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.