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.