with respect to housing or other facilities financed by the commission or assisted by federal, state, or local programs administered by the commission, by executing and recording regulatory agreements or other covenants between the commission and the person or entity to be bound. These regulatory agreements and covenants shall run with the land and be enforceable by the commission or its successors or assigns against the person or entity making the regulatory agreement or covenants or its successors or assigns, even though there may be no privity of estate or privity of contract between the commission or its successors or assigns and the person or entity against whom enforcement is sought. The term of any such covenant shall be set forth in the recorded agreement containing the covenant. This subsection shall apply to regulatory agreements and covenants previously entered into by the commission as well as regulatory agreements and covenants entered into by the commission on or after July 27, 1997;
     (18) Delegate any of its powers and duties if consistent with the purposes of this chapter;
     (19) Exercise any other power reasonably required to implement the purposes of this chapter.

Sec. 8   RCW 43.180.050 and 1986 c 264 s 1 are each amended to read as follows:
     (1) In addition to other powers and duties prescribed in this chapter, and in furtherance of the purposes of this chapter to provide decent, safe, sanitary, and affordable housing for eligible persons, the commission is empowered to:
     (a) Issue bonds in accordance with this chapter;
     (b) Invest in, purchase, or make commitments to purchase or take assignments from mortgage lenders of mortgages or mortgage loans;
     (c) Make loans to or deposits with mortgage lenders for the purpose of making mortgage loans; and
     (d) Participate fully in federal and other governmental programs and to take such actions as are necessary and consistent with this chapter to secure to itself and the people of the state the benefits of those programs and to meet their requirements, including such actions as the commission considers appropriate in order to have the interest payments on its bonds and other obligations treated as tax exempt under the code.
     (2) The commission shall establish eligibility standards for eligible persons, considering at least the following factors:
     (a) Income;
     (b) Family size;
     (c) Cost, condition and energy efficiency of available residential housing;
     (d) Availability of decent, safe, and sanitary housing;
     (e) Age or infirmity; and
     (f) Applicable federal, state, and local requirements.
     (3) The commission may only allocate low-income housing tax credits to organizations that are defined as a nonprofit organization under section 501(c)(3) of the internal revenue code or similar successor provisions.
     The state auditor shall audit the books, records, and affairs of the commission annually to determine, among other things, if the use of bond proceeds complies with the general plan of housing finance objectives including compliance with the objective for the use of financing assistance for implementation of cost-effective energy efficiency measures in dwellings.