H-3603.1

HOUSE BILL 2668

ByRepresentative Ryu

AN ACT Relating to providing local governments with options to preserve affordable housing in their communities; adding a new chapter to Title 84 RCW; and creating new sections.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

(1) Families, senior citizens, and workers with limited financial resources are likely to experience fewer housing choices;

(2) Affordable housing is a necessary component of strong, thriving neighborhoods;

(3) Limited income household renters should have the opportunity to live in homes in neighborhoods close to major infrastructure investments like transit, quality schools, and vital services like health care, grocery shopping, and employment;

(4) Community members with critical occupations, senior citizens, and families are struggling to afford rent around the state;

(5) Rising rents are causing the displacement of low and very low-income households and long-time community members; and

(6) Communities need a wide range of local tools to create healthy, affordable homes and address affordable housing needs.

(1) "Governing authority" means the local legislative authority of a city or county having jurisdiction over the property for which an exemption may be applied under this chapter.

(2) "Health and quality standards" means standards substantially equivalent to uniform physical condition standards, as established by the United States department of housing and urban development, or the national healthy housing standard, as established by the national center for healthy housing and the American public health association.

(3) "Household" means a single person, family, or unrelated persons living together.

(4) "Low-income household" means a single person, family, or unrelated persons living together whose adjusted income is at or below eighty percent of the median family income adjusted for family size, for the county in which the project is located, as reported by the United States department of housing and urban development.

(5) "Multifamily dwelling" means a residential community comprised of four or more units.

(6) "Owner" means the property owner of record.

(7) "Permanent residential occupancy" means housing that provides rental occupancy on a nontransient basis that is leased for a period of at least one year. "Permanent residential occupancy" excludes hotels and motels that predominately offer rental accommodation on a daily or weekly basis.

(8) "Single-family dwelling" means an individual detached dwelling.

(9) "Very low-income household" means a single person, family, or unrelated persons living together whose adjusted income is at or below fifty percent of the median family income adjusted for family size, for the county in which the project is located, as reported by the United States department of housing and urban development.

(2) In order to qualify for a property tax exemption under this chapter, housing units must be:

(a) Rented at below market rent levels, as determined by the governing authority's appraisal or market study;

(b) For multifamily dwellings, affordable to very low-income households and part of a building that is at least forty years old; and

(c) For a single-family dwelling or an attached or detached accessory dwelling unit that is accessory to a single-family dwelling, affordable to low-income households. Either the single-family dwelling or the accessory dwelling unit must remain owner occupied.

(3) The governing authority may establish income or rent thresholds below those indicated in subsection (1) of this section where it determines that such an adjustment is warranted to reflect the value of the exemption.

(4) Rent levels for qualifying affordable housing units, including any mandatory fees for tenant paid utilities that are required as a condition of tenancy, may not exceed thirty percent of the income limit for the very low-income housing unit.

(2) The exemption provided under this chapter may be applied in addition to any tax credits, grants, or other incentives provided by law when required to increase the rental affordability already secured by such incentives.

(3) The exemption in this chapter does not apply to any nonqualifying portions of a building or land.

(4) The governing authority must provide local taxing districts in the designated exemption area notice and an opportunity to be heard prior to establishing a tax exemption program under this chapter.

(1) A minimum of twenty-five percent of residential units in a multifamily property subject to tax exemption must be affordable as described in section 5 of this act. A governing authority may require that more than twenty-five percent of the units in multifamily dwellings are affordable to address local market conditions. Up to and including the midpoint, the percentage requirement may be rounded down to the nearest whole number of units;

(2) Qualified affordable units must be comparable in terms of quality, living conditions, and mix of unit types to market rate units in the building;

(3) At least ninety percent of the residential units of a multifamily property must be occupied by tenants at the time of application;

(4) The property must be part of a multifamily residential or mixed use (residential and nonresidential) project or a single-family property with an affordable attached or detached accessory dwelling unit;

(5) With respect to a single-family dwelling or attached or detached accessory dwelling unit accessory to a single-family dwelling, only the designated affordable improvement area and underlying land dedicated solely to the affordable dwelling may qualify for the exemption;

(6) The multifamily, mixed-use property must provide for a minimum of fifty percent of the space in each building for permanent residential occupancy;

(7) If a multifamily or mixed-use property has dedicated less than one hundred percent of its total square footage to qualifying units, only that dedicated percent portion of the land beneath the building footprint is subject to the exemption under this chapter; and

(8) The property owner must enter into a contract with the city or county agreeing to terms and conditions required satisfactory to the governing authority.

(2) The property must be inspected for compliance with subsection (1) of this section prior to awarding the tax exemption under this chapter and thereafter, as established by the governing authority. The governing authority must deny an application for tax exemption for failure to comply with health and quality standards.

(a) The designation of particular targeted residential eligible areas based on community needs to prevent displacement, provide affordable housing options near community infrastructure such as transportation or public schools, or other local factors;

(b) Standards for property size, unit size, unit type, mix of unit types, or mix of unit sizes; and

(c) Any additional requirements to reduce displacement of very low-income household tenants.

(2) The governing authority must adopt and implement standards and guidelines to be utilized in considering applications and making the determinations required under this chapter. The standards and guidelines must include:

(a) An application process and procedures;

(b) Guidelines and requirements that may include height, density, public benefit features, number and size of proposed development, parking, income limits for occupancy, health and quality standards, and other adopted requirements indicated as necessary by the governing authority. The required amenities should be commensurate with the size of the project and tax benefit to be obtained;

(c) An inspection policy and procedures to ensure the property complies with housing and health and quality standards;

(d) Income and rent limits as required under section 5 of this act;

(e) Documentation necessary to establish income eligibility of households in affordable housing units; and

(f) Fees required of the applicant in order to process the application and monitor compliance with eligibility criteria. Such fees must be commensurate with the cost anticipated by the governing authority to administer this chapter.

(3) Standards may apply to part or all of a jurisdiction and different standards may be applied to different areas within a jurisdiction or to different types of development. Programs authorized under this section may include provisions not expressly provided in this section in order to meet local needs.

(1) The applicant must apply to the city or county on forms adopted by the governing authority. The application must contain the following:

(a) Information setting forth the grounds supporting the requested exemption, including information indicated on the application form and other requirements specified in the governing authority's adopted exemption program;

(b) A description of the project, including the floor plan of units and other information requested;

(c) A statement that the applicant is aware of the potential tax liability involved when the property ceases to be eligible for the incentive provided under this chapter; and

(d) A certification of family size and annual income in a form acceptable to the governing authority for designated affordable housing units.

(2) The applicant must verify the information provided in the application by oath or affirmation.

(3) The applicant must submit a fee, if any, with the application as required under this chapter.

(a) The property meets affordable housing requirements as described in section 5 of this act;

(b) The property meets health and quality standards; and

(c) The owner has complied with all standards and guidelines adopted by the governing authority under this chapter.

(2) If the application is approved, the governing authority must issue the owner a certificate of acceptance of tax exemption. The certificate must contain a statement specifying that the property has complied with the required findings indicated in this chapter. The governing authority must submit a copy of the certificate with the assessor no later than October 1st of the year before the exemption is to be applied.

(3) If the application is denied, the governing authority must state in writing the reasons for denial and issue notice to the applicant by regular or certified mail to the applicant's last known address, or by other means reasonably calculated to provide notice, within ten days of the denial.

(4) An applicant may appeal the governing authority decision to the governing authority or its designated agent within thirty days after receipt. The appeal must be based upon the record made before the administrative official or commission, and the burden is on the applicant to show that the governing authority's decision is not supported by substantial evidence.

(2) The owner must file a report with the governing authority's designated official at least annually indicating the following:

(a) Family size and annual income for each tenant living in designated affordable housing rental units and a statement that the property is in compliance with affordable housing requirements described in section 5 of this act;

(b) A statement of occupancy and vacancy;

(c) A schedule of rents charged in market rate units;

(d) A description of any changes or improvements; and

(e) Any other information required to determine compliance with program requirements.

(3) A governing authority that issues certificates of tax exemption under this chapter must report annually to the department of commerce the following information:

(a) The number of tax exemption certificates granted;

(b) The number and type of units in building properties receiving a tax exemption;

(c) The number and type of units meeting affordable housing requirements;

(d) The total monthly rent amount for each affordable and market rate unit; and

(e) The dollar amount of the tax exemption issued for each project and the total dollar amount of tax exemptions granted within the city or county.

(a) Additional real property tax must be imposed on the property. This additional tax is the difference between the property tax paid and the property tax that would have been paid if the property had included the value of the nonqualifying improvements, for each of the prior six years during which the exemption was claimed;

(b) Additional interest is owed upon the amounts of the additional property tax at the same statutory rate charged on delinquent property taxes, calculated from the dates on which the additional tax would have been payable without the tax exemption;

(c) A penalty must be imposed in the amount equal to twenty percent of the additional property tax imposed under this section; and

(d) The additional tax, interest, and penalty are declared to be a lien on the real property and attach at the time the property or portion of the property is removed from the tax exemption program. The lien has priority to and must be fully paid and satisfied before a recognizance, mortgage, judgment, debt, obligation, or responsibility to or with which the land may become charged or liable, except that the lien is of equal rank with liens for amounts deferred under chapter 84.37 or 84.38 RCW. The lien may be foreclosed upon expiration of the same period after delinquency and in the same manner provided by law for foreclosure of liens for delinquent real property taxes. An additional tax unpaid on its due date is delinquent. From the date of delinquency until paid, interest must be charged at the same rate applied by law to delinquent ad valorem property taxes.

(2) Upon a determination that a tax exemption is to be canceled for a reason stated in this section, the governing authority or authorized representative of the governing authority must notify the taxpayer shown by the tax rolls by certified mail of the determination to cancel the tax exemption. The owner may appeal the determination within thirty days of the date of the notice by filing a notice of appeal with the clerk of the governing authority, specifying the factual and legal basis upon which the determination of cancellation is alleged to be erroneous. The governing authority or its authorized agent may hear the appeal. At the hearing, all affected parties may be heard and all competent evidence received. The burden is on the taxpayer to show that the governing authority's decision is not supported by substantial evidence. After the hearing, the decision maker must affirm, modify, or overturn the decision to cancel the tax exemption based on the evidence received. An aggrieved party may appeal the decision of the deciding body or officer to the superior court.

(3) The assessor must annually value the exempt and nonexempt portions of the property and improvements as necessary to permit the correction of the rolls in accordance with this section.

(1) The legislature categorizes this tax preference as one intended to induce certain designated behavior by taxpayers, as indicated in RCW 82.32.808(2)(a).

(2) It is the legislature's specific public policy objective to preserve quality and healthy affordable housing where housing options, including quality and healthy affordable housing options, are severely limited. It is the legislature's intent to provide the value of residential improvements and land qualifying under chapter . . ., Laws of 2020 (this act) an exemption from ad valorem property taxation for six years, as provided for in chapter . . ., Laws of 2020 (this act), to provide incentives to property owners to preserve affordable housing units for low-income households.

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