SENATE BILL REPORT

SB 5831

BYSenators Warnke and Smitherman

Providing funds for the housing trust fund from rental security deposit interest.

Senate Committee on Economic Development & Labor

Senate Hearing Date(s):February 21, 1989

Senate Staff:David Cheal (786-7576)

AS OF FEBRUARY 20, 1989

BACKGROUND:

The housing trust fund was established in 1986 by the Legislature to provide money on a competitive grant and loan basis to local governments and nonprofit housing groups.  Funds must be used to assist in providing housing to families and individuals at or below 50 percent of the median income.

A variety of methods have been used to put money into the fund, for example, operating budget and capital budget appropriations, and aggregated interest on realtor's trust accounts.  Many other techniques have been proposed.

The Residential Landlord Tenant Act declares that interest which accrues to tenant's security deposits is the property of the landlord unless otherwise agreed in writing.

SUMMARY:

Landlords must place security deposits that are nominal and short term in pooled interest bearing trust accounts.  "Nominal" is defined as a deposit which is less than one-half of one month's rent; "short term" is defined as either an indefinite period, or a period of time less than one year.

Landlords shall direct the depository institution to pay the interest on this account to the State Treasurer for deposit into the housing trust fund at least every six months.  Banks may deduct a reasonable transaction cost not to exceed 1 percent of a typical passbook rate.  Other security deposits which are not nominal or short term must be placed in interest bearing trust accounts with the tenant entitled to receive the interest.

Appropriation:    none

Revenue:    none

Fiscal Note:      requested February 14, 1989