Background:

Department of Commerce Housing Assistance Program.

The state Housing Trust Fund (HTF), a common name for the state Housing Assistance Program, was established as a renewable resource to meet the basic housing needs of low income and special needs citizens. The HTF is managed by the Department of Commerce (Department) to support the Department's housing programs.

Through the HTF, the Department distributes funding through a competitive grant process to eligible organizations for projects that serve individuals and families with special needs and whose income is at, or below, 50 percent of the median family income for the county or city where the project is located. At least 30 percent of the HTF funding must be used for projects in rural areas. Organizations eligible to receive funding include local governments, local housing authorities, regional support networks, nonprofit community or neighborhood-based organizations, federally recognized Indian tribes, and regional or statewide nonprofit housing assistance organizations.

Funding from the HTF may be used for various related purposes, including:

low-income housing construction and rehabilitation;
rent subsidies, matching funding for housing-related social services;
administrative and technical costs for housing assistance groups;
homeless shelters;
mortgage and down payment assistance; and
accessibility in housing for persons with disabilities.

Federal Department of Health and Human Services.

The United States Department of Health and Human Services (HHS) provides nationwide health and human services, and oversees programs that provide advancement in medicine, public health, and social services. Each year the HHS issues poverty guidelines, also referred to as the federal poverty level. The poverty guidelines are used as eligibility criterion for a number of federal assistance programs. For example, in Washington, the federal poverty level used for a single person is $12,060 and the federal poverty level used for a family of four is $24,600.

United States Department of Housing and Urban Development.

The United States Department of Housing and Urban Development (HUD) provides many affordable housing opportunities to states, local governments, and individual homebuyers. The HUD's Community Development Block Grant Program provides grants to non-entitled areas in state and local governments for housing and community development needs. The HUD defines "non-entitlement areas" as those that are not metropolitan cities or part of an urban county, cities with a population of less than 50,000, and counties with a population of less than 200,000.

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Summary of Substitute Bill:

The Low-Income Home Rehabilitation Revolving Loan Program (LHRRLP) is established within the Department. The program must include certain elements, including:

Eligible homeowners must be low-income and live in rural areas. "Low-income" means persons or households with incomes at or below 200 percent of the federal poverty level as adjusted for family size and determined annually by the federal HHS. "Rural areas" means areas of Washington defined as non-entitlement areas by HUD.
Homeowners who are senior citizens, persons with disabilities, families with children 5 years old and younger, and veterans must receive priority for loans.
The cost of the home rehabilitation must be the lesser of 80 percent of the assessed value of the property or $40,000. "Home rehabilitation" means residential repairs and improvements that address health, safety, and durability issues in existing housing in rural areas.
The maximum amount that may be loaned under this program may not exceed the cost of the home rehabilitation.
The interest rate of the loan must be equal to the previous calendar year's annual average consumer price index compiled by the Bureau of Labor Statistics.
The Department must allow participating homeowners to defer repayment of the loan principal and interest and any fees related to the administration or issuance of the loan.

The Department must contract with rehabilitation agencies to provide home rehabilitation to participating homeowners. "Rehabilitation agency" means any approved Department grantee, tribal nation, or any public service company, municipality, public utility district, mutual cooperative or other entity that bears the responsibility for rehabilitating residences under the LHRRLP. Rehabilitation agencies may not charge more than the allowed administrative fee to participating homeowners and must report at least quarterly on project costs and the number of homes repaired and rehabilitated under the LHRRLP.

A nonappropriated account is created, the LHRRLP Account (Account), in the custody of the State Treasurer. Expenditures from the Account may only be used for the purpose of the LHRRLP and may only be authorized by the Director of the Department or the Director's designee.

Substitute Bill Compared to Original Bill:

The substitute bill: (1) expands eligible rehabilitation projects to include duplexes and rental properties; (2) limits the loan amount to 80 percent of the assessed value on the property, rather than 80 percent of the appraised value of the home; (3) changes the interest rate of rehabilitation loans from variable to fixed interest rates; (4) requires there to be an exchange of money for refinancing purposes, not solely a property transfer, for repayment of a loan under the program to be required; (5) eliminates the requirement that a rehabilitation loan must be repaid when an owner no longer resides in the home permanently; and (6) places the rehabilitation loan in second position to the rehabilitation mortgage, rather than first.

Staff Summary of Public Testimony:

(In support) The LHRRLP is meant to work in conjunction with other programs, including low-income weatherization programs, to address the need to stabilize homes requiring repair before other improvements can be made. For example, the Opportunity Council weatherizes approximately 125 homes per year and is unable to weatherize some homes due to severe issues with the homes. In many instances, homeowners have the equity in their home, but do not have funds available to make necessary repairs to keep a home stable. This program will provide a means for homeowners to make the necessary repairs, allowing for additional improvements to be made, and avoiding potential loss of the home in the future. Not only will the program be an additional resource for homeowners in rural areas, but will help homeowners from needing subsidized housing or becoming homeless. The goal in the end is to create a sustainable revolving fund to support these efforts, creating a more robust program to help with affordable housing.

(Opposed) None.