4091574 Zoning Commission Notice of Emergency & Proposed Rulemaking: Case No. 04-33F (Text Amendments: PUDs & Inclusionary Zoning - Termination of Affordability Controls upon Foreclosure)
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ZONING COMMISSION FOR THE DISTRICT OF COLUMBIA
NOTICE OF EMERGENCY & PROPOSED RULEMAKING
Z.C. Case No. 04-33F
(Text Amendments: PUDs and Inclusionary Zoning – Termination of Affordability Controls upon Foreclosure)
The Zoning Commission for the District of Columbia, pursuant to the authority set forth in § 1 of the Zoning Act of 1938, approved June 20, 1938 (52 Stat. 797; D.C. Official Code § 6-641.01 (2008 Repl.)) and the authority set forth in § 6(c) of the District of Columbia Administrative Procedure Act, approved October 21, 1968 (82 Stat. 1206; D.C. Official Code § 2-505(c) (2011 Repl.)), hereby gives notice of the adoption, on an emergency basis, of amendments to §§ 2409, 2602, and 2603 of the Zoning Regulations of the District of Columbia, DCMR Title 11.
The amendments would add a new § 2409.11 that provides for the automatic termination of affordable housing controls imposed upon a unit by a Commission order approving a planned unit development (PUD) if title to the mortgaged property is transferred by foreclosure or deed-in-lieu of foreclosure, or if the mortgage is assigned to the Secretary of the U.S. Department of Housing and Urban Development. The automatic termination of the PUD’s affordability requirements is contingent upon the prior execution of the monitoring and enforcement documents described in new § 2409.10. The execution of these documents is also made a precondition to the issuance of a certificate of occupancy for the PUD. The monitoring and enforcement documents must bind the owner and all successors in title to abide by such terms as the District considers necessary to ensure that the affordable housing will be constructed, marketed, sold, re-sold, rented, and occupied, so as to be affordable to the target households during the specified control period and safeguarded regarding foreclosure.
A new § 2602.10 provides for the automatic termination of the Inclusionary Zoning (IZ) controls set forth in Chapter 26 under the same circumstances. However, that subsection does not require the prior execution of monitoring and enforcement documents, because the decision whether to require such agreements must be made by the District agency entrusted with the administration of that aspect of the Inclusionary Zoning Program. In addition, the Commission adopted new § 2603.6, which permits the Mayor or the District of Columbia Housing Authority to acquire title to any inclusionary unit in a for-sale inclusionary development if the title to that units is at risk of being transferred or has been transferred by foreclosure, deed-in-lieu of foreclosure, or the unit’s mortgage is at risk of being assigned or has been assigned to the Secretary of the U.S. Department of Housing and Urban Development. Existing § 2603.5 grants the Mayor or the District of Columbia Housing Authority the right to purchase up to twenty-five percent (25%) of inclusionary units in a for-sale inclusionary development. This right to purchase also serves as a cap. The new amendment will allow the Mayor or the Authority to negotiate the purchase of any inclusionary unit under the circumstances described.
This is the second emergency action taken by the Commission under this docket. On July 30th of this year the Commission also adopted rules to provide automatic termination upon foreclosure, but those rules required the lien holder to provide notice to the District of any potential foreclosure. As noted by the Commission in its first notice of emergency rulemaking, when IZ and many PUD orders were first drafted, FannieMae and FreddieMac dominated the secondary market for home mortgages and FannieMae had underwriting policies that permitted affordability covenants to survive foreclosure. “Fannie” and “Freddie’s” financial difficulties have reduced their role in the market and their role has been largely filled by the U.S. Department of Housing and Urban Development (HUD), which provides mortgage insurance to lenders for home mortgages. HUD’s regulations[1] provide that a mortgage is ineligible for insurance if “the mortgaged property is subject to legal restrictions on conveyance.” 24 CFR § 203.41(b). However, the regulation provides an exception for eligible government programs if the “restrictions will automatically terminate if title to the mortgaged property is transferred by foreclosure or deed-in-lieu of foreclosure.” 24 CFR § 203.41(c)(2). As a result of the HUD’s recent implementation of this regulation, many lenders have imposed similar restrictions, but allow for the same exception.
Because this exception is not contained in the Zoning Regulations, many of the affordable units produced as a result of PUD orders and the IZ regulations do not qualify for HUD mortgage insurance and, therefore, these affordable units have become effectively unmarketable because many purchasers of affordable units use HUD insured mortgages. This creates a hardship for developers in marketing and selling the units and causes an unnecessary and harmful delay in the provision of affordable housing mandated by the Commission.
Through comments provided on September 25, 2012, HUD informed the District that the notice requirement contained in the first emergency was in conflict with the need for automatic termination of the affordability controls. The Office of Planning, in coordination with the Department of Housing and Community Development and Office of the Attorney General, revised the text to eliminate the notice requirement and added provisions intended to safeguard affordable units regarding foreclosure.
However, in order to prevent the loss of mandated affordable housing as a result of foreclosure, the Commission adopted provisions discussed above that require PUD owners to sign monitoring and enforcement agreements that will include safeguards regarding foreclosure. The Commission also agreed to permit the Mayor and the Housing Authority to purchase more than 25% of affordable units within an IZ development where foreclosure is threatened. As a result of the foregoing, the Commission concluded that the immediate adoption of these amendments was necessary for the “immediate preservation of public ... welfare.” D.C. Official Code § 2-505(c) (2006 Repl.).
This emergency rule was adopted on November 19, 2012, and became effective on that date.
The Commission also gives notice of its intent to take final rulemaking action to adopt the following amendments to the Zoning Regulations in not less than thirty (30) days from the date of publication of this notice in the D.C. Register or thirty (30) days following referral of this amendment to the National Capital Planning Commission, whichever occurs last.
The emergency rule will expire on March 19, 2013, which is the one hundred twentieth (120th) day after the adoption of the rule, or upon the publication of a Notice of Final Rulemaking in the D.C. Register, whichever occurs first.
Title 11 of the District of Columbia Municipal Regulations, ZONING, was amended on an emergency basis as follows:
Chapter 24, PLANNED UNIT DEVELOPMENT PROCEDURES, § 2409, IMPLEMENTATION, is amended by adding new §§ 2409.10 and 2409.11 to read as follows:
2409.10 The Zoning Administrator shall not approve an application for a certificate of occupancy for a PUD if the order approving the PUD includes a condition requiring the provision of affordable housing unless the owner has executed monitoring and enforcement documents with the District of Columbia, which will bind the owner and all successors in title to abide by such terms as the District considers necessary to ensure that the affordable housing will be constructed, marketed, sold, re-sold, rented, and occupied, so as to be affordable to the target households during the specified control period and safeguarded regarding foreclosure.
2409.11 A condition in an order approving or modifying a PUD that requires the provision of affordable housing shall automatically terminate if title to the mortgaged property is transferred by foreclosure or deed-in-lieu of foreclosure, or if the mortgage is assigned to the Secretary of the U.S. Department of Housing and Urban Development provided the owner has executed monitoring and enforcement documents per the requirements of § 2409.10.
Chapter 26, INCLUSIONARY ZONING, is amended as follows:
Section 2602, APPLICABILITY, is amended as follows:
By amending § 2602.4 to add a reference to new §§ 2602.10 and, 2603.6, so that the provision will read as follows:
2602.4 Except as provided in §§ 2602.5, 2602.10, 2603.5, 2603.6, and 2607.1(c) or the Act, all inclusionary units created pursuant to this chapter shall be leased or sold only to eligible households for so long as the inclusionary development exists.
By adding a new § 2602.10 to read as follows:
2602.10 The requirements of this chapter shall automatically terminate if title to the mortgaged property is transferred by foreclosure or deed-in-lieu of foreclosure, or if the mortgage is assigned to the Secretary of the U.S. Department of Housing and Urban Development.
Section 2603, SET-ASIDE REQUIREMENTS, is amended by adding a new § 2603.6 to read as follows:
2603.6 Notwithstanding § 2603.5, nothing shall prohibit the Mayor or the District of Columbia Housing Authority to acquire title to inclusionary units in a for-sale inclusionary development if any of the following circumstances exist:
(a) There is a risk that title to the units will be transferred by foreclosure or deed-in-lieu of foreclosure, or that the units’ mortgages will be assigned to the Secretary of the U.S. Department of Housing and Urban Development; or
(b) Title to the units have been transferred by foreclosure or deed-in-lieu of foreclosure, or the units’ mortgages have been assigned to the Secretary of the U.S. Department of Housing and Urban Development
All persons desiring to comment on the subject matter of the proposed rulemaking action should file comments in writing no later than thirty (30) days after the date of publication of this notice in the D.C. Register. Comments should be filed with Sharon Schellin, Secretary to the Zoning Commission, Office of Zoning, 441 4th Street, N.W., Suite 210-S, Washington, D.C. 20001, or via email at zcsubmission@dc.gov. Ms. Schellin may also be contacted by telephone at 202-727-6311 or by email at Sharon.Schellin@dc.gov. Copies of this proposed rulemaking action may be obtained at cost by writing to the above address.
[1] The regulations were promulgated by HUD’s Office of the Assistant Secretary for Housing—Federal Housing Commissioner.
