88R16362 TYPED

By: Gates H.B. No. 3568

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 if:

(1) the corporation or sponsor complies with all applicable provisions of this chapter; and

(2) the development is located:

(A) in the area of operation of the sponsor, if the sponsor is a housing authority; or

(B) in the jurisdictional boundaries of the sponsor, if the sponsor is not a housing authority.

SECTION 2. The heading to Section 303.042, Local Government Code, is amended to read as follows:

Sec. 303.042. TAXATION; EXEMPTION.

SECTION 3. 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 CORPORATIONS.

SECTION 4. Section 303.0421, Local Government Code, as added by this Act, is amended by adding Subsections (a), (c), and (d) 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 Subchapter DD, Chapter 2306, Government Code; and

(c) A corporation created under this chapter by a housing authority must hold a public hearing, at a meeting of the authority's governing body, to approve the development.

(d) A corporation, other than a corporation created under this chapter by a housing authority, must hold a public hearing, at a meeting of the corporation's board, to approve the development.

SECTION 5. 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), 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) the initial construction of the development occurs while the development is owned by the corporation; and

(3) not later than the 60th day before the public hearing to approve the development, the corporation delivers to the presiding officer of the governing body of each taxing jurisdiction in which the development is to be located a written notice of the public hearing.

(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) [Subsections (a) and (b)], during the period [of time] that a corporation owns a particular public facility that is a multifamily residential development, 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).

SECTION 6. Subchapter B, Chapter 303, Local Government Code, is amended by adding Sections 303.0425, 303.0426, and 303.0427 to read as follows:

Sec. 303.0425. ADDITIONAL REQUIREMENTS FOR BENEFICIAL TAX TREATMENT RELATING TO CERTAIN PUBLIC FACILITIES. (a) In this section:

(1) "Developer" means a private entity that constructs 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) "Moderate income housing unit" means a residential unit reserved for occupancy by an individual or family earning not more than 80 of the area median income, adjusted for family size.

(4) "Lower income housing unit" means a residential unit reserved for occupancy by an individual or family earning not more than 65 percent of the area median income, adjusted for family size.

(5) "Lower income plus housing unit" means a 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.

(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.

(b) At least 50 percent of the units in a multifamily residential development must be reserved as affordable units, defined as follow:

(1) At least 5 percent of the units in the development must be 1-bedroom units that are lower income plus housing units;

(2) At least 5 percent of the units in the development must be 2-bedroom units that are lower income plus housing units;

(3) At least 5 percent of the units in the development must be 3-bedroom units that are lower income plus housing units;

(4) At least an additional 5 percent of the units in the development must be 1-bedroom units that are lower income housing units;

(5) At least an additional 5 percent of the units in the development must be 2-bedroom units that are lower income housing units;

(6) At least an additional 5 percent of the units in the development must be 3-bedroom units that are lower income housing units;

(7) At least an additional 5 percent of the units in the development must be 2-bedroom units that are moderate income housing units;

(8) At least an additional 5 percent of the units in the development must be 3-bedroom units that are moderate income housing units; and

(9) At least an additional 10 percent of the units in the development must be reserved to an individual or family who participates in the housing choice voucher program administered by a public housing authority with headquarters located within 100 miles of the development.

(c) The monthly rent charged for a lower income plus housing unit in a development may not exceed 25 percent of 50 percent of the area median family income, adjusted for family size, unless the tenants are not responsible for any of the costs of water, gas, and electrical utilities, in which case the rent may not exceed 30 percent of 50 percent of the area median family income, adjusted for family size.

(d) The monthly rent charged for a lower income housing unit in a development may not exceed 25 percent of 65 percent of the area median family income, adjusted for family size, unless the tenants are not responsible for any of the costs of water, gas, and electrical utilities, in which case the rent may not exceed 30 percent of 65 percent of the area median family income, adjusted for family size.

(e) The monthly rent charged for a moderate income housing unit in a development may not exceed 25 percent of 80 percent of the area median family income, adjusted for family size, unless the tenants are not responsible for any of the costs of water, gas, and electrical utilities, in which case the rent may not exceed 30 percent of 80 percent of the area median family income, adjusted for family size.

(f) Notwithstanding Subsections(c)-(e), if the unit in a development is occupied by a participant in the housing choice voucher program, the monthly rent may not exceed the payment standard used by the housing authority that administers the voucher for the unit.

(g) Units reserved as affordable units under Subsections (b) may not be smaller than:

(1) 550 square feet for a 1 bedroom;

(2) 800 square feet for a 2 bedroom; or

(3) 1000 square feet for a 3 bedroom.

(h) In calculating the income of an individual or family for an affordable unit under Subsection (b), the public facility user must consider the income of each individual who will be living in the unit. If the income of a tenant exceeds an applicable limit, 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 income housing unit.

(i) A public facility user shall comply with the following requirements:

(1) annually, by April 1 for the first three years after the certificate of occupancy for the development is issued, then, not later than April 1 of every third year, pay to the Texas Department of Housing and Community Affairs $40 per unit to reimburse the department to conduct an audit of the public facility user's compliance with the requirements of this Chapter;

(2) reimburse all taxing authorities for any units in a development not meeting the requirements of this Chapter, as identified by the Texas Department of Housing and Community Affairs in its audit of the development.

Sec. 303.0426. Auditing Requirements Relating to Certain Multifamily Residential Developments. (a) The Texas Department of Housing and Community Affairs shall conduct an audit of each public facility user of a multifamily residential development with an exemption under Section 303.042(c) and to which Section 303.0421 applies to determine whether the public facility user is compliance with the requirements of this Chapter. The audit shall be conducted annually for the first three years after the certificate of occupancy for the development is issued, then not later than every third year. The Department shall issue its audit findings in a report that is made available on the Department's website. The Department shall adopt forms and reporting standards for the auditing process.

Sec. 303.0427. Reporting Requirements Relating to Multifamily Residential Developments. (a) Not later than February 1 of each year, a public facility corporation that owns a multifamily residential development with an exemption under Section 303.042(c) must submit to the comptroller a report that includes:

(1) a list of each multifamily residential development owned by the public facility corporation, including the name of the development, the address of the development, the number of units in the development, a summary of any income and rent restrictions and the property, and the name of the public facility users associated with the development; and

(2) a copy of all agreements between the public facility corporation and the public facility user for the development, if such agreements have not previously been submitted to the comptroller.

(b) The comptroller shall post a copy of the report received under Subsection (a) on its Internet website.

SECTION 7. 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 50 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 family income, adjusted for family size.

(3) for a development acquired or constructed after January 1, 2024 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:

(i) At least 15 percent of the units are reserved for occupancy by an individual or family earning not more than 50 percent of the area median income, adjusted for family size;

(ii) At least 15 percent of the units are reserved for occupancy by an individual or family earning not more than 65 percent of the area median income, adjusted for family size;

(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 8. (a) Subject to Subsections (b) and (c) of this section, Section 303.0421, Local Government Code, as added by this Act, applies only to a tax imposed for a tax year beginning on or after the effective date of this Act.

(b) Section 303.0421(c) and Section 303.0421(d), Local Government Code, as added by this Act, applies only to a multifamily residential development that is approved by a public facility corporation on or after the effective date of this Act. A multifamily residential development that is approved by a public facility before the effective date of this Act is governed by the law in effect on the date the development was approved by the public facility corporation, and the former law is continued in effect for that purpose.

SECTION 9. 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, 2023.