Cook Bill Puts Strings On Housing Authority Tax Breaks

The text as introduced · 3,604 words

By: Cook
S.B. No. 2766

A BILL TO BE ENTITLED

AN ACT

relating to public housing authorities.

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

SECTION 1. Section 392.002(9), (10), (11), and (12) Local

Government Code, is amended to read as follows:

(9) "Persons of low income" means individuals or

families earning less than 60 percent of the area median income,

adjusted for family size, as defined by the United States

Department of Housing and Urban Development [ families or persons

who lack the amount of income that an authority considers necessary

to live, without financial assistance, in decent, safe, and

sanitary housing without overcrowding ].

(10) "Persons of moderate income " means individuals

or families earning less than 80 percent of the area median income,

adjusted for family size, as defined by the United States

Department of Housing and Urban Development.

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

is required to pay as a condition of occupancy, including but not

limited to, a fee or charge for the use of a common area or facility

reasonably associated with a multifamily residential rental

property.

(12) "Rent reduction" means the difference between:

(i) the total rent charged during the tax year for

the income-restricted units in the multifamily residential

development; and

(ii) the maximum total rent that could be charged

during the tax year for the same units in the absence of any rent or

income restrictions on such units.

SECTION 2. Section 392.005, Local Government Code, is

amended by adding Subsection (d), (e), and (f) and amended Sections

392.005(b), (c), and (c-1) to read as follows:

(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 ,

provided that the governing body of each taxing unit in which the

housing project is to be located approves the payments .

(c) An exemption under this section for a multifamily

residential development which is owned by a housing development

corporation or a similar entity created by a housing authority,

other than a public facility corporation created by a housing

authority under Chapter 303, 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) the development is approved by the governing body

of each taxing unit in which the development is located; and

(3) [ (2) ] at least :

(A) 10 [ 50 ] percent of the units in the

multifamily residential development are reserved for occupancy by

individuals and families earning less than 60 [ 80 ] percent of the

area median income, adjusted for family size ; and

(B) 40 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 ;

(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 this section;

(5) the development is approved by the governing body

of each taxing unit in which the development is located;

(6) for an occupied multifamily residential

development that is acquired by a authority that was occupied at the

time of acquisition or was occupied at any time within the two-year

period preceding the date of the acquisition:

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

cost of acquiring the existing development, as shown in the

settlement statement related to the acquisition, 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, as defined under Section

392.002(9), and at least 25 percent of the units in the development

are reserved for occupancy as moderate income housing units, as

defined under Section 392.002(10) 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; and

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

development:

(A) the authority or authority's sponsor

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 public facility user, an underwriting assessment of

the proposed development that allows the authority to make a good

faith determination that:

(i) for an occupied multifamily residential

development acquired by a authority, the total annual amount of

rent reduction on the income-restricted 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 under Section 392.005(c) for the second,

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

corporation; and

(ii) for a newly constructed multifamily

residential development, the total annual amount of rent reduction

on the income-restricted 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 under Section 392.005(c) for the second, third, and

fourth years after the date of acquisition by the authority; and

(B) the authority publishes on its Internet

website a copy of the underwriting assessment described by

Paragraph (A).

(d) A multifamily residential development that is owned by a

public facility corporation created under this chapter by a housing

authority and to which Subsection (a) applies must hold a public

hearing, at a meeting of the authority's governing body, to approve

the development.

(e) Notwithstanding Subsection (b), an occupied multifamily

residential development that is acquired by a authority and to

which Subsection (c) applies is eligible for an exemption under

Section 303.042(c) for:

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

acquisition, regardless of whether the development complies with

the requirements of Subsection (b); and

(2) a year following the year described by Subdivision

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

requirements of Subsection (b) not later than the first anniversary

of the date of the acquisition.

(f) For the purposes of Subsection (a), a "public housing

unit" is a residential unit for which the landlord receives a public

housing operating subsidy. It does not include a unit for which

payments are made to the landlord under the Section 8, United States

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

(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) the development is approved by the governing body

of each taxing unit in which the development is located;

(2) at least :

(A)10 [ 50 ] percent of the units in the

multifamily residential development are reserved for occupancy by

individuals and families earning less [ not more ] than 60 [ 80 ]

percent of the area median income, adjusted for family size ; and

(B) 40 percent of the units in the multifamily

residential development are reserved for occupancy by persons of

low income

(3) [ (2) ] the development :

(A) has at least 20 percent of its residential

units reserved for public housing units;

(B) participates in the Rental Assistance

Demonstration program administered by the United States Department

of Housing and Urban Development;

(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.

SECTION 3.Subchapter A, Chapter 392, Local Government Code,

is amended by adding Section 392.0051, and a heading is added to

that section to read as follows: Sec. 392.0051. ADDITIONAL

REQUIREMENTS FOR BENEFICIAL TAX TREATMENT RELATING TO CERTAIN

PUBLIC HOUSING AUTHORITIES.

Sec. 392.0051. ADDITIONAL REQUIREMENTS FOR BENEFICIAL TAX

TREATMENT RELATING TO CERTAIN PUBLIC HOUSING AUTHORITIES. (a) In

this section:

(1) "Developer" means a private entity that constructs

a development, including the rehabilitation, renovation,

reconstruction, or repair of a development.

(2) "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).

(3) "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.

(4) "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.

(b) The percentage of lower and moderate income housing

units reserved in each category of units in the development, based

on the number of bedrooms per unit, must be the same as the

percentage of each category of housing units reserved in the

development as a whole.

(c) The monthly rent charged per unit may not exceed:

(1) 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

(2) 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.

(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) The authority may not:

(1) refuse to rent a residential unit to an individual

or family because the individual or family participates in the

housing choice voucher program; or

(2) 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.

(f) 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.

(g) An authority that owns or leases to a public facility

user a public facility used as a multifamily residential

development shall publish on its Internet website information about

the development's:

(1) compliance with the requirements of this section;

and

(2) policies regarding tenant participation in the

housing choice voucher program.

(h) The public facility user shall:

(1) affirmatively market available residential units

directly to individuals and families participating in the housing

choice voucher program; and

(2) notify local housing authorities of the

multifamily residential development's acceptance of tenants in the

housing choice voucher program.

(i) Each lease agreement for a residential unit in a

multifamily residential development subject to this section must

provide that:

(1) 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;

(2) the landlord may only choose to not renew the lease

if the tenant:

(A) is in material noncompliance with the lease,

including nonpayment of rent;

(B) committed one or more substantial violations

of the lease;

(C) failed to provide required information on the

income, composition, or eligibility of the tenant's household; or

(D) committed repeated minor violations of the

lease that:

(i) disrupt the livability of the property;

(ii) adversely affect the health and safety

of any person or the right to quiet enjoyment of the leased premises

and related development facilities;

(iii) interfere with the management of the

development; or

(iv) have an adverse financial effect on

the development, including the failure of the tenant to pay rent in

a timely manner; and

(3) 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.

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

Subsection (i).

(k) Requirements under this subchapter relating to the

reservation of income-restricted residential units or income

restrictions applicable to tenants of a multifamily residential

development subject to this subchapter must be documented in a land

use restriction agreement or a similar restrictive instrument that:

(1) ensures that the applicable restrictions are in

effect for not less than 10 years; and

(2) is recorded in the real property records of the

county in which the development is located.

(l) An agreement or instrument recorded under Subsection

(k) may be terminated if the development that is the subject of the

agreement or instrument:

(1) is the subject of a foreclosure sale; or

(2) becomes ineligible for an exemption under Section

303.042(c) for a reason other than the failure to comply with

restrictions recorded in the agreement or instrument.

SECTION 4. Sections 392.042(a), Local Government Code, are

amended to read as follows:

(a) In this section :

(1) [ , ] " Housing [ housing ] project" includes, in

addition to the works or undertakings described by [ Subdivision (6)

of ] Section 392.002(6) [ 392.002 ]:

(A) [ (1) ] a work or undertaking implemented for a

reason described by [ Subdivision (6) of ] Section 392.002(6)

[ 392.002 ] that is financed in any way by public funds or tax-exempt

revenue bonds; or

(B) [ (2) ] a building over which the housing

authority has jurisdiction and of which a part is reserved for

occupancy by persons who receive income or rental supplements from

a governmental entity.

SECTION 6. Subchapter D, Chapter 392, Local Government

Code, is amended by adding Section 392.0625 to read as follows:

Sec. 392.0625. AUDIT REQUIREMENTS. (a) In this section:

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

and Community Affairs.

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

from the taxes and fees imposed with respect to property owned by a

authority or with respect to income from that property.

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

a multifamily residential development under Section 392.005 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 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 Sections 392.005

and 392.0051(d); 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 a authority that has an interest in a

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

the governing body of the authority 's sponsoring local government

or governments; and

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

comply with the conditions imposed for the property-based exemption

by Section 392.005(a) or 392.0051.

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

indicates noncompliance with Section 392.005(a) or 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 392.905;

(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 392.005 or 392.0051, as applicable; and

(2) is considered to be in compliance with Sections

392.005 or 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, a

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

for a tax year in which a multifamily residential development that

is owned by a authority created under this chapter is determined by

the department based on an audit conducted under Subsection (b) to

not be in compliance with the conditions imposed for that exemption

by Sections 392.005 or 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 a

authority; or

(2) the date a new multifamily residential development

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.

SECTION 7. Section 392.066, Local Government Code, is

amended by adding Subsection (f) to read as follows:

(f) An authority that creates a public facility corporation

under Chapter 303 must submit to the Texas Department of Housing and

Community Affairs for each year that the corporation remains in

operation a certification providing:

(1) the name of the corporation;

(2) the names of all the developments owned by an

authority;

(3) the names of all subsidiaries of an authority;

(4) the names of any private partners involved in the

development;

(5) the areas in which the corporation operates; and

(6) any other information required by the department.

SECTION 8. (a) Subject to Subsections (b) and (c) of this

section, Sections 392.005(c), (d),(e), and (f), Local Government

Code, as amended by this Act, apply only to a tax or special

assessment imposed for a tax year or calendar year, respectively,

beginning on or after the effective date of this Act.

(b) Sections 392.005(c), Local Government Code, as amended

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

by this Act, apply only to an occupied multifamily residential

development that is acquired by a housing 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) Notwithstanding any other provision of this section,

Section 392.0625, Local Government Code, as added by this Act,

applies to all multifamily residential developments with respect to

which an exemption is sought or claimed under Section 392.005,

Local Government Code, as amended by this Act.

SECTION 9. This Act takes effect September 1, 2025.