Home ownership option found in some tribal housing projects has not yet been used, audit finds

A program intended to help people in low-income housing eventually buy their homes has yet to be used, according to a new performance audit by the Office of the Washington State Auditor.

The federal Low-Income Housing Tax Credit program is intended to encourage development of affordable rental housing, but a few program projects allow tenants to buy their homes. The Housing Finance Commission manages this program in Washington.

The state has nearly 1,300 program projects, but only 18 offer tenant purchase options. All but one of those are managed by tribal governments. Of those 18 projects, six had properties old enough to qualify for tenant purchase as of 2023, including a combined total of 135 homes. However, the audit found project owners had not yet transferred any of those properties to tenants.

“Although it’s disappointing that the promise of the purchase option has yet to lead to homeownership in Washington, this audit sheds needed light on why that is the case,” said State Auditor Pat McCarthy. “We found the ownership option is little-known and largely misunderstood, even by participating developers and eligible tenants. It’s a complex process in need of more and better communication.”

Auditors spoke with both tenants and developers of qualifying housing projects. Tenants’ understanding of purchase options varied. Some did not know ownership was an option at all, and most wanted more information about how the program worked. Project owners described challenges including unclear program requirements and limited guidance from the state on how to transfer properties to tenants.

The commission met the legal requirements related to tenant purchase options, and awarded points  to projects when they included the tenant purchase option in their applications. However, the commission did not follow its own plan to monitor project owners’ progress in that area.

The audit makes recommendations to improve the commission’s monitoring of projects with tenant purchase options and to give project owners clearer guidance. The recommendations also aim to improve communication about purchase options between the commission, project owners and tenants.

A controversial, decade-old evictions case involving the purchase option and the Nooksack Indian Tribe prompted interest in an audit of Washington’s administration of the option. Auditors did not review that specific project and the related evictions because they remain legally contested.

“An audit is not a tool that can resolve such a long-disputed and complex case, but our independent review can help state leaders make the tenant purchase option work better across Washington,” said McCarthy. “We gained a ground-level understanding of how the tenant purchase option works with the aim of making the process more effective. We believe our  recommendations can serve to help current and future tenants become homeowners.”

The full report and a two-page summary can be found here: Housing Finance Commission: Tenant purchase options.

Media questions: Assistant Director of Communications Adam Wilson, Adam.Wilson@sao.wa.gov, 564-999-0799