Title: An act relating to land acquisition for affordable housing development.

Brief Description: Regarding the acquisition of land for affordable housing.

Sponsors: Representatives Pettigrew, Springer, Dunn, McCune, Miloscia, Chase and Santos.

Brief History:

Housing: 1/22/07, 1/31/07 [DPS].

HOUSE COMMITTEE ON HOUSING

Majority Report: The substitute bill be substituted therefor and the substitute bill do pass. Signed by 6 members: Representatives Miloscia, Chair; Springer, Vice Chair; Dunn, Ranking Minority Member; Kelley, McCune and Ormsby.

Minority Report: Do not pass. Signed by 1 member: Representative Schindler.

Staff: Robyn Dupuis (786-7166).

Background:

The Department of Community, Trade and Economic Development (DCTED) provides financial assistance to housing projects for low-income persons through its Housing Trust Fund Loan and Grant Program. Eligible activities for Housing Trust Fund assistance include new construction and rehabilitation, rent subsidies, housing related social services, shelters, acquisition of low income housing units, and down payment assistance.

There exists a formal process by which eligible organizations may apply for funding. Application periods of at least 90 days duration are announced as often as the DCTED deems appropriate (currently twice a year) and applications are accepted and evaluated only during those periods of time. The review process evaluates the merits of a proposal based on need, readiness, capacity of the organization, and the proposed project impact. The review process takes approximately 12 weeks.      

Some low-income housing developers have found it difficult to purchase and hold land for future affordable housing development given the fast-paced real estate market and the short time periods they are allowed to gather financing and close the deal. Many traditional sources of funding and financing for low-income housing developments, including the Housing Trust Fund, have strict application and review periods which are not always conducive to purchasing land in a timely manner within the private market. Furthermore, although short-term "bridge loans" are available, recipient organizations find themselves with tight deadlines to secure permanent financing for fear of losing the property in question.       

Summary of Substitute Bill:

The Affordable Housing Land Acquisition Program is created within the DCTED for the purpose of implementing and managing a revolving loan fund for land acquisition for affordable housing and associated facility development. Loan interest rates may not exceed 1 percent. Housing must be maintained as affordable for 30 years.
   
In addition to a proposed affordable housing development plan required as part of the loan application process, loan recipients must present a more detailed development plan within five years of loan receipt and must place housing into service within eight years of loan receipt.

The DCTED will contract with the Washington State Housing Finance Commission (HFC) to implement and manage the program. The revolving loan fund will reside with the HFC and all receipts from loan payments and penalties will be remitted to this fund.

Penalty for Non-Compliance
If a housing development does not comply with the requirements of the program, a penalty is imposed which consists of the principal of the loan plus compounded interest calculated at the current market rate at the time the loan was made. The market rate will be determined by the HFC and shall be noted in the loan documents.

Program Reporting
The HFC will report annually on the results of the program to the DCTED and the Legislature using performance measurement data.

Accounts Created and Funding
There is a null and void clause.

Applicable Terms:

• Affordable Housing is housing for rental or homeownership housing for low-income families (80 percent of the median family income). For rental housing, payment of monthly housing costs cannot exceed over 30 percent of the household's income (RCW 43.185A.010).

• Eligible Organizations include local governments, housing authorities, non-profit community or neighborhood-based organizations, federally recognized Indian tribes and regional or statewide nonprofit housing assistance organizations.

Substitute Bill Compared to Original Bill:

Authorizes the Washington State Housing Finance Commission to establish and administer a revolving loan fund for land acquisition. Loan repayments and penalties will be deposited into this fund instead of into an account within the DCTED.

A $5 million appropriation for the program is removed and a null and void clause is added to the bill.

Appropriation: None.

Fiscal Note: Available. New fiscal note requested January 29, 2007.

Effective Date of Substitute Bill: The bill takes effect 90 days after adjournment of session in which bill is passed. However, the bill is null and void if not funded in the budget.

Staff Summary of Public Testimony:

(In support of original bill) Non-profit developers find it difficult to access land in the private market. They must move quickly to access available land opportunities, however, the short-term financing opportunities that exist charge interest rates often above 4 percent which makes land banking for future developments cost prohibitive. Furthermore, most short-term financing opportunities require development to commence within three years of loan receipt, a time constraint that often conflicts with other development commitments. This property acquisition loan program fills an important need in that it provides inexpensive financing for a longer period of time so that an organization can take advantage of an opportunity to purchase and hold land for affordable housing. This is a complimentary tool to the Housing Trust Fund. The Washington State Housing Finance Commission intends to add other financial resources to the fund and is willing to blend this program into other existing programs in order to cover administrative costs.

(In support with concerns on original bill) This is a good program, however General Fund money would be better spent to help Washington residents in greatest need through rental assistance and other programs. The bill could be improved if the Washington State Housing Finance Commission had authority and responsibility for management of the fund instead of the Department of Commerce, Trade and Economic Development.

(Opposed) None.

Persons Testifying: (In support) Representative Pettigrew, prime sponsor; Kim Herman, Washington State Housing Finance Commission; and Maureen Howard, Habitat for Humanity of Washington State.

(In support with concerns on original bill) Randall Lewis, Association of Washington Cities and the City of Tacoma; and Gregory Provenzano, Columbia Legal Services.

Persons Signed In To Testify But Not Testifying: None.