LEGISLATIVE BUDGET BOARD
                          Austin, Texas

                           FISCAL NOTE
                       74th Regular Session

                          April 25, 1995



 TO:     Honorable Kim Brimer, Chair            IN RE:  House Bill No. 3028
         Committee on Business & Industry               By: Ehrhardt, etal.
         House of Representatives
         Austin, Texas







FROM: John Keel, Director

In response to your request for a Fiscal Note on House Bill No.
3028 (relating to security deposits provided by residential
tenants and prospective residential tenants) this office has
determined the following:

The bill would make no appropriation but could provide the legal
basis for an appropriation of funds to implement the provisions
of the bill.  The bill would prohibit landlords who own more than
two rental properties from commingling tenant security deposits
with assets of the landlord.  It would require landlords to
deposit a tenant's security deposit in an interest bearing trust
account in a bank or with a licensed escrow agent, and the bank
or escrow agent would be required to promptly transfer accrued
interest to the Housing Trust Fund administered by the Texas
Department of Housing and Community Affairs. The bill also
stipulates certain conditions regarding the return of security
deposits to tenants.

The bill would result in a revenue gain to the Housing Trust
Fund.  According to the 1990 U.S. Census, there were 2,312,670
renter-occupied housing units in Texas.  It is assumed that 15
percent, or 346,900, of those units would be exempted from
transferring interest to the Housing Trust Fund because their
owners own no more than two units.  It is also assumed that the
average security deposit is $325, based on the average rent
according to the 1990 Census.  Using a 3.5 percent interest rate,
this would result in a maximum projected revenue of $25.6 million
per year.  Assuming a 50 percent compliance rate would result in
projected revenue of $11.2 million per year, increasing 10    




percent per year.  Landlords who do not comply with the 
prohibition against commingling and the required transfer to the
Trust Fund would forfeit the right to withhold any portion of the
security deposit or to bring suit against the tenant for damages
to the premises.  They would also be liable for civil penalties
in an amount equal to the amount of the security deposit, court
costs, and reasonable attorney's fees.

The probable fiscal implication of implementing the provisions of
the bill during each of the first  five years following passage
is estimated as follows:



            Fiscal   Probable Revenue 
             Year      Gain to the    
                    Housing Trust Fund
                                      
          1996             $11,180,314
          1997              13,416,377
                                      
          1998              15,652,437
                                      
          1999              17,888,502
          2000              20,124,565
                                      
                                      
                                      
       Similar annual fiscal implications would continue as long as the
provisions of the bill are in effect.

No fiscal implication to units of local government is
anticipated.


Source:   Department of Housing and Community Affairs
          LBB Staff: JK, PVT, RR