BILL ANALYSIS

 

 

Senate Research Center

S.B. 1925

88R9309 JG-D

By: Springer

 

Local Government

 

4/11/2023

 

As Filed

 

 

 

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT


The Texas Department of Housing and Community Affairs (TDHCA) provides low-income housing tax credits (LIHTC) that allow housing developers to take a federal tax credit to offset up to nine percent of its federal tax liability in exchange for building low-income rental housing projects. Each year the federal government allocates a fixed amount of nine percent LIHTC authority to each state on a per-capita basis. For 2022, states received $2.60 in tax credits per person. In exchange for tax credits for the 9% low-income tax credit program the TDHCA has instituted the affordability period of 45 years.

 

The developer community insists, among other things, that there is not sufficient funding to maintain properties beyond 30 years; that the cost of building LIHTC properties with "sustainable building materials" is prohibitive; and that LIHTC properties built now will likely not be up to the standard that stakeholders will want from LIHTC properties 45 years from now. Additionally, TDHCA has yet to raise, in 10 years, the maximum amount of tax credits of $3 million that the governing board may allocate to a low-income housing tax credit per applicant in a single application. Lastly, some of the final paperwork from the 9% program has been taking over a year for developers to receive from TDHCA. There is a concern from many in the industry that the current affordability 9% program will result in Chicago-like run-down developments in Texas that no one would want in their neighborhoods and eventual substandard housing for low-income residents.

 

The solutions proposed by the bill are to increase the cap that participants in the 9% program could receive annually, which would ensure that developers can build more units per awarded application and go a long way to increasing the financial feasibility of each development; raise the developer cap on max tax credits available to applicants to $6 million per cycle to address the increased costs of building materials and land; and require TDHCA to be more efficient in its paperwork for developers to receive their final paperwork (8609s) from the agency within a reasonable amount of time so that the investors could receive their tax credits from the IRS.

 

Summary Analysis

The bill defines "federal minimum affordability period" for the purposes of the bill.

 

The bill amends the Government Code to prohibit TDHCA from adopting a qualified allocation plan for the low-income housing tax credit program that does the following, in a land use agreement or otherwise:

 

�         requires as part of the threshold criteria that an applicant agree to an affordability period for a proposed development that is greater than the federal minimum affordability period; or

 

�         uses a scoring system that awards points to an application based on whether an applicant agrees to an affordability period for a proposed development that is greater than the federal minimum affordability period.

 

The bill increases from $3 million to $6 million the maximum amount of tax credits that the governing board of TDHCA may allocate to a low-income housing tax credit applicant in a single application round.


The bill requires TDHCA to issue a final commitment for an allocation of housing tax credits not later than the 120th day following the date on which TDHCA first receives from an applicant the appropriate federal tax form, for the purpose of obtaining a low-income housing credit allocation and certification.


The bill repeals Section 2306.1112, Government Code, that requires TDHCA to establish an executive award and review advisory committee to make recommendations to the TDHCA governing board regarding funding and allocation decisions and providing for the advisory committee's membership and administration.


The bill takes effect September 1, 2023, and is made prospective to the application cycle based on the 2024 qualified allocation plan or a subsequent plan adopted by the governing board of TDHCA.

As proposed, S.B. 1925 amends current law relating to the allocation of low income housing tax credits.

 

RULEMAKING AUTHORITY

 

This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.

 

SECTION BY SECTION ANALYSIS

 

SECTION 1. Amends Section 2306.67022, Government Code, as follows:

 

Sec. 2306.67022.  QUALIFIED ALLOCATION PLAN; MANUAL. (a) Creates this subsection from existing text.

 

(b)  Prohibits the Texas Department of Housing and Community Affairs (TDHCA) from adopting a qualified allocation plan that:

 

(1)  requires as part of the threshold criteria that an applicant agree to, in a land use restriction agreement or otherwise, an affordability period for a proposed development that is greater than the federal minimum affordability period; or

 

(2)  uses a scoring system that awards points to an application based on whether an applicant agrees to, in a land use restriction agreement or otherwise, an affordability period for a proposed development that is greater than the federal minimum affordability period.

 

(c) Provides that "federal minimum affordability period," for purposes of Subsection (b), means the period beginning on the first day of the compliance period, as defined by Section 42(i)(1), Internal Revenue Code of 1986 (26 U.S.C. Section 42(i)(1)), and ending 15 years from the date on which the compliance period ends.

 

SECTION 2. Amends Section 2306.6711(b), Government Code, as follows:

 

(b) Prohibits the board of TDHCA (board) from allocating to an applicant housing tax credits in any unnecessary amount, as determined by TDHCA's underwriting policy and by federal law, and in any event from allocating to the applicant housing tax credits in an amount greater than $6 million, rather than $3 million, in a single application round.

 

SECTION 3. Amends Section 2306.6724, Government Code, by adding Subsection (g), as follows:

 

(g) Requires TDHCA, notwithstanding other law, to issue a final commitment for an allocation of housing tax credits not later than the 90th day following the date on which TDHCA first receives from an applicant an Internal Revenue Service Form 8609, or that form's successor, for the purpose of obtaining a low-income housing credit allocation and certification.

 

SECTION 4. Repealer: Section 2306.1112 (Executive Award and Review Advisory Committee), Government Code.

 

SECTION 5. Provides that the change in law made by this Act applies only to an application for low income housing tax credits that is submitted to TDHCA during an application cycle that is based on the 2024 qualified allocation plan or a subsequent plan adopted by the board.� Provides that an application that is submitted during an application cycle that is based on an earlier qualified allocation plan is governed by the law in effect on the date the application cycle began, and the former law is continued in effect for that purpose.

 

SECTION 6. Effective date: September 1, 2023.