Two Washington lawmakers have requested an audit of certain rent-to-own housing programs, saying they believe a state agency’s lack of oversight is allowing promises to be broken.
Reps. Gerry Pollet, D-Seattle, and Chris Stearns, D-Kent, sent a letter last week asking state Auditor Pat McCarthy to probe the Washington State Housing Finance Commission’s supervision of programs that are supposed to guarantee homeownership after 15 years and that have been used to develop low-income housing by a number of Native American tribes.
More than 200 homes that should have been transferred to tenants by now have not been transferred and hundreds of additional tenants could be at risk, the audit request alleges. The commission says the number of homes with past-due transfers is lower. McCarthy’s office is reviewing the request.
The commission acknowledged that no homes have been transferred so far and that eight projects involving three tribes have been reported to the Internal Revenue Service, but otherwise downplayed the matter.
An audit will show that the commission “has already remedied our compliance oversight and worked diligently over the past two years to help the tribal housing authorities develop and implement their tenant ownership plans,” spokesperson Margret Graham said in an email. “While a few residents have had to wait longer than necessary for this opportunity, we are committed to working with the tribes to ensure that residents who are qualified and who wish to purchase their homes can do so.”
Pollet and Stearns were alerted to the issue by Gabe Galanda, a Seattle Indigenous rights attorney who’s spent years fighting attempts by the Nooksack Indian Tribe to expel certain families from the tribe and evict them from their homes, including homes developed with federal tax credits. Pollet says he dug into the issue on his own after hearing from Galanda.
While the state should in theory be helping people “break out of intergenerational poverty by having an opportunity to own their own homes,” the commission “is not only undermining that policy but is robbing these tenants of their dreams,” Pollet said in an interview.
Rent-to-own scams have long plagued the private sector, but Pollet is “flabbergasted” by the state agency’s apparent neglect, he said, describing the commission’s response as inappropriate and insensitive.
“This is a flagship example” of why independent audits are important, Pollet said. “Conversations with [the commission] have been very frustrating.”
Stearns, a member of the Navajo Nation, says he wants to make sure the housing programs live up to their potential. Native American people suffer from high rates of homelessness and related challenges, Stearns noted.
“How can we get some results?” he said. “That’s my interest.”
Homeownership promises
For context, one of the commission’s main roles is to allocate federal tax credits to developers of affordable housing projects, which it does through a competitive process, awarding application “points” based on various criteria, like whether a project has an “eventual tenant ownership” program.
Over the years, the commission allocated tax credits to at least 16 projects that received ownership-based points, according to lists made by the commission, which has been working to verify the requirements of some projects. Only one such project has no tribe involved.
More than 500 homes were scheduled to be transferred to tenants after 15 years being operated as rentals. But some projects have passed their 15-year marks in recent years without transferring any homes. In their audit request, Pollet and Stearns say 234 homes are past due, while the commission — using a smaller list of projects — says the tally is 135 homes, mostly at Nooksack. Other projects are set to hit their 15-year marks between 2023 and 2029.
The commission was supposed to conduct reviews every five years to make sure the transfers were on track but didn’t, Pollet and Stearns say. The commission was focused on making sure the homes were “safe, decent and affordable” as rentals, and didn’t start looking at the ownership issue until it surfaced as part of the Nooksack conflict, Graham said.
Pollet and Stearns say an audit should determine whether tenants have been deprived homes they should own by now, whether the commission should ensure such tenants are made whole, whether it has a plan to address the issue, and whether it’s been doing its job with regard to oversight.
In June, the commission announced it was suspending its use of ownership-based application points, pending an update of policies and procedures.
“We want to evaluate how we can better support developers and residents” in planning the transfers, Graham said. “This is difficult everywhere in the country. … We know of only one or two successful programs nationwide.”
The suspension “does not represent a major change,” because ownership programs accounted for just two out of 150 potential application points, she said. Such programs aren’t part of the vast majority of the 1,100-plus projects that have received tax credits from the commission, Graham added.
Pollet dismissed those arguments, calling the ownership-based points “a significant advantage” and saying the projects in question must deliver.
Nooksack claims
The scrutiny of the somewhat-obscure programs stems from a long-running conflict over Indigenous heritage and property involving the Nooksack Tribe, which has about 2,000 members and a reservation in Whatcom County.
More than two dozen people are at risk for eviction from rent-to-own homes developed on Nooksack properties with federal tax credits. The tribe says they can no longer use the homes because their Nooksack memberships were revoked years ago in a purge of 300-plus people, while the residents say they were wrongly expelled and say they have property rights, nonetheless.
The residents have asked for help from state and federal officials, while the tribe has cited its sovereign status in telling those officials to butt out. The claims have spawned legal battles, and experts assigned by the United Nations to monitor human rights have weighed in twice.
The audit request by Pollet and Stearns also asks McCarthy’s office to investigate the Nooksack homes in particular. Four of the projects that have hit their 15-year transfer marks are Nooksack projects. They represent 85 homes and were developed by the tribe with the investment banking company Raymond James, according to Pollet and Stearns.
The tribe has the authority to exclude nonmembers from the homes, said Graham, from the housing finance commission. Courts have rejected lawsuits brought by the tenants, she noted. Galanda said the projects appear to be “a shell game,” because investors like Raymond James are making money and avoiding taxes but low-income people aren’t becoming homeowners. The attorney said the commission has been “asleep at the switch.”
Gov. Jay Inslee “has no concerns with an audit,” particularly if it leads to a resolution of the Nooksack matter, his office said. The governor appoints the commission’s board members but doesn’t control its work directly.
