Fair Housing Act. The Fair Housing Act (FHA) protects people from discrimination on the basis of race, color, national origin, religion, sex, familial status, or disability when they are renting or buying a home, getting a mortgage, seeking housing assistance, or engaging in other housing-related activities. The FHA is enforced by the United States Department of Housing and Urban Development (HUD). The Washington Law Against Discrimination (WLAD), which is substantially similar to the FHA, is enforced by the state Human Rights Commission (HRC).
Washington Law Against Discrimination. The WLAD prohibits discriminatory practices in employment; places of public resort, accommodation, or amusement; real estate transactions; and credit and insurance. The law protects persons from discrimination based on their race, creed, color, national origin, citizenship or immigration status, families with children, sex, marital status, sexual orientation, age, honorably discharged veterans, or military status. The law also protects persons from discrimination based on the presence of any sensory, mental, or physical disability or the use of a trained dog guide or service animal by a person with a disability.
The WLAD declares void any provision in a written instrument relating to real property that purports to forbid or restrict the conveyance, encumbrance, occupancy, or lease of the property to individuals within a protected class. If a written instrument contains a provision void under the WLAD, the owner, occupant, or tenant of the property or the homeowners' association board may bring an action in superior court to have the provision struck from the public records, or may record a restrictive covenant modification document with the county auditor.
Restrictive Covenants. Restrictive real estate covenants prohibiting people of certain races, religions, and ethnicities from buying or owning homes were recorded across Washington State until 1968, when the FHA prohibited real estate covenants that discriminate on the basis of race, color, religion, or national origin. In 1969, the WLAD declared these types of covenants void and having no legal effect.
Currently, property owners in Washington State are able to record a restrictive covenant modification document that has the legal effect of striking discriminatory language from a property’s chain of title, but these modifications do not physically strike the discriminatory provisions from the original deed.
Property owners are also able to file a lawsuit in superior court to physically strike restrictive covenants from the chain of title. If the court finds that a covenant is void, the court will issue an order striking the discriminatory language from the public record. The property owner may obtain and deliver a certified copy of the order to the county auditor, and the auditor must record the documents prepared by the court and comply with certain other requirements.
Duties and Authority of County Auditors. The county auditor is responsible for recording specified documents required by law to be maintained as part of the public record kept by a county. The documents that must be recorded by a county auditor include judgments, liens, deeds, mortgages, and many other categories of documents pertaining to property ownership and real estate transactions. State law specifies requirements that must be met by an auditor when exercising their recording duties, including the collection of specified fees when a document is recorded.
Housing Finance Commission. The Housing Finance Commission (Commission) is a finance authority established to act as a financial conduit to help provide housing throughout the state. To provide financing, the Commission may: issue bonds; make loans to or deposits with mortgage lenders for making mortgage loans; make loans for down payment assistance to home buyers; and participate in federal, state, and local housing programs to make additional funds available to help provide low- to moderate-income housing without the use of public funds or lending the state's credit.
Covenant Homeownership Program Assessment. Beginning January 1, 2024, each county auditor must collect a Covenant Homeownership Program (CHP) assessment of $100 for each document recorded. The CHP assessment does not apply to:
The county auditor may retain up to 1 percent of the assessment for its fee collection activities, and the remainder of the moneys must be remitted to the state treasurer to be deposited in the Covenant Homeownership Account (CHA).
Covenant Homeownership Account. The CHA is created as an appropriated account in the state treasury. The Legislature may appropriate moneys in the account as follows:
Covenant Homeownership Program Study. The Commission must complete an initial CHP study by December 31, 2023, and updated CHP studies every five years thereafter. The initial CHP study must:
As part of the recommendations related to the creation of one or more SPCPs, the commission must identify through evidence-based documentation the economically disadvantaged class or classes of persons that require down payment and closing cost assistance to reduce racial disparities in homeownership in Washington State. The class or classes of persons identified in the study may share one or more common characteristics such as race, national origin, or sex.
A "special purpose credit program" means a credit assistance program created by the Commission, authorized by the Federal Consumer Financial Protection Bureau under regulation B pursuant to the Equal Credit Opportunity Act, allowing a creditor to extend special purpose credit to applicants who meet eligibility requirements under a credit assistance program expressly authorized by state law for the benefit of an economically disadvantaged class of persons.
The updated CHP study must:
The Commission must submit the initial and updated CHP studies to the appropriate committees of the Legislature and post copies on its website. The board of the Commission must review each CHP study and consider the evidence-based documentation and recommendations when designing and implementing CHP amendments.
Covenant Homeownership Program. As part of the CHP, Commerce must contract with the Commission, to design, develop, implement, and evaluate one or more SPCP to provide down payment and closing cost assistance to economically disadvantaged classes of persons identified in a CHP study. The contract must authorize the Commission to use the funding as follows:
Special Purpose Credit Program Requirements. When creating a SPCP, the Commission must consider the evidence-based documentation and programmatic and policy recommendations in the CHP studies. If the CHP study identifies an economically disadvantaged class or classes of persons that share one or more common characteristics such as race, national origin, or sex, and the board of the Commission finds it necessary to consider this information in tailoring a SPCP to provide credit assistance to economically disadvantaged classes of persons, the Commission may consider these characteristics when designing and implementing the SPCP.
An authorized SPCP must, at a minimum:
Applicant Eligibility. To be eligible to receive down payment and closing cost assistance through a SPCP, an applicant must:
Records that show a person's address on or about a specific date or include a reference indicating that a person is a resident of a specific city or area on or about a specific date such as genealogy records, vital records, church records, military records, probate records, public records, census data, newspaper clippings, and other similar documents may be used to prove that such a person satisfies the eligibility criteria.
Adoption of Rules and Policies. The Commission may adopt rules, and must adopt policies, necessary to implement the CHP. CHP rules or policies must include procedures and standards for extending credit under the SPCP, including program eligibility requirements.
Annual Report to the Legislature. The Commission must submit a report to the appropriate committees of the Legislature on the progress of the SPCP beginning December 31, 2025, and annually thereafter.
One or more SPCP must begin providing down payment and closing cost assistance to program participants by July 1, 2024.
Covenant Homeownership Program Oversight Committee. DFI must establish an oversight committee (Committee) to oversee and review the Commission's activities and performance related to the CHP, including the Commission's creation and administration of the SPCPs.
The Committee must consist of the following members appointed by the Director of DFI :
The Committee must also consist of the following legislative members:
Members of the Committee shall each serve a three-year term, subject to renewal for no more than one additional three-year term. The Committee must develop rules that provide for staggered terms so that after the first three years of the Committee's existence, the terms of one-third of the members expire each year.
The Committee is a class one group under the statute that sets compensation and allowances for members of part-time boards, committees, and other similar groups established by state government that function primarily in an advisory coordinating or planning capacity. Members of the Committee do not receive compensation for their services, but may be reimbursed for travel and other expenses. As authorized by the class one group statute, DFI may provide a stipend to individuals who are low-income or have lived experience to support their participation on the Committee.
DFI must provide administrative assistance and staff support to the Committee.
The committee recommended a different version of the bill than what was heard. PRO: Homeownership is the primary wealth builder for most Washingtonians. For generations, black, brown, indigenous and people of color have faced massive barriers to homeownership. Homeownership rates among people of color are nearly 20 percent lower than white Washingtonians. We have a large wealth gap in our state and this bill can do something to close that gap. Forty-two percent of black households in this state have zero net wealth.
This bill is a once in a generational step to address the homeownership race gap in our state. It is a groundbreaking step in the right direction that demonstrates commitment to change. We want to see the damage from racially restrictive covenants repaired. This bill will address the harm done by investing in down payment assistance and essential programs for those who have been harmed by historically discriminative policies in Washington State.
We have had in this state, a long history of racially discriminative policies that violate the 14th Amendment of the U.S. Constitution. Home equity is the number one asset among Americans and it is an opportunity that has been excluded from the BIPOC community. Even when it was technically illegal, many people of color still found purchasing housing difficult. Redlining, racially restrictive covenants, and discrimination in access to credit all contributed to the difficulty for attaining homeownership even after these practices were outlawed. No one can read one of these restrictive covenants and not be ashamed. The shame people had to endure because of the restrictive covenants is real. No one is better than anyone else based on the color of your skin, this bill makes this point clearer than ever. It gets us closer to a world where we are judged by the content of our character and not by the color of our skin.
The program proposed by this bill speaks to the report produced by legislative work group on homeownership disparity. An alternative way to look at rent control or rent stabilization is the 30-year mortgage for those who are fortunate enough to have access to it. But, access to the ability to own houses has not been equally distributed. Barriers to credit and homeownership for black, indigenous, and people of color have been built into our system and laws. Systemic and structural changes are the only way to move forward. Credit, including home mortgages are harder and more expensive to obtain for people of color. The rise in prices over the last 40 years have exacerbated the problem and further created a housing gap. Without action, the gap will continue to widen. Homeowners net wealth is 40 times that of renters. Down payment is one of biggest obstacles to accessing the housing market. Purchase assistance works by providing down payment assistance and closing costs. This helps candidates be more attractive for lenders. Down payment assistance is looked at positively by lenders. The program proposed by this bill has been looked at and worked on by a work group of stakeholders. Without this bill, the gap that was opened in society is widened. Renting is unstable and growing up with a stable house is important for children. Race neutral programs have not been effective in helping people of color.
OTHER: This bill is not in the Governor’s budget. The homeownership disparities work group issued a report, improving homeownership rates for black, indigenous, and people of color in Washington State. Homeownership rates for BIPOC families are low, 19 percent less than for non-Hispanic white families. High-income black families are still 20 percent less likely to be homeowners than non-Hispanic white families. Although the Department of Commerce has a wide-array of homeownership assistance programs, but they are unable to address the needs identified in this bill: access to good credit, a chunk of savings for a down payment, and money left over to pay for closing costs.