bill tightening tax breaks for public housing authority complexes

The text as introduced · 3,422 words

89R2681 JAM-F

By: Gates
H.B. No. 1595

A BILL TO BE ENTITLED

AN ACT

relating to public housing authorities; authorizing a fee.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subchapter A, Chapter 392, Local Government

Code, is amended by amending Section 392.005 and adding Sections

392.0051 and 392.0052 to read as follows:

Sec. 392.005. TAX EXEMPTION. (a) The property of an

authority is public property used for essential public and

governmental purposes. Subject to Section 392.0051, the [ The ]

authority and the authority's property are exempt from all taxes

and special assessments of a municipality, a county, another

political subdivision, or the state.

(b) If a municipality, county, or political subdivision

furnishes improvements, services, or facilities for a housing

project, an authority may, in lieu of paying taxes or special

assessments, agree to reimburse in payments to the municipality,

county, or political subdivision an amount not greater than the

estimated cost to the municipality, county, or political

subdivision for the improvements, services, or facilities.

Sec. 392.0051. CONDITIONS FOR BENEFICIAL PROPERTY-BASED

TAX AND SPECIAL ASSESSMENT TREATMENT RELATING TO CERTAIN

MULTIFAMILY RESIDENTIAL DEVELOPMENTS. (a) In this section:

(1) "Housing choice voucher program" means the housing

choice voucher program under Section 8, United States Housing Act

of 1937 (42 U.S.C. Section 1437f).

(2) "Lower income housing unit" means a residential

unit reserved for occupancy by an individual or family earning not

more than 60 percent of the area median income, adjusted for family

size, as defined by the United States Department of Housing and

Urban Development.

(3) "Moderate income housing unit" means a residential

unit reserved for occupancy by an individual or family earning not

more than 80 percent of the area median income, adjusted for family

size, as defined by the United States Department of Housing and

Urban Development.

(4) "Property-based exemption" means an exemption

from the taxes and special assessments imposed with respect to

property owned by an authority.

(5) "Public housing unit" means a residential unit for

which the landlord receives a public housing operating subsidy.

The term does not include a unit for which payments are made to the

landlord under the housing choice voucher program.

(6) "Rent" means any recurring fee or charge a tenant

is required to pay as a condition of occupancy, including a fee or

charge for the use of a common area or facility reasonably

associated with residential rental property.

(b) This section applies to [ (c) An exemption under this

section for ] a multifamily residential development which is owned

by an authority, a housing development corporation or a similar

entity created by a housing authority, and [ other than ] a public

facility corporation created by a housing authority under Chapter

303, except that this section does not apply to a multifamily

residential development that [ and which does not have at least 20

percent of its residential units reserved for public housing units,

applies only if ]:

(1) [ the authority holds a public hearing, at a

regular meeting of the authority's governing body, to approve the

development; and

[ (2) at least 50 percent of the units in the

multifamily residential development are reserved for occupancy by

individuals and families earning less than 80 percent of the area

median income, adjusted for family size.

[ (c-1) An exemption under this section for a multifamily

residential development which is owned by a public facility

corporation created by a housing authority under Chapter 303

applies only if:

[ (1) at least 50 percent of units in the multifamily

residential development are reserved for occupancy by individuals

and families earning not more than 80 percent of the area median

income, adjusted for family size; and

[ (2) the development:

[ (A) ] has at least 20 percent of its residential

units reserved for public housing units;

(2) [ (B) ] participates in the Rental Assistance

Demonstration program administered by the United States Department

of Housing and Urban Development; or

(3) [ (C) receives financial assistance administered

under Chapter 1372, Government Code, or receives financial

assistance from another type of tax-exempt bond; or

[ (D) ] receives financial assistance administered

under Subchapter DD, Chapter 2306, Government Code.

(c) Subject to Subsection (g) of this section, a

property-based exemption under Section 392.005(a) for a

multifamily residential development to which Subsection (b)

applies is available only if the development satisfies the other

requirements of this chapter and if:

(1) any applicable audit report requirements provided

by Section 392.0052 are satisfied, other than those imposed on a

multifamily residential development under the circumstances

described by Subsection (g);

(2) the authority submits to the Texas Department of

Housing and Community Affairs and to the county tax

assessor-collector for the applicable appraisal district in which

the exemption is sought a one-time exemption application on a form

promulgated by the comptroller;

(3) a portion of the units in the multifamily

residential development are reserved as follows:

(A) at least:

(i) 10 percent of the units are reserved for

occupancy as lower income housing units, as defined under Section

303.0425; and

(ii) 40 percent of the units are reserved

for occupancy as moderate income housing units, as defined under

Section 303.0425; or

(B) at least 20 percent of the units are reserved

for occupancy by:

(i) recipients of assistance administered

through a project-based rental assistance program; or

(ii) individuals or families earning not

more than 30 percent of the area median income, adjusted for family

size, as defined by the United States Department of Housing and

Urban Development;

(4) the authority delivers to the presiding officer of

the governing body of each taxing unit in which the development is

to be located written notice of the development, at least 30 days

before the date:

(A) the authority takes action to approve a new

multifamily residential development or the acquisition of an

occupied multifamily residential development; and

(B) of any public hearing required to be held

under Section 303.0421(c);

(5) a majority of the members of the board are not

elected representatives of the governing body of the political

subdivision or subdivisions that established the authority, the

development is approved by the governing body of the municipality

in which the development is located or, if the development is not

located in a municipality, the county in which the development is

located, except that the approval described by this subdivision is

not required for a multifamily residential development that

reserves a portion of units as described by Subdivision (3)(B);

(6) for a multifamily residential development that is

acquired by an authority, the development is occupied or was

occupied within the two-year period preceding the date of the

acquisition and is not otherwise subject to a land use restriction

agreement under Section 2306.185, Government Code, and:

(A) not less than 15 percent of the total gross

cost of the existing development, as shown in the settlement

statement, is expended on rehabilitating, renovating,

reconstructing, or repairing the development, with initial

expenditures and construction activities:

(i) beginning not later than the first

anniversary of the date of the acquisition; and

(ii) finishing not later than the third

anniversary of the date of the acquisition; or

(B) at least 25 percent of the units are reserved

for occupancy as lower income housing units;

(7) not less than 30 days before the date of final

approval of the development:

(A) the authority conducts, or obtains from a

professional entity that has experience underwriting affordable

multifamily residential developments and does not have a financial

interest in the applicable development, developer, or authority, an

underwriting assessment of the proposed development that allows the

authority to make a good faith determination that, for an occupied

multifamily residential development acquired by an authority or for

a newly constructed multifamily residential development owned by an

authority, the total annual amount of rent reduction on the

income-restricted residential units provided at the development

will be not less than 60 percent of the estimated amount of the

annual ad valorem taxes that would be imposed on the property

without an exemption from those taxes under Section 392.005(a) for

the second, third, and fourth years after the date of acquisition by

the authority or the date the certificate of occupancy is issued for

the development, as applicable; and

(B) the authority publishes on its Internet

website a copy of the underwriting assessment described by

Paragraph (A);

(8) the percentage of lower and moderate income

housing units reserved in each category of income-restricted

residential units in the development, based on the number of

bedrooms per unit, is the same as the percentage of each category of

income-restricted residential units reserved in the development as

a whole;

(9) the monthly rent charged per unit does not exceed:

(A) for a lower income housing unit, 30 percent

of 60 percent of the area median income, adjusted for family size,

as defined by the United States Department of Housing and Urban

Development; or

(B) for a moderate income housing unit, 30

percent of 80 percent of the area median income, adjusted for family

size, as defined by the United States Department of Housing and

Urban Development;

(10) the authority that owns the development does not:

(A) refuse to rent a residential unit to an

individual or family because the individual or family participates

in the housing choice voucher program; or

(B) use a financial or minimum income standard

that requires an individual or family participating in the housing

choice voucher program to have a monthly income of more than 250

percent of the individual's or family's share of the total monthly

rent payable for a unit;

(11) the authority publishes on its Internet website

information about the development's:

(A) compliance with the conditions prescribed by

this section; and

(B) policies regarding tenant participation in

the housing choice voucher program;

(12) the authority that owns the development:

(A) affirmatively markets available residential

units directly to individuals and families participating in the

housing choice voucher program; and

(B) notifies local housing authorities of the

development's acceptance of tenants in the housing choice voucher

program; and

(13) each lease agreement for a residential unit in

the development provides that:

(A) the landlord may not retaliate against the

tenant or the tenant's guests by taking an action because the tenant

established, attempted to establish, or participated in a tenant

organization;

(B) the landlord may only choose to not renew the

lease if the tenant:

(i) committed one or more substantial

violations of the lease;

(ii) failed to provide required information

on the income, composition, or eligibility of the tenant's

household; or

(iii) committed repeated minor violations

of the lease that disrupt the livability of the property, adversely

affect the health and safety of any person or the right to quiet

enjoyment of the leased premises and related development

facilities, interfere with the management of the development, or

have an adverse financial effect on the development, including the

failure of the tenant to pay rent in a timely manner; and

(C) to not renew the lease, the landlord must

serve a written notice of proposed nonrenewal on the tenant not

later than the 30th day before the effective date of nonrenewal.

(d) In calculating the income of an individual or family for

a lower or moderate income housing unit, the authority must use the

definition of annual income described in 24 C.F.R. Section 5.609,

as implemented by the United States Department of Housing and Urban

Development. If the income of a tenant exceeds an applicable limit

at the time of the renewal of a lease agreement for a residential

unit, the provisions of Section 42(g)(2)(D), Internal Revenue Code

of 1986, apply in determining whether the unit may still qualify as

a lower or moderate income housing unit.

(e) An authority may require an individual or family

participating in the housing choice voucher program to pay the

difference between the monthly rent for the applicable unit and the

amount of the monthly voucher if the amount of the voucher is less

than the rent.

(f) A tenant may not waive the protections provided by

Subsection (c)(13). An authority may adopt tenant protections that

are more protective of tenants than the tenant protections provided

by Subsection (c)(13).

(g) Notwithstanding Subsection (c), a multifamily

residential development that is acquired by an authority, that is

occupied or was occupied within the two-year period preceding the

date of the acquisition, and that is not otherwise subject to a land

use restriction agreement under Section 2306.185, Government Code,

is eligible for a property-based exemption under Section 392.005(a)

for:

(1) the one-year period following the date of the

acquisition, regardless of whether the development complies with

the conditions prescribed by Subsection (c); and

(2) a year following the year described by Subdivision

(1) only if the development comes into compliance with the

conditions prescribed by Subsection (c) not later than the first

anniversary of the date of the acquisition.

Sec. 392.0052. AUDIT REQUIREMENTS FOR CERTAIN MULTIFAMILY

RESIDENTIAL DEVELOPMENTS. (a) In this section:

(1) "Department" means the Texas Department of Housing

and Community Affairs.

(2) "Property-based exemption" has the meaning

assigned by Section 392.0051.

(b) An authority that claims a property-based exemption for

a multifamily residential development under Section 392.005(a)

must annually submit to the department and the chief appraiser of

the appraisal district in which the development is located an audit

report for a compliance audit, prepared at the expense of the

authority and conducted by an independent auditor or compliance

expert with an established history of providing similar audits on

housing compliance matters, to:

(1) determine whether the authority is in compliance

with the conditions imposed for the exemption by Section 392.0051;

and

(2) identify the difference in the rent charged for

income-restricted residential units and the estimated maximum

market rents that could be charged for those units without the rent

or income restrictions.

(c) Not later than the 60th day after the date of receipt of

the audit conducted under Subsection (b), the department shall

examine the audit report and publish a report summarizing the

findings of the audit. The report must:

(1) be made available on the department's Internet

website;

(2) be issued to an authority that has an interest in a

development that is the subject of an audit, the comptroller, and

the governing body of the political subdivision or subdivisions

that established the authority; and

(3) describe in detail the nature of any failure to

comply with the conditions imposed for the property-based exemption

by Section 392.0051.

(d) If an audit report submitted under Subsection (b)

indicates noncompliance with Section 392.0051, an authority:

(1) must be given:

(A) written notice from the department or

appropriate appraisal district that:

(i) is provided not later than the 90th day

after the date a report has been submitted under Subsection (b);

(ii) specifies the reasons for

noncompliance;

(iii) contains at least one option for a

corrective action to resolve the noncompliance; and

(iv) informs the authority that failure to

resolve the noncompliance will result in the loss of the

property-based exemption under Section 392.005(a);

(B) a period of 60 days after the date notice is

received under this subdivision to resolve the matter that is the

subject of the notice; and

(C) if a matter that is the subject of a notice

provided under this subdivision is not resolved to the satisfaction

of the department and appropriate taxing authority during the

period provided by Paragraph (B), a second notice that informs the

authority of the loss of the property-based exemption due to

noncompliance with Section 392.0051; and

(2) is considered to be in compliance with Section

392.0051 if notice under Subdivision (1)(A) is not provided as

specified by Subparagraph (i) of that paragraph.

(e) Except as provided by Section 392.0051(g), a

property-based exemption under Section 392.005(a) does not apply

for a tax year in which the department determines that an authority

established under this chapter:

(1) has not submitted the audit report required by

this section; or

(2) based on an audit conducted under Subsection (b),

is not in compliance with the conditions imposed for the exemption

by Section 392.0051.

(f) The initial audit report required by Subsection (b) is

due not later than June 1 of the year following the first

anniversary of:

(1) the date of acquisition for an occupied

multifamily residential development that is acquired by an

authority; or

(2) the date a new multifamily residential development

owned by an authority first becomes occupied by one or more tenants.

(g) Subsequent audit reports following the issuance of the

initial audit report under Subsection (f) are due not later than

June 1 of each year.

(h) An independent auditor or compliance expert may not

prepare an audit under Subsection (b) for more than three

consecutive years for the same authority. After the third

consecutive audit, the independent auditor or compliance expert may

prepare an audit only after the second anniversary of the

preparation of the third consecutive audit.

(i) The department:

(1) shall adopt forms and reporting standards for the

auditing process;

(2) may charge a fee for the submission of an audit

report under this section in a reasonable amount necessary to cover

the expenses of administering this section; and

(3) may adopt rules necessary to implement this

section.

(j) An audit conducted under Subsection (b) is subject to

disclosure under Chapter 552, Government Code, except that

information containing tenant names, unit numbers, or other tenant

identifying information may be redacted.

[ (d) For the purposes of Subsections (c) and (c-1), a

"public housing unit" is a residential unit for which the owner

receives a public housing operating subsidy. It does not include a

unit for which payments are made to the landlord under the federal

Section 8 Housing Choice Voucher Program. ]

SECTION 2. (a) Subject to Subsections (b), (c), and (d) of

this section, Section 392.005, Local Government Code, as amended by

this Act, and Section 392.0051, Local Government Code, as added by

this Act, apply only to a tax or special assessment imposed for a

tax year or calendar year, respectively, that begins on or after the

effective date of this Act.

(b) Subject to Subsections (c) and (d) of this section,

Section 392.005, Local Government Code, as amended by this Act, and

Section 392.0051, Local Government Code, as added by this Act,

apply only to a tax or special assessment to be imposed on a housing

authority with respect to an occupied multifamily residential

development that is acquired by the authority on or after the

effective date of this Act or with respect to a newly built

multifamily residential development for which a certificate of

occupancy is issued on or after the effective date of this Act.

(c) Section 392.0051(g), Local Government Code, as added by

this Act, applies only to an occupied multifamily residential

development that is acquired by a housing authority on or after the

effective date of this Act. An occupied multifamily residential

development that is acquired by a housing authority before the

effective date of this Act is governed by the law in effect on the

date the development was acquired by the housing authority, and the

former law is continued in effect for that purpose.

(d) Sections 392.0051(c)(10), (11), (12), and (13) and (f),

Local Government Code, as added by this Act, apply to a multifamily

residential development owned by a housing authority on or after

the effective date of this Act, regardless of the date the

development was acquired by the housing authority.

(e) Notwithstanding Section 392.0052(f), Local Government

Code, as added by this Act, the initial audit report required to be

submitted under Section 392.0052(b), Local Government Code, as

added by this Act, for an occupied multifamily residential

development that was acquired or for a newly built multifamily

residential development that first became occupied, as applicable,

before the effective date of this Act must be submitted by the later

of:

(1) the date established by Section 392.0052(f), Local

Government Code, as added by this Act; or

(2) June 1, 2026.

(f) Not later than January 1, 2026, the Texas Department of

Housing and Community Affairs shall adopt rules necessary to

implement Section 392.0052(i), Local Government Code, as added by

this Act.

SECTION 3. This Act takes effect immediately if it receives

a vote of two-thirds of all the members elected to each house, as

provided by Section 39, Article III, Texas Constitution. If this

Act does not receive the vote necessary for immediate effect, this

Act takes effect September 1, 2025.