By: Cook S.B. No. 2766

A BILL TO BE ENTITLED

AN ACT

relating to public housing authorities.

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

SECTION 1. Section 392.002(9), (10), (11), and (12) Local Government Code, is amended to read as follows:

(9) "Persons of low income" means individuals or families earning less than 60 percent of the area median income, adjusted for family size, as defined by the United States Department of Housing and Urban Development [families or persons who lack the amount of income that an authority considers necessary to live, without financial assistance, in decent, safe, and sanitary housing without overcrowding].

(10) "Persons of moderate income " means individuals or families earning less than 80 percent of the area median income, adjusted for family size, as defined by the United States Department of Housing and Urban Development.

(11) "Rent" means any recurring fee or charge a tenant is required to pay as a condition of occupancy, including but not limited to, a fee or charge for the use of a common area or facility reasonably associated with a multifamily residential rental property.

(12) "Rent reduction" means the difference between:

(i) the total rent charged during the tax year for the income-restricted units in the multifamily residential development; and

(ii) the maximum total rent that could be charged during the tax year for the same units in the absence of any rent or income restrictions on such units.

SECTION 2. Section 392.005, Local Government Code, is amended by adding Subsection (d), (e), and (f) and amended Sections 392.005(b), (c), and (c-1) to read as follows:

(b) If a municipality, county, or political subdivision furnishes improvements, services, or facilities for a housing project, an authority may, in lieu of paying taxes or special assessments, agree to reimburse in payments to the municipality, county, or political subdivision an amount not greater than the estimated cost to the municipality, county, or political subdivision for the improvements, services, or facilities, provided that the governing body of each taxing unit in which the housing project is to be located approves the payments.

(c) An exemption under this section for a multifamily residential development which is owned 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, 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) the development is approved by the governing body of each taxing unit in which the development is located; and

(3) [(2)] at least:

(A) 10 [50] percent of the units in the multifamily residential development are reserved for occupancy by individuals and families earning less than 60 [80] percent of the area median income, adjusted for family size; and

(B) 40 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 income, adjusted for family size;

(4) the authority delivers to the presiding officer of the governing body of each taxing unit in which the development is to be located written notice of the development, at least 30 days before the date:

(A) the authority takes action to approve a new multifamily residential development or the acquisition of an occupied multifamily residential development; and

(B) of any public hearing required to be held under this section;

(5) the development is approved by the governing body of each taxing unit in which the development is located;

(6) for an occupied multifamily residential development that is acquired by a authority that was occupied at the time of acquisition or was occupied at any time within the two-year period preceding the date of the acquisition:

(A) not less than 15 percent of the total gross cost of acquiring the existing development, as shown in the settlement statement related to the acquisition, is expended on rehabilitating, renovating, reconstructing, or repairing the development, with initial expenditures and construction activities:

(i) beginning not later than the first anniversary of the date of the acquisition; and

(ii) finishing not later than the third anniversary of the date of the acquisition; or

(B) at least 25 percent of the units are reserved for occupancy as lower income housing units, as defined under Section 392.002(9), and at least 25 percent of the units in the development are reserved for occupancy as moderate income housing units, as defined under Section 392.002(10) the development is approved by the governing body of the municipality in which the development is located or, if the development is not located in a municipality, the county in which the development is located; and

(7) not less than 30 days before final approval of the development:

(A) the authority or authority's sponsor conducts, or obtains from a professional entity that has experience underwriting affordable multifamily residential developments and does not have a financial interest in the applicable development, developer, or public facility user, an underwriting assessment of the proposed development that allows the authority to make a good faith determination that:

(i) for an occupied multifamily residential development acquired by a authority, the total annual amount of rent reduction on the income-restricted units provided at the development will be not less than 60 percent of the estimated amount of the annual ad valorem taxes that would be imposed on the property without an exemption under Section 392.005(c) for the second, third, and fourth years after the date of acquisition by the corporation; and

(ii) for a newly constructed multifamily residential development, the total annual amount of rent reduction on the income-restricted units provided at the development will be not less than 60 percent of the estimated amount of the annual ad valorem taxes that would be imposed on the property without an exemption under Section 392.005(c) for the second, third, and fourth years after the date of acquisition by the authority; and

(B) the authority publishes on its Internet website a copy of the underwriting assessment described by Paragraph (A).

(d) A multifamily residential development that is owned by a public facility corporation created under this chapter by a housing authority and to which Subsection (a) applies must hold a public hearing, at a meeting of the authority's governing body, to approve the development.

(e) Notwithstanding Subsection (b), an occupied multifamily residential development that is acquired by a authority and to which Subsection (c) applies is eligible for an exemption under Section 303.042(c) for:

(1) the one-year period following the date of the acquisition, regardless of whether the development complies with the requirements of Subsection (b); and

(2) a year following the year described by Subdivision (1) only if the development comes into compliance with the requirements of Subsection (b) not later than the first anniversary of the date of the acquisition.

(f) For the purposes of Subsection (a), a "public housing unit" is a residential 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 Section 8, United States Housing Act of 1937 (42 U.S.C. Section 1437f).

(c-1) An exemption under this section for a multifamily residential development which is owned by a public facility corporation created by a housing authority under Chapter 303 applies only if:

(1) the development is approved by the governing body of each taxing unit in which the development is located;

(2) at least:

(A)10 [50] percent of the units in the multifamily residential development are reserved for occupancy by individuals and families earning less [not more] than 60 [80] percent of the area median income, adjusted for family size; and

(B) 40 percent of the units in the multifamily residential development are reserved for occupancy by persons of low income

(3) [(2)] the development:

(A) has at least 20 percent of its residential units reserved for public housing units;

(B) participates in the Rental Assistance Demonstration program administered by the United States Department of Housing and Urban Development;

(C) receives financial assistance administered under Chapter 1372, Government Code, or receives financial assistance from another type of tax-exempt bond; or

(D) receives financial assistance administered under Subchapter DD, Chapter 2306, Government Code.

SECTION 3.Subchapter A, Chapter 392, Local Government Code, is amended by adding Section 392.0051, and a heading is added to that section to read as follows: Sec. 392.0051. ADDITIONAL REQUIREMENTS FOR BENEFICIAL TAX TREATMENT RELATING TO CERTAIN PUBLIC HOUSING AUTHORITIES.

Sec. 392.0051. ADDITIONAL REQUIREMENTS FOR BENEFICIAL TAX TREATMENT RELATING TO CERTAIN PUBLIC HOUSING AUTHORITIES. (a) In this section:

(1) "Developer" means a private entity that constructs a development, including the rehabilitation, renovation, reconstruction, or repair of 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) "Lower income housing unit" means a residential unit reserved for occupancy by an individual or family earning not more than 60 percent of the area median income, adjusted for family size, as defined by the United States Department of Housing and Urban Development.

(4) "Moderate income housing unit" means a residential unit reserved for occupancy by an individual or family earning not more than 80 percent of the area median income, adjusted for family size, as defined by the United States Department of Housing and Urban Development.

(b) The percentage of lower and moderate income housing units reserved in each category of units in the development, based on the number of bedrooms per unit, must be the same as the percentage of each category of housing units reserved in the development as a whole.

(c) The monthly rent charged per unit may not exceed:

(1) for a lower income housing unit, 30 percent of 60 percent of the area median income, adjusted for family size, as defined by the United States Department of Housing and Urban Development; or

(2) for a moderate income housing unit, 30 percent of 80 percent of the area median income, adjusted for family size, as defined by the United States Department of Housing and Urban Development.

(d) In calculating the income of an individual or family for a lower or moderate income housing unit, the authority must use the definition of annual income described in 24 C.F.R. Section 5.609, as implemented by the United States Department of Housing and Urban Development. If the income of a tenant exceeds an applicable limit at the time of the renewal of a lease agreement for a residential unit, 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 or moderate income housing unit.

(e) The authority may not:

(1) refuse to rent a residential unit to an individual or family because the individual or family participates in the housing choice voucher program; or

(2) use a financial or minimum income standard that requires an individual or family participating in the housing choice voucher program to have a monthly income of more than 250 percent of the individual's or family's share of the total monthly rent payable for a unit.

(f) An authority may require an individual or family participating in the housing choice voucher program to pay the difference between the monthly rent for the applicable unit and the amount of the monthly voucher if the amount of the voucher is less than the rent.

(g) An authority that owns or leases to a public facility user a public facility used as a multifamily residential development shall publish on its Internet website information about the development's:

(1) compliance with the requirements of this section; and

(2) policies regarding tenant participation in the housing choice voucher program.

(h) The public facility user shall:

(1) affirmatively market available residential units directly to individuals and families participating in the housing choice voucher program; and

(2) notify local housing authorities of the multifamily residential development's acceptance of tenants in the housing choice voucher program.

(i) Each lease agreement for a residential unit in a multifamily residential development subject to this section must provide that:

(1) the landlord may not retaliate against the tenant or the tenant's guests by taking an action because the tenant established, attempted to establish, or participated in a tenant organization;

(2) the landlord may only choose to not renew the lease if the tenant:

(A) is in material noncompliance with the lease, including nonpayment of rent;

(B) committed one or more substantial violations of the lease;

(C) failed to provide required information on the income, composition, or eligibility of the tenant's household; or

(D) committed repeated minor violations of the lease that:

(i) disrupt the livability of the property;

(ii) adversely affect the health and safety of any person or the right to quiet enjoyment of the leased premises and related development facilities;

(iii) interfere with the management of the development; or

(iv) have an adverse financial effect on the development, including the failure of the tenant to pay rent in a timely manner; and

(3) to not renew the lease, the landlord must serve a written notice of proposed nonrenewal on the tenant not later than the 30th day before the effective date of nonrenewal.

(j) A tenant may not waive the protections provided by Subsection (i).

(k) Requirements under this subchapter relating to the reservation of income-restricted residential units or income restrictions applicable to tenants of a multifamily residential development subject to this subchapter must be documented in a land use restriction agreement or a similar restrictive instrument that:

(1) ensures that the applicable restrictions are in effect for not less than 10 years; and

(2) is recorded in the real property records of the county in which the development is located.

(l) An agreement or instrument recorded under Subsection (k) may be terminated if the development that is the subject of the agreement or instrument:

(1) is the subject of a foreclosure sale; or

(2) becomes ineligible for an exemption under Section 303.042(c) for a reason other than the failure to comply with restrictions recorded in the agreement or instrument.

SECTION 4. Sections 392.042(a), Local Government Code, are amended to read as follows:

(a) In this section:

(1) [,] "Housing [housing] project" includes, in addition to the works or undertakings described by [Subdivision (6) of] Section 392.002(6) [392.002]:

(A) [(1)] a work or undertaking implemented for a reason described by [Subdivision (6) of] Section 392.002(6) [392.002] that is financed in any way by public funds or tax-exempt revenue bonds; or

(B) [(2)] a building over which the housing authority has jurisdiction and of which a part is reserved for occupancy by persons who receive income or rental supplements from a governmental entity.

SECTION 6. Subchapter D, Chapter 392, Local Government Code, is amended by adding Section 392.0625 to read as follows:

Sec. 392.0625. AUDIT REQUIREMENTS. (a) In this section:

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

(2) "Property-based exemption" means an exemption from the taxes and fees imposed with respect to property owned by a authority or with respect to income from that property.

(b) An authority that claims a property-based exemption for a multifamily residential development under Section 392.005 must annually submit to the department and the chief appraiser of the appraisal district in which the development is located an audit report for a compliance audit, prepared at the expense of the authority conducted by an independent auditor or compliance expert with an established history of providing similar audits on housing compliance matters, to:

(1) determine whether the authority is in compliance with the conditions imposed for the exemption by Sections 392.005 and 392.0051(d); and

(2) identify the difference in the rent charged for income-restricted residential units and the estimated maximum market rents that could be charged for those units without the rent or income restrictions.

(c) Not later than the 60th day after the date of receipt of the audit conducted under Subsection (b), the department shall examine the audit report and publish a report summarizing the findings of the audit. The report must:

(1) be made available on the department's Internet website;

(2) be issued to a authority that has an interest in a development that is the subject of an audit, the comptroller, and the governing body of the authority 's sponsoring local government or governments; and

(3) describe in detail the nature of any failure to comply with the conditions imposed for the property-based exemption by Section 392.005(a) or 392.0051.

(d) If an audit report submitted under Subsection (b) indicates noncompliance with Section 392.005(a) or 392.0051, an authority:

(1) must be given:

(A) written notice from the department or appropriate appraisal district that:

(i) is provided not later than the 90th day after the date a report has been submitted under Subsection (b);

(ii) specifies the reasons for noncompliance;

(iii) contains at least one option for a corrective action to resolve the noncompliance; and

(iv) informs the authority that failure to resolve the noncompliance will result in the loss of the property-based exemption under Section 392.905;

(B) a period of 60 days after the date notice is received under this subdivision to resolve the matter that is the subject of the notice; and

(C) if a matter that is the subject of a notice provided under this subdivision is not resolved to the satisfaction of the department and appropriate taxing authority during the period provided by Paragraph (B), a second notice that informs the authority of the loss of the property-based exemption due to noncompliance with Section 392.005 or 392.0051, as applicable; and

(2) is considered to be in compliance with Sections 392.005 or 392.0051 if notice under Subdivision (1)(A) is not provided as specified by Subparagraph (i) of that paragraph.

(e) Except as provided by Section 392.0051, a property-based exemption under Section 392.005(a) does not apply for a tax year in which a multifamily residential development that is owned by a authority created under this chapter is determined by the department based on an audit conducted under Subsection (b) to not be in compliance with the conditions imposed for that exemption by Sections 392.005 or 392.0051.

(f) The initial audit report required by Subsection (b) is due not later than June 1 of the year following the first anniversary of:

(1) the date of acquisition for an occupied multifamily residential development that is acquired by a authority; or

(2) the date a new multifamily residential development first becomes occupied by one or more tenants.

(g) Subsequent audit reports following the issuance of the initial audit report under Subsection (f) are due not later than June 1 of each year.

(h) An independent auditor or compliance expert may not prepare an audit under Subsection (b) for more than three consecutive years for the same authority. After the third consecutive audit, the independent auditor or compliance expert may prepare an audit only after the second anniversary of the preparation of the third consecutive audit.

(i) The department:

(1) shall adopt forms and reporting standards for the auditing process;

(2) may charge a fee for the submission of an audit report under this section in a reasonable amount necessary to cover the expenses of administering this section; and

(3) may adopt rules necessary to implement this section.

(j) An audit conducted under Subsection (b) is subject to disclosure under Chapter 552, Government Code, except that information containing tenant names, unit numbers, or other tenant identifying information may be redacted.

SECTION 7. Section 392.066, Local Government Code, is amended by adding Subsection (f) to read as follows:

(f) An authority that creates a public facility corporation under Chapter 303 must submit to the Texas Department of Housing and Community Affairs for each year that the corporation remains in operation a certification providing:

(1) the name of the corporation;

(2) the names of all the developments owned by an authority;

(3) the names of all subsidiaries of an authority;

(4) the names of any private partners involved in the development;

(5) the areas in which the corporation operates; and

(6) any other information required by the department.

SECTION 8. (a) Subject to Subsections (b) and (c) of this section, Sections 392.005(c), (d),(e), and (f), Local Government Code, as amended by this Act, apply only to a tax or special assessment imposed for a tax year or calendar year, respectively, beginning on or after the effective date of this Act.

(b) Sections 392.005(c), Local Government Code, as amended by this Act, and Section 392.0051, Local Government Code, as added by this Act, apply only to an occupied multifamily residential development that is acquired by a housing authority on or after the effective date of this Act or with respect to a newly built multifamily residential development for which a certificate of occupancy is issued on or after the effective date of this Act.

(c) Notwithstanding any other provision of this section, Section 392.0625, Local Government Code, as added by this Act, applies to all multifamily residential developments with respect to which an exemption is sought or claimed under Section 392.005, Local Government Code, as amended by this Act.

SECTION 9. This Act takes effect September 1, 2025.