5.1 Maximum Allowable Sales Prices of WFH Units.
(a) The Department will set the Sales Price based on an amount that is affordable to households eligible to participate in the WFH Program based on the households’ verified income and household size, according to the procedures described below. The Director shall determine what portion of a household’s monthly gross income it is expected to pay towards housing expenses (for example, a Certified Household might be expected to pay no more than thirty-three percent (33%) of its gross monthly household income towards housing expenses including mortgage principal, mortgage interest, real estate taxes, hazard insurance, private mortgage insurance, and condominium fee, but excluding utilities). The Department will then determine the sales price using the following pricing model and procedures described below.
(b) The income used to calculate the sales price is based on one and one half (1½ ) people per bedroom. Therefore:
(1) The maximum sales price for an efficiency unit is calculated using the income for a one person household.
(2) The maximum sales price for a one bedroom unit is calculated using the mid-point between the income for a one person household and a two person household (e.g. 1.5 people per bedroom).
(3) The maximum sales price for a two bedroom unit is calculated using the income for a three person household.
(4) The maximum sales price for a three bedroom unit is based on the mid- point between the income for a four person household and a five person household (that is, 4.5 people per bedroom).
(c) To calculate the sales price for any unit by bedroom size, the corresponding total household “monthly income” is calculated by dividing the annual income set by the Department by 12;
(1) The maximum “monthly housing cost” is calculated by multiplying the resulting “monthly income” by the percentage of income towards housing as set by the Director as described in paragraph (a) above.
(2) From the maximum “monthly housing cost,” subtract monthly condominium fees, hazard insurance, private mortgage insurance, and real estate taxes to calculate the “adjusted housing cost;”
(3) The maximum allowable sales price is calculated as follows:
(A) Divide the “adjusted housing cost” by the applicable annual mortgage loan constant for a 30 year, fixed rate conventional mortgage at the prevailing mortgage interest rate (The mortgage constant, or installment to amortize, represents the amount of each periodic loan payment expressed as a percentage of the original loan, necessary to pay the contract rate of interest (expressed as i) and the entire principal in equal periodic installments over the term of the loan (expressed as n). It is the periodic payment necessary to repay a loan of $1 completely without resorting to a balloon payment. Thus, the mortgage constant is always the periodic payment for a loan of $1 expressed on an annual basis. As a mathematical product, the applicable loan constant can be found on standard charts). The applicable mortgage interest rate will be determined by the prevailing interest rate for a 30 year, conventional mortgage as published by Freddie Mac (or such other source as determined by the Department). This figure represents the “maximum mortgage amount” the Certified Household can afford to support.
(B) Divide the “maximum mortgage amount” by 95% (.95) to calculate the “maximum allowable sales price” after accounting for a down payment of 5%
(d) At least annually, the Department will establish and publicize the assumptions and factors it will use under this pricing model, such as: the expected percentage a Certified Household is expected to pay towards its “maximum monthly housing cost,” the percentage a household is expected to pay as a down payment, the prevailing mortgage interest rate, monthly real estate taxes, monthly private mortgage insurance premium, monthly hazard insurance, and other such factors). The prevailing mortgage interest rate may be adjusted as needed at the time the Offering Agreement is negotiated.
(e) The maximum allowable sales price includes the following closing costs which are to be paid by the Developer:
(1) One-half of one percent for the permanent loan origination fee;
(2) County tax certificate, transfer charges, revenue stamps and recordation charges;
(3) Title examination, settlement, and attorney fees;
(4) Notary fees and fees for preparation of a deed of conveyance, a deed of trust or mortgage, and the deed of trust or mortgage note;
(5) Appraisal fee and credit report fee;
(6) House location survey plat; and
(7) Fees required to place permanent financing that are paid by the Developer.
(f) The “maximum affordable sales price” may be adjusted at the discretion of the Director to include closing costs if the purchaser wishes to finance closing costs. However, the initial sales price basis used to calculate subsequent sales prices for the unit must be calculated before the addition of any closing costs.
(g) The Department must ensure that the WFH Units are affordable to the full range of Certified Households in the program, based on their total annual household income. Therefore, no later than the time the WFH Units are offered for sale within each project, and using the methodology to set affordable sales prices described in the preceding section, the Department will set three sales prices for each size of unit (by bedroom count) based on three different levels of income: a sales price affordable to household earing 75 percent of median, which shall be available for purchase for households earing between 71% and 80% of median; a sales price affordable to households earing 90 percent of median, which shall be available for purchase for households earning between 81% and 100% of median; and a sales price affordable to households earning 110 percent of median, which shall be available for purchase for households earning between 101% and 120% of median. The resulting sales prices shall be calculated for each income level and each unit according to bedroom size.
(h) When an Applicant requests that the Department estimate the sales prices earlier than at the time of offering for the purposes of project planning and financial underwriting, the Department may provide such an estimate using current variable inputs, such as income levels, prevailing mortgage interest rates, and the estimates condominium or homeowners association fee for the project, among other factors. Alternately, the Department may annually calculate and publish the maximum affordable sales prices by income level and bedroom size using current income levels, prevailing mortgage interest rates, tax rates, and with other assumed or estimated inputs, such as condominium or homeowner association fee. When the Department provides sales price estimates for a project, they are provided as estimates only. The actual sales prices shall be calculated at the time the Offering Agreement is approved by the County (which can be no more than 365 days from the estimated settlement date on the unit).
(i) In any instance where water and sewer connection charges are not waived, the “base amount of proceeds” may be adjusted to reflect this increased cost to the Developer.
(j) When the purchaser and Developer of a WFH Unit agree to modify the unit structurally to facilitate access or use by a Disabled Individual, the Department may adjust the sales price by the amount of the additional costs. The Developer must obtain approval of the price from the Department prior to executing a sales contract.
5.2 Maximum Rental Rates for WFH Units.
(a) The maximum allowable rents that may be charged for the WFH Units are those in effect at the time the Department approves the rental Offering Agreement; WFH Unit rents must be based on the maximum income permitted under the program, as revised by June 15 of each year. One third fo the rental WFH Units must be allocated to each of three income categories designated by the Department: a rent affordable to households earing up to 75% of median income, a rent affordable to households earning up to 90% of median income, and a rent affordable to households earning up to 110% of median income. If the number of units of a particular size is not divisible by three, then the remainders must be assigned to the 90% category.
(b) Rental rates established for WFH Units must distinguish units which are inclusive and exclusive of utilities paid by the tenant and those utilities paid by the Developer.
(c) WFH Units developed under the programs designated in accordance with Section 3.2 of this regulation are to be offered and marketed in accordance with the procedures established for those programs.
(d) The method for computing the maximum allowable monthly rents for WFH Units is described below. The income for the rent calculation is based on one and one half (1½ ) people per bedroom. Rental rates must be computed based on the income limits for the Program in effect at the time the WFH Units are offered for rent. The resulting maximum allowable rent by this calculation must be adjusted by the Director, if necessary, to ensure that the maximum allowable rent for a WFH Unit is no more than 80 percent of the rental rate of market rate units of the same type listed below:
(1) The maximum rent for an efficiency unit is based on the income for a one person household.
(2) The maximum rent for a one (1) bedroom unit is based on mid-point between the income for a one person household and a two person household (e.g. 1.5 people).
(3) The maximum rent for a two (2) bedroom unit is based on the income for a three person household.
(4) The maximum rent for a three bedroom unit is based on the mid-point between the income for a four person household and a five person household (e.g. 4.5 people).
(5) The appropriate household size and corresponding maximum income for each unit size is multiplied by twenty-five percent (25%) then divided by 12 and rounded to the next highest whole number which is evenly divided by five (5) to establish the rent for the unit, excluding utilities.
(6) When the Developer pays utilities, the appropriate household size and corresponding maximum income for each unit size is multiplied by thirty percent (30%) then divided by 12 and rounded to the next highest whole number which is evenly divided by five (5) to establish the rent for the unit. Alternatively, the Department may, at its discretion, use “Allowances for Tenant-Furnished Utilities and Other Services” for the Washington PMSA, as determined by the U.S. Department of Housing and Urban Development.
(e) The Director may set different maximum rent limits for rental units in age- restricted buildings if the Director determines that to do so will contribute to the long term availability and affordability of WFH Units for Certified Households. The Director may exercise this option upon the conclusion of the Priority Marketing Period if there are WFH Units that can not be rented to Certified Households at the approved WFH Unit rents.
(f) The maximum allowable rental rate for currently rented WFH Units must be adjusted annually by the Director in accordance with the County’s voluntary rent guidelines. If the apartment development is financed through a federal or state affordable housing program, then the requirements of that program must supercede this regulation.
(g) Utility charges that are paid by the Developer may be added to the WFH Unit rental rate, at the discretion of the Director. The Department may use the annual utility allowances published by the U.S. Department of Housing and Urban Development (HUD) to calculate these charges. Any request by the Developer for a variance from these rates may only be granted by the Department upon receipt of a certified report from a registered engineer or by the appropriate utility company confirming that the HUD utility allowance is not a valid utility factor for the Project. After the first year of operation, utility charges may be based on the actual, average cost of the utility expenses for the previous 12 months.
(h) Laundry washer and dryer equipment must be provided in each WFH Unit unless this equipment is not provided in the market rate units. No increase in rent is allowed for laundry washer and dryer equipment unless the market rate units are separately charged and the increase is limited to the same fee that the market rate apartments are charged.
(i) The Developer must not be permitted to charge a fee for non-structured, automobile parking to WFH Unit tenants. Structured parking, garage or other enclosed spaces may be offered as an option to the WFH Unit occupants at the monthly rate normally charged to market rate units by the Developer.
(j) In the Department’s annual report to the Council regarding the Program, the Director will report on the maximum sales prices and rent limits in effect for the year and the methodology used to arrive at the figures.
5.3 Rental WFH Units Sold as For Sale WFH Units. In the event a rental WFH Unit is sold as a sale WFH Unit, the WFH Unit must not be sold at any time during the applicable rental control period for a price greater than the controlled, approved resale price for the unit. The resale price must be established in accordance with this regulation as if the unit had initially been a “for sale” WFH Unit based on household and bedroom size, and adjusted by the change in CPI since the date of the original rental agreement, The household occupying the unit has the right of first refusal to purchase the unit when it is offered for sale as long as the household is legally occupying the unit in accordance with the Workforce Housing Law and these executive regulations. The occupying household must exercise this right within 60 days of receiving notification of sale. A new control period for the unit must be established according to the control period in effect at that time for sale WFH Units. This control period must begin on the date of settlement of each unit. The existing rental covenants must be released, and new sale covenants recorded on the property.