HOUSE BILL REPORT

SHB 2536

BYHouse Committee on Housing (originally sponsored by Representatives Phillips, Winsley, Todd, Rector, Nutley, Brekke, Anderson, Leonard, Jacobsen, Basich, Locke, Sprenkle and Prentice)

Giving local governments the right of first refusal in the purchase of federally assisted housing.

House Committe on Housing

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (8)

      Signed by Representatives Nutley, Chair; Leonard, Vice Chair; Winsley, Ranking Republican Member; Anderson, Ballard, Padden, Rector and Todd.

House Staff:Kenny Pittman (786-7392)

AS PASSED HOUSE FEBRUARY 9, 1990

BACKGROUND:

In the 1960s and 1970s, the federal government developed a variety of programs to encourage private sector development of rental housing that would be available to low-and moderate-income persons at affordable rents.  The programs were administered by the U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of Agriculture's Farmers Home Administration (FmHA). The type of assistance provided to the private sector developers consisted of:  (a) direct low-interest rate loans; (b) insurance on mortgages made by private financial institutions; or (c) rental subsidies to tenants in the development to make the rents affordable.

Under the HUD and FmHA contracts, owners of these federally assisted low-rent apartments are able to terminate or prepay their federally-subsidized mortgages and convert projects to more profitable uses, such as condominium complexes or deluxe apartments.  These actions can result in low-income tenants being forced to pay more in rent, move or possibley become homeless.

In 1989, the Legislature revised the Landlord-Tenant Act to require owners of federally assisted multifamily rental housing developments to give a written 12 month advance notice to tenants, the local government, and the state Department of Community Development prior to the termination or prepayment of the federal subsidies.

SUMMARY:

The Landlord-Tenant Act is revised to require owners of federally assisted multifamily rental housing developments to provide written notice of intent to sell or transfer the property 60 days prior to it being offered for sale on the open market. The written notification of intent to sell or transfer the property must be sent by regular and certified mail to the local government where the property is located and the state Department of Community Development (DCD).

The Department of Community Development is required to develop and maintain a list of interested public housing authorities, nonprofit organizations, and cities and counties (potential purchasers) that have expressed an interest in bidding on available properties. DCD, upon receipt of written notification of intent to sell or transfer the property, will provide written notification to potential purchasers that have expressed an interest in bidding on available properties.

The Department of Community Development must approve the form of the notice of intent to sell or transfer title. The notice must include statements by the owner on:  (a) the sales price and any proposed improvements to the development; (b) the organization's right of first refusal to purchase the development; (c) the availability of information monthly operating expenses and recent rent rolls; and (d) future access to inspect the property.

Potential purchasers that have expressed an interest in bidding on available properties have a 60 day right of first refusal based on the DCD's receipt of the owner's notice of intent to sell or purchase the property.

An additional 60 day period, commencing upon the end of the 60 day right of first refusal period, is provided upon written notification to the owner of a potential purchaser's intent to buy or produce a buyer for the property.  The owner and the potential purchaser may extend this period for an agreed upon time.

1An owner may withdraw the property from the market at any time during the 120 day period and void all rights of first refusal to a potential purchaser.  However, the right of first refusal does not apply if the owner plans to sell the property to a buyer that agrees to maintain the property as low-income housing.

The Federally Assisted Housing Preservation Advisory Group (advisory group) is established in DCD.  The advisory group is made up of 11 members.  The membership consists of:  (a) One representative from the Federal Home Loan Bank of Seattle; (b) Two representatives of financial institutions that provide development financing; (c) One representative of the Washington State Housing Finance Commission; (d) One representative of a nonprofit housing development organization; (e) One representative of public housing authorities; (f) One representative of a public-private housing partnership organization; (g) One representative of cities; (h) One representative of counties; One representative of the Department of Community Development, as an ex-officio, nonvoting member; and One representative selected by the members of the advisory group to act as chair.

The Department of Community Development shall appoint the members to the advisory group.  Staffing is provided by the members of the advisory group.  Members shall receive no compensation.

The advisory group shall conduct a study to determine the most efficient combination of state tax provisions, and direct public and private financing to preserve the continued occupancy of federally assisted housing by low- and moderate-income persons.  The advisory group shall provide a written report to the House of Representatives' Committees on Housing and on Revenue and the Senate Economic Development and Labor and Ways and Means Committees by November 1, 1990.

Fiscal Note:      Available.

Effective Date:The bill contains an emergency clause and takes effect immediately.

House Committee ‑ Testified For:    Representative Larry Phillips (Bill Sponsor); Steve Fredrickson, Evergreen Legal Services (in concept); Frank Morris, Puget Sound Council of Senior Citizens; Sharon Lee, Washington Low Income Housing Congress; Mike Doubleday, City of Seattle; Andrea Dahl, Association of Washington Cities; Tony Lee, Washington Association of Churches; and Ben Bonkowski, Department of Community Development.

House Committee - Testified Against:      Jeff Powell and Jim Salatino, Washington Association of Realtors.

House Committee - Testimony For:    The loss of up to 9,000 assisted housing units in the state is a growing problem.  Allowing nonprofit organizations or local governments the opportunity to purchase the housing is an important step in addressing this problem.  This is just one tool that we can use to keep the housing affordable for low- and moderate-income households.  The bill does not go far enough and should require owners that terminate the federal contracts to offer the development for sale.

House Committee - Testimony Against:      The legislation needs to be revised.  We are willing to work with all parties.