By: Rodriguez H.B. No. 525
A BILL TO BE ENTITLED
AN ACT
relating to allowing the creation of homestead preservation
districts to increase homeownership and provide affordable
housing.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle A, Title 12, Local Government Code, is
amended by adding Chapter 373A to read as follows:
SUBCHAPTER A. HOMESTEAD PRESERVATION DISTRICT
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 373.025. PURPOSE. The purpose of this chapter is to:
(1) Promote the ability of municipalities to increase
homeownership, provide affordable housing and prevent the
involuntary loss of homesteads by existing low and moderate income
homeowners living in disadvantaged neighborhoods;
(2) Protect a municipality's interest in improving
economic and social conditions within disadvantaged communities by
enhancing the viability of homeownership among low and moderate
income residents in areas experiencing economic pressures;
(3) Furnish municipalities with a means to expand and
protect the homestead interests of low and moderate income
families.
Sec. 373.026. DEFINITIONS. In this chapter:
(1) "Community housing development organization" has
the meaning assigned by 42 U.S.C. Section 12704.
(2) "District" means a homestead preservation
district designated under this section.
(3) "Municipality" means the municipality which
designates the district.
(4) "Taxing unit" has the meaning assigned by Section
1.04 of the Tax Code.
(5) "Central Business District" means a compact and
contiguous geographical area of a municipality in which at least 90
percent of the land is used or zoned for commercial purposes and
that is the area that has historically been the primary location in
the municipality where business has been transacted.
[Sections 373.027-373.030 reserved for expansion]
SUBCHAPTER B. GENERAL POWERS AND DUTIES
Sec. 373.031. MUNICIPAL POWER TO DESIGNATE DISTRICT. (a)
To promote and expand the ownership of affordable housing and to
prevent the involuntary loss of homesteads by existing homeowners
living in the district, the governing body of a municipality by
ordinance may designate as a homestead preservation district an
area in the municipality that is eligible under Section 373.032.
(b) The ordinance must describe the boundaries of the
district and designate the powers that apply to the district under
this chapter.
Sec. 373.032. ELIGIBILITY FOR DESIGNATION. To be
designated as a district under this chapter, an area must be:
(1) composed of contiguous United States census tracts
that, based on the most recent decennial census, have a median
family income of less than 60 percent of the median family income of
the entire municipality; and
(2) adjacent to a Central Business District.
Sec. 373.033. INVENTORY FROM TAXING UNITS. Each taxing
unit in a district shall provide the governing body of the
municipality on an annual basis:
(1) an inventory of all land owned by the taxing unit
in the district; and
(2) a list of the current and anticipated uses the
taxing unit has for the property.
[Sections 373.034-373.040 reserved for expansion]
SUBCHAPTER C. HOMESTEAD LAND TRUST
Sec. 373.047. CREATION. The municipality may create or
designate one or more homestead land trusts to operate solely
within the district under this subchapter.
Sec. 373.048. NATURE OF TRUST. (a) A homestead land trust
must be a nonprofit organization created to acquire and hold land
for the benefit of developing affordable housing in the district.
(b) A trust must be an organization that is exempt from
federal income tax under Section 501(a), Internal Revenue Code of
1986, and its subsequent amendments, by being certified as an
exempt organization under Section 501(c)(3), Internal Revenue Code
of 1986, and its subsequent amendments.
Sec. 373.049. BOARD OF DIRECTORS. (a) A board of directors
shall govern the trust.
(b) The governing body of the municipality shall establish
the number of directors on the board. The governing body shall
appoint the directors so that at least 40 percent of the directors
are homeowners or persons eligible to be homeowners in the
district.
Sec. 373.050. TITLE TO PROPERTY. The homestead land trust
may retain title to the land and may sell or lease homes located on
the land under long-term ground leases to low-income and
moderate-income families at affordable rents.
Sec. 373.051. SALE OF HOUSES. (a) The homestead land trust
shall sell or lease all housing to families with a yearly income at
the time of purchase or lease of the house at or below 80 percent of
the area median family income, adjusted for family size.
(b) At least one-half of the housing units sold or leased by
the Homestead Land Trust must be sold or leased to families with a
yearly income at the time of purchase or lease at or below 50
percent of the municipality's median family income, adjusted for
family size.
Sec. 373.052. TRANSFER FROM TAXING ENTITIES; FORGIVING
OUTSTANDING TAXES. (a) Any taxing unit may transfer land to the
homestead land trust without competitive bidding.
(b) A taxing unit may forgive outstanding taxes and fees on
any property transferred under this section if otherwise allowed by
law.
Sec. 373.053. TAX EXEMPTIONS. The homestead land trust's
real property is exempt from taxes imposed by the state or a
political subdivision of the state.
[Sections 373.054-373.060 reserved for expansion]
SUBCHAPTER D. HOME OWNERSHIP TAX INCREMENT FINANCING ZONE
Sec. 373.061. GENERAL AUTHORITY TO CREATE A HOMESTEAD
PRESERVATION TAX INCREMENT FINANCING ZONE. (a) A municipality has
the power to create a Homeownership Preservation Tax Increment
Financing Zone ("zone").
(b) The boundaries of a zone shall run congruent with the
Homeownership Preservation District.
Sec. 373.062. DETERMINATION OF AMOUNT OF TAX INCREMENT.
(a) The amount of a taxing unit's tax increment for a year is the
amount of property taxes levied and collected by the unit for that
year on the captured appraised value of real property taxable by the
unit and located in a zone.
(b) The captured appraised value of real property taxable by
a taxing unit for a year is the total appraised value of all real
property taxable by the unit and located in a zone for that year
less the tax increment base of the unit.
(c) The tax increment base of a taxing unit is the total
appraised value of all real property taxable by the unit and located
in a zone for the year in which the zone was designated under this
chapter.
Sec. 373.063. COLLECTION AND DEPOSIT OF TAX INCREMENTS.
(a) Each taxing unit that taxes real property located in a zone
shall provide for the collection of its taxes in the zone as for any
other property taxed by the unit.
(b) Each taxing unit shall pay into the tax increment fund
for the zone an amount equal to the tax increment produced by the
unit.
(c) A taxing unit shall make a payment required by
Subsection (b) not later than the 90th day after the delinquency
date for the unit's property taxes. A delinquent payment incurs a
penalty of five percent of the amount delinquent and accrues
interest at an annual rate of 10 percent.
(d) A taxing unit is not required to pay into the tax
increment fund any of its tax increment produced from property
located in a district unless the taxing unit enters into an
agreement to do so with the governing body of the municipality that
created the zone. A taxing unit may enter into an agreement under
this subsection at any time before or after the zone is created.
The agreement may include conditions for payment of that tax
increment into the fund and must specify the portion of the tax
increment to be paid into the fund and the years for which that tax
increment is to be paid into the fund. The agreement and the
conditions in the agreement are binding on the taxing unit and the
municipality.
Sec. 373.064. ADMINISTRATION AND USE OF TAX INCREMENT FUND.
(a) The tax increment fund will be administered by the governing
body of the municipality. All revenue from the tax increment fund
must be dedicated to city-certified community housing development
organizations or a city-created Homestead Land Trust for the
development of affordable housing within the zone for low-income
families at or below sixty percent of the area median family income.
(b) All housing created with the reinvestment funds has to
have at least a 30-year affordability period that preserves the
affordability of the property for a 30-year term.
(c) If a Homestead Land Trust is created in the district, at
least 50 percent of the funds must be allocated to the Homestead
Land Trust for property acquisition.
Sec. 373.065. ANNUAL REPORT. (a) On or before the 90th day
following the end of the fiscal year of the municipality, the
governing body of a municipality shall submit to the chief
executive officer of each taxing unit that levies property taxes on
real property in a reinvestment zone created by the municipality a
report on the status of the zone.
(b) The report must include:
(1) the amount and source of revenue in the tax
increment fund established for the zone;
(2) the amount and purpose of expenditures from the
fund; and
(3) the tax increment base and current captured
appraised value retained by the municipality for the district, the
total amount of tax increments received, and any additional
information necessary to demonstrate compliance with provisions of
this Chapter
(c) The municipality shall send a copy of a report made
under this section to:
(1) the attorney general; and
(2) the comptroller.
[Sections 373.066-373.070 reserved for expansion]
SUBCHAPTER E. HOMEOWNER LAND BANK PROGRAM
Sec. 373.071. SHORT TITLE. This subchapter may be cited as
the Homeowner Land Bank.
Sec. 373.072. DEFINITIONS. In this subchapter: "Community
housing development organization" or "organization" means an
organization that:
(A) meets the definition of a community housing
development organization in 42 USC Sec. 120704; and
(B) is certified by the municipality as a
community housing development organization.
(2) "Land bank" means an entity established or
approved by the governing body of a municipality for the purpose of
acquiring, holding, and transferrinq unimproved real property
under this chapter.
(3) "Low income household" means a household with a
gross income of not greater than 60 percent of the area median
family income, adjusted for household size, for the metropolitan
statistical area in which the municipality is located, as
determined annually by the United States Department of Housing and
Urban Development.
(4) "Qualified participating developer" means a
developer who meets the requirements of Section 373.074 and
includes a qualified organization under Section 373.080(a).
(5) "Homeowner land bank plan" or "plan" means a plan
adopted by the governing body of a municipality as provided by
Section 373.075.
(6) "Homeowner land bank program" or "program" means a
program adopted under Section 373.073.
Sec. 373.073. HOMEOWNER LAND BANK PROGRAM. (a) The
governing body of a municipality may adopt an homeowner land bank
program in which the officer charged with selling real property
ordered sold pursuant to foreclosure of a tax lien may sell certain
eligible real property by private sale for purposes of affordable
housing development as provided by this chapter.
(b) The governing body of a municipality that adopts an
homeowner land bank program shall establish or approve a land bank
for the purpose of acquiring, holding, and transferring unimproved
real property under this chapter.
Sec. 373.074. QUALIFIED PARTICIPATING DEVELOPER. To
qualify to participate in an homeowner land bank program, a
developer must:
(1) have built three or more housing units within the
three-year period preceding the submission of a proposal to the
land bank seeking to acquire real property from the land bank;
(2) have a development plan approved by the
municipality for the land bank property; and (3) meet any other
requirements adopted by the municipality in the homeowner land bank
plan.
Sec. 373.075. HOMEOWNER LAND BANK PLAN. (a) A municipality
that adopts an homeowner land bank program shall operate the
program in conformance with an homeowner land bank plan.
(b) The governing body of a municipality that adopts a
homeowner land bank program shall adopt a plan annually. The plan
may be amended from time to time following the procedures set forth
in this Subchapter.
(c) In developing the plan, the municipality shall consider
other housing plans adopted by the municipality, including the
comprehensive plan submitted to the United States Department of
Housing and Urban Development and all fair housing plans and
policies adopted or agreed to by the municipality.
(d) The plan must include the following:
(1) a list of community housing development
organizations eligible to participate in the right of first refusal
provided by Section 373.080;
(2) a list of the parcels of real property that may
become eligible for sale to the land bank during the upcoming year;
(3) the municipality's plan for affordable housing
development on those parcels of real property; and
(4) the sources and amounts of funding anticipated to
be available from the municipality for subsidies for development of
affordable housing in the municipality, including any money
specifically available for housing developed under the program, as
approved by the governing body of the municipality at the time the
plan is adopted.
(e) In developing the plan. The municipality shall take into
consideration other housing plans adopted by the municipality
including. But not limited to, the Comprehensive Plan submitted to
the United States Department of Housing and Urban Development and
all fair housing plans adopted or agreed to be the municipality.
Sec. 373.076. PUBLIC HEARING ON PROPOSED PLAN. (a) Before
adopting a plan, a municipality shall hold a public hearing on the
proposed plan.
(b) The city manager or the city manager's designee shall
provide notice of the hearing to all community housing development
organizations and to neighborhood associations identified by the
municipality as serving the neighborhoods in which properties
anticipated to be available for sale to the land bank under this
chapter are located.
(c) The city manager or the city manager's designee shall
make copies of the proposed plan available to the public not later
than the 60th day before the date of the public hearing.
Sec. 373.077. PRIVATE SALE TO LAND BANK. (a)
Notwithstanding any other law and except as provided by Subsection
(f), property that is ordered sold pursuant to foreclosure of a tax
lien may be sold in a private sale to a land bank by the officer
charged with the sale of the property without first offering the
property for sale as otherwise provided by Section 34.01, Tax Code,
if: the market value of the property as specified in the judgment of
foreclosure is less than the total amount due under the judgment,
including all taxes, penalties, and interest, plus the value of
nontax liens held by a taxing unit and awarded by the judgment,
court costs, and the cost of the sale;
(2) the property is not improved with a building or
buildings;
(3) there are delinquent taxes on the property for
each of the preceding six years; and
(4) the municipality has executed with the other
taxing units that are parties to the tax suit an interlocal
agreement that enables those units to agree to participate in the
program while retaining the right to withhold consent to the sale of
specific properties to the land bank. A sale of property for use in
connection with the program is a sale for a public purpose.
(c) If the person being sued in a suit for foreclosure of a
tax lien does not contest the market value of the property in the
suit, the person waives the right to challenge the amount of the
market value determined by the court for purposes of the sale of the
property under Section 33.50, Tax Code.
(d) For any sale of property under this chapter, each person
who was a defendant to the judgment, or that person's attorney,
shall be given, not later than the 90th day before the date of sale,
written notice of the proposed method of sale of the property by the
officer charged with the sale of the property. Notice shall be
given in the manner prescribed by Rule 21a, Texas Rules of Civil
Procedure.
(e) After receipt of the notice required by Subsection (d)
and before the date of the proposed sale, the owner of the property
subject to sale may file with the officer charged with the sale a
written request that the property not be sold in the manner provided
by this chapter.
(f) If the officer charged with the sale receives a written
request as provided by Subsection (e), the officer shall sell the
property as otherwise provided in Section 34.01, Tax Code.
(g) The owner of the property subject to sale may not
receive any proceeds of a sale under this chapter. However, the
owner does not have any personal liability for a deficiency of the
judgment as a result of a sale under this chapter.
(h) Notwithstanding any other law, if consent is given by
the taxing units that are a party to the judgment, property may be
sold to the land bank for less than the market value of the property
as specified in the judgment or less than the total of all taxes,
penalties, and interest, plus the value of nontax liens held by a
taxing unit and awarded by the judgment, court costs, and the cost
of the sale.
(i) The deed of conveyance of the property sold to a land
bank under this section conveys to the land bank the right, title,
and interest acquired or held by each taxing unit that was a party
to the judgment, subject to the right of redemption.
Sec. 373.078. SUBSEQUENT RESALE BY LAND BANK. (a) Each
subsequent resale of property acquired by a land bank under this
chapter must comply with the conditions of this section.
(b) The land bank must sell a property to a qualified
participating developer within the three-year period following the
date of acquisition for the purpose of construction of affordable
housing for sale or rent to low income households. If after three
years a qualified participating developer has not purchased the
property, the property shall be transferred from the land bank to
the taxing units who were parties to the judgment for disposition as
otherwise allowed under the law.
(c) The deed conveying a property sold by the land bank must
include a right of reverter so that if the qualified participating
developer does not apply for a construction permit and close on any
construction financing within the three-year period following the
date of the conveyance of the property from the land bank to the
qualified participating developer, the property will revert to the
land bank for subsequent resale to another qualified participating
developer or conveyance to the taxing units who were parties to the
judgment for disposition as otherwise allowed under the law.
Sec. 373.079. RESTRICTIONS ON OCCUPANCY AND USE OF
PROPERTY. (a) The land bank shall impose deed restrictions on
property sold to qualified participating developers requiring the
development and sale or rental of the property to low income
households.
(b) If property is developed for rental housing, the deed
restrictions must be for a period of not less than 15 years and must
require that:
(1) 100 percent of the rental units be occupied by
households with incomes not greater than 60 percent of area median
family income, based on gross household income, adjusted for
household size, for the metropolitan statistical area in which the
municipality is located, as determined annually by the United
States Department of Housing and Urban Development;
(2) 40 percent of the units be occupied by households
with incomes not greater than 50 percent of area median family
income, based on gross household income, adjusted for household
size, for the metropolitan statistical area in which the
municipality is located, as determined annually by the United
States Department of Housing and Urban Development; or
(3) 20 percent of the units be occupied by households
with incomes not greater than 30 percent of area median family
income, based on gross household income, adjusted for household
size, for the metropolitan statistical area in which the
municipality is located, as determined annually by the United
States Department of Housing and Urban Development.
(c) The deed restrictions under Subsection (b) must require
the owner to file an annual occupancy report with the municipality
on a reporting form provided by the municipality. The deed
restrictions must also prohibit the exclusion of an individual or
family from admission to the development because the individual or
family participates in the housing choice voucher program under
Section 8, United States Housing Act of 1937 (42 U.S.C. Section
1437f), as amended.
(d) Additional occupancy and use restrictions may be
adopted by the governing body of the municipality in the plan and
applied to property sold to the land bank under this chapter.
Sec. 373.080. RIGHT OF FIRST REFUSAL. (a) In this section,
"qualified organization" means a community housing development
organization that:
(1) contains within its designated geographical
boundaries of operation, as set forth in its application for
certification filed with and approved by the municipality, a
portion of the property that the land bank is offering for sale;
(2) has built at least three single-family homes or
duplexes or one multifamily residential dwelling of four or more
units in compliance with all applicable building codes within the
preceding two-year period and within the organization's designated
geographical boundaries of operation; and
(3) within the preceding two-year period has built or
rehabilitated housing units within a one-half mile radius of the
property that the land bank is offering for sale.
(b) The land bank shall first offer a property for sale to
qualified organizations.
(c) Notice must be provided to the qualified organizations
by certified mail, return receipt requested.
(d) The municipality shall specify in its plan the period
during which the right of first refusal provided by this section may
be exercised by a qualified organization. That period must be at
least nine months but not more than 26 months from the date of the
deed of conveyance of the property to the land bank.
(e) During the specified period, the land bank may not sell
the property to a qualified participating developer other than a
qualified organization. If all qualified organizations notify the
land bank that they are declining to exercise their right of first
refusal during the specified period, or if an offer to purchase the
property is not received from a qualified organization during that
period, the land bank may sell the property to any other qualified
participating developer at the same price that the land bank
offered the property to the qualified organizations.
(f) In its plan, the municipality shall establish the amount
of additional time, if any, that a property may be held in the land
bank once an offer has been received and accepted from a qualified
organization or other qualified participating developer.
(g) If more than one qualified organization expresses an
interest in exercising its right of first refusal, the organization
that has designated the most geographically compact area
encompassing a portion of the property shall be given priority.
(h) In its plan, the municipality may provide for other
rights of first refusal for any other nonprofit corporation
exempted from federal income tax under Section 501(c)(3), Internal
Revenue Code of 1986, as amended, provided that the preeminent
right of first refusal is provided to qualified organizations as
provided by this section.
(i) The land bank is not required to provide a right of first
refusal to qualified organizations under this section if the land
bank is selling property that reverted to the land bank under
Section 373.078(c).
Sec. 373.081. OPEN RECORDS AND MEETINGS. The land bank
shall comply with the requirements of Chapters 551 and 552,
Government Code.
Sec. 373.082. RECORDS; AUDIT; REPORT. (a) The land bank
shall keep accurate minutes of its meetings and shall keep accurate
records and books of account that conform with generally accepted
principles of accounting and that clearly reflect the income and
expenses of the land bank and all transactions in relation to its
property.
(b) The land bank shall file with the municipality not later
than the 90th day after the close of the fiscal year annual audited
financial statements prepared by a certified public accountant.
The financial transactions of the land bank are subject to audit by
the municipality.
(c) For purposes of evaluating the effectiveness of the
program, the land bank shall submit an annual performance report to
the municipality not later than November 1 of each year in which the
land bank acquires or sells property under this chapter. The
performance report must include:
(1) a complete and detailed written accounting of all
money and properties received and disbursed by the land bank during
the preceding fiscal year;
(2) for each property acquired by the land bank during
the preceding fiscal year:
(A) the street address of the property;
(B) the legal description of the property;
(C) the date the land bank took title to the
property;
(D) the name and address of the property owner of
record at the time of the foreclosure;
(E) the amount of taxes and other costs owed at
the time of the foreclosure; and
(F) the assessed value of the property on the tax
roll at the time of the foreclosure;
(3) for each property sold by the land bank during the
preceding fiscal year to a qualified participating developer:
(A) the street address of the property;
(B) the legal description of the property;
(C) the name and mailing address of the
developer;
(D) the purchase price paid by the developer;
(E) the maximum incomes allowed for the
households by the terms of the sale; and
(F) the source and amount of any public subsidy
provided by the municipality to facilitate the sale or rental of the
property to a household within the targeted income levels;
(4) for each property sold by a qualified
participating developer during the preceding fiscal year, the
buyer's household income and a description of all use and sale
restrictions; and
(5) for each property developed for rental housing
with an active deed restriction, a copy of the most recent annual
report filed by the owner with the land bank.
(d) The land bank shall maintain in its records for
inspection a copy of the sale settlement statement for each
property sold by a qualified participating developer and a copy of
the first page of the mortgage note with the interest rate and
indicating the volume and page number of the instrument as filed
with the county clerk.
(e) The land bank shall provide copies of the performance
report to the taxing units who were parties to the judgment of
foreclosure and shall provide notice of the availability of the
performance report for review to the organizations and neighborhood
associations identified by the municipality as serving the
neighborhoods in which properties sold to the land bank under this
chapter are located.
(f) The land bank and the municipality shall maintain copies
of the performance report available for public review.
SECTION 2. 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, 2005.