Bill Text: TX SB867 | 2025-2026 | 89th Legislature | Comm Sub

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Bill Title: Relating to housing finance corporations; authorizing a fee.

Sponsorship: Slight Partisan Bill (Republican 6-3)

Status: (Introduced - Dead) 2025-05-15 - Placed on intent calendar [SB867 Detail]

Download: Texas-2025-SB867-Comm_Sub.html

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By: Bettencourt, et al. S.B. No. 867
(In the Senate - Filed January 22, 2025; February 13, 2025,
read first time and referred to Committee on Local Government;
May 5, 2025, reported adversely, with favorable Committee
Substitute by the following vote: Yeas 6, Nays 0; May 5, 2025, sent
to printer.)
COMMITTEE SUBSTITUTE FOR S.B. No. 867 By: Paxton

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 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. Section 394.032(d), Local Government Code, is
amended to read as follows:
(d) Subject to Sections 394.9026, 394.903(a), and
394.905(c), a [A] housing finance corporation may enter into
contracts to perform services for any other housing finance
corporation or any individual or entity acting on behalf of any
other housing finance corporation or, with respect to residential
development, any housing authority, nonprofit enterprise, or
similar entity.
SECTION 4. Section 394.037, Local Government Code, is
amended by adding Subsection (a-1) to read as follows:
(a-1) A housing finance corporation may only issue bonds
under this chapter for a purpose described by Subsection (a) to
finance or support a residential development or home that is
located or will be constructed within the boundaries of the local
government that formed the corporation under Section 394.011 or
394.012.
SECTION 5. 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) subject to Sections 394.9026, 394.903(a), and
394.905(c), 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 6. Section 394.9025, Local Government Code, is
amended to read as follows:
Sec. 394.9025. MULTIFAMILY RESIDENTIAL DEVELOPMENT. (a)
Following a public hearing, a housing finance corporation may,
subject to the geographic limitations of Section 394.037(a-1),
issue bonds to finance a multifamily residential development to be
owned, financed, or supported by the housing finance corporation if
at least 50 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 family income.
(b) Following a public hearing by the governing body of the
applicable local government, a housing finance corporation may,
subject to the geographic limitations of Section 394.037(a-1),
issue bonds to finance a multifamily residential development to be
owned, financed, or supported by the housing finance corporation in
accordance with Section 394.004 if the housing finance corporation
receives approval of the governing body of the local government.
SECTION 7. 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 AD
VALOREM TAX 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) "Housing finance corporation user" means a
public-private partnership entity or a developer or other private
entity that has an ownership interest or a leasehold or other
possessory interest in a multifamily residential development
owned, financed, or supported by a housing finance corporation.
(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.
(5) "Multifamily residential development" means any
residential development consisting of four or more residential
units intended for occupancy as rentals, regardless of whether the
units are attached or detached.
(6) "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. The term does not
include fees and charges for services or amenities that are
optional for a tenant, such as pet fees and fees for storage or
covered parking.
(b) This section does not apply to a multifamily residential
development that receives financial assistance administered under
Subchapter DD, Chapter 2306, Government Code.
(c) Subject to Subsection (g), an ad valorem tax exemption
under Section 394.905 for a multifamily residential development
owned, financed, or supported by a housing finance corporation is
available only if the other requirements of this chapter are
satisfied and if:
(1) subject to Subdivision (2), at least:
(A) 10 percent of the units in the development
are reserved for occupancy as lower income housing units; and
(B) 40 percent of the units in the development
are reserved for occupancy as moderate income housing units;
(2) for a development that is acquired by a housing
finance corporation and that is occupied at acquisition or was
occupied at any time within the two-year period preceding the date
of the acquisition:
(A) at least:
(i) 10 percent of the units in the
development are reserved for occupancy as lower income housing
units and at least 40 percent of the units in the development are
reserved for occupancy as moderate income housing units; and
(ii) unless a resolution waiving this
requirement is received from the governing body of the local
government within the boundaries of which the development is
located, 15 percent of the total gross cost of 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:
(a) beginning not later than the first
anniversary of the date of the acquisition; and
(b) finishing not later than the third
anniversary of the date of the acquisition; or
(B) the development is approved by the governing
body of the local government within the boundaries of which the
development is located and at least:
(i) 25 percent of the units are reserved for
occupancy as lower income housing units; and
(ii) 25 percent of the units are reserved
for occupancy as moderate income housing units;
(3) the income-restricted residential units in the
development have the same access to community amenities and
programs as residential units that are not income-restricted;
(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, the housing
finance corporation user, and the development, including any
individual or entity associated with or acting on behalf of the
corporation, user, or development, do not:
(A) refuse to rent a residential unit in the
development 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, the housing
finance corporation user, or the development causes to be published
on the Internet website of the development information about the
development's policies regarding tenant participation in the
housing choice voucher program;
(8) any housing finance corporation or housing finance
corporation user 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 housing finance corporation, the housing
finance corporation user, and the development 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 housing finance corporation, the housing
finance corporation user, and the development 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 housing finance
corporation, the housing finance corporation user, or the
development 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, the housing finance corporation user, or the
development must use the definition of annual income described in
24 C.F.R. Section 5.609 for the applicable fair market rent area
with an imputed family size of one person per bedroom plus one
person, as defined and 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, housing finance
corporation user, or development 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, housing finance
corporation user, or development may adopt tenant protections that
are more protective of tenants than the tenant protections provided
by Subsection (c)(9).
(g) A multifamily residential development that is acquired
by a housing finance corporation and is occupied on the date of the
acquisition is eligible for an ad valorem exemption under Section
394.905 for the two-year period following the date of the
acquisition, regardless of whether the development complies with
the conditions prescribed by Subsection (c), if the development
comes into compliance with Subsection (c) not later than the second
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) "Housing finance corporation user" has the meaning
assigned by Section 394.9026.
(b) A housing finance corporation or housing finance
corporation user that claims an ad valorem tax exemption for a
multifamily residential development under Section 394.905 and to
which Section 394.9026 applies must annually submit to the
department an audit report for a compliance audit, prepared at the
expense of the corporation or user and conducted by an independent
auditor or compliance expert with an established history of
providing similar audits on housing compliance matters, that:
(1) states whether the corporation or user is in
compliance with the requirements imposed for the exemption by
Section 394.9026; and
(2) identifies 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
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 any housing finance corporation or
housing finance corporation user that owns the 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 requirements of Section 394.9026.
(d) If an audit report submitted under Subsection (b)
indicates noncompliance with Section 394.9026, any housing finance
corporation or housing finance corporation user that owns the
development must be given written notice from the department that
is provided not later than the 120th day after the date a report has
been submitted under Subsection (b) and specifies the reasons for
noncompliance. The notice must:
(1) for a finding of noncompliance with any provision
of Section 394.9026, contain at least one option for a corrective
action to resolve each instance of noncompliance;
(2) give a period of 60 days after the date of receipt
of the notice to resolve the matter that is the subject of the
notice; and
(3) inform the housing finance corporation or housing
finance corporation user that failure to resolve the noncompliance
within the period provided by Subdivision (2) will result in the
loss of the ad valorem tax exemption under Section 394.905.
(e) If a matter that is the subject of a notice provided
under Subsection (d) is not resolved to the satisfaction of the
department during the period provided by that subsection, the
department must give a housing finance corporation or housing
finance corporation user a second written notice that informs the
chief appraiser of the appraisal district in which the development
is located, the housing finance corporation, and the housing
finance corporation user of the loss of the ad valorem tax exemption
for the development due to noncompliance with Section 394.9026.
(f) A housing finance corporation or housing finance
corporation user is considered to be in compliance with Section
394.9026 if notice under Subsection (d) is not provided before the
121st day after the date the report was submitted under Subsection
(b).
(g) 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 existing
multifamily residential development that is acquired by a housing
finance corporation; or
(2) the date a newly constructed multifamily
residential development first becomes occupied by one or more
tenants.
(h) Subsequent audit reports following the issuance of the
initial audit report under Subsection (g) are due not later than
June 1 of each year.
(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;
(3) may extend any deadline imposed under this section
for good cause shown, as determined by the department; and
(4) may adopt rules necessary to implement this
section and Section 394.9026.
(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 8. Section 394.903, Local Government Code, is
amended to read as follows:
Sec. 394.903. LOCATION OF RESIDENTIAL DEVELOPMENTS
[DEVELOPMENT]; TRANSFER OF [RESIDENTIAL DEVELOPMENT] SITES. (a) A
residential development subject to [covered by] this chapter must
be located within the boundaries of the local government that
formed the housing finance corporation that owns, finances, or
supports the development.
(b) 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 9. Section 394.905, Local Government Code, is
amended to read as follows:
Sec. 394.905. EXEMPTION FROM TAXES AND FEES [TAXATION].
(a) Subject to compliance with the requirements of this chapter, a
[The] housing finance corporation and[,] all property owned,
financed, or supported by the corporation [it], the income from
that [the] property, all bonds issued by the corporation [it], the
income from those [the] bonds, and the transfer of those [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.
(b) The corporation is exempt from the franchise tax imposed
by Chapter 171, Tax Code, only if the corporation is exempted by
that chapter.
(c) A residential development is exempt from ad valorem
taxes imposed by this state or any political subdivision of this
state only if any applicable requirements of Section 394.9026 are
met and if:
(1) the residential development is located within the
boundaries of the local government that formed the housing finance
corporation;
(2) the board of directors of the housing finance
corporation has adopted a resolution approving the multifamily
residential development;
(3) before approval of the board of directors under
Subdivision (2), the housing finance corporation or a sponsoring
local government of the corporation:
(A) conducts, or obtains from a professional
entity that has experience underwriting affordable residential
developments and does not have a financial interest in the
applicable development or any applicable housing finance
corporation user, an underwriting assessment of the proposed
development that is dated not earlier than the 180th day before the
date of the board resolution;
(B) based on the underwriting assessment, makes a
good faith determination that:
(i) for a development that is acquired by a
housing finance corporation and that is occupied at acquisition or
was occupied at any time within the two-year period preceding the
date of the acquisition, the annual public benefit at the
development will be not less than 60 percent of the amount of
estimated ad valorem taxes that would be imposed on the property in
the same tax year if the applicable property did not receive an
exemption from those taxes under Subsection (a) for each of the
third, fourth, and fifth tax years after the tax year that the
corporation acquires the development; and
(ii) for a newly constructed development
not described by Subparagraph (i), the development would not be
feasible if the property did not receive an exemption from ad
valorem taxes under Subsection (a); and
(C) publishes on its Internet website a copy of
the underwriting assessment required by this subsection; and
(4) the housing finance corporation submits to the
Texas Department of Housing and Community Affairs and to the chief
appraiser for each appraisal district in which the exemption is
sought a one-time project information form on a form promulgated by
the comptroller.
(d) For purposes of Subsection (c)(3)(B)(i), not less than
50 percent of the annual public benefit required under that
subparagraph must be attributable to rent reduction.
(e) Notwithstanding Subsections (a)-(c), and subject to
Section 394.9027, a multifamily residential development owned by a
housing finance corporation or housing finance corporation user is
not entitled to an ad valorem tax exemption in any given tax year in
which:
(1) the corporation or user is not in compliance with
Section 394.9026 and:
(A) the notice requirements in Section
394.9027(d) have been fulfilled; and
(B) the noncompliance is not resolved to the
satisfaction of the Texas Department of Housing and Community
Affairs within the period provided by Section 394.9027(d)(2); or
(2) the corporation or user has not timely submitted
the audit report required by Section 394.9027.
(f) Subsection (a) does not apply to ad valorem taxes
imposed on a multifamily residential development by:
(1) a conservation or reclamation district created
under Section 52, Article III, or Section 59, Article XVI, Texas
Constitution, that provides water, sewer, or drainage service to
the development, unless the applicable corporation has entered into
a written agreement with the district to make a payment to the
district in lieu of taxation, in the amount specified in the
agreement; or
(2) an emergency services district created under
Chapter 775, Health and Safety Code, unless the applicable
corporation has entered into a written agreement with the district
to make a payment to the district in lieu of taxation, in the amount
specified in the agreement.
(g) Subsections (c)(3), (c)(4), (d), and (e) do not apply to
a multifamily residential development that receives financial
assistance administered under Subchapter DD, Chapter 2306,
Government Code.
(h) In this section:
(1) "Housing finance corporation user" has the meaning
assigned by Section 394.9026.
(2) "Public benefit" means the overall measurable
economic benefit delivered by a multifamily residential
development, including rent reduction, any monetary payments made
in lieu of taxes by the housing finance corporation or housing
finance corporation user, and any monetary payments received by the
corporation.
(3) "Rent reduction" means the projected difference
between the rent charged for an income-restricted unit and the
maximum market rate rent that could be charged for that same unit
without the income restrictions.
SECTION 10. Section 394.005, Local Government Code, is
repealed.
SECTION 11. (a) Section 394.037(a-1), Local Government
Code, as added by this Act, applies 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.
(b) Section 394.9026, Local Government Code, as added by
this Act, and Section 394.905, Local Government Code, as amended by
this Act, apply only to a tax for a tax year that begins on or after
the effective date of this Act.
(c) Subject to Subsections (d) and (e) of this section,
Sections 394.9026 and 394.9027, Local Government Code, as added by
this Act, apply to all multifamily residential developments that do
not receive financial assistance administered under Subchapter DD,
Chapter 2306, Government Code, and are claiming an ad valorem tax
exemption under Section 394.905, Local Government Code, as amended
by this Act, regardless of when the developments were approved or
acquired.
(d) 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.
(e) Notwithstanding Section 394.9027(b) or (g), 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(g), Local
Government Code, as added by this Act; or
(2) June 1, 2026.
(f) Subject to Subsections (g) and (h) of this section,
Section 394.905, Local Government Code, as amended by this Act,
applies to all multifamily residential developments owned,
financed, or supported by a housing finance corporation, regardless
of when the developments were approved or acquired.
(g) Section 394.905(c), Local Government Code, as added by
this Act, applies only to a multifamily residential development
that does not receive financial assistance administered under
Subchapter DD, Chapter 2306, Government Code, and that is acquired
by a housing finance corporation on or after the effective date of
this Act.
(h) A multifamily residential development that is owned,
financed, or supported by a housing finance corporation on
September 1, 2025, does not receive financial assistance
administered under Subchapter DD, Chapter 2306, Government Code,
and is located outside an area in which the corporation is
authorized to engage in residential development under Section
394.903, Local Government Code, as amended by this Act, is not
eligible for an ad valorem tax exemption under Section 394.905,
Local Government Code, as amended by this Act, after January 1,
2027.
(i) 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 12. 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.
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