State audit finds low-income tenant homeownership program ‘ineffective’ in Whatcom County
A federal program designed to give low-income Washington residents living in affordable rental housing — many in Whatcom County — the option to eventually purchase their home has been “ineffective” and “disappointing,” according to a performance audit released last week by the state auditor’s office.
The Low-Income Housing Tax Credit program (LIHTC) managed by the Washington State Housing Finance Commission (WSHFC) encourages the development of affordable rental housing projects, a few of which offer options for tenants to buy their homes after the home has been available to rent for at least 15 years.
Concerns raised over evictions at LIHTC housing projects managed by the Nooksack Indian Tribe in Whatcom County prompted the audit, which examined the commission’s oversight role of those types of projects.
“At the highest level, the findings of this performance audit are disappointing. An option for tenants in affordable housing projects to buy their homes has not yet been used, despite applying to 135 housing units in 2023,” the performance audit states.
Only 18 of the state’s nearly 1,300 LIHTC projects offer tenant purchase options, and all but one are managed by Tribal governments.
The audit found that of those 18 projects, just six — with a combined total of 135 homes in Okanogan, Snohomish and Whatcom Counties — had properties old enough to qualify for tenant purchase as of 2023. Still, the option for tenants to buy their homes has not yet been used.
“Project owners have yet to sell and transfer the 135 eligible homes for sale to tenants. This appears inconsistent with formal agreements between the project owners and the commission, although the complex process to prepare for home sales means some delay before tenants can take ownership of their homes could be expected,” the performance audit states.
All of the homes eligible for purchase in Whatcom County — 61 in Deming and 24 in Everson — are owned by the Nooksack Indian Tribe.
An additional 254 homes across Washington will become eligible for tenant purchase by 2030. Between those already eligible and those entering availability in the next five years, 389 homes will be eligible for tenant purchase in 2030.
In a letter responding to the findings of the performance audit, WSHFC Executive Director Steve Walker said the commission agreed that “it is unfortunate that no units have yet been sold and that improvements to our process and compliance oversight were needed to better prepare owners to offer units for sale to tenants after year 15.”
“Over the past two years, since realizing this need, we have worked as closely as possible with the owners of LIHTC properties with the eventual tenant ownership option (referred to as tenant purchase option in the report) to support owners’ progress towards fulfilling this commitment,” Walker wrote in the letter.
The audit indicated that while the failure to deliver homeownership to tenants was not the fault of WSHFC management, the commission did not effectively monitor these projects to ensure they were ready for tenant purchases and did not sufficiently develop guidance for project owners to implement purchases.
“Although the commission met legal requirements, its monitoring activities were ineffective for ensuring project owners’ progress toward tenant purchases,” the audit states. “For example, the commission did not follow its own plan for monitoring project owners’ progress in that area.”
The audit found that while the eventual tenant ownership option is “little-known and largely misunderstood,” tenants have received other meaningful benefits through the program.
“Despite these barriers to homeownership, LIHTC projects provide affordable rental housing to disadvantaged communities, even if tenants do not buy eligible homes,” the audit states. “These income-restricted housing options directly benefit communities through increased housing supply and below-market rents.”
The state auditor’s office made recommendations to the commission about ways to improve its monitoring of projects with tenant purchase options and provide project owners with clearer guidance to better ensure the projects will fulfill tenant purchase options in the future.
“As our recommendations show, this tenant ownership option needs greater clarity — in communicating how it works, what tenants’ options are, and the goals of policy makers in offering it,” the audit states.
