A state-run housing program that has failed to deliver on its promise of providing longtime tenants a chance to buy their homes recently came under fire from Washington lawmakers.

A bipartisan panel conducted a hearing on a new state audit that found no purchases have been made through the program that operates mostly in Indian Country and is overseen by the Washington State Housing Finance Commission. That’s despite at least 135 units being eligible for homeownership.

“This really did clarify that there was serious mismanagement and that thousands of Native American tenants are not getting to own the homes they are living in as they were promised,” Rep. Gerry Pollet, D-Seattle, said after the meeting of the Joint Legislative Audit and Review Committee.

State auditors found that the program giving low-income renters the ability to own their homes after 15 years is “little-known and largely misunderstood.”

The audit found 135 eligible homes have yet to be sold and transferred, in part, because monitoring activities and guidance for project owners and tenants are “ineffective.”

“At the highest level, the findings of this performance audit are disappointing,” State Auditor Pat McCarthy wrote in the report. 

Known as Eventual Tenant Ownership, the program provides private developers with federal Low-Income Housing Tax Credits in exchange for building homes that renters are offered a chance to buy.

Pollet and Rep. Chris Stearns, D-Auburn, requested the audit about a year ago, citing flaws with how the Housing Finance Commission was running the program.

The two lawmakers plan to introduce legislation to compel developers and project owners to make ownership available or face the prospect of losing out on housing tax credits in the future.

“We need something to ensure that the private companies that benefit from the tax credit are held accountable and are preparing to turn over the rental units to the tenants,” Pollet said.

Concerns about the ownership program were raised after Nooksack Indian Tribal members faced eviction from low-income housing after they were disenrolled from the tribe. These members lived in units owned by the tribes that could qualify for ownership after 15 years. Three Nooksack households received eviction notices last week. 

The state’s audit did not evaluate the Nooksack Housing Department’s decision to evict tribal members living in that housing and instead focused on the Housing Finance Commission’s management of the program, according to the audit. 

‘Ineffective’ policies 

The home purchase option is supposed to be offered after the unit has been available to rent for 15 years. Tenants do not have to live in the unit for 15 years to receive the purchase option, state auditors said.

Tenants are not required to buy, nor are homes automatically transferred from a rental agreement to a purchase contract.

Only 18 of the state’s nearly 1,300 projects receiving the federal tax credits offer tenant purchase options and all but one are managed by tribal governments. Of the 18 projects, six — with a combined total of 135 rental units – had properties old enough to qualify for tenant purchase as of 2023, according to the audit.

Even if the homes do qualify, it can take longer than 15 years for owners to complete multiple required steps before interested tenants can buy the homes. This includes preparing tenants for homeownership and resolving any legal issues for those units on tribal lands, auditors concluded.

The audit found the Housing Finance Commission met its legal requirements for operating the home purchase program, but it did not do enough to oversee project owners or to make sure tenants knew they had the option to buy their homes. 

Auditors also found that tenants’ understanding of the program varied and that many faced possible challenges with homeownership, including financial barriers.

The auditor’s office recommended that the commission improve its process for monitoring project owners’ progress toward fulfilling tenant purchase plans by requiring frequent progress reports. It also recommends the commission develop clearer guidance for how owners can develop and implement tenant purchase plans. 

Housing Finance Commission Executive Director Steve Walker told lawmakers “we own the fact” that the agency did not take necessary steps to ensure home purchase opportunities. 

He said the agency has spent the last two years developing guidance and a new framework for the program. 

“We really hope to see some purchases in the coming year,” he said.

Gabe Galanda, an Indigenous rights attorney who represents the Nooksack families facing eviction, said the commission needs to do more to oversee the private property owners who rent out these homes. 

“WSHFC has continually claimed or feigned that it lacks authority to enforce the eventual tenant ownership program or its agreements,” Galanda told the committee Dec. 4. “If that is true, and I don’t believe it to be true, the Legislature must now consider legislating some enforcement remedy to prevent the types of abuse of these tax credits.”