"Sec. 1   RCW 43.185.050 and 2006 c 371 s 236 are each amended to read as follows:
     (1) The department shall use moneys from the housing trust fund and other legislative appropriations to finance in whole or in part any loans or grant projects that will provide housing for persons and families with special housing needs and with incomes at or below fifty percent of the median family income for the county or standard metropolitan statistical area where the project is located. At least thirty percent of these moneys used in any given funding cycle shall be for the benefit of projects located in rural areas of the state as defined by the department. If the department determines that it has not received an adequate number of suitable applications for rural projects during any given funding cycle, the department may allocate unused moneys for projects in nonrural areas of the state.
     (2) Activities eligible for assistance from the housing trust fund and other legislative appropriations include, but are not limited to:
     (a) New construction, rehabilitation, or acquisition of low and very low-income housing units;
     (b) Rent subsidies;
     (c) Matching funds for social services directly related to providing housing for special-need tenants in assisted projects;
     (d) Technical assistance, design and finance services and consultation, and administrative costs for eligible nonprofit community or neighborhood-based organizations;
     (e) Administrative costs for housing assistance groups or organizations when such grant or loan will substantially increase the recipient's access to housing funds other than those available under this chapter;
     (f) Shelters and related services for the homeless, including emergency shelters and overnight youth shelters;
     (g) Mortgage subsidies, including temporary rental and mortgage payment subsidies to prevent homelessness;
     (h) Mortgage insurance guarantee or payments for eligible projects;
     (i) Down payment or closing cost assistance for eligible first-time home buyers;
     (j) Acquisition of housing units for the purpose of preservation as low-income or very low-income housing;
     (k) Projects making housing more accessible to families with members who have disabilities; and
     (l) During the 2005-2007 fiscal biennium, a manufactured/mobile home landlord-tenant ombudsman conflict resolution and park registration program.
     (3) During the 2005-2007 fiscal biennium, revenues generated under RCW 36.22.178 may be used for the development of affordable housing projects and other activities funded in section 108, chapter 371, Laws of 2006.
     (4) Legislative appropriations from capital bond proceeds may be used only for the costs of projects authorized under subsection (2)(a), (i), and (j) of this section, and ((not for the administrative costs of the department)) for department costs directly related to project application, review, selection, contracting, and project development, as specified in the omnibus capital appropriations act. Legislative appropriations from capital bond proceeds may not be used for loans if the appropriations are also obligated for other grants or loans or if the anticipated repayment of the loan is from future state legislative appropriations.
     (5) Moneys from repayment of loans from appropriations from capital bond proceeds may be used for all activities necessary for the proper functioning of the housing assistance program except for activities authorized under subsection (2)(b) and (c) of this section.
     (((6) Administrative costs of the department shall not exceed five percent of the annual funds available for the housing assistance program.))

Sec. 2   RCW 43.185.070 and 2005 c 518 s 1802 and 2005 c 219 s 2 are each reenacted and amended to read as follows:
     (1) During each calendar year in which funds from the housing trust fund or other legislative appropriations are available for use by the department for the housing assistance program, the department shall announce to all known interested parties, and through major media throughout the state, a grant and loan application period of at least ninety days' duration. This announcement shall be made as often as the director deems appropriate for proper utilization of resources. The department shall then promptly grant as many applications as will utilize available funds less appropriate administrative costs of the department. ((Administrative costs paid out of the housing trust fund may not exceed five percent of annual revenues available for distribution to housing trust fund projects.)) In awarding funds under this chapter, the department shall provide for a geographic distribution on a statewide basis.
     (2) The department shall give first priority to applications for projects and activities which utilize existing privately owned housing stock including privately owned housing stock purchased by nonprofit public development authorities and public housing authorities as created in chapter 35.82 RCW. As used in this subsection, privately owned housing stock includes housing that is acquired by a federal agency through a default on the mortgage by the private owner. Such projects and activities shall be evaluated under subsection (3) of this section. Second priority shall be given to activities and projects which utilize existing publicly owned housing stock. All projects and activities shall be evaluated by some or all of the criteria under subsection (3) of this section, and similar projects and activities shall be evaluated under the same criteria.
     (3) The department shall give preference for applications based on some or all of the criteria under this subsection, and similar projects and activities shall be evaluated under the same criteria:
     (a) The degree of leveraging of other funds that will occur;
     (b) The degree of commitment from programs to provide necessary habilitation and support services for projects focusing on special needs populations;
     (c) Recipient contributions to total project costs, including allied contributions from other sources such as professional, craft and trade services, and lender interest rate subsidies;
     (d) Local government project contributions in the form of infrastructure improvements, and others;
     (e) Projects that encourage ownership, management, and other project-related responsibility opportunities;
     (f) Projects that demonstrate a strong probability of serving the original target group or income level for a period of at least twenty-five years;
     (g) The applicant has the demonstrated ability, stability and resources to implement the project;
     (h) Projects which demonstrate serving the greatest need;
     (i) Projects that provide housing for persons and families with the lowest incomes;
     (j) Projects serving special needs populations which are under statutory mandate to develop community housing;
     (k) Project location and access to employment centers in the region or area;
     (l) Projects that provide employment and training opportunities for disadvantaged youth under a youthbuild or youthbuild-type program as defined in RCW 50.72.020; and
     (m) Project location and access to available public transportation services.
     (4) The department shall only approve applications for projects for ((mentally ill)) persons with mental illnesses that are consistent with a regional support network six-year capital and operating plan.

Sec. 3   RCW 43.185A.030 and 2005 c 518 s 1803 and 2005 c 219 s 3 are each reenacted and amended to read as follows:
     (1) Using moneys specifically appropriated for such purpose, the department shall finance in whole or in part projects that will provide housing for low-income households.
     (2) Activities eligible for assistance include, but are not limited to:
     (a) New construction, rehabilitation, or acquisition of housing for low-income households;
     (b) Rent subsidies in new construction or rehabilitated multifamily units;
     (c) Down payment or closing costs assistance for first-time home buyers;
     (d) Mortgage subsidies for new construction or rehabilitation of eligible multifamily units; and
     (e) Mortgage insurance guarantee or payments for eligible projects.
     (3) Legislative appropriations from capital bond proceeds may be used only for the costs of projects authorized under subsection (2) (a), (c), (d), and (e) of this section, and ((not for the administrative costs of the department)) for department costs directly related to project application, review, selection, contracting, and project development, as specified in the omnibus capital appropriations act. Legislative appropriations from capital bond proceeds may not be used for loans if the appropriations are also obligated for other grants or loans or if the anticipated repayment of the loan is from future state legislative appropriations.
     (4) Moneys from repayment of loans from appropriations from capital bond proceeds may be used for all activities necessary for the proper functioning of the affordable housing program except for activities authorized under subsection (2)(b) of this section.
     (((5) Administrative costs of the department shall not exceed five percent of the annual funds available for the affordable housing program.))"