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Bill would create revolving loan fund to finance permanently affordable homeownership
Summary
A proposed substitute would create an Affordable Homeownership Revolving Loan Fund in Commerce to provide construction loans (up to 50% of project cost) to nonprofit developers building permanently affordable homeownership for households at or below 80% AMI, with loans priced 1–2.5% and repayable after initial sales.
A proposed substitute to House Bill 18 08 would establish an Affordable Homeownership Revolving Loan Fund in the Department of Commerce to provide low‑cost, construction‑phase loans to nonprofit and governmental sponsors building permanently affordable homeownership for households at or below 80% of area median income, staff told the committee on Feb. 13.
Under the substitute presented by Audrey Vacek, loans may not exceed 50% of total project costs (the bill allows the department to exceed that cap “for cause”), must carry an interest rate of at least 1% but not more than 2.5%, and must be structured to be assumable under Commerce’s terms. Loans would generally be repaid after all homes in a financed project are sold, and repaid funds would be re‑loaned through the revolving account. Commerce could use up to 3% of biannual appropriations for administrative costs.
Program design: Eligible projects must create ‘‘permanently affordable homeownership’’ as defined by the housing trust fund rules: a nonprofit or government sponsor executes a new ground lease or deed restriction of at least 99 years; resale restrictions and a right of first refusal for the sponsor are required; sponsors must approve refinances and home equity lines of credit. Loans may be combined with private capital and other public funding.
Why it matters: Witnesses said high construction financing costs and elevated market interest rates are blocking viable permanently affordable homeownership construction. Scott Slater, chief financial officer at Habitat for Humanity Seattle‑King‑Kittitas, said higher construction loan rates materially raise buyer incomes needed for home purchases. “If we were able to obtain a sponsored loan product with an interest rate of just 2%, we would be able to reduce the adjusted median income of a potential buyer by up to 10%,” Slater testified.
Support and details: The Seattle Metropolitan Chamber of Commerce supported the bill as a workforce and economic vitality measure; Kim Toske of Homes and Hope Community Land Trust described the loan product as a ‘‘passive subsidy’’ that could reduce project costs, increase nonprofit capacity and expand permanently affordable units.
Questions and gaps: Representative Jacobson asked why the bill excludes for‑profit developers; a witness from Habitat said staff would follow up. Jacobson also asked about the bill language allowing loans to exceed 50% "for cause"; committee staff said the bill does not further define that standard and that Commerce would determine the specific criteria.
Outcome: The committee held a public hearing; no committee vote occurred during this session.
Ending: Proponents said the fund would make permanently affordable homeownership more feasible by lowering construction finance costs for mission‑driven developers; key parameters (appropriation, ‘‘for cause’’ definition) remain to be specified.
