89R8430 JAM/DRS-F

By: Talarico H.B. No. 3792

A BILL TO BE ENTITLED

AN ACT

relating to the identification, use, and taxation of surplus state property suitable for the development of affordable housing.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subchapter E, Chapter 31, Natural Resources Code, is amended by adding Section 31.1555 to read as follows:

Sec. 31.1555. SURPLUS STATE PROPERTY INVENTORY. (a) In this section:

(1) "Department" means the Texas Department of Housing and Community Affairs.

(2) "Surplus state property" means unused or underused state property, including unimproved real property, historic buildings, residential buildings, and commercial buildings.

(b) The land office shall establish a digitized inventory of surplus state property located in:

(1) municipalities with a population of 25,000 or more; or

(2) counties with a population of 50,000 or more.

(c) The land office, in consultation with the department, shall:

(1) identify from the inventory established under Subsection (b) any surplus state property that may feasibly be developed to provide affordable housing; and

(2) develop and make available a comprehensive map that:

(A) contains the properties identified under Subdivision (1); and

(B) is overlaid with graphical representation of the areas of the state where affordable housing is feasible and impactful, where the relative degrees of feasibility and impact are indicated by different colors on the map.

(d) To identify suitable properties under Subsection (c)(1), the land office and department jointly shall develop a process that analyzes and ranks properties based on criteria including:

(1) the economic feasibility of the potential development based on:

(A) a property's size, shape, grading, and lack of development constraints;

(B) a property's proximity to job centers, education, high-frequency public transportation networks, utilities, and other services and amenities; and

(C) whether a property is adjacent to other properties in a manner that would allow for consolidation of those properties into a larger parcel of property considered appropriate for affordable housing; and

(2) a property's location with respect to areas where the underproduction of housing is having the greatest effect on housing affordability as demonstrated by the lack of availability of affordable housing, the gap between supply and demand for affordable housing, and the rate of increase in rents.

(e) The land office, in consultation with the department, shall issue requests for proposals from developers of affordable housing for long-term ground leases of surplus state property identified under Subsection (c)(1) for the purpose of developing affordable housing on those properties. The proposals must address:

(1) the number of residential rental units to be built and maintained for occupancy as affordable units;

(2) the maximization of the natural resources of the property;

(3) levels of affordability of residential rental units in the development;

(4) the feasibility of:

(A) breaking ground not later than the second anniversary of the date the developer enters the lease; and

(B) completing the development not later than the third anniversary of the date the developer enters the lease;

(5) the cost of construction for each residential rental unit built; and

(6) the developer's demonstrated capacity to complete affordable housing projects.

(f) Surplus state property identified under Subsection (c)(1) may be exchanged for other real property of a local governmental entity if the exchange:

(1) facilitates the provision of affordable housing by that local governmental entity; and

(2) is conducted in accordance with rules jointly adopted by the land office and the department governing an exchange of real property under this subsection, including rules adopted to ensure that the primary purpose of a property exchange is to provide affordable housing in this state.

SECTION 2. Section 25.07, Tax Code, is amended by amending Subsection (b) and adding Subsection (f) to read as follows:

(b) Except as provided by Sections 11.11(b) and (c), a leasehold or other possessory interest in exempt property may not be listed if:

(1) the property is permanent university fund land;

(2) the property is county public school fund agricultural land;

(3) the property is a part of a public transportation facility owned by a municipality or county and:

(A) is an airport passenger terminal building or a building used primarily for maintenance of aircraft or other aircraft services, for aircraft equipment storage, or for air cargo;

(B) is an airport fueling system facility;

(C) is in a foreign-trade zone:

(i) that has been granted to a joint airport board under Subchapter C, Chapter 681, Business & Commerce Code;

(ii) the area of which in the portion of the zone located in the airport operated by the joint airport board does not exceed 2,500 acres; and

(iii) that is established and operating pursuant to federal law; or

(D)(i) is in a foreign trade zone established pursuant to federal law after June 1, 1991, that operates pursuant to federal law;

(ii) is contiguous to or has access via a taxiway to an airport located in two counties, one of which has a population of 500,000 or more according to the federal decennial census most recently preceding the establishment of the foreign trade zone; and

(iii) is owned, directly or through a corporation organized under the Development Corporation Act (Subtitle C1, Title 12, Local Government Code), by the same municipality that owns the airport;

(4) the interest is in a part of:

(A) a park, market, fairground, or similar public facility that is owned by a municipality; or

(B) a convention center, visitor center, sports facility with permanent seating, concert hall, arena, or stadium that is owned by a municipality as such leasehold or possessory interest serves a governmental, municipal, or public purpose or function when the facility is open to the public, regardless of whether a fee is charged for admission;

(5) the interest involves only the right to use the property for grazing or other agricultural purposes;

(6) the property is:

(A) owned by a municipality, a public port, or a navigation district created or operating under Section 59, Article XVI, Texas Constitution, or under a statute enacted under Section 59, Article XVI, Texas Constitution; and

(B) used as an aid or facility incidental to or useful in the operation or development of a port or waterway or in aid of navigation-related commerce; [or]

(7) the property is part of a rail facility owned by a rural rail transportation district operating under Chapter 172, Transportation Code; or

(8) subject to Subsection (f), the property is surplus state property identified by the General Land Office in consultation with the Texas Department of Housing and Community Affairs under Section 31.1555(c)(1), Natural Resources Code, as suitable to be developed to provide affordable housing and the owner of the possessory interest agrees in writing to:

(A) develop affordable housing on the property pursuant to the terms of a long-term ground lease with the General Land Office; and

(B) rent at least 30 percent of the residential rental units to individuals and families of low income or families of moderate income as defined by Section 2306.004, Government Code.

(f) The prohibition provided by Subsection (b)(8) on the listing of a leasehold or other possessory interest in property to be developed as affordable housing:

(1) applies to the property for a single period of:

(A) 12 consecutive tax years if the owner of the possessory interest agrees to rent at least 30 percent of the residential rental units to individuals and families of low income or families of moderate income as defined by Section 2306.004, Government Code; or

(B) 20 consecutive tax years if the owner of the possessory interest agrees to rent at least 40 percent of the residential rental units to individuals and families of low income or families of moderate income as defined by Section 2306.004, Government Code;

(2) expires as to the property on the earliest of the date:

(A) the period described by Subdivision (1)(A) or (B), as applicable, expires;

(B) the property changes ownership; or

(C) the property is no longer used for affordable housing as provided by an agreement under Subsection (b)(8); and

(3) applies only to the portion of the property used for residential purposes, including common areas.

SECTION 3. (a) Not later than November 30, 2025, the General Land Office, in consultation with the Texas Department of Housing and Community Affairs, shall establish the process required under Section 31.1555(d), Natural Resources Code, as added by this Act, to identify surplus state property suitable for development as affordable housing.

(b) Not later than December 31, 2025, the General Land Office shall establish the digitized inventory required by Section 31.1555(b), Natural Resources Code, as added by this Act.

(c) Not later than April 30, 2026, the Texas Department of Housing and Community Affairs shall provide a report describing the status of:

(1) the process described by Subsection (a) of this section;

(2) the inventory described by Subsection (b) of this section; and

(3) the map required to be developed under Section 31.1555(c)(2), Natural Resources Code, as added by this Act.

SECTION 4. This Act takes effect September 1, 2025.