89R2225 JAM-D     By: Bettencourt S.B. No. 867       A BILL TO BE ENTITLED   AN ACT   relating to housing finance corporations; authorizing a fee.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Section 394.004, Local Government Code, is   amended to read as follows:          Sec. 394.004.  APPLICATION OF CHAPTER TO CERTAIN RESIDENTIAL   DEVELOPMENTS. This chapter applies only to a residential   development that, in accordance with the requirements of this   chapter, [at least 90 percent of which] is occupied [for use] by or   is intended to be occupied by persons of low and moderate income   whose adjusted gross income, together with the adjusted gross   income of all persons who intend to reside with those persons in one   dwelling unit, did not for the preceding tax year exceed the maximum   amount constituting moderate income under the housing finance   corporation's rules, resolutions relating to the issuance of bonds,   or financing documents relating to the issuance of bonds.          SECTION 2.  Subchapter A, Chapter 394, Local Government   Code, is amended by adding Section 394.0045 to read as follows:          Sec. 394.0045.  APPLICABILITY OF OPEN MEETINGS AND OPEN   RECORDS LAWS.  (a)  Chapter 551, Government Code, applies to actions   and proceedings under this chapter.          (b)  Chapter 552, Government Code, applies to all records of   a housing finance corporation.          SECTION 3.  The heading to Section 394.031, Local Government   Code, is amended to read as follows:          Sec. 394.031.  EXERCISE OF POWERS; AREA OF OPERATION.          SECTION 4.  Section 394.031, Local Government Code, is   amended by adding Subsections (c) and (d) to read as follows:          (c)  Subject to Subsection (d), the area in which a housing   finance corporation may exercise its powers is limited to:                (1)  for a housing finance corporation sponsored by a   municipality under Section 394.011, the jurisdictional boundaries   of the municipality that sponsored the corporation;                 (2)  for a housing finance corporation sponsored by a   county under Section 394.011, the unincorporated areas of the   county that sponsored the corporation; or                (3)  for a housing finance corporation sponsored by   more than one local government under Section 394.012:                      (A)  the jurisdictional boundaries of each   municipal sponsor of the corporation; and                       (B)  the unincorporated areas of each county   sponsor of the corporation.          (d)  A housing finance corporation may exercise its powers   outside an area described by Subsection (c) only if a resolution or   order, as applicable, approving that exercise of power in the   outside area is adopted by the governing body of each sponsoring   local government and by the governing bodies of:                (1)  each municipality that contains any part of the   outside area in which the corporation proposes to operate; and                (2)  if proposing to operate in the unincorporated area   of a county, each county that contains any part of the outside area   in which the corporation proposes to operate.          SECTION 5.  Sections 394.032(a) and (e), Local Government   Code, are amended to read as follows:          (a)  Subject to the limitations of Sections 394.031(c) and   (d), a [A] housing finance corporation may:                (1)  make contracts and other instruments as necessary   or convenient to the exercise of powers under this chapter;                (2)  incur liabilities;                (3)  borrow money at rates determined by the   corporation;                (4)  issue notes, bonds, and other obligations; and                (5)  secure any of its obligations by the mortgage or   pledge of all or part of the corporation's property, franchises,   and income.          (e)  A housing finance corporation may delegate to the Texas   Department of Housing and Community Affairs the authority to act on   its behalf in the financing, refinancing, acquisition, leasing,   ownership, improvement, and disposal of home mortgages or   residential developments, within [and outside] the jurisdiction of   the housing finance corporation, including its authority to issue   bonds for those purposes.          SECTION 6.  Section 394.037, Local Government Code, is   amended by adding Subsection (a-1) to read as follows:          (a-1)  Bonds issued under this chapter for a purpose   described by Subsection (a) may be issued only to finance or support   residential developments or homes that are located:                (1)  inside the boundaries of the sponsoring local   government, if the bonds are issued by a housing finance   corporation formed under Section 394.011; or                (2)  inside the boundaries of at least one sponsoring   local government, if the bonds are issued by a joint housing finance   corporation formed under Section 394.012.          SECTION 7.  Section 394.039, Local Government Code, is   amended to read as follows:          Sec. 394.039.  SPECIFIC POWERS RELATING TO FINANCIAL AND   PROPERTY TRANSACTIONS. A housing finance corporation may:                (1)  lend money for its corporate purposes, invest and   reinvest its funds, and take and hold real or personal property as   security for the payment of the loaned or invested funds;                (2)  mortgage, pledge, or grant security interests in   any residential development, home mortgage, note, or other property   in favor of the holders of bonds issued for those items;                (3)  purchase, receive, lease, or otherwise acquire,   own, hold, improve, use, or deal in and with real or personal   property or interests in that property, [wherever the property is   located,] as required by the purposes of the corporation or as   donated to the corporation; and                (4)  sell, convey, mortgage, pledge, lease, exchange,   transfer, and otherwise dispose of all or part of its property and   assets.          SECTION 8.  Section 394.9025(b), Local Government Code, is   amended to read as follows:          (b)  Following a public hearing by the governing body of the   applicable local government as described by Section 394.037(a-1), a   housing finance corporation may issue bonds to finance a   multifamily residential development to be owned by the housing   finance corporation in accordance with the requirements of this   chapter [Section 394.004] if the housing finance corporation   receives approval of the governing body of that [the] local   government.          SECTION 9.  Subchapter Z, Chapter 394, Local Government   Code, is amended by adding Sections 394.9026 and 394.9027 to read as   follows:          Sec. 394.9026.  ADDITIONAL CONDITIONS FOR BENEFICIAL   PROPERTY-BASED TAX AND FEE TREATMENT RELATING TO CERTAIN   MULTIFAMILY RESIDENTIAL DEVELOPMENTS. (a)  In this section:                (1)  "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).                (2)  "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.                (3)  "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.                (4)  "Property-based exemption" means an exemption   from the taxes and fees imposed with respect to property owned by a   housing finance corporation or with respect to income from that   property.                (5)  "Rent" means any recurring fee or charge a tenant   is required to pay as a condition of occupancy, including a fee or   charge for the use of a common area or facility reasonably   associated with residential rental property.          (b)  This section does not apply to a multifamily residential   development that is the recipient of a low income housing tax credit   allocated under Subchapter DD, Chapter 2306, Government Code.          (c)  Subject to Subsection (g), a property-based exemption   under Section 394.905(a) for a multifamily residential development   is available only if the multifamily residential development   satisfies the other requirements of this chapter and if:                (1)  at least:                      (A)  10 percent of the units in the multifamily   residential development are reserved for occupancy as lower income   housing units; and                      (B)  40 percent of the units in the multifamily   residential development are reserved for occupancy as moderate   income housing units;                (2)  for a multifamily residential development that is   acquired by a housing finance corporation, the development is   occupied or was occupied within the two-year period preceding the   date of the acquisition and is not otherwise subject to a land use   restriction agreement under Section 2306.185, Government Code,   and:                      (A)  not less than 15 percent of the total gross   cost of the existing development, as shown in the settlement   statement, 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 and 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;                 (3)  not less than 30 days before the date of final   approval of the development:                      (A)  the housing finance corporation or a   sponsoring local government of the corporation 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   housing finance corporation, an underwriting assessment of the   proposed development that allows the housing finance corporation to   make a good faith determination that, for an occupied multifamily   residential development acquired by a housing finance corporation   or for a newly constructed multifamily residential development   owned by a housing finance corporation, the total annual amount of   rent reduction on the income-restricted residential 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 from those taxes under Section   394.905(a) for the second, third, and fourth years after the date of   acquisition by the housing finance corporation or the date the   certificate of occupancy is issued for the development, as   applicable; and                      (B)  the housing finance corporation publishes on   its Internet website a copy of the underwriting assessment   described by Paragraph (A);                (4)  the percentage of lower and moderate income   housing units reserved in each category of income-restricted   residential units in the development, based on the number of   bedrooms per unit, is the same as the percentage of each category of   income-restricted residential units reserved in the development as   a whole;                 (5)  the monthly rent charged per unit does not exceed:                      (A)  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                      (B)  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;                (6)  the housing finance corporation that owns the   development does not:                      (A)  refuse to rent a residential unit to an   individual or family because the individual or family participates   in the housing choice voucher program; or                      (B)  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;                 (7)  the housing finance corporation publishes on its   Internet website information about the development's:                      (A)  compliance with the conditions prescribed by   this section; and                      (B)  policies regarding tenant participation in   the housing choice voucher program;                 (8)  the housing finance corporation that owns the   development:                      (A)  affirmatively markets available residential   units directly to individuals and families participating in the   housing choice voucher program; and                      (B)  notifies local housing authorities of the   development's acceptance of tenants in the housing choice voucher   program; and                 (9)  each lease agreement for a residential unit in the   development provides that:                      (A)  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;                      (B)  the landlord may only choose to not renew the   lease if the tenant:                            (i)  committed one or more substantial   violations of the lease;                            (ii)  failed to provide required information   on the income, composition, or eligibility of the tenant's   household; or                            (iii)  committed repeated minor violations   of the lease that disrupt the livability of the property, adversely   affect the health and safety of any person or the right to quiet   enjoyment of the leased premises and related development   facilities, interfere with the management of the development, or   have an adverse financial effect on the development, including the   failure of the tenant to pay rent in a timely manner; and                      (C)  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.          (d)  In calculating the income of an individual or family for   a lower or moderate income housing unit, the housing finance   corporation 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)  A housing finance corporation 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.          (f)  A tenant may not waive the protections provided by   Subsection (c)(9). A housing finance corporation may adopt tenant   protections that are more protective of tenants than the tenant   protections provided by Subsection (c)(9).          (g)  Notwithstanding Subsection (c) and Section   394.905(a)(1), a multifamily residential development that is   acquired by a housing finance corporation, that is occupied or was   occupied within the two-year period preceding the date of the   acquisition, and that is not otherwise subject to a land use   restriction agreement under Section 2306.185, Government Code, is   eligible for a property-based exemption under Section 394.905(a)   for:                (1)  the one-year period following the date of the   acquisition, regardless of whether the development complies with   the conditions prescribed by Subsection (c) and Section   394.905(a)(1); and                (2)  a year following the year described by Subdivision   (1) only if the development comes into compliance with the   conditions prescribed by Subsection (c) and Section 394.905(a)(1)   not later than the first anniversary of the date of the acquisition.          Sec. 394.9027.  AUDIT REQUIREMENTS FOR CERTAIN MULTIFAMILY   RESIDENTIAL DEVELOPMENTS.  (a)  In this section:                (1)  "Department" means the Texas Department of Housing   and Community Affairs.                (2)  "Property-based exemption" has the meaning   assigned by Section 394.9026.          (b)  A housing finance corporation that claims a   property-based exemption for a multifamily residential   development under Section 394.905(a) 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 housing finance corporation   and 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 housing finance corporation   is in compliance with the conditions imposed for the exemption by   Sections 394.905(a) and 394.9026; 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 housing finance corporation that   has an interest in a development that is the subject of an audit,   the comptroller, and the governing body of the housing finance   corporation'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 394.905(a) or 394.9026.          (d)  If an audit report submitted under Subsection (b)   indicates noncompliance with Section 394.905(a) or 394.9026, a   housing finance corporation:                (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 housing finance   corporation that failure to resolve the noncompliance will result   in the loss of the property-based exemption under Section   394.905(a);                      (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   housing finance corporation of the loss of the property-based   exemption due to noncompliance with Section 394.905(a) or 394.9026,   as applicable; and                (2)  is considered to be in compliance with Sections   394.905(a) and 394.9026 if notice under Subdivision (1)(A) is not   provided as specified by Subparagraph (i) of that paragraph.          (e)  Except as provided by Section 394.9026(g), a   property-based exemption under Section 394.905(a) does not apply   for a tax year in which a multifamily residential development that   is owned by a housing finance corporation 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 394.905(a) and 394.9026.          (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 housing   finance corporation; 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 housing finance corporation. 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 10.  Section 394.903, Local Government Code, is   amended to read as follows:          Sec. 394.903.  TRANSFER [LOCATION] OF [RESIDENTIAL   DEVELOPMENT;] RESIDENTIAL DEVELOPMENT SITES. [(a) A residential   development covered by this chapter must be located within the   local government.          [(b)]  A [The] local government may transfer any residential   development site to a housing finance corporation by sale or lease.   The governing body of the local government may authorize the   transfer by resolution without submitting the issue to the voters   and without regard to the requirements, restrictions, limitations,   or other provisions contained in any other general, special, or   local law. The site location is subject to the requirements of this   chapter [may be located wholly or partly inside or outside the local   government].          SECTION 11.  Section 394.905, Local Government Code, is   amended to read as follows:          Sec. 394.905.  EXEMPTION FROM TAXES AND FEES [TAXATION].     (a) Notwithstanding any other law, the [The] housing finance   corporation, all property owned by it, the income from the   property, all bonds issued by it, the income from the bonds, and the   transfer of the bonds are exempt, as public property used for public   purposes, from license fees, recording fees, and all other taxes   imposed by this state or any political subdivision of this state   only if:                (1)  for an exemption from taxes and fees imposed with   respect to property owned by the housing finance corporation:                      (A)  any applicable audit report requirements   provided by Section 394.9027 are satisfied, other than those   imposed on a multifamily residential development under the   circumstances described by Section 394.9026(g);                      (B)  the property is located in an area in which   the housing finance corporation is authorized to exercise its   powers as described by Section 394.031(c) or the exemption is   approved by each applicable governing body described by Section   394.031(d); and                      (C)  if an exemption from ad valorem taxation is   claimed, the housing finance corporation submits to the Texas   Department of Housing and Community Affairs and to the county tax   assessor-collector for each appraisal district in which the   exemption is sought a one-time exemption application on a form   promulgated by the comptroller; or                (2)  the requirements provided by Section 394.037(a-1)   are satisfied, for an exemption from taxes and fees imposed with   respect to bonds issued by the housing finance corporation, the   income from those bonds, and the transfer of those bonds.          (b)  The corporation is exempt from the franchise tax imposed   by Chapter 171, Tax Code, only if the corporation is exempted by   that chapter.          SECTION 12.  Section 394.005, Local Government Code, is   repealed.          SECTION 13.  (a) Sections 394.031(c) and (d), Local   Government Code, as added by this Act, apply only to the exercise of   power by a housing finance corporation made on or after the   effective date of this Act. An exercise of power made before the   effective date of this Act is governed by the law in effect on the   date the power was exercised, and the former law is continued in   effect for that purpose.          (b)  Sections 394.037(a-1) and 394.905(a)(2), Local   Government Code, as added by this Act, apply only to bonds issued on   or after the effective date of this Act. Bonds issued before the   effective date of this Act are governed by the law in effect on the   date the bonds were issued, and the former law is continued in   effect for that purpose.          (c)  Subject to Subsections (d), (e), and (f) of this   section, Sections 394.905(a)(1) and 394.9026, Local Government   Code, as added by this Act, apply only to a tax or fee imposed for a   tax year or calendar year, respectively, that begins on or after the   effective date of this Act.          (d)  Subject to Subsections (e) and (f) of this section,   Sections 394.905(a)(1) and 394.9026, Local Government Code, as   added by this Act, apply only to a residential development that is   acquired by a housing finance corporation on or after the effective   date of this Act.  A residential development that was acquired by a   housing finance corporation before the effective date of this Act   is governed by the law in effect on the date the development was   acquired by the corporation, and the former law is continued in   effect for that purpose.          (e)  Section 394.9026(g), Local Government Code, as added by   this Act, applies only to an occupied multifamily residential   development that is acquired by a housing finance corporation on or   after the effective date of this Act.  An occupied multifamily   residential development that is acquired by a housing finance   corporation before the effective date of this Act is governed by the   law in effect on the date the development was acquired by the   housing finance corporation, and the former law is continued in   effect for that purpose.          (f)  Sections 394.9026(c)(6), (7), (8), and (9) and (f),   Local Government Code, as added by this Act, apply to a multifamily   residential development owned by a housing finance corporation on   or after the effective date of this Act, regardless of the date the   development was acquired by the housing finance corporation.          (g)  Notwithstanding Section 394.9027(b) or (f), Local   Government Code, as added by this Act, the initial audit report   required to be submitted under Section 394.9027(b), Local   Government Code, as added by this Act, for a multifamily   residential development that was acquired by a housing finance   corporation before the effective date of this Act must be submitted   by the later of:                (1)  the date established by Section 394.9027(f), Local   Government Code, as added by this Act; or                (2)  June 1, 2026.          (h)  Not later than January 1, 2026, the Texas Department of   Housing and Community Affairs shall adopt rules necessary to   implement Section 394.9027(i), Local Government Code, as added by   this Act.          SECTION 14.  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, 2025.