SENATE BILL REPORT
SB 6367
BYSenators Lee, Warnke, Smitherman, Vognild, Murray and Moore
Creating a right of first refusal for certain federally assisted housing developments.
Senate Committee on Economic Development & Labor
Senate Hearing Date(s):January 30, 1990
Senate Staff:Traci Anderson (786-7452)
AS OF JANUARY 29, 1990
BACKGROUND:
In the recent study entitled "Households at Risk: Loss of Federally Subsidized Housing in Washington," conducted by the University of Washington for the Department of Community Development, it was estimated that there are approximately 27,000 federally assisted, privately owned housing units in the state of Washington, which provide low and moderate income households with affordable housing.
These units were privately developed with the use of federally assisted mortgage subsidy programs and project-based rental subsidy programs. Owners of these federally assisted housing developments are required to reserve all or a portion of the units in these buildings for use by low to moderate income individuals for a specific period of time, usually ranging from five to 40 years. Owners are allowed to terminate the subsidy or pre-pay the mortgage after the specified time period elapses. Those units previously reserved for use by low and moderate income households, can then be converted to market rate rentals, with a subsequent increase in the rental rate often occurring.
The study done by the University of Washington revealed that by 1995, as many as 18,458 of these housing units could be lost for use by low and moderate income households, due to expiring rental subsidy contracts or the pre-payment of assisted mortgages. The cost of replacing this housing could be in excess of $250 million.
During the 1988-1989 legislative session, the Landlord-Tenant Act was revised to require owners of federally assisted housing developments to provide written notification of their intent to terminate a rental subsidy or prepay a mortgage. Notification is to be made to tenants and local and state government officials 12 months before the planned termination or pre-payment of the federal assistance is to occur. Owners are not prohibited from terminating a rental contract or prepaying a mortgage or loan.
SUMMARY:
Any owner of a federally assisted housing development intending to take action which would either: (a) end the use of this property as a federally assisted housing development; or (b) terminate any low-income use restrictions which apply to the development is required to provide to designated eligible entities the first opportunity to purchase the development at a price and upon terms which represent a bona fide offer for sale.
The owner must send a written copy of an offer for sale to all groups or organizations identified by the Department of Community Development, as eligible purchasers of the designated housing development.
The following groups or organizations are designated as eligible entities under this act and are given the right of first refusal on the purchase of federally assisted property, in the following descending order: a tenant association of the development; a local nonprofit organization; a local public agency; the city or county in which the development is located; and a regional or national organization.
To qualify as a purchaser of such property, a group or organization must demonstrate to the Department of Community Development that: (a) it has the financial and organizational capacity to acquire the development and successfully manage the housing for the remaining lifespan of the building; (b) it is willing to agree to maintain the federally assisted housing development for use by a specified percentage of low-income and very-low-income households; and (c) it has no person involved in the administration or governance of the entity or those holding legal ownership with a financial stake in the assisted housing development, that has previously terminated a subsidy contract or prepaid a mortgage on a federally assisted housing development.
An eligible purchaser interested in buying a federally assisted housing development must deliver to the owner its acceptance of the owner's offer to sale or a written offer to purchase the development, within 90 days from the date of delivery of the owner's offer for sale. The owner is required to accept or reject the offer to purchase within 15 days after its receipt.
Provisions are made for resolving disputed purchase agreements between owners and eligible purchasers.
An owner is released from the requirements of this act if the time periods specified in this act have expired without the receipt of an offer to purchase the property or without the execution of a legitimate real estate purchase and sale agreement by an eligible group or organization.
If, during the one-year period after the date of release from the provisions of this act, an owner receives an offer to purchase the property from an entity that is not a qualified entity, the owner must provide each eligible group or organization with the first opportunity to purchase the development under the same terms and conditions of the pending offer to sell or purchase. These groups or organizations have 60 days from the date of notice to respond to the offer. An owner is excluded from this provision if the pending offer comes from an entity that is willing to maintain the development for use by low income tenants, as specified by this act.
Any owner of a federally assisted housing development who fails to comply with the provisions of this act is subject to a civil penalty of up to $25,000 for each rental unit in the housing development that is subject to this act.
A task force is established by the director of the Department of Community Development to develop criteria for evaluating development acquisition opportunities and development acquisition feasibility.
The Department of Community Development, with the advice of the task force, will promulgate rules necessary to implement this act.
Appropriation: none
Revenue: none
Fiscal Note: requested January 24, 1990