CONSTITUTIONALITY OF BILL EXPANDING POWER OF HOUSING AUTHORITY

HOUSING AUTHORITIES ‑- PUBLIC ‑- CONSTITUTIONALITY OF BILL EXPANDING POWER OF HOUSING AUTHORITY

Discussion of the constitutionality of House Bill No.449, pending before the 1975 legislature, insofar as this bill would authorize a housing authority to provide housing to persons other than those of low income and to become involved in the financing of housing projects constructed by private builders.

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                                                                  March 19, 1975

Honorable Joe D. Haussler
State Representative, 7th District
Legislative Building
Olympia, Washington 98504                                                                                                               Cite as:  AGLO 1975 No. 32

Dear Sir:

            This is written in response to your recent letter asking for our opinion regarding the constitutionality, under Article VIII, § 7 of the Washington State Constitution, of House Bill No. 449 which is currently pending before the state legislature.  As you have described it, this bill would amend existing laws relating to public housing authorities so as to add certain new powers and duties ‑ particularly the authority to purchase mortgage loans related to housing projects.

                                                                     ANALYSIS

            Article VIII, § 7 of the state constitution, with which you had expressed concern, reads as follows:

            "No county, city, town or other municipal corporation shall hereafter give any money, or property, or loan its money, or credit to or in aid of any individual, association, company or corporation, except for the necessary support of the poor and infirm, or become directly or indirectly the owner of any stock in or bonds of any association, company or corporation."

            The applicability of this constitutional prohibition to public housing authorities operating under chapter 35.82 RCW derives from the fact that such authorities, upon being made operative by the governing body of the city or county in which they are situated in accordance with RCW 35.82.030, constitute public corporate agencies having the same general nature as cities and other municipal corporations.  Accord,Mercy v. Seattle, 71 Wn.2d 556, 429 P.2d 917 (1967).

             [[Orig. Op. Page 2]]   The first aspect of House Bill No. 449 which you have asked us to consider is so much of § 1 as would redefine the term "housing project," as currently defined in RCW 35.82.020(9), to mean:

            ". . . any work or undertaking:  (a) to demolish, clear or remove buildings from any slum area; such work or undertaking may embrace the adaptation of such area to public purposes, including parks or other recreational or community purposes; or (b) to provide decent, safe and sanitary urban or rural dwellings, apartments or other living accommodationsprimarily for persons of low income; such work or undertaking may include the rehabilitation of dwellings owned by parties other than the authority, and also may include buildings, land, equipment, facilities and other real or personal property for necessary, convenient or desirable appurtenances, streets, sewers, water service, parks, site preparation, gardening, administrative, community, health, recreational, welfare or other purposes; or (c) to accomplish a combination of the foregoing.  The term 'housing project' also may be applied to the planning of the buildings and improvements, the acquisition of property, the demolition of existing structures, the construction, reconstruction, alteration and repair of the improvements and all other work in connection therewith."  (Amendatory language underscored.)

            The term "persons of low income," as used therein, is defined by RCW 35.82.020(10) to mean:

            ". . . persons or families who lack the amount of income which is necessary (as determined by the authority undertaking the housing project) to enable them, without financial assistance, to live in decent, safe and sanitary dwellings, without overcrowding."

            Under the law as it presently exists, there seems clearly to be no constitutional problem under Article VIII, § 7, supra, for the reason that whatever housing projects are provided by a housing authority will fall within the constitutionally stated exception to the prohibition of  [[Orig. Op. Page 3]] that section involving "necessary support of the poor and infirm."  Under the proposed amendment, however, the legislature by inserting the word "primarily" in the definition of "housing project" could conceivably impair the constitutionality of the act unless, as you have suggested, a further amendment is added to the bill expressly directing that any persons other than those of low income who receive accommodations from a housing authority be required to pay a fair market value price for those accommodations or for any other benefit received from transactions entered into or services performed by a housing authority under the act.

            The second facet of House Bill 449 with which you appear to be concerned is so much of § 2 of the bill as would amend RCW 35.82.070, relating to the powers of a housing authority, to add the following express authorization:

            "(14) To make loans to persons of low income incidental to rehabilitating their dwellings or selling a dwelling to them, and to take such security therefor as is deemed necessary and prudent by the authority."

            So long as the loans thus made are, however, made directly to persons of low income, and not to anyone else, it would not appear to us that this provision would pose any constitutional problem under Article VIII, § 7,supra.  Loans of money or property, like gifts, are constitutional if made "for the necessary support of the poor and infirm."

            On the other hand, this office has previously advised in AGO 1973 No. 18 [[to Robert V. Graham, State Auditor on August 2, 1973]], copy enclosed, that a gift or loan made to some other natural or corporate entity which cannot itself be characterized as either a "poor" or an "infirm" person would be unconstitutional even though its ultimate purpose might be to benefit persons who are eligible for direct assistance under the constitution.  Thus, while we see no constitutional problem with subsection (14) of § 2, supra, we are concerned with the constitutionality of subsection (11) of this same section of the bill, the text of which reads as follows:

            "(11) Within its area of operation, to invest in, purchase, participate in the purchase of, make commitments to purchase or participate in the purchase of, and take assignments from mortgage lenders, of mortgage loans made by others for the construction, reconstruction, rehabilitation, purchase, leasing or refinancing of housing projects upon the terms set forth in section 10 of this 1975 amendatory act."

             [[Orig. Op. Page 4]]   While proposed new subsection (14),supra, would authorize direct loans only to "persons of low income," subsection (11) is not similarly limited in its scope.  Nor do we find any saving language in § 10 of the bill to which reference is made in subsection (11),supra.  That section, which proposes to establish certain detailed procedures to be followed by a housing authority in investing its funds in mortgage loans, appears to permit such investments to be made without regard to the economic status of the borrower or obligor on the mortgage loan.

            Conceivably, this problem could be cured through an amendment to the bill which would expressly limit the class of mortgage loans in which a housing authority might invest its funds to those directly benefiting such persons of low income as a housing authority would be empowered to loan its funds directly to under subsection (14),supra even though this approach might be likened to that which was condemned in our earlier opinion, AGO 1973 No. 18, supra. At least, if such language were inserted in the bill it would be entitled to a presumption of constitutionality under well-established court rules.  But unlike the problem posed in connection with housing rentals themselves under § 1(9),supra, the constitutional "loan" problems posed by this aspect of the bill would not be cured simply by requiring all the borrowers involved, other than those of low income, to pay fair market value to the housing authority for their loans; i.e., an interest rate equivalent to the going market rate charged by commercial lenders or the like.  Simply stated, this aspect of Article VIII, § 7,supra, is not limited to those loans of credit or money for which less than the going rate of interest is paid.

            It is hoped that the foregoing analysis and evaluation of the constitutionality of House Bill No. 449 will be of some assistance to you.

Very truly yours,

SLADE GORTON
Attorney General

PHILIP H. AUSTIN
Deputy Attorney General