By: Jetton, Harris of Anderson, DeAyala, H.B. No. 2071
Cortez, Lozano, et al.
A BILL TO BE ENTITLED
AN ACT
relating to certain public facilities used to provide affordable
housing.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 303.021, Local Government Code, is
amended by adding Subsection (d) to read as follows:
(d) A corporation or a sponsor may finance, own, or operate
a multifamily residential development only if:
(1) the corporation or sponsor complies with all
applicable provisions of this chapter; and
(2) the development is located:
(A) inside the area of operation of the sponsor,
if the sponsor is a housing authority; or
(B) if the sponsor is not a housing authority,
inside the boundaries of the sponsor, without regard to whether the
sponsor is authorized to own property or provide services outside
the boundaries of the sponsor.
SECTION 2. Subchapter B, Chapter 303, Local Government
Code, is amended by adding Section 303.0415 to read as follows:
Sec. 303.0415. APPLICABILITY OF LAWS RELATING TO CONFLICT
OF INTEREST. A member of the board of a corporation or a member of
the governing body of a sponsor of a corporation is subject to the
same restrictions as a local public official under Chapter 171.
SECTION 3. The heading to Section 303.042, Local Government
Code, is amended to read as follows:
Sec. 303.042. TAXATION; EXEMPTION.
SECTION 4. Subchapter B, Chapter 303, Local Government
Code, is amended by adding Section 303.0421, and a heading is added
to that section to read as follows:
Sec. 303.0421. MULTIFAMILY RESIDENTIAL DEVELOPMENTS OWNED
BY PUBLIC FACILITY CORPORATIONS.
SECTION 5. Section 303.0421, Local Government Code, as
added by this Act, is amended by adding Subsections (a), (c), (d),
(f-1), (f-2), (g), and (h) to read as follows:
(a) This section applies to a multifamily residential
development that is owned by a corporation created under this
chapter, except that this section does not apply to a multifamily
residential development that:
(1) has at least 20 percent of its residential units
reserved for public housing units;
(2) participates in the Rental Assistance
Demonstration program administered by the United States Department
of Housing and Urban Development;
(3) receives financial assistance administered under
Chapter 1372, Government Code, or receives financial assistance
from another type of tax-exempt bond; or
(4) receives financial assistance administered under
Subchapter DD, Chapter 2306, Government Code.
(c) A multifamily residential development that is owned by a
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.
(d) Notwithstanding Subsection (b), an occupied multifamily
residential development that is acquired by a corporation and to
which Subsection (a) 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-1) Subsection (f) does not apply to taxes imposed by a
conservation and reclamation district created under Section 52,
Article III, or Section 59, Article XVI, Texas Constitution, that
provides water, sewer, or drainage services to a public facility
if:
(1) the district has outstanding bond indebtedness;
and
(2) when the facility is combined with other existing
or proposed public facilities in the district, the application of
Subsection (f) would result in the aggregate loss of at least 10
percent of the total assessed value of all property located in the
district.
(f-2) Subsection (f-1) does not apply if the corporation has
entered into a written agreement with the district to make a payment
to the district in lieu of taxation, in the amount specified in the
agreement.
(g) An exemption under Section 303.042(c) for a multifamily
residential development to which Subsection (a) applies expires:
(1) for an occupied multifamily residential
development that is acquired by a corporation, on the 10th
anniversary of the date of the acquisition by the corporation; and
(2) for a multifamily residential development not
described by Subdivision (1), on the 12th anniversary of the date
the development receives, from the corporation or the corporation's
sponsor, the final approval under this chapter that is necessary to
obtain the exemption.
(h) This subsection and Subsection (f) expire December 31,
2025.
SECTION 6. Section 303.042(c), Local Government Code, is
amended to read as follows:
(c) Subject to Section 303.0421(g), a [A] corporation is
engaged exclusively in performance of charitable functions and is
exempt from taxation by this state or a municipality or other
political subdivision of this state. Bonds issued by a corporation
under this chapter, a transfer of the bonds, interest on the bonds,
and a profit from the sale or exchange of the bonds are exempt from
taxation by this state or a municipality or other political
subdivision of this state.
SECTION 7. Sections 303.042(d), (e), and (f), Local
Government Code, are transferred to Section 303.0421, Local
Government Code, as added by this Act, redesignated as Sections
303.0421(b), (e), and (f), Local Government Code, and amended to
read as follows:
(b) Notwithstanding Section 303.042(c) and subject to
Subsections (c) and (d) of this section, an [(d) An] exemption under
Section 303.042(c) [this section] for a multifamily residential
development to which Subsection (a) applies is available [which is
owned by a public facility corporation created by a housing
authority under this chapter and which does not have at least 20
percent of its units reserved for public housing units, applies]
only if:
(1) the requirements under Section 303.0425 are met
[housing authority holds a public hearing, at a regular meeting of
the authority's governing body, to approve the development]; [and]
(2) at least:
(A) 12 percent of the units in the multifamily
residential development are reserved for occupancy:
(i) as very low income housing units, as
defined under Section 303.0425; or
(ii) by participants in the housing choice
voucher program;
(B) 12 percent of the units in the multifamily
residential development are reserved for occupancy as lower income
housing units, as defined under Section 303.0425; and
(C) 12 [50] percent of the units in the
multifamily residential development are reserved for occupancy as
moderate income housing units, as defined under Section 303.0425;
[by individuals and families earning less than 80 percent of the
area median family income]
(3) the corporation 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 corporation 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;
(4) the multifamily residential development is
approved by the governing body of the municipality, if any, the
county, and the school district in which the development is
located;
(5) for an occupied multifamily residential
development that is acquired by a corporation and not otherwise
subject to a land use restriction agreement under Section 2306.185,
Government Code:
(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, as defined under
Section 303.0425, and 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
(6) before final approval of the development:
(A) the corporation or corporation's sponsor
conducts, or obtains from a professional entity that has experience
underwriting affordable multifamily residential developments and
does not have financial interests in the applicable development,
public facility user, or developer, an underwriting assessment of
the proposed development to determine the appropriate category of
income-restricted units to require at the development; and
(B) based on the assessment conducted under
Paragraph (A), the corporation makes a good faith determination
that 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 303.042(c), for:
(i) the first three years after the rent
stabilization period, for newly constructed developments; and
(ii) the second, third, and fourth years
after the date of acquisition by the corporation, for developments
occupied at the time of acquisition.
(e) For the purposes of Subsection (a) [(d)], a "public
housing unit" is a residential [dwelling] 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
federal Section 8 Housing Choice Voucher Program.
(f) Notwithstanding Sections 303.042(a) and (b) and subject
to Subsection (f-1) [Subsections (a) and (b)], during the period
[of time] that a corporation owns a particular public facility that
is a multifamily residential development:
(1) [,] a leasehold or other possessory interest in
the real property of the public facility granted by the corporation
shall be treated in the same manner as a leasehold or other
possessory interest in real property granted by an authority under
Section 379B.011(b); and
(2) the materials used by a person granted a
possessory interest described by Subdivision (1) to improve the
real property of the public facility shall be exempt from all sales
and use taxes because the materials are for the benefit of the
corporation.
SECTION 8. Subchapter B, Chapter 303, Local Government
Code, is amended by adding Sections 303.0425 and 303.0426 to read as
follows:
Sec. 303.0425. ADDITIONAL REQUIREMENTS FOR BENEFICIAL TAX
TREATMENT RELATING TO CERTAIN PUBLIC FACILITIES. (a) In this
section:
(1) "Department" means the Texas Department of Housing
and Community Affairs.
(2) "Developer" means a private entity that constructs
a development, including the rehabilitation, renovation,
reconstruction, or repair of a development.
(3) "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).
(4) "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.
(5) "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.
(6) "Public facility user" means a public-private
partnership entity or a developer or other private entity that has
an ownership interest or a leasehold or other possessory interest
in a public facility that is a multifamily residential development.
(7) "Very low income housing unit" means a residential
unit reserved for occupancy by an individual or family earning not
more than 50 percent of the area median income, adjusted for family
size, as defined by the United States Department of Housing and
Urban Development.
(b) If a majority of the members of the board of the
corporation are not elected officials, the development must be
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.
(c) The percentage of very low, 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.
(d) The monthly rent charged per unit may not exceed:
(1) for a very low income housing unit, 30 percent of
50 percent of the area median income, adjusted for family size, as
defined by the United States Department of Housing and Urban
Development;
(2) 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
(3) 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.
(e) In calculating the income of an individual or family for
a very low, lower, or moderate income housing unit, the public
facility user 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 very low, lower, or moderate
income housing unit.
(f) The public facility user 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-1) A public facility user 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) A corporation 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) The department shall conduct an annual audit of each
public facility user of a multifamily residential development
claiming an exemption under Section 303.042(c) and to which Section
303.0421 applies, to:
(1) determine whether the public facility user is in
compliance with this section and Section 303.0421; 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.
(i-1) An independent auditor or compliance expert may not
prepare an audit under Subsection (i) for more than three
consecutive years for the same public facility user. 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.
(j) The department shall complete and publish a report
regarding the findings of an audit conducted under Subsection (i).
The report must:
(1) be made available on the department's Internet
website;
(2) be issued to a public facility user that has an
interest in a development that is the subject of an audit; and
(3) describe in detail the nature of any failure to
comply with the requirements in this section and Section 303.0421.
(j-1) The department shall adopt forms and reporting
standards for the auditing process.
(k) The initial audit report required by Subsection (j) 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
corporation; or
(2) the date a new multifamily residential development
first becomes occupied by one or more tenants.
(k-1) Subsequent audit reports following the issuance of
the initial audit report under Subsection (k) are due not later than
June 1 of each year.
(l) Not later than the 60th day after the date of receipt of
the department's audit report under Subsection (j)(2), a public
facility user shall provide a copy of the report to the comptroller,
the appraisal district containing the development that is the
subject of the report, the corporation, the governing body of the
corporation's sponsor, and, if the corporation's sponsor is a
housing authority, the elected officials who appointed the housing
authority's governing board.
(l-1) Not later than June 1 of each year for which an audit
is required under Subsection (i), a public facility user to which
Section 303.0421 applies shall pay to the department a fee of $40
per unit contained in the development, as determined by the audit,
to reimburse the department for expenses related to the audit.
(l-2) An exemption under Section 303.042(c) does not apply
for a tax year in which a multifamily residential development that
is owned by a public facility corporation created under this
chapter is determined by an audit conducted under Subsection (i) to
not be in compliance with the requirements of this section and
Section 303.0421.
(l-3) An audit conducted under Subsection (i) 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.
(m) 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.
(n) A tenant may not waive the protections provided by
Subsection (m).
(o) If an audit report submitted under Subsection (j)
indicates noncompliance with this section, a public facility user:
(1) must be given:
(A) written notice from the Texas Department of
Housing and Community Affairs or appropriate appraisal district
that:
(i) is provided not later than the 45th day
after the date a report has been submitted under Subsection (j);
(ii) specifies the reasons for
noncompliance;
(iii) contains at least one option for a
corrective action to resolve the noncompliance; and
(iv) informs the public facility user that
failure to resolve the noncompliance will result in the loss of an
exemption under Section 303.042(c);
(B) 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 Texas Department of Housing and Community Affairs and the
appropriate appraisal district during the period provided by
Paragraph (B), a second notice that informs the public facility
user of the loss of the exemption under Section 303.042(c) due to
noncompliance with this section;
(2) is considered to be in compliance with this
section if notice under Subdivision (1)(A) is not provided as
specified by Subparagraph (i) of that paragraph; and
(3) may appeal a determination of noncompliance to a
district court in the county in which the applicable development is
located.
(p) 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.
(q) An agreement or instrument recorded under Subsection
(p) 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.
Sec. 303.0426. STUDY OF TAX EXEMPTIONS FOR MULTIFAMILY
RESIDENTIAL DEVELOPMENTS OWNED BY PUBLIC FACILITY CORPORATIONS.
(a) In this section, "board" means the Legislative Budget Board.
(b) The board shall conduct a study that assesses the
long-term effects on the state's funding and revenue, including
funding for public education, of ad valorem tax exemptions and
sales and use tax exemptions for multifamily housing developments
under Sections 303.042(c) and 303.0421(f).
(c) Not later than December 10, 2024, the board shall submit
to the governor, the lieutenant governor, and the speaker of the
house of representatives a report on the results of the study. The
report must include an estimate of:
(1) the funding or revenue that the state has lost as a
result of the exemptions; and
(2) the potential increase in funding or revenue that
would result from the repeal of the exemptions.
(d) The board may delegate any authority granted to the
board under this section that the board determines is necessary to
conduct the study under this section.
(e) This section expires January 1, 2025.
SECTION 9. Sections 392.005(c) and (d), Local Government
Code, are amended to read as follows:
(c) An exemption under this section for a multifamily
residential development which is owned by [(i) a public facility
corporation created by a housing authority under Chapter 303, (ii)]
a housing development corporation[,] or [(iii)] 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) at least:
(A) 12 percent of the units in the multifamily
residential development are reserved for occupancy:
(i) as very low income housing units, as
defined under Section 303.0425; or
(ii) by participants in the housing choice
voucher program;
(B) 12 percent of the units in the multifamily
residential development are reserved for occupancy as lower income
housing units, as defined under Section 303.0425; and
(C) 12 [50] percent of the units in the
multifamily residential development are reserved for occupancy as
moderate income housing units, as defined under Section 303.0425
[by individuals and families earning less than 80 percent of the
area median family income].
(d) For the purposes of Subsection (c), a "public housing
unit" is a residential [dwelling] 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 10. (a) Subject to Subsections (b), (c), and (d) of
this section, Sections 303.0421 and 303.0425, Local Government
Code, as added by this Act, apply only to a tax imposed for a tax
year beginning on or after the effective date of this Act.
(b) Subject to Subsections (c) and (d) of this section,
Sections 303.0421 and 303.0425, Local Government Code, as added by
this Act, apply only to a multifamily residential development that
is approved on or after the effective date of this Act by a public
facility corporation or the sponsor of a public facility
corporation, in accordance with Chapter 303, Local Government Code.
A multifamily residential development that was approved by a public
facility corporation or the sponsor of a public facility
corporation before the effective date of this Act is governed by the
law in effect on the date the development was approved by the
corporation or sponsor, and the former law is continued in effect
for that purpose.
(c) Subject to Subsection (d) of this section, Section
303.0421(d), Local Government Code, as added by this Act, applies
only to an occupied multifamily residential development that is
acquired by a public facility corporation on or after the effective
date of this Act. An occupied multifamily residential development
that is acquired by a public facility corporation before the
effective date of this Act is governed by the law in effect on the
date the development was acquired by the public facility
corporation, and the former law is continued in effect for that
purpose.
(d) Notwithstanding any other provision of this section:
(1) Sections 303.0425(g), (i), (j), (k), (l), (l-1),
and (l-2), Local Government Code, as added by this Act, apply to all
multifamily residential developments owned by a public facility
corporation; and
(2) the initial audit report required to be submitted
under Section 303.0425(j), Local Government Code, as added by this
Act, for a multifamily residential development that was approved or
acquired by a public facility corporation before the effective date
of this Act must be submitted by the later of:
(A) the date established by Section 303.0425(k),
Local Government Code, as added by this Act; or
(B) June 1, 2024.
(e) Section 303.0421(h), Local Government Code, as added by
this Act, does not affect a tax exemption available to a multifamily
residential development under Section 303.0421(f), Local
Government Code, as amended by this Act, immediately before
December 31, 2025. A tax exemption available to a multifamily
residential development under Section 303.0421(f), Local
Government Code, immediately before that date is covered by the law
in effect when the development qualified for the exemption, and
that law is continued in effect for that purpose.
SECTION 11. Not later than January 1, 2024, the Texas
Department of Housing and Community Affairs shall adopt rules
necessary to implement Section 303.0425(i), Local Government Code,
as added by this Act.
SECTION 12. This Act takes effect September 1, 2023.