HOUSE BILL REPORT

ESB 5647

As Reported by House Committee On:

Community Development, Housing & Tribal Affairs

Capital Budget

Title: An act relating to creating a low-income home rehabilitation revolving loan program.

Brief Description: Creating a low-income home rehabilitation revolving loan program.

Sponsors: Senators Honeyford, Takko, Schoesler and Saldaña.

Brief History:

Committee Activity:

Community Development, Housing & Tribal Affairs: 3/15/17, 3/21/17 [DP];

Capital Budget: 3/30/17, 4/3/17 [DPA].

Majority Report: Do pass. Signed by 7 members: Representatives Ryu, Chair; Macri, Vice Chair; McCabe, Ranking Minority Member; Barkis, Assistant Ranking Minority Member; Jenkin, Reeves and Sawyer.

Staff: Kirsten Lee (786-7133).

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 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 state and local governments to provide assistance to nonentitled areas for housing and community development needs. The HUD defines nonentitlement 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 Bill:

The Low-Income Home Rehabilitation Revolving Loan Program (LHRRLP) is established within the Department of Commerce (Department).

The program must include that:

• 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 Department of Health and Human Services. "Rural areas" means areas of Washington defined as nonentitlement areas by the United States Department of Housing and Urban Development.

• Homeowners who are senior citizens, persons with disabilities, families with children five 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 home post rehabilitation 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 and must not result in loans borrowed against the property equaling more than 80 percent of the assessed value.

• 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.  Any amounts deferred become a lien in favor of the state and is secondary in rank to all other privileges, liens, monetary encumbrances, or other security interests that affect the real property, with the exception of special district property tax assessments.  The loan must be repaid upon sale of the home or upon change in ownership of the home.

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 Low-Income Home Rehabilitation Revolving Loan Program 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.

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Appropriation: None.

Fiscal Note: Available.

Effective Date: The bill takes effect 90 days after adjournment of the session in which the bill is passed.

Staff Summary of Public Testimony:

(In support) The Low-Income Revolving Loan Program (LHRRLP) is designed to allow residents to continue living in their homes by providing funding for those who cannot afford to maintain their homes. The LHRRLP is focused on providing loans for residents located in rural areas of the state. Nonrural area residents of the state currently receive funding from the Community Development Block Grant Program for the purpose of maintaining their homes, while rural areas do not have funding available for this purpose.  If it is not possible to create a statewide program for this purpose, the goal is to provide similar funding opportunities for those located in rural areas of the state.

The recent change to this legislation that requires the loan amount to be based on the assessed value of the property, rather than the appraised value, is a positive change.  While the change may cause a slight decrease in the amount of funds available to LHRRLP participants, the change provides a better safeguard for the state's investment.

(Opposed) None.

Persons Testifying: Senator Honeyford, prime sponsor; Seth Dawson, Washington State Community Action Partnership, National Alliance on Mental Illness, Washington; and Dave Finet, Washington State Community Action Partnership.

Persons Signed In To Testify But Not Testifying: None.

Majority Report: Do pass as amended. Signed by 17 members: Representatives Tharinger, Chair; Doglio, Vice Chair; Peterson, Vice Chair; DeBolt, Ranking Minority Member; Smith, Assistant Ranking Minority Member; Dye, Johnson, Koster, Kraft, Macri, Morris, Reeves, Ryu, Sells, Steele, Stonier and J. Walsh.

Staff: Melissa Palmer (786-7388).

Summary of Recommendation of Committee On Capital Budget Compared to Recommendation of Committee On Community Development, Housing & Tribal Affairs:

Any amounts deferred under the Low-Income Home Rehabilitation Revolving Loan Program become a lien in favor of the state and the lien is subordinate to liens for general taxes, amounts deferred under chapters 84.37 RCW or 84.38 RCW, or special assessments as defined in RCW 84.38.020.

Appropriation: None.

Fiscal Note: Available.

Effective Date of Amended Bill: The bill takes effect 90 days after adjournment of the session in which the bill is passed.

Staff Summary of Public Testimony:

(In support) We support this policy and the way it was amended in the Senate, which conformed the policy to the way the companion bill passed the House of Representatives with one difference.  The additional language in the Senate version better protects the state in recovering the loan as it sets the limit of the loan to 80 percent of the assessed value of the property.  The Senate does include $1.2 million in funding in their Capital Budget proposal for this bill.  There is data on programs like these which show it helps the elderly and disabled stay in their homes.  It also provides stability to low-income families with young children.  The funding would be allocated to various areas of the state.  Most homeowners would be identified through the Weatherization Program.  Additionally, a low-income homeowner could separately apply for the loans offered through this program. 

(Opposed) None.

Persons Testifying: Seth Dawson and Dave Finet, Washington State Community Action Partnership.

Persons Signed In To Testify But Not Testifying: None.