Texas 2025 - 89th Regular

Texas House Bill HB1590 Compare Versions

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1	1		By: Gates H.B. No. 1590
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4	6		A BILL TO BE ENTITLED
5	7		AN ACT
6	8		relating to multifamily residential developments owned by public
7	9		facility corporations.
8	10		BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
9	11		SECTION 1. Section 303.003, Local Government Code, is
10	12		amended by adding Subdivisions (7-a) and (7-b) and amending
11	13		Subdivision (11) to read as follows:
12	14		(7-a) "Rent" means any recurring fee or charge a
13	15		tenant is required to pay as a condition of occupancy, including but
14	16		not limited to, a fee or charge for the use of a common area or
15	17		facility reasonably associated with a multifamily residential
16	18		rental property. "Rent" does not include fees and charges for
17	19		services or amenities which are optional for a tenant, such as pet
18	20		fees and fees for storage or covered parking.
19	21		(7-b) "Rent reduction" means the difference between
20	22		(i) the total rent charged during the tax year for the
21	23		income-restricted units in the multifamily residential
22	24		development, and (ii) the maximum total rent that could be charged
23	25		during the tax year for the same units in the absence of any rent or
24	26		income restrictions on such units.
25	27		(11) "Sponsor" means a municipality, county, [school
26	28		district,] housing authority or special district that causes a
27	29		corporation to be created to act in accordance with this chapter.
28	30		SECTION 2. Section 303.0421(b), Local Government Code, is
29	31		amended to read as follows:
30	32		(b) Notwithstanding Section 303.042(c) and subject to
31	33		Subsections (c) and (d) of this section, an exemption under Section
32	34		303.042(c) for a multifamily residential development to which
33	35		Subsection (a) applies is available only if:
34	36		(1) the requirements under Sections [Section]
35	37		303.0425, 303.0426 and 303.0427 are met;
36	38		(2) for a development not covered under Subdivision
37	39		(5), at least:
38	40		(A) 10 percent of the units in the multifamily
39	41		residential development are reserved for occupancy as lower income
40	42		housing units, as defined under Section 303.0425; and
41	43		(B) 40 percent of the units in the multifamily
42	44		residential development are reserved for occupancy as moderate
43	45		income housing units, as defined under Section 303.0425;
44	46		(3) the corporation delivers to the presiding officer
45	47		of the governing body of each taxing unit in which the development
46	48		is to be located written notice of the development, at least 30 days
47	49		before the date:
48	50		(A) the corporation takes action to approve a new
49	51		multifamily residential development or the acquisition of an
50	52		occupied multifamily residential development; and
51	53		(B) of any public hearing required to be held
52	54		under this section;
53	55		(4) if a majority of the members of the board are not
54	56		elected officials, the development is approved by the governing
55	57		body of the municipality in which the development is located or, if
56	58		the development is not located in a municipality, the county in
57	59		which the development is located;
58	60		(5) for [an occupied] a multifamily residential
59	61		development [that is] acquired by a corporation [and not otherwise
60	62		subject to a land use restriction agreement under Section 2306.185,
61	63		Government Code] that was occupied at the time of acquisition or was
62	64		occupied at any time within the two-year period preceding the date
63	65		of the acquisition:
64	66		(A) at least 10 percent of the units in the
65	67		development are reserved for occupancy as lower income housing
66	68		units, as defined under Section 303.0425; at least 40 percent of the
67	69		units in the development are reserved for occupancy as moderate
68	70		income housing units, as defined under Section 303.0425; and not
69	71		less than 15 percent of the total gross cost of acquiring the
70	72		[existing] development, as shown in the settlement statement
71	73		related to the acquisition, is expended on rehabilitating,
72	74		renovating, reconstructing, or repairing the development, with
73	75		initial expenditures and construction activities:
74	76		(i) beginning not later than the first
75	77		anniversary of the date of the acquisition; and
76	78		(ii) finishing not later than the third
77	79		anniversary of the date of the acquisition; or
78	80		(B) at least:
79	81		(i) 25 percent of the units in the
80	82		development are reserved for occupancy as lower income housing
81	83		units, as defined under Section 303.0425[, and the development is
82	84		approved by the governing body of the municipality in which the
83	85		development is located or, if the development is not located in a
84	86		municipality, the county in which the development is located; and
85	87		(ii) at least 25 percent of the units in the
86	88		development are reserved for occupancy as moderate income housing
87	89		units, as defined under Section 303.0425;
88	90		(6) [not less than 30 days before final approval of the
89	91		development: (A)] the corporation or corporation's sponsor
90	92		conducts, or obtains from a professional entity that has experience
91	93		underwriting affordable multifamily residential developments and
92	94		does not have a financial interest in the applicable development,
93	95		developer, or public facility user, an underwriting assessment of
94	96		the proposed development that [allows the corporation to make a
95	97		good faith determination that:] is dated within six months of the
96	98		corporation's approval of the development;
97	99		(7) not less than 30 days before final approval of the
98	100		development, the corporation or corporation's sponsor makes a good
99	101		faith determination based on the underwriting assessment that
100	102		[(i) for an occupied multifamily
101	103		residential development acquired by the corporation,] the total
102	104		annual amount of rent reduction [on the income-restricted units
103	105		provided] at the development will be not less than 60 percent of the
104	106		estimated amount of the annual ad valorem taxes that would be
105	107		imposed on the property [without an exemption under Section
106	108		303.042(c) for the second, third, and fourth years after the date of
107	109		acquisition by the corporation; and]in the same tax year if the
108	110		property did not have the income restrictions and did not have an
109	111		exemption from those taxes under Section 303.042(c):
110	112		(A) for occupied developments acquired by the
111	113		corporation, for each of the third, fourth, and fifth tax years
112	114		after the date of acquisition; and
113	115		(B) for other developments, for each of the
114	116		second, third, and fourth tax years after the development first
115	117		becomes occupied by one or more tenants while owned by the
116	118		corporation; and
117	119		[(ii) for a newly constructed multifamily
118	120		residential development, the development would not be feasible
119	121		without the participation of the corporation; and]
120	122		(8) [(B)] the corporation publishes on its Internet
121	123		website a copy of the underwriting assessment described by
122	124		[Paragraph (A)] Subdivision (6).
123	125		SECTION 3. Sections 303.0421(h) and 303.0421(i), Local
124	126		Government Code, are repealed.
125	127		SECTION 4. Chapter 303, Local Government Code, is amended
126	128		by adding Section 303.0422 to read as follows:
127	129		Sec. 303.0422. RENT REDUCTION REQUIREMENTS FOR
128	130		BENEFICIAL TAX TREATMENT RELATING TO CERTAIN MULTIFAMILY
129	131		RESIDENTIAL DEVELOPMENTS.
130	132		(a) This section does not apply to a multifamily development
131	133		that:
132	134		(1) has at least 20 percent of its residential units
133	135		reserved for public housing units;
134	136		(2) participates in the Rental Housing Assistance
135	137		Demonstration program administered by the United States Department
136	138		of Housing and Urban Development;
137	139		(3) receives financial assistance administered under
138	140		Subchapter 2306, Government Code.
139	141		(b) An exemption under Section 303.042(c) does not apply in
140	142		a tax year to a multifamily residential development if the
141	143		difference in the rent charged for the income-restricted
142	144		residential units in the development in the immediately prior tax
143	145		year and the estimated maximum market rents that could be charged
144	146		for those units without the rent or income restrictions in such tax
145	147		year, as reported in the audit under Section 303.0426, is less than
146	148		60 percent of the amount of the ad valorem taxes that would have
147	149		been imposed on the property in the same prior tax year if the
148	150		property did not have the income restrictions and did not have an
149	151		exemption from those taxes under Section 303.042(c):
150	152		(1) beginning with the first tax year after the tax
151	153		year in which the development first becomes occupied by one or more
152	154		residential tenants;
153	155		(2) notwithstanding Subdivision (1), for an existing
154	156		multifamily residential development that is acquired by the
155	157		corporation, beginning with the third tax year after the tax year
156	158		that the corporation acquires the development; and
157	159		(3) notwithstanding Subdivisions (1) and (2), for a
158	160		multifamily residential development owned by the corporation as of
159	161		September 1, 2025, beginning with the 2028 tax year.
160	162		SECTION 5. Section 303.0426, Local Government Code, is
161	163		amended by adding Subsection (a-1) and (e-1) and amending Sections
162	164		303.0426(b), (c), (d), (e), (f), and (g) to read as follows:
163	165		(a-1) This section does not apply to a multifamily
164	166		residential development that:
165	167		(1) has at least 20 percent of its residential units
166	168		reserved for public housing units;
167	169		(2) participates in the Rental Housing Assistance
168	170		Demonstration program administered by the United States Department
169	171		of Housing and Urban Development;
170	172		(3) receives financial assistance administered under
171	173		Subchapter 2306, Government Code.
172	174		(b) A public facility user of any [a] multifamily
173	175		residential development claiming an exemption under Section
174	176		303.042(c) [and to which Section 303.0421 applies] must annually
175	177		submit to the department and the chief appraiser of the appraisal
176	178		district in which the development is located an audit report for a
177	179		compliance audit, prepared at the expense of the public facility
178	180		user and conducted by an independent auditor or compliance expert
179	181		with an established history of providing similar audits on housing
180	182		compliance matters, to:
181	183		(1) determine whether the public facility user and
182	184		development is in compliance with Sections 303.0421, 303.0422 and
183	185		303.0425, if applicable; and
184	186		(2) identify the difference in the rent charged for
185	187		income-restricted residential units and the estimated maximum
186	188		market rents that could be charged for those units without the rent
187	189		or income restrictions.
188	190		(c) Not later than the 60th day after the date of receipt of
189	191		the audit conducted under Subsection (b), the department shall
190	192		examine the audit report and publish a report summarizing the
191	193		findings of the audit. The report must:
192	194		(1) be made available on the department's Internet
193	195		website;
194	196		(2) be issued to a public facility user that has an
195	197		interest in a development that is the subject of an audit, the
196	198		comptroller, the applicable corporation, the governing body of the
197	199		corporation's sponsor, and, if the corporation's sponsor is a
198	200		housing authority, the elected officials who appointed the housing
199	201		authority's governing board; and
200	202		(3) describe in detail the nature of any failure to
201	203		comply with the requirements in Sections 303.0421, 303.0422 and
202	204		303.0425, if applicable.
203	205		(d) If an audit report submitted under Subsection (b)
204	206		indicates noncompliance with Sections 303.0421(b)(2),
205	207		303.0421(b)(5), 303.0422, or 303.0425:
206	208		(1) a public facility user[:] [(1)]must be given[:
207	209		(A)] written notice from the department or appropriate appraisal
208	210		district that:
209	211		(A) [(i)]is provided not later than the 60th
210	212		[45th] day after the date a report has been submitted under
211	213		Subsection (b);
212	214		(B) [(ii)]specifies the reasons for
213	215		noncompliance;
214	216		(C) [(iii)]for noncompliance with Section
215	217		303.0425:
216	218		(i) contains at least one option for a
217	219		corrective action to resolve the noncompliance; and
218	220		(ii)[(iv)] informs the public facility user
219	221		that failure to resolve the noncompliance will result in the loss of
220	222		an exemption under Section 303.042(c); and
221	223		(2) If the audit report indicates noncompliance for
222	224		noncompliance with Section 303.0425, a public facility user must
223	225		also be given:
224	226		(A)[(B)] 60 days after the date notice is
225	227		received under [this] subdivision (1), to resolve the matter that
226	228		is the subject of the notice; and
227	229		(B)[(C)] if a matter that is the subject of a
228	230		notice provided under [this]subdivision (1) is not resolved to the
229	231		satisfaction of the department and the appropriate appraisal
230	232		district during the period provided by Paragraph (A)[(B)], a second
231	233		notice that informs the public facility user of the loss of the
232	234		exemption under Section 303.042(c) due to noncompliance with
233	235		Section [Sections 303.0421 and] 303.0425.[; and (2) is considered
234	236		to be incompliance with Sections 303.0421 and 303.0425 if notice
235	237		under Subdivision (1)(A) is not provided as specified by
236	238		Subparagraph(i) of that paragraph.]
237	239		(e) An exemption under Section 303.042(c) does not apply to
238	240		a multifamily residential development owned by a public facility
239	241		corporation for a tax year in which:
240	242		(1) the department determines that the public facility
241	243		user for the development is not in compliance with the audit report
242	244		requirements of Subsection (b); or
243	245		(2) based on the audit conducted under Subsection (b),
244	246		the department complies with the applicable notice requirements in
245	247		Subsection (d) and:
246	248		(i) the department determines that public
247	249		facility user or development is not in compliance with the
248	250		requirements of Section 303.0425 and the matter is not resolved to
249	251		the satisfaction of the department within 60 days after the date
250	252		notice is received under Subsection (d); or
251	253		(ii) the department determines that the
252	254		development is not in compliance with the requirements of Sections
253	255		303.0421(b)(2) or 303.0421(b)(5). [a multifamily residential
254	256		development that is owned by a public facility corporation created
255	257		under this chapter is determined by the department based on an audit
256	258		conducted under Subsection (b) to not be in compliance with the
257	259		requirements of Section 303.0421 or 303.0425.]
258	260		(e-1) Notwithstanding Subsection (e), a public facility
259	261		user and development is considered to be in compliance with:
260	262		(1) Section 303.0425 to the extent the applicable
261	263		notice required under Subsections (d)(1) and (d)(2) is not
262	264		provided; and
263	265		(2) Sections 303.0421 (b)(2) and (b)(5) to the extent
264	266		the applicable notice required under Subsection (d)(1) is not
265	267		provided.
266	268		(f) Notwithstanding Subsection (g), the [The] initial audit
267	269		report required by Subsection (b) is due not later than June 1 of
268	270		the year following the first anniversary of:
269	271		(1) the date of acquisition for an occupied
270	272		multifamily residential development that is acquired by a
271	273		corporation; or
272	274		(2) the date a new multifamily residential development
273	275		first becomes occupied by one or more tenants.
274	276		(g) An audit report required by this section is [Subsequent
275	277		audit reports following the issuance of the initial audit report
276	278		under Subsection (f) are] due not later than June 1 of each year.
277	279		SECTION 6. Subchapter B, Chapter 303, Local Government
278	280		Code, is amended by adding Section 303.0427 to read as follows:
279	281		Sec. 303.0427. ADDITIONAL REQUIREMENT FOR BENEFICIAL TAX
280	282		TREATMENT APPLICABLE TO CERTAIN MULTIFAMILY RESIDENTIAL
281	283		DEVELOPMENTS. (a) In this section, "public facility user" has the
282	284		meaning assigned by Section 303.0425.
283	285		(b) A multifamily residential development owned by a public
284	286		facility corporation to which Section 303.0426 applies is
285	287		ineligible for an exemption under Section 303.042(c) unless the
286	288		corporation, the corporation's sponsor, or public facility user for
287	289		the development submits to the Texas Department of Housing and
288	290		Community Affairs and to the chief appraiser for each appraisal
289	291		district in which the exemption is sought a one-time exemption
290	292		application on a form promulgated by the comptroller.
291	293		SECTION 7. (a) This Act applies only to a tax imposed for a
292	294		tax year beginning after the effective date of this Act.
293	295		(b) Sections 303.003 and 303.0421, Local Government Code,
294	296		as amended by this Act, apply only to a multifamily residential
295	297		development that is approved on or after the effective date of this
296	298		Act by a public facility corporation or the sponsor of a public
297	299		facility corporation. A multifamily residential development that
298	300		was approved by a public facility corporation or the sponsor of a
299	301		public facility corporation before the effective date of this Act
300	302		is governed by the law in effect on the date the development was
301	303		approved by the corporation or sponsor, and the former law is
302	304		continued in effect for that purpose.
303	305		(c) Notwithstanding subsection (b), Subdivision (1) of
304	306		Subsection 303.0421(b), as amended by this Act, applies to all
305	307		multifamily residential developments, regardless of the date they
306	308		were acquired or approved by a public facility corporation or
307	309		sponsor of the public facility corporation.
308	310		(d) Section 303.0422, Local Government Code, as added by
309	311		this Act, applies to all multifamily residential developments,
310	312		regardless of the date they were acquired or approved by a public
311	313		facility corporation or sponsor of the public facility corporation.
312	314		(e) Notwithstanding Section 10(d)(1), Chapter 1169 (H.B.
313	315		2071), Acts of the 88th Legislature, Regular Session, 2023, Section
314	316		303.0426, Local Government Code, as amended by this Act, applies to
315	317		all multifamily residential developments claiming an exemption
316	318		under Section 303.042(c), Local Government Code, regardless of when
317	319		the developments were approved or acquired and regardless of
318	320		whether Sections 303.0421, 303.0422 and 303.0425, Local Government
319	321		Code, apply to those developments.
320	322		(f) Section 303.0427, Local Government Code, as added by
321	323		this Act, applies to all multifamily residential developments
322	324		claiming an exemption under Section 303.042(c), Local Government
323	325		Code, regardless of when the developments were approved or acquired
324	326		and regardless of whether Sections 303.0421 and 303.0425, Local
325	327		Government Code, apply to those developments.
326	328		SECTION 6. This Act takes effect immediately if it receives
327	329		a vote of two-thirds of all the members elected to each house, as
328	330		provided by Section 39, Article III, Texas Constitution. If this
329	331		Act does not receive the vote necessary for immediate effect, this
330	332		Act takes effect September 1, 2025.