HB3532 - Relating to multifamily residential developments owned by public facility corporations.

      By: Gates H.B. No. 3532       A BILL TO BE ENTITLED   AN ACT   relating to multifamily residential developments owned by public   facility corporations.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Section 303.003, Local Government Code, is   amended by adding Subdivisions (7-a) and (7-b) and amending   Subdivision (11) to read as follows:                 (7-a)     "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.   "Rent" does not include fees and charges for   services or amenities which are optional for a tenant, such as pet   fees and fees for storage or covered parking.                 (7-b)     "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.                (11)  "Sponsor" means a municipality, county, [ school   district, ] housing authority or special district that causes a   corporation to be created to act in accordance with this chapter.          SECTION 2.  Section 303.0421(b), Local Government Code, is   amended to read as follows:          (b)  Notwithstanding Section 303.042(c) and subject to   Subsections (c) and (d) of this section, an exemption under Section   303.042(c) for a multifamily residential development to which   Subsection (a) applies is available only if:                (1)  the requirements under Sections [ Section ]   303.0425 , 303.0426 and 303.0427 are met;                (2)   for a development not covered under Subdivision   (5), at least:                      (A)  10 percent of the units in the multifamily   residential development are reserved for occupancy as lower income   housing units, as defined under Section 303.0425; and                      (B)  40 percent of the units in the multifamily   residential development are reserved for occupancy as moderate   income housing units, as defined under Section 303.0425;                (3)  the corporation 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 corporation 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;                (4)  if a majority of the members of the board are not   elected officials, 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;                (5)  for [ an occupied ] a multifamily residential   development [ that is ] acquired by a corporation [ and not otherwise   subject to a land use restriction agreement under Section 2306.185,   Government Code ] 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)     at least 10 percent of the units in the   development are reserved for occupancy as lower income housing   units, as defined under Section 303.0425; at least 40 percent of the   units in the development are reserved for occupancy as moderate   income housing units, as defined under Section 303.0425; and 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:                             (i)   25 percent of the units in the   development are reserved for occupancy as lower income housing   units, as defined under Section 303.0425[ , 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 ; and                             (ii)     at least 25 percent of the units in the   development are reserved for occupancy as moderate income housing   units, as defined under Section 303.0425;                (6)  [ not less than 30 days before final approval of the   development: (A) ] the corporation or corporation'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 corporation to make a   good faith determination that: ] is dated within six months of the   corporation's approval of the development;                 (7)     not less than 30 days before final approval of the   development, the corporation or corporation's sponsor makes a good   faith determination based on the underwriting assessment that                            [ (i)     for an occupied multifamily   residential development acquired by the corporation, ] 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   303.042(c) for the second, third, and fourth years after the date of   acquisition by the corporation; and ] in the same tax year if the   property did not have the income restrictions and did not have an   exemption from those taxes under Section 303.042(c):                       (A)     for occupied developments acquired by the   corporation, for each of the third, fourth, and fifth tax years   after the date of acquisition; and                       (B)     for other developments, for each of the   second, third, and fourth tax years after the development first   becomes occupied by one or more tenants while owned by the   corporation; and                            [ (ii) for a newly constructed multifamily   residential development, the development would not be feasible   without the participation of the corporation; and ]                 (8)  [ (B) ]  the corporation publishes on its Internet   website a copy of the underwriting assessment described by   [ Paragraph (A) ] Subdivision (6).          SECTION 3.  Sections 303.0421(h) and 303.0421(i), Local   Government Code, are repealed.          SECTION 4.  Chapter 303, Local Government Code, is amended   by adding Section 303.0422 to read as follows:                 Sec.   303.0422.     RENT REDUCTION REQUIREMENTS FOR   BENEFICIAL TAX TREATMENT RELATING TO CERTAIN MULTIFAMILY   RESIDENTIAL DEVELOPMENTS.                 (a)     This section does not apply to a multifamily   development that:                       (1)     has at least 20 percent of its residential   units reserved for public housing units;                       (2)     participates in the Rental Housing   Assistance Demonstration program administered by the United States   Department of Housing and Urban Development;                       (3)     receives financial assistance administered   under Subchapter 2306, Government Code.                 (b)     An exemption under Section 303.042(c) does not   apply in a tax year to a multifamily residential development if the   difference in the rent charged for the income-restricted   residential units in the development in the immediately prior tax   year and the estimated maximum market rents that could be charged   for those units without the rent or income restrictions in such tax   year, as reported in the audit under Section 303.0426, is less than   60 percent of the amount of the ad valorem taxes that would have   been imposed on the property in the same prior tax year if the   property did not have the income restrictions and did not have an   exemption from those taxes under Section 303.042(c):                       (1)     beginning with the first tax year after the   tax year in which the development first becomes occupied by one or   more residential tenants;                       (2)     notwithstanding Subdivision (1), for an   existing multifamily residential development that is acquired by   the corporation, beginning with the third tax year after the tax   year that the corporation acquires the development; and                       (3)     notwithstanding Subdivisions (1) and (2),   for a multifamily residential development owned by the corporation   as of September 1, 2025, beginning with the 2028 tax year.          SECTION 5.  Section 303.0426, Local Government Code, is   amended by adding Subsection (a-1) and (e-1) and amending Sections   303.0426(b), (c), (d), (e), (f), and (g) to read as follows:           (a-1)     This section does not apply to a multifamily   residential development that:                 (1)     has at least 20 percent of its residential units   reserved for public housing units;                 (2)     participates in the Rental Housing Assistance   Demonstration program administered by the United States Department   of Housing and Urban Development;                 (3)     receives financial assistance administered under   Subchapter 2306, Government Code.       [Text truncated for display. 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