89R2225 JAM-D
By: Gates H.B. No. 21
A BILL TO BE ENTITLED
AN ACT
relating to housing finance corporations; authorizing a fee.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 394.004, Local Government Code, is
amended to read as follows:
Sec. 394.004. APPLICATION OF CHAPTER TO CERTAIN RESIDENTIAL
DEVELOPMENTS. This chapter applies only to a residential
development that, in accordance with the requirements of this
chapter, [at least 90 percent of which] is occupied [for use] by or
is intended to be occupied by persons of low and moderate income
whose adjusted gross income, together with the adjusted gross
income of all persons who intend to reside with those persons in one
dwelling unit, did not for the preceding tax year exceed the maximum
amount constituting moderate income under the housing finance
corporation's rules, resolutions relating to the issuance of bonds,
or financing documents relating to the issuance of bonds.
SECTION 2. Subchapter A, Chapter 394, Local Government
Code, is amended by adding Section 394.0045 to read as follows:
Sec. 394.0045. APPLICABILITY OF OPEN MEETINGS AND OPEN
RECORDS LAWS. (a) Chapter 551, Government Code, applies to actions
and proceedings under this chapter.
(b) Chapter 552, Government Code, applies to all records of
a housing finance corporation.
SECTION 3. The heading to Section 394.031, Local Government
Code, is amended to read as follows:
Sec. 394.031. EXERCISE OF POWERS; AREA OF OPERATION.
SECTION 4. Section 394.031, Local Government Code, is
amended by adding Subsections (c) and (d) to read as follows:
(c) Subject to Subsection (d), the area in which a housing
finance corporation may exercise its powers is limited to:
(1) for a housing finance corporation sponsored by a
municipality under Section 394.011, the jurisdictional boundaries
of the municipality that sponsored the corporation;
(2) for a housing finance corporation sponsored by a
county under Section 394.011, the unincorporated areas of the
county that sponsored the corporation; or
(3) for a housing finance corporation sponsored by
more than one local government under Section 394.012:
(A) the jurisdictional boundaries of each
municipal sponsor of the corporation; and
(B) the unincorporated areas of each county
sponsor of the corporation.
(d) A housing finance corporation may exercise its powers
outside an area described by Subsection (c) only if a resolution or
order, as applicable, approving that exercise of power in the
outside area is adopted by the governing body of each sponsoring
local government and by the governing bodies of:
(1) each municipality that contains any part of the
outside area in which the corporation proposes to operate; and
(2) if proposing to operate in the unincorporated area
of a county, each county that contains any part of the outside area
in which the corporation proposes to operate.
SECTION 5. Sections 394.032(a) and (e), Local Government
Code, are amended to read as follows:
(a) Subject to the limitations of Sections 394.031(c) and
(d), a [A] housing finance corporation may:
(1) make contracts and other instruments as necessary
or convenient to the exercise of powers under this chapter;
(2) incur liabilities;
(3) borrow money at rates determined by the
corporation;
(4) issue notes, bonds, and other obligations; and
(5) secure any of its obligations by the mortgage or
pledge of all or part of the corporation's property, franchises,
and income.
(e) A housing finance corporation may delegate to the Texas
Department of Housing and Community Affairs the authority to act on
its behalf in the financing, refinancing, acquisition, leasing,
ownership, improvement, and disposal of home mortgages or
residential developments, within [and outside] the jurisdiction of
the housing finance corporation, including its authority to issue
bonds for those purposes.
SECTION 6. Section 394.037, Local Government Code, is
amended by adding Subsection (a-1) to read as follows:
(a-1) Bonds issued under this chapter for a purpose
described by Subsection (a) may be issued only to finance or support
residential developments or homes that are located:
(1) inside the boundaries of the sponsoring local
government, if the bonds are issued by a housing finance
corporation formed under Section 394.011; or
(2) inside the boundaries of at least one sponsoring
local government, if the bonds are issued by a joint housing finance
corporation formed under Section 394.012.
SECTION 7. Section 394.039, Local Government Code, is
amended to read as follows:
Sec. 394.039. SPECIFIC POWERS RELATING TO FINANCIAL AND
PROPERTY TRANSACTIONS. A housing finance corporation may:
(1) lend money for its corporate purposes, invest and
reinvest its funds, and take and hold real or personal property as
security for the payment of the loaned or invested funds;
(2) mortgage, pledge, or grant security interests in
any residential development, home mortgage, note, or other property
in favor of the holders of bonds issued for those items;
(3) purchase, receive, lease, or otherwise acquire,
own, hold, improve, use, or deal in and with real or personal
property or interests in that property, [wherever the property is
located,] as required by the purposes of the corporation or as
donated to the corporation; and
(4) sell, convey, mortgage, pledge, lease, exchange,
transfer, and otherwise dispose of all or part of its property and
assets.
SECTION 8. Section 394.9025(b), Local Government Code, is
amended to read as follows:
(b) Following a public hearing by the governing body of the
applicable local government as described by Section 394.037(a-1), a
housing finance corporation may issue bonds to finance a
multifamily residential development to be owned by the housing
finance corporation in accordance with the requirements of this
chapter [Section 394.004] if the housing finance corporation
receives approval of the governing body of that [the] local
government.
SECTION 9. Subchapter Z, Chapter 394, Local Government
Code, is amended by adding Sections 394.9026 and 394.9027 to read as
follows:
Sec. 394.9026. ADDITIONAL CONDITIONS FOR BENEFICIAL
PROPERTY-BASED TAX AND FEE 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 fees imposed with respect to property owned by a
housing finance corporation or with respect to income from that
property.
(5) "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 does not apply to a multifamily residential
development that is the recipient of a low income housing tax credit
allocated under Subchapter DD, Chapter 2306, Government Code.
(c) Subject to Subsection (g), a property-based exemption
under Section 394.905(a) for a multifamily residential development
is available only if the multifamily residential development
satisfies the other requirements of this chapter and if:
(1) at least:
(A) 10 percent of the units in the multifamily
residential development are reserved for occupancy as lower income
housing units; and
(B) 40 percent of the units in the multifamily
residential development are reserved for occupancy as moderate
income housing units;
(2) for a multifamily residential development that is
acquired by a housing finance corporation, 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 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;
(3) not less than 30 days before the date of final
approval of the development:
(A) the housing finance corporation or a
sponsoring local government of the corporation 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
housing finance corporation, an underwriting assessment of the
proposed development that allows the housing finance corporation to
make a good faith determination that, for an occupied multifamily
residential development acquired by a housing finance corporation
or for a newly constructed multifamily residential development
owned by a housing finance corporation, 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
394.905(a) for the second, third, and fourth years after the date of
acquisition by the housing finance corporation or the date the
certificate of occupancy is issued for the development, as
applicable; and
(B) the housing finance corporation publishes on
its Internet website a copy of the underwriting assessment
described by Paragraph (A);
(4) 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;
(5) 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;
(6) the housing finance corporation 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;
(7) the housing finance corporation 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;
(8) the housing finance corporation 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
(9) 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 housing finance
corporation 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) A housing finance corporation 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)(9). A housing finance corporation may adopt tenant
protections that are more protective of tenants than the tenant
protections provided by Subsection (c)(9).
(g) Notwithstanding Subsection (c) and Section
394.905(a)(1), a multifamily residential development that is
acquired by a housing finance corporation, 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 394.905(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 Section
394.905(a)(1); 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) and Section 394.905(a)(1)
not later than the first anniversary of the date of the acquisition.
Sec. 394.9027. 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 394.9026.
(b) A housing finance corporation that claims a
property-based exemption for a multifamily residential
development under Section 394.905(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 housing finance corporation
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 housing finance corporation
is in compliance with the conditions imposed for the exemption by
Sections 394.905(a) and 394.9026; 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 housing finance corporation that
has an interest in a development that is the subject of an audit,
the comptroller, and the governing body of the housing finance
corporation'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 394.905(a) or 394.9026.
(d) If an audit report submitted under Subsection (b)
indicates noncompliance with Section 394.905(a) or 394.9026, a
housing finance corporation:
(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 housing finance
corporation that failure to resolve the noncompliance will result
in the loss of the property-based exemption under Section
394.905(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
housing finance corporation of the loss of the property-based
exemption due to noncompliance with Section 394.905(a) or 394.9026,
as applicable; and
(2) is considered to be in compliance with Sections
394.905(a) and 394.9026 if notice under Subdivision (1)(A) is not
provided as specified by Subparagraph (i) of that paragraph.
(e) Except as provided by Section 394.9026(g), a
property-based exemption under Section 394.905(a) does not apply
for a tax year in which a multifamily residential development that
is owned by a housing finance corporation 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 394.905(a) and 394.9026.
(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 housing
finance corporation; 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 housing finance corporation. 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 10. Section 394.903, Local Government Code, is
amended to read as follows:
Sec. 394.903. TRANSFER [LOCATION] OF [RESIDENTIAL
DEVELOPMENT;] RESIDENTIAL DEVELOPMENT SITES. [(a) A residential
development covered by this chapter must be located within the
local government.
[(b)] A [The] local government may transfer any residential
development site to a housing finance corporation by sale or lease.
The governing body of the local government may authorize the
transfer by resolution without submitting the issue to the voters
and without regard to the requirements, restrictions, limitations,
or other provisions contained in any other general, special, or
local law. The site location is subject to the requirements of this
chapter [may be located wholly or partly inside or outside the local
government].
SECTION 11. Section 394.905, Local Government Code, is
amended to read as follows:
Sec. 394.905. EXEMPTION FROM TAXES AND FEES [TAXATION].
(a) Notwithstanding any other law, the [The] housing finance
corporation, all property owned by it, the income from the
property, all bonds issued by it, the income from the bonds, and the
transfer of the bonds are exempt, as public property used for public
purposes, from license fees, recording fees, and all other taxes
imposed by this state or any political subdivision of this state
only if:
(1) for an exemption from taxes and fees imposed with
respect to property owned by the housing finance corporation:
(A) any applicable audit report requirements
provided by Section 394.9027 are satisfied, other than those
imposed on a multifamily residential development under the
circumstances described by Section 394.9026(g);
(B) the property is located in an area in which
the housing finance corporation is authorized to exercise its
powers as described by Section 394.031(c) or the exemption is
approved by each applicable governing body described by Section
394.031(d); and
(C) if an exemption from ad valorem taxation is
claimed, the housing finance corporation submits to the Texas
Department of Housing and Community Affairs and to the county tax
assessor-collector for each appraisal district in which the
exemption is sought a one-time exemption application on a form
promulgated by the comptroller; or
(2) the requirements provided by Section 394.037(a-1)
are satisfied, for an exemption from taxes and fees imposed with
respect to bonds issued by the housing finance corporation, the
income from those bonds, and the transfer of those bonds.
(b) The corporation is exempt from the franchise tax imposed
by Chapter 171, Tax Code, only if the corporation is exempted by
that chapter.
SECTION 12. Section 394.005, Local Government Code, is
repealed.
SECTION 13. (a) Sections 394.031(c) and (d), Local
Government Code, as added by this Act, apply only to the exercise of
power by a housing finance corporation made on or after the
effective date of this Act. An exercise of power made before the
effective date of this Act is governed by the law in effect on the
date the power was exercised, and the former law is continued in
effect for that purpose.
(b) Sections 394.037(a-1) and 394.905(a)(2), Local
Government Code, as added by this Act, apply only to bonds issued on
or after the effective date of this Act. Bonds issued before the
effective date of this Act are governed by the law in effect on the
date the bonds were issued, and the former law is continued in
effect for that purpose.
(c) Subject to Subsections (d), (e), and (f) of this
section, Sections 394.905(a)(1) and 394.9026, Local Government
Code, as added by this Act, apply only to a tax or fee imposed for a
tax year or calendar year, respectively, that begins on or after the
effective date of this Act.
(d) Subject to Subsections (e) and (f) of this section,
Sections 394.905(a)(1) and 394.9026, Local Government Code, as
added by this Act, apply only to a residential development that is
acquired by a housing finance corporation on or after the effective
date of this Act. A residential development that was acquired by a
housing finance corporation before the effective date of this Act
is governed by the law in effect on the date the development was
acquired by the corporation, and the former law is continued in
effect for that purpose.
(e) Section 394.9026(g), Local Government Code, as added by
this Act, applies only to an occupied multifamily residential
development that is acquired by a housing finance corporation on or
after the effective date of this Act. An occupied multifamily
residential development that is acquired by a housing finance
corporation before the effective date of this Act is governed by the
law in effect on the date the development was acquired by the
housing finance corporation, and the former law is continued in
effect for that purpose.
(f) Sections 394.9026(c)(6), (7), (8), and (9) and (f),
Local Government Code, as added by this Act, apply to a multifamily
residential development owned by a housing finance corporation on
or after the effective date of this Act, regardless of the date the
development was acquired by the housing finance corporation.
(g) Notwithstanding Section 394.9027(b) or (f), Local
Government Code, as added by this Act, the initial audit report
required to be submitted under Section 394.9027(b), Local
Government Code, as added by this Act, for a multifamily
residential development that was acquired by a housing finance
corporation before the effective date of this Act must be submitted
by the later of:
(1) the date established by Section 394.9027(f), Local
Government Code, as added by this Act; or
(2) June 1, 2026.
(h) Not later than January 1, 2026, the Texas Department of
Housing and Community Affairs shall adopt rules necessary to
implement Section 394.9027(i), Local Government Code, as added by
this Act.
SECTION 14. 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.