2006 Revised APPENDIX H
to the 2005-2008 Consolidated Plan
Section 6 - HOUSING POLICIES
The policies outlined in this Appendix H to the Consolidated Plan pertain to all capital funds administered by the Seattle Office of Housing (OH) unless otherwise noted. Please refer to the currently applicable 2002 Housing Levy Administrative and Financial Plan for additional policies governing the use of 2002 Housing Levy funds.
The rental housing priorities described below indicate the types of rental housing the City is most interested in funding, but are not listed in priority order. Proposed projects not meeting one or more these priorities may still be considered for City funding.
Particular interest:
· The area of greatest need based on 2000 Census special tabulation data provided by HUD is housing for extremely low-income families (0-30% of MI);
· Supportive transitional and permanent housing for families who are homeless, including projects participating in the Gates Foundation Sound Families Initiative.
Needs rationale:
·
Over 5,000 extremely low-income families in
· The October 2003 One Night Count found that 369 families with children were living in shelters or transitional housing.
· Preliminary findings from a recent evaluation of the Sound Families Initiative found positive outcomes for homeless families, with two-thirds moving on to stable housing, and slightly more than half with increased monthly income.
Particular interest:
·
The area of greatest need among
· Permanent supportive housing projects serving people who are chronically homeless and/or disabled.
Needs rationale:
·
In
·
The Seattle-King County Health Care for the
Homeless Network (HCHN) estimated that, in 2002, at least 4,900 single men and
women in the downtown
· Ninety-eight percent of persons who are homeless or who live in transitional housing report either having no source of income or having extremely low incomes through social security, unemployment insurance, or State general assistance.
· Most homeless persons suffer from one or more disabilities, such as mental illness, chemical or alcohol dependency, and/or chronic and acute medical conditions.
· National studies have documented the success of supportive housing models on multiple levels:
ü utilization of health services (decreases in emergency room visits, hospitalization, and emergency detoxification, and increases in preventive health care services);
ü employment status (increase in earned income and employment rates when employment services are provided in supportive housing, and decrease in dependence on entitlements);
ü treatment of mental illness (decreased symptoms of schizophrenia and depression); and
ü ending substance abuse (much higher success rates for people living in supportive housing).
Particular interest:
· Projects that preserve affordable units that are at risk due to expiring project-based Section 8 subsidy.
· Preservation of tax credit projects with expiring affordability restrictions, if rents are currently below-market and buildings serve a significant number of very low-income (0-50% of MI) households.
Needs rationale:
·
The Washington Low Income Housing Alliance
estimates that 984 affordable units in 19 buildings in
·
In addition, a list provided by the Washington
State Housing Finance Commission in January 2004 showed 19 other low-income
housing tax credit buildings (1,023 units) in
Particular interest:
Affordable workforce housing (generally housing affordable to households with incomes 31-80% of MI) that furthers revitalization or other community development goals in Housing Investment Areas. Strategies and priorities for Housing Investment Areas are identified in the Levy Administrative & Financial Plan, Consolidated Plan, and neighborhood plans.
· New construction of affordable housing in urban centers, especially those lagging in meeting their residential growth targets as identified in the Comprehensive Plan or those where affordable housing is needed to help mitigate displacement of low-income people due to gentrification.
· Transit-oriented development projects that are generally located within ½ mile of a light rail station or major transit center.
Needs rationale:
·
Mixed-use and multifamily development projects
are needed in certain
·
The market in some
· Housing is integrally connected to targeted community development strategies, as well as to wealth creation efforts for economically disadvantaged families and individuals. Affordable housing not only benefits residents, but also contributes to security and stability of neighborhoods. As neighborhoods revitalize, continued provision of affordable housing helps enable existing residents to continue to live there.
· Locating affordable housing near employment centers and public transit reduces household transportation costs and increases transportation choices.
The policies described in this section apply to capital funds awarded by OH for production or rehabilitation to provide or preserve affordable rental housing, including HOME and CDBG funds, except that these policies do not apply to Housing Levy funds, Sound Families funds, programs where the City leverages other funds through credit enhancement strategies, other City fund sources for which specific affordability guidelines are adopted by City legislation, mitigation funds that are used to provide affordable rental housing in accordance with the findings of a nexus study, or funds used for bridge loans (but amounts repaid on bridge loans and bridge loans converted to long-term financing are subject to these policies unless the fund source for the bridge loan was otherwise exempt). Affordability policies for Levy funds are provided in the Levy Administrative & Financial Plan.
The following rental affordability policies apply to permanent capital funding appropriated for use in a biennial budget cycle (e.g. 2005-2006):
· At least 50% of rental program funds shall be used for units with affordable rents for extremely low-income households;
· Remaining rental program funds shall be used for units with affordable rents for very low-income households, except:
ü Funds may be used to produce or preserve units with affordable rents for low-income households, that are not affordable to very low-income households, in the Central Area, Rainier Valley/Beacon Hill, Delridge/Westwood, South Park, Pioneer Square, and International District Housing Investment Areas as described in Appendix G of this Consolidated Plan;
ü Funds may be used to produce or preserve units with affordable rents for low-income households, that are not affordable to very low-income households, within half a mile of a light rail station or major transit center located outside of Downtown;
· Funds may be used to acquire or rehabilitate an existing, occupied project and subsidize some units affordable to low-income households, but occupied by over-income households with incomes up to 80% of median income. Such funds will be considered to have been used for housing affordable to extremely low-income households or very low-income households, respectively, to the extent the units are required to be occupied solely by and affordable to, such households within 2 years of the date of the loan agreement. In such case, the initial regulatory term will be established for a 52-year period. By the end of the initial 2-year period after the date of the loan agreement, over-income households need to be relocated or the Borrower will be in default and required to return a prorata portion of the OH funding.
Except as provided in the Affordability Policies above, program funds are to be used only for units that are occupied or will be initially occupied by eligible households at affordable rents for the respective income categories.
For the purposes of the Consolidated Plan, “affordable rent” for low-income households means annual rent not exceeding 30% of 80% of median income; affordable rent for very low-income households means an annual rent not exceeding 30% of 50% of median income; and affordable rent for extremely low-income households means an annual rent not exceeding 30% of 30% of median income. For the purposes of determining whether a unit bears affordable rent, the term “rent” includes the rent paid by the tenant plus an allowance for utilities paid by the tenant.
Tenant households with income above the applicable eligibility levels are called “over-income households.” City funding is not available for units that are occupied at the time of funding by residents with household income greater than 80% of median income. The City may require as a funding condition that units occupied by such households, although not City-funded, become rent-regulated under a City regulatory agreement when occupancy changes.
Unless the Director waives the siting policy as stated below, OH will not fund, or certify as consistent with this Consolidated Plan, a project if the proposed number of subsidized rental housing units for extremely low-income households would exceed the capacity for additional subsidized rental housing units for extremely low-income households in the Census block group where the proposed project is located.
Capacity for additional subsidized rental housing units for extremely low-income households is defined as:
· The total number of housing units in the Census block group according to the latest information as updated annually by the Department of Planning and Development (DPD), multiplied by 20%;
· Less the number of existing subsidized rental housing units for extremely low-income households in the Census block group according to the latest report available from OH (OH’s inventory of subsidized rental housing in Seattle includes projects with capital subsidies from public agencies; i.e. City-funded projects as well as non-City funded projects as reported annually by county, state and federal agencies).
The siting policy does not apply to projects located within Downtown because of its special nature as a high priority area for affordable housing investment. A map of Downtown is included in Appendix G of this Consolidated Plan.
The OH Director may grant a waiver of the siting policy if
one or more of the following criteria are met:
·
The proposed project is a
“neighborhood-supported project”.
To be considered a neighborhood-supported project, OH will need to determine
that the proposed project is supported by a reasonable number of immediate
neighbors and/or affected neighborhood organizations. Such determination will be based on review of
results of the community notification process as described in the Good Neighborhood Guidelines section of
this Appendix H, including notification of immediate neighbors, consultation
with established community groups, public meetings, and/or other means of
community notification as OH deems appropriate. In accordance with national,
state and local fair housing laws, OH disregards, in evaluating neighborhood
support for the project, any opposition that appears to be based on
characteristics of future residents of a project if discrimination based on
such characteristics is prohibited.
·
Additional market-rate housing development is
planned in the Census block group, and OH determines that the proposed project
would not result in more than 20% of total housing units in the block group
being subsidized rental housing for extremely low-income households, based on
an adjusted estimate of total housing units that includes units for which
building permits have been issued (based on the Department of Planning &
Development’s latest annual report of building permit data) or other such
documentation as deemed appropriate by OH.
· OH determines that natural or manmade barriers (e.g. a bluff, waterway, or freeway) physically separate the proposed project from existing concentrations of subsidized rental housing for extremely low-income households.
OH bridge loans are intended to provide short-term funding to permit housing projects to proceed in advance of the availability of permanent project funding. Bridge loan funding is available to enable property acquisition, construction or rehabilitation to proceed when the borrower can provide assurance that permanent funding will be available from other sources on acceptable terms within a reasonable time period to repay the bridge loan. Given reasonable assurance of repayment, bridge loans may also be made for acquiring at-risk Section 8 preservation projects or to assist in the acquisition of sites or buildings in designated Housing Investment Areas or in certain neighborhood areas in order to implement neighborhood plan-identified strategies advocated by community organizations. Applications for bridge loans may be made outside of OH’s NOFA process.
Bridge loans for affordable housing are made utilizing any OH-administered fund sources determined to be appropriate by the OH Director. The maximum term of a bridge loan shall be two years. OH shall require payment of a reasonable rate of interest, which shall be no less than 3% simple interest. In addition, a loan fee may be charged for providing the bridge loan. A bridge loan may be made as a component of a larger loan that includes long-term financing.
OH may allow all or a portion of a bridge loan to be converted to a permanent loan subject to maximum subsidy limits for all OH and other City agency administered or allocated capital funds that may be combined to provide permanent gap financing for the housing portion of a project, pursuant to the Levy Administrative & Financial Plan, and availability of permanent fund sources. Conversion to a long-term loan may be conditioned upon affordability restrictions for additional units.
The policies that follow apply to City Homebuyer Assistance Program funds, including Levy, American Dream Downpayment Initiative (ADDI), and other HOME funds. Additional policies pertaining to Housing Levy Homebuyer Assistance Program funds are provided in the Levy Administrative & Financial Plan.
· HOME funds, including ADDI funds, may be used for home purchase assistance and development of affordable units to be sold to eligible low-income households.
· OH may provide up to $1,000 of HOME funds to non-profit homeownership organizations at the time of loan closing to help pay for counseling services provided by such organizations in connection with each OH-funded homebuyer assistance loan. However, the $1,000 for counseling services must be authorized in the contracts between organizations that originate homebuyer assistance loans and OH, and may not be included as part of the loans to homebuyers.
· All types of for-sale units are eligible, including single-family residences, condominiums, limited equity cooperatives, co-housing, land trusts, and homes on leased land.
· The maximum home purchase price is the same as the FHA mortgage limit, as adjusted annually or 95 percent of the median purchase price for single family housing in Seattle as documented according to HUD requirements/.
·
Borrowers must purchase a home in
· Borrowers must have household incomes at or below 80% of median income.
· Each borrower or the borrower’s family must be a “first-time homebuyer,” which is defined as any individual and his or her spouse who have not owned a home during the three-year period prior to purchase of a home using Homebuyer Assistance Program funds. Any individual who is a displaced homemaker may not be excluded because that individual, while a homemaker, previously owned a home with his or her former spouse. Any individual who is a single parent may not be excluded because that individual previously owned a home with his or her spouse. Definitions of “displaced homemaker” and “single-parent” are per 24 CFR 92.2. OH may narrow the definition of “first-time homebuyers” in order to ensure equitable treatment between married and non-married persons, subject to federal requirements in the case of loans using ADDI funds. OH also may, for the same purpose, expand the “single parent” eligibility category with respect to loans not using ADDI funds.
· Borrowers must successfully complete a pre-purchase homebuyer education program approved by OH.
· Borrowers must be able to financially qualify for a first mortgage approved by OH.
· In programs administered directly by the City, qualifying income will be defined using the IRS definition of adjusted gross income for reporting on IRS Form 1040, subject to any adjustments or exclusions required by federal law or regulations. House Key Plus Seattle, a program administered for the City by the Washington State Housing Finance Commission, will use the Section 8 Program definition for gross annual income.
· Homebuyer assistance loans will be limited to the amount needed for each borrower, providing gap financing for low-income borrowers unable to qualify for sufficient private financing to purchase a home.
· Borrowers may receive homebuyer assistance loans up to a maximum of $45,000 per assisted household, including both Levy funds and other City-administered funds, unless the maximum is increased in accordance with provisions below. The $45,000 cap includes any fees paid to non-profit homeownership organizations for counseling services. Homebuyer assistance loans include loans to homebuyers and loans to developers or prior owners assumed by, or otherwise passed through to, homebuyers. Homebuyer assistance loans may be used for downpayments, closing costs, and/or first mortgage loan interest rate write down, as approved by OH.
· City-funded assistance for any home improvements, if committed or provided in connection with a home purchase, is considered to be assistance for the purchase and, together with the homebuyer assistance loan, cannot exceed the $45,000 loan limit except in the following cases: (1) assistance provided to a nonprofit developer for home purchase and improvement costs associated with an OH-approved land trust project, and (2) assistance to an eligible buyer purchasing a home located within a Housing Investment Area, for which the combined homebuyer and home improvement assistance may total up to $65,000, provided that the homebuyer assistance loan does not exceed $45,000.
· In order that single-source downpayment assistance may be provided for the convenience of borrowers, in lieu of loans from Levy or other City funds and non-City sources to the same borrower, OH may allow a higher amount of City-funded home purchase assistance, not to exceed $70,000, for a borrower that receives a loan made as part of a project or lending program for which a developer or nonprofit lending agency has obtained commitments of non-City homebuyer subsidy funds, but only if all of the following conditions are satisfied:
(1) Non-City subsidy funds provided to such project or program must be used for deferred downpayment assistance loans or other assistance that increases the ability of low-income households to purchase a home.
(2) The average amount of City-administered home purchase assistance for all low-income homebuyers participating in the project or lending program, including buyers who do not receive any City-administered funds, may not exceed $45,000.
· The OH Director may revise the maximum loan amount of $45,000 by up to $10,000 for the homebuyer assistance if increases in interest rates or sales prices, or lack of other homebuyer subsidies, create difficulty in qualifying households with incomes up to 60% of median income as eligible homebuyers in Seattle. The OH Director must provide five working days notice to the Mayor and City Council if the loan amount is to be increased. The final decision of the OH Director will be made with responses from the Mayor and City Council taken into account. Council approval is required if the OH Director wants to increase the maximum loan amount by more than $10,000.
· Homebuyer assistance loans using HOME funds, including ADDI funds, and using the recapture option will be structured with repayment obligations, using a promissory note and deed of trust approved by OH.
· Loans will generally be 30-year amortizing loans, with payments deferred for the first 5 to 8 years or longer for homebuyers with disabilities or who are participating in certain OH homebuyer programs. Loans may include provisions for payment of a share of appreciation. Any share of appreciation payable may be reduced and/or eliminated over time. Loan repayment terms shall specify the interest rate, which generally shall not exceed 3% simple interest; loan term; period of payment deferral; and any contingent interest or share of appreciation. Interest may be forgiven for households participating in certain OH homebuyer programs if specific conditions are met as determined by OH.
· Borrowers must provide a minimum of $2,500 or 2% of the purchase price, whichever is greater, of their own funds toward the home purchase as a condition to any homebuyer assistance loan. Borrowers may receive gifts of funds towards their portion of the downpayment; however, gifts must not exceed 25% of the borrower's total downpayment requirement. Borrowers with incomes 60% of median income or less may provide a lower contributin as follows: (1) for borrowers who are participating in an Individual Development Account-type matching fund program, verified and approved by the Office of Housing, the minimum downpayment to be paide from the borrower’s own funds, not including matching funds provided to the borrower, is $2,500; (2) for borrowers participating in an OH-approved nonprofit-sponsored sweat equity housing program that requires significant participation by the borrower, the borrower’s contribution of volunteer time may be accepted in lieu of the minimum cash contribution; and (3) for borrowers who have a long-term disability and whose household income includes SSI or similar public income support, gifts may constitute up to 75% of the borrower’s total downpayment requirement.
· The terms of each loan made to a homebuyer shall provide that the entire principal balance is due upon sale or refinancing of the home, at the lender’s option, to the extent permitted by applicable law. However, OH may permit assumption of the loan by another eligible borrower in lieu of repayment.
· Borrowers may use any first mortgage product approved by OH, including FHA, Fannie Mae and Freddie Mac products, and portfolio loans. FHA 203(k) purchase-rehabilitation loans are also eligible, provided the rehabilitation amount exceeds $5,000.
The following provisions apply to HOME, including ADDI, homebuyer assistance funds.
In conformity with HUD rules, OH will impose either resale or recapture requirements, at its option. The recapture or resale options may be managed by the City, a subrecipient, or other contracting party at OH’s option. The recapture or resale options cannot be used together in the same loan.
·
For HOME funds that are allocated for eligible development costs and
programs operated by nonprofit housing agencies, the resale option may be
used. In such cases, the agreement with
the developer or nonprofit housing agency will provide for long-term
affordability of the housing.
Requirements include:
ü The initial sale and any
resale of subsidized units during the applicable affordability period must be
made to low-income households.
ü The resale price during the
applicable affordability period is limited to maintain an affordable purchase
price for subsequent low-income homebuyers.
The resale formula must also provide for a fair return to the
seller. The resale price and return
formula must be approved in advance by OH.
ü New purchaser income and
resale price are restricted during the affordability period via a recorded deed
restriction or land covenant, or there is a purchase option or right of first
refusal in favor of the City or a City-approved entity at a restricted price,
or both methods are used.
·
For HOME funds allocated to lending programs, the recapture option may
be used. The City or a City-approved
entity will have the right to require full repayment of the HOME subsidy,
including ADDI funds, when resale occurs, regardless of the applicable
affordability period, to the full extent permitted by law.
Many program borrowers refinance
their homes or borrow against the value of their homes, and request that their
homebuyer assistance loan’s lien position be subordinated to another loan. In some cases agreeing to these subordination
requests could greatly increase the risk that taxpayer funds may not be paid
back. The current policy of OH is that
subordination requests will be evaluated by the Homeownership Program Manager
and will be considered only when all of the following conditions are met:
·
The total proposed loan to value ratio does not exceed 90% of the
appraised or assessed value, whichever is less. The new loan does not have a
balloon payment before the homebuyer assistance loan maturity date and is not
an interest only loan.
·
The homeowner needs to refinance only the existing first mortgage
indebtedness against the property to take advantage of better rates, terms, and
payments, and is not incurring additional indebtedness against the property,
except for one or more of the following:
ü Refinancing fees;
ü Payments needed in order to
save the house from a foreclosure;
ü Costs of an urgent health
and safety repair;
ü Medical, funeral, or other
emergency expenses of the homeowner or immediate family that are determined to
be allowable by the Homeownership Program Manager.
OH has worked with the Seattle Housing Authority (SHA), local lenders, and the Washington State Housing Finance Commission (WSHFC) to make City downpayment assistance funds available for residents and tenants of public housing and manufactured housing. SHA, through its Family Self-Sufficiency and Section 8 Homeownership programs, is marketing to residents and tenants of public housing and identifying eligible families for homeownership programs. The City will work with the WSHFC and participating lenders to identify tenants of manufactured housing in the City and mail program brochures to them. The City has made Levy, ADDI, and other HOME funds available for downpayment assistance. WSHFC is making below-market interest rate first mortgages available to eligible borrowers. Private mortgage lenders are originating and closing the mortgage loans.
All homebuyers using City downpayment assistance funds are required to attend homebuyer education. A portion of available federal funds are awarded by OH for delivery of homebuyer education and counseling programs. In addition, the Seattle Housing Authority (SHA) has contracted with the Urban League and the International District Housing Alliance to provide homebuyer education and counseling to residents and tenants of public housing who are planning to buy homes. SHA staff screen and determine the suitability of residents and tenants of public housing for participation in homebuyer programs.
SHA and King County Housing Authority (KCHA) received ROSS Homeownership Counseling funding in a joint application in FY 2002. SHA and KCHA procured the services of an ethnically-diverse homeownership counseling and referral consortium. The consortium of the Urban League, El Centro de la Raza and International District Housing Alliance has begun culturally-specific outreach to qualified public housing tenants in Family Self-Sufficiency or similar programs to identify possible Section 8 homeownership recipients. The consortium also recruits and enrolls eligible households in homebuyer education workshops, works with participants on credit issues, prequalifies and connects them with lending programs and assists with housing search and other supportive services.
OH’s HomeWise Program provides for low-interest rehabilitation loans and weatherization grants primarily for the purpose of improving the health, safety, and energy efficiency of housing for low-income households. Income limits for rehabilitation loans vary by fund source, but in no case exceed 80% of MI. The maximum individual rehab loan is $45,000, with a waiver by the OH Director allowing up to $10,000 additional (for an overall total of $55,000) due to demonstrated health and safety needs. Interest rates generally are set at 3% simple interest. Depending on the circumstances of the individual household, the loan may be amortized or deferred. HomeWise forgivable grants are available, up to $10,000, for lead-based paint abatement if required in a rehabilitation project. Grant terms require full repayment if the home is sold within 5 years and provide for forgiveness after 5 years.
The program generally gives priority to loans for improving health and safety, and for curing code violations. For a time period through December 31, 2007, the program will also give priority for repairs that address exterior dilapidation or conditions that would contribute to neighborhood revitalization in the Rainier Valley/Beacon Hill Housing Investment Area in Southeast Seattle.
Weatherization grants are made for energy efficiency-related repairs in owner- and renter- occupied single-family homes and eligible multifamily rental properties. The income limits for such grants vary by both fund source and tenure of the household (i.e. owner, renter).
The City administers two rental assistance programs. The Rental Stabilization Program is funded with HOME funds. The second program, called the Emergency Rental Assistance Program, is funded through the 2002 Seattle Housing Levy and is described in more detail in the Levy Administrative & Financial Plan.
Under the Rental Stabilization Program, $205,947 of 2005 HOME funds are available for tenant-based rental assistance for families and individuals who are transitioning out of homelessness or who are at risk of becoming homeless. Up to eighteen months of transition and eviction prevention assistance is provided to eligible households. Additional non-HOME funding supplements the core rental assistance with case management services to address the special needs of those who have been or are at-risk of homelessness and to promote long-term stability for the households served. The program emphasizes client stabilization in housing six months after leaving the program. The Salvation Army is administering the program through a contract with the City.
Population served: Only
Need: The need for rental assistance in
· The increasing number of individuals who are homeless;
· The “cost burden” or extent to which gross housing costs exceed 30% of gross household income; and
· The number of households on the Seattle Housing Authority’s waiting list for subsidized housing.
Feasibility:
Tenant-based rental assistance is feasible in
Consistency with the Consolidated Plan: Tenant-based rental assistance is used to
assist households with incomes up to 50% of median income and who are homeless
or at risk of becoming homeless. This is
consistent with the Seattle Consolidated Plan priority to provide safe,
habitable permanently affordable, rental housing primarily to very low-income
Both of