Chapter 743 Oregon Laws 2003

AN ACT

HB 3276

Relating to housing; creating new provisions; amending ORS 456.593, 456.615, 456.620, 456.635, 458.625, 458.630 and 458.720; and declaring an emergency.

Be It Enacted by the People of the State of Oregon:

SECTION 1. ORS 456.593 is amended to read:

456.593. (1) Notwithstanding any of the provisions of ORS 456.550 to 456.725 to the contrary:

(a) Of the $2 billion bond authorization under ORS 456.661, the aggregate principal amount of not to exceed $30 million is to be made available exclusively for making or participating in making residential loans for detached single-family homes, including lots described in ORS 92.840, in any city.

(b) The bonds under paragraph (a) of this subsection may be sold as a part of the Housing and Community Services Department’s overall nongeneral obligation bond issues under ORS 456.550 to 456.725, or separate issues totaling no more than $30 million in an aggregate principal amount may be sold by the department as required and requested by a city. The bonds need not be identified by individual loans or transactions but may include any number of individual loans or transactions or purposes within any single issue.

(c) With moneys received under paragraph (b) of this subsection, the department may purchase, service, sell and make commitments to purchase, service and sell residential loans, originated by private lending institutions or any individual or organization authorized by law to make those loans, for residential housing for owner-occupied detached single-family housing, including lots described in ORS 92.840, located within an area of a city where the median income is below median Portland family income to persons whose annual income for the current and the immediately preceding year does not exceed 105 percent of the prevailing median income for families within that city. Areas eligible under this paragraph shall be identified by ordinance of the governing body of that city. That city shall have sole discretion to designate one or more of those areas, and the proportionate or approximate actual amount of single-family residential loans to be made in those areas.

(d) Fees or service charges pursuant to ORS 456.625 (3) shall be charged or collected in connection with, or for, any loan, advance, insurance, loan commitments or servicing, by the department under this section only after consultation with the city.

(2) As used in this section, unless the context requires otherwise, “city” means any city with a population of 300,000 or more.

SECTION 2. ORS 456.615 is amended to read:

456.615. As used in ORS 456.550 to 456.725, unless the context requires otherwise:

(1) “Bonds” means any bonds, notes or other evidence of indebtedness, including notes or other evidence of indebtedness issued in anticipation of the issuance of bonds and payable from the proceeds of bonds issued, issued under ORS 456.515 to 456.725.

(2) “Capital reserve account” or “capital reserve accounts” means one or more of the special trust accounts that may be established by the Housing and Community Services Department within the Housing Finance Fund.

(3) “Housing finance bond declaration” means a written instrument signed by the Director of the Housing and Community Services Department and on file with and bearing the certificate of approval of the State Treasurer, and all housing finance bond declarations supplemental thereto.

(4) “Consumer housing cooperative” means a cooperative corporation formed under ORS chapter 62 and whose articles of incorporation provide, in addition to the other requirements of ORS chapter 62, that:

(a) The consumer housing cooperative has been organized exclusively to provide housing facilities for persons and families of lower income and such social, recreational, commercial and communal facilities as may be incidental to such housing facilities.

(b) All income and earnings of the consumer housing cooperative shall be used exclusively for consumer housing cooperative purposes and that no unreasonable part of the net income or net earnings of the cooperative shall inure to the benefit or profit of any private individual, firm, corporation, partnership or association.

(c) The consumer housing cooperative is in no manner controlled or under the direction of or acting in the substantial interest of any private individual, firm, corporation, partnership or association seeking to derive profit or gain therefrom or seeking to eliminate or minimize losses in any transaction therewith, except that such limitation shall apply to the members of the cooperative only to the extent provided by rules of the department.

(d) The operations of the consumer housing cooperative may be supervised by the department and that the consumer housing cooperative shall enter into such agreements with the department as the department may require to provide regulation by the department of the planning, development and management of any housing project undertaken by the cooperative and the disposition of the property and other interests of the cooperative.

(5) “Development costs” means the costs that have been approved by the department as appropriate expenditures and includes, but is not limited to payments for options to purchase property for the proposed housing project site, deposits on contracts of purchase, payments for the purchase of property as approved by the department, legal, organizational and marketing expenses including payment of attorney fees, managerial and clerical staff salaries, office rent and other incidental expenses, payment of fees for preliminary feasibility studies, advances for planning, engineering and architectural work; expenses for surveys as to need and market analyses; and such other expenses incurred by the qualified housing sponsor as the department may deem necessary under ORS 456.550 to 456.725.

(6) “Elderly” means a person or a family whose head of the household is 58 years of age or older, residing in the state, whose income is below the level that the department has determined to be necessary in order to obtain in the open market decent, safe and sanitary housing, including the costs of utilities and taxes, for 25 percent of the gross income of the household.

(7) “Federally insured security” means an evidence of indebtedness insured or guaranteed as to repayment of principal and interest by the United States or an agency or instrumentality thereof.

(8) “Housing development” means a development that contains housing units for persons or families of lower income and such other incidental elements of residential, commercial, recreational, industrial, communal or educational facilities as the department determines improve the quality of the development as it relates to housing for persons or families of lower income and the financial feasibility of the development. Not more than 50 percent of the total amount of any financing provided by the department for a particular development may be used to finance commercial, recreational, industrial, communal or educational facilities. Profits from incidental elements shall be applied to loans due under ORS 456.550 to 456.725.

(9) “Housing Finance Fund” means the Housing Finance Fund established in ORS 456.720 (1).

(10) “Lending institution” means any bank, mortgage banking company, trust company, savings bank, savings and loan association, credit union, national banking association, federal savings and loan association or federal credit unit maintaining an office in this state, or any insurance company authorized to do business in this state.

(11) “Limited dividend housing sponsor” means a corporation, trust, partnership, association, other entity, or an individual. Such mortgagor shall be restricted as to distribution of income and shall be regulated as to rents, charges, rate of return and methods of operation as the department determines necessary to carry out the purposes of ORS 456.550 to 456.725.

(12) “Lower income families or persons” means the elderly and families and persons, residing in this state, whose income is below the level that the department has determined to be necessary in order to obtain in the open market decent, safe and sanitary housing, including the costs of utilities and taxes, for 25 percent of the gross income of such family or person. The term may also include other families or persons where the assistance provided is determined by the director to be incidental to the accomplishment of the department’s programs for lower income families or persons. The department, in cooperation with affected local governments, shall determine what constitutes “decent, safe and sanitary housing.”

(13) “Manufactured housing” means a dwelling unit manufactured off-site having a minimum width of 10 feet and a minimum area of 400 square feet built on a permanent chassis and designed to be used for permanent residential occupancy whether or not on a permanent foundation, and that contains permanent eating, cooking, sleeping and sanitary facilities and meets such standards as the department determines, by rule, are reasonable to maintain the quality, safety and durability of the dwelling, the sanitary requirements of the communities in which they are located and the security of the loans that the department may finance for the purchase of the dwellings.

(14) “Nonprofit housing corporation” means an organization formed under ORS chapter 65 and whose articles of incorporation provide, in addition to the other requirements of ORS chapter 65, that:

(a) The corporation has been organized exclusively to provide housing facilities for persons and families of lower income and such other social, recreational, commercial and communal facilities as may be incidental to such housing facilities.

(b) All the income and earnings of the corporation shall be used exclusively for corporation purposes and that no part of the net income or net earnings of the corporation may inure to the benefit of any private individual, firm, corporation, partnership or association.

(c) The corporation is in no manner controlled or under the direction or acting in the substantial interest of any private individual, firm, partnership or association seeking to derive profit or gain therefrom or seeking to eliminate or minimize losses in transactions therewith.

(d) The operations of the corporation may be supervised by the department and that the corporation shall enter into such agreements with the department as the department may require to regulate the planning, development and management of any housing project undertaken by the corporation and the disposition of the property and other interests of the corporation.

(15) “Project cost” or “costs of the project” means the sum of all reasonable expenses incurred by a qualified housing sponsor in undertaking and completing a housing project approved by the department. “Project costs” or “costs of the project” include but are not limited to the expenses incurred by a qualified housing sponsor for:

(a) Studies and surveys;

(b) Plans, specifications, architectural and engineering services;

(d) Financing, acquisition, demolition, construction, equipment and site development of new and rehabilitated housing units;

(e) Movement of existing buildings to new sites; the cost of acquisition, or estimated fair market value, of land and other interests in real estate;

(f) Rehabilitation, reconstruction, repair or remodeling of existing buildings;

(g) Estimated carrying charges during construction and for a reasonable period thereafter;

(h) Placement of tenants or occupants and relocation services in connection with the housing project;

(i) Reasonable builder’s or sponsor’s profit and risk allowance; and

(j) Development costs not otherwise included in this subsection.

(16) “Qualified housing sponsor” includes, subject to the approval of the department, a consumer housing cooperative, a limited dividend housing sponsor, a nonprofit housing corporation, a for-profit housing sponsor including, but not limited to, an individual operating in compliance with the criteria adopted by the department under ORS 456.620 (1), a housing authority created by ORS 456.075, an urban renewal agency created by ORS 457.035 and any city or county governing body or agency or department designated by the governing body.

(17) “Residential housing” means a specific work or improvement within this state undertaken primarily to provide dwelling accommodations, including land development and acquisition, construction or rehabilitation of buildings and improvements thereto, for residential housing, and such other nonhousing facilities as may be incidental or appurtenant thereto and as the department determines improve the quality of the development as it relates to housing for persons or families of lower income and the financial feasibility of the development. Not more than 50 percent of the total amount of any financing provided by the department for a particular development may be used to finance nonhousing facilities. “Residential housing” includes, but is not limited to, a specific work or improvement within this state undertaken to provide mobile home or manufactured dwelling parks as defined in ORS 446.003. As used in this subsection, “land development” includes, but is not limited to, the improvement of streets and alleys and the construction of surface drains, sewers, curbing and sidewalks.

(18) “Residential loan” means a loan for the acquisition, construction, improvement or rehabilitation of residential housing and, if the loan is for acquisition or construction of residential housing, that is secured by a first lien on real property located in the state and improved by a newly constructed, existing or rehabilitated residential structure for lower income persons or families, or unimproved if the proceeds of such loan shall be used for the erection of a residential structure thereon, whether or not such loan is insured or guaranteed by the United States or any instrumentality or agency thereof. “Residential loan” includes an insured or guaranteed loan for the acquisition of manufactured housing or for the acquisition of a lot described in ORS 92.840 by a manufactured dwelling park tenant. The insured or guaranteed loan need not be secured by a first mortgage on real property but shall be secured by a security interest of first priority. “Residential loan” also includes a loan for the purchase of a proprietary lease and related cooperative shares in a housing cooperative formed under ORS chapter 62 secured by a security interest of first priority and a pledge or an assignment of proprietary leases and related cooperative shares.

(19) “Revolving account” means the Housing and Community Services Department Revolving Account created in ORS 456.574.

SECTION 3. ORS 456.620 is amended to read:

456.620. In carrying out housing programs, the Housing and Community Services Department shall:

(1) With the approval of the State Housing Council, adopt standards for the planning, development and management of housing projects for which qualified housing sponsors receive all or a portion of any required financing under ORS 456.550 to 456.725, for audits and inspections to determine compliance with such standards and adopt criteria for the approval of qualified housing sponsors under ORS 456.550 to 456.725.

(2) Adopt criteria for the approval of qualified housing sponsors in ORS 456.550 to 456.725.

(3) Enter into agreements with qualified housing sponsors to regulate the planning, development and management of housing projects constructed with the assistance of the department under ORS 456.550 to 456.725.

(4) With the approval of the council, establish maximum household income limits for all or a portion of the units in housing projects, housing developments or other residential housing financed in whole or in part by the department. A maximum of one-third of the units in a housing project, housing development or other residential housing financed by the department may be rented to households with an income level exceeding 120 percent of the median family income level, as determined by the department. If the income level in any unit exceeds 120 percent of the median family income, the department shall, to the extent practicable, require that the project, development or other housing financed by the department have a percentage of low income units that is higher than the minimum percentages established in ORS 456.120 (19) for projects financed by local housing authorities or income limitations that are lower than the limits described in ORS 456.120 (19) or a combination thereof. Income limits for department programs administered on a statewide basis may be established by reference to the median family or personal income in the state, or in various regions in the state, as determined by the department. This subsection does not restrict the acquisition of manufactured dwelling parks.

(5) With the approval of the council, ensure that financing is provided in the department’s programs for manufactured housing and for the purchase of lots described in ORS 92.840 by manufactured dwelling park tenants.

SECTION 4. ORS 456.635 is amended to read:

456.635. (1) In order to provide additional permanent financing for housing for persons and families of lower income and for manufactured dwelling park tenant purchases of lots described in ORS 92.840, the Housing and Community Services Department may make commitments to purchase and purchase, insure, service and sell residential loans held by lending institutions for persons and families of lower income in this state and for manufactured dwelling park tenant purchases of lots described in ORS 92.840. The department may purchase from lending institutions securities backed by residential loans.

(2) Any commitment made by the department subject to subsection (1) of this section shall be based upon an agreement with the lending institution that the proceeds received by the lending institution from the sale of such loans to the department shall be used by the lending institution only for the financing of residential housing for persons and families of lower income in this state, including the financing of newly originated residential loans, or for the financing of loans for the purchase of lots described in ORS 92.840 by manufactured dwelling park tenants, provided the loans are made after the date of the department’s commitment.

SECTION 5. ORS 458.625 is amended to read:

458.625. (1) The Housing and Community Services Department [shall] may disburse the revenue earned from investment of the principal in the Housing Development and Guarantee Account to expand this state’s supply of housing for low and very low income families and individuals, including, but not limited to, housing for persons over 65 years of age, disabled persons, farmworkers and Native Americans. [For purposes of this section and ORS 458.630, “account” means the Housing Development and Guarantee Account.] The State Housing Council shall have a policy [of distributing] that provides for distribution by the department of account investment revenue disbursements statewide while concentrating account investment revenue disbursements in those areas of the state with the greatest need for low and very low income housing, as determined by the council[, for low and very low income housing].

(2) The department may disburse account investment revenue,[shall be disbursed as] in the form of grants or loans[, at the awardee’s election,] as determined by the department, for any or all of the following purposes:

(a) To organizations as defined in ORS 458.610 and to for-profit business entities to construct new housing or to acquire or rehabilitate existing structures, or both, for housing for persons of low or very low income, or both;

(b) To provide nonprofit organizations, as set forth in ORS 458.210 to 458.240, technical assistance or predevelopment costs, or both. Predevelopment costs include, but are not limited to, site acquisition, architectural services and project consultants. Predevelopment costs do not include costs described in paragraph (c) of this subsection;

(c) For costs to develop nonprofit organizations that show sufficient evidence of having strong community support and a strong likelihood of producing low or very low income housing. [No] Account investment revenue [shall] may not be used by an organization for its general operations;

(d) To match public and private moneys available from other sources for purposes of production of low or very low income housing; or

(e) For purposes of administration of the account, not to exceed five percent of the account investment revenue.

(3) The [council] department[, in developing policy,] shall give preference in making grants or loans[, at the awardee’s election,] to those entities that [would propose to] the department determines will:

(a) Provide the greatest number of low and very low income housing units constructed, acquired or rehabilitated for the amount of account investment revenue expended by matching account investment revenue with other grant, loan or eligible in-kind contributions;

(b) Ensure the longest use for the units as low or very low income housing units; or

(c) Include social services to occupants of the proposed housing, including but not limited to, programs that address home health care, mental health care, alcohol and drug treatment and post-treatment care, child care and case management.

(4) [At least 75 percent of the] Account investment revenue derived in any calendar year [shall] may be used to construct, acquire or rehabilitate housing for low and very low income persons[. No] but not more than 25 percent of the account investment revenue derived in any calendar year [shall] may be used to construct, acquire or rehabilitate housing for low income households. Account investment revenue not disbursed by the department as grants or loans to construct, acquire or rehabilitate low or very low income housing may be retained and credited as account principal.

(5) Loans disbursed from account investment revenue shall bear an interest rate equal to the interest rate paid on United States Treasury long-term obligations as identified by the department.

[(6) Notwithstanding subsections (2), (3) and (5) of this section, the department shall not disburse account investment revenue as loans after December 31, 2003.]

SECTION 6. ORS 458.630, as amended by section 1, chapter 20, Oregon Laws 2003 (Enrolled House Bill 2169), is amended to read:

458.630. (1)(a) The Housing and Community Services Department [shall] may hold and use the principal that is credited to the Housing Development and Guarantee Account [under ORS 458.620 (3)] as the Guarantee Fund. The department [shall] may use the fund [only] to guarantee repayment of loans made to finance the construction, development, acquisition or rehabilitation of low income housing, of the commercial component of a structure that contains both commercial property and low income housing, or of both. The department, by rule, shall specify the grounds on which it may deny loan guarantees for a structure that contains both commercial and low income housing components. The grounds for denial specified by the department must include, but need not be limited to, a commercial component that is excessive in scope or that is designed for commercial activity of a type incompatible with residential housing. The State Housing Council shall review loans that are guaranteed by the fund to ensure that the loans meet prudent underwriting standards.

(b) A guarantee may not be prepared or construed in such a manner as to violate the provisions of section 7, Article XI of the Oregon Constitution.

(2) The department may not issue any loan guarantee under this section that guarantees the repayment of more than 25 percent of the original principal balance of any loan.

(3) The department may not issue a loan guarantee if the guarantee would cause the aggregate dollar total of all loan guarantees issued by the department under this section to exceed two times the total amount then in the Guarantee Fund established under subsection (1) of this section. Notwithstanding ORS 458.625,whenever payouts on loan guarantees cause the fund principal [decreases] to decrease by five percent or more, the interest on the fund shall be deposited only to the principal account until the [full] amount of the fund principal lost due to payouts on loan guarantees is restored.

(4) [In developing policy] Subject to council review under subsection (1) of this section, the department shall give preference for loan guarantees under this section[, the council shall give preference] to loans for the construction, development, acquisition or rehabilitation of low income housing, or of structures containing both commercial and low income housing components, that [would] the department determines will:

(a) Provide the greatest number of low income housing units constructed, acquired, developed or rehabilitated for the amount of guarantee allowed;

(b) Ensure the longest possible use for the units as low income housing units. Pursuant to this end, the State Housing Council may adopt a formula that optimizes the interests of the lender and the developer and the working life of the low income units; or

(c) Include a program of services for the occupants of the proposed housing including, but not limited to, programs that address home health care, mental health services, alcohol and drug treatment and post-treatment care, child care and case management.

(5) The council may adopt a policy that gives loan guarantee preference to loans for low income housing, or structures containing both commercial and low income housing components, for which the department has provided a grant, loan, tax credit or other investment.

SECTION 7. ORS 458.720 is amended to read:

458.720. (1) Pursuant to ORS 286.560 to 286.580 and 348.716, lottery bonds may be issued to make grants or loans to Oregon municipalities, businesses and individuals to encourage real estate developments that promote downtown and community center areas, provide affordable housing and other infill developments, and fund projects that promote business opportunities in Oregon’s distressed areas and rural communities.

(2) The use of lottery bond proceeds is authorized based on the following findings:

(a) The grants and loans made will be used to fund projects that assist Oregon communities in managing growth, thereby attracting industry and workers and improving Oregon’s labor market; and

(b) The projects will bring jobs and economic diversity to Oregon’s distressed areas and rural communities.

(3) The aggregate principal amount of lottery bonds issued pursuant to this section [shall] may not exceed the sum of $25 million and an additional amount estimated by the State Treasurer to be necessary to pay bond-related costs. Lottery bonds issued pursuant to this section shall be issued only at the request of the Director of the Housing and Community Services Department.

(4) The net proceeds of lottery bonds issued pursuant to this section shall be deposited in the Community Development Incentive Project Fund, which is hereby established in the State Treasury separate and distinct from the General Fund.

(5) The proceeds of lottery bonds issued pursuant to this section shall be used only for the purposes set forth in subsection (1) of this section and for bond-related costs.

(6) Interest earned by the Community Development Incentive Project Fund shall be credited to the fund or to the Housing Development and Guarantee Account, as determined by the director. In addition to any other moneys specifically designated by law, the fund shall consist of any amounts appropriated by the Legislative Assembly and any gifts, grants or donations.

SECTION 8. Notwithstanding any limitation on the purposes for which moneys deposited in the Housing Development and Guarantee Account created in ORS 458.620 may be expended, the amount of $5,530,000 is transferred from the Housing Development and Guarantee Account to the General Fund to be used for general governmental purposes.

SECTION 9. The amendments to ORS 456.593, 456.615, 456.620, 456.635, 458.625, 458.630 and 458.720 by sections 1 to 7 of this 2003 Act become operative on January 1, 2004.

SECTION 10. This 2003 Act being necessary for the immediate preservation of the public peace, health and safety, an emergency is declared to exist, and this 2003 Act takes effect on its passage.

Approved by the Governor September 2, 2003

Filed in the office of Secretary of State September 2, 2003

Effective date September 2, 2003

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