Relating to housing finance corporations; authorizing a fee.

89(R) HB 21 - Enrolled version - Bill Text

H.B. No. 21

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 for use by or is

intended to be occupied by
households
[
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
as defined
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), (d), and (e) to read as follows:

(c)

Subject to Subsection (d), the area in which a housing

finance corporation may own real property for residential

development or engage in residential development is limited to:

(1)

for a housing finance corporation sponsored by a

municipality under Section 394.011, the boundaries of the

municipality that sponsored the corporation;

(2)

for a housing finance corporation sponsored by a

county under Section 394.011, the boundaries 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 boundaries of each municipal sponsor of

the corporation; and

(B)

the boundaries of each county sponsor of the

corporation.

(d)

A housing finance corporation may own real property for

residential development or engage in residential development

outside an area described by Subsection (c) only if a resolution or

order, as applicable, approving that ownership or development in

the outside area is adopted by the governing bodies of:

(1)

each municipality that contains any part of the

outside area in which the corporation proposes to own real property

for residential development or engage in residential development;

(2)

for a residential development or home located in

the unincorporated area of a county, each county that contains any

part of the outside area in which the corporation proposes to own

real property for residential development or engage in residential

development; and

(3)

any housing finance corporation sponsored by a

municipality or county described by Subdivision (1) or (2), as

applicable.

(e)

This section does not prohibit or limit a housing

finance corporation from owning real property outside an area

described by Subsection (c) or (d) if the property is not owned for

purposes of residential development.

SECTION 5. Section 394.032(e), Local Government Code, is

amended to read as follows:

(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)

A housing finance corporation may issue bonds under

this chapter for a purpose described by Subsection (a) only to

finance or support a residential development or home that is

located or will be constructed:

(1)

within the boundaries of a local government in

which a housing finance corporation is permitted to own real

property for residential development or engage in residential

development under Section 394.031(c); or

(2)

outside the boundaries of a local government

described by Subdivision (1) if a resolution or order, as

applicable, approving the issuance of bonds is adopted by the

governing body of:

(A)

each municipality that contains any part of

the residential development or home; and

(B)

for a residential development or home located

in the unincorporated area of a county, each county that contains

any part of the residential development or home.

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.
Subject to Sections 394.031(c), (d), and

(e), a
[
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, Local Government Code, is

amended to read as follows:

Sec. 394.9025. MULTIFAMILY RESIDENTIAL DEVELOPMENT. (a)

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 by the

housing finance corporation if
:

(1)
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
; or

(2)

the units in the multifamily residential

development are reserved in the manner provided by Section

394.9026(c)(1)
.

(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 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 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 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) a housing finance corporation; or

(B)

for a multifamily residential development

that is not owned directly by a housing finance corporation, a

public-private partnership entity or a developer or other person or

entity that has an ownership interest or a leasehold or other

possessory interest in multifamily residential development

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)

"Maximum market rent" means, with respect to a

particular income-restricted unit, the average annual rent charged

for all non-income-restricted units in the development having the

same or substantially similar floor plan as the income-restricted

unit.

(5)

"Middle income housing unit" means a residential

unit reserved for occupancy by an individual or family earning not

more than 100 percent of the area median income, adjusted for family

size, as defined by the United States Department of Housing and

Urban Development.

(6)

"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.

(7)

"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.

(8)

"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.

(9)

"Rent reduction" means the projected difference

between the rent charged for an income-restricted unit and the

maximum market rent that could be charged for that same unit without

the income restrictions.

(10)

"Very low income housing unit" means a

residential unit reserved for occupancy by an individual or family

earning not more than 50 percent of the area median income, adjusted

for family size, as defined by the United States Department of

Housing and Urban Development.

(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), an ad valorem tax exemption

under Section 394.905 for a multifamily residential development

owned by a housing finance corporation is available only if the

other requirements of this chapter are satisfied and if:

(1) at least:

(A)

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; or

(B)

10 percent of the units in the development

are reserved for occupancy as very low income housing units and at

least 40 percent of the units in the development are reserved for

occupancy as middle income housing units;

(2)

the rent reduction at the development in the

preceding tax year was:

(A)

not less than 50 percent of the amount of the

estimated ad valorem taxes that would have been imposed on the

applicable property in the same preceding tax year if the property

did not receive an exemption from those taxes under Section

394.905, beginning with:

(i)

for a multifamily residential

development that is acquired by the corporation, the first tax year

after the tax year that the corporation acquires the development;

and

(ii)

for a newly constructed multifamily

residential development not described by Subparagraph (i), the

first tax year after the tax year in which construction first begins

on the development; or

(B)

less than 50 percent of the amount of the

estimated ad valorem taxes described by Paragraph (A) beginning

with the tax year specified by that paragraph, but the housing

finance corporation user paid to each taxing unit authorized to

impose ad valorem taxes on the applicable property for the

applicable tax year an amount equal to that taxing unit's pro rata

share of the rent reduction shortfall that exists based on the

difference between the minimum rent reduction amount described by

Paragraph (A) and the amount of actual rent reduction at the

development in the preceding tax year;

(3)

the income-restricted residential units in the

development have the same unit finishes and equipment and access to

community amenities and programs as residential units that are not

income-restricted;

(4)

the percentage of very low, lower, moderate, and

middle 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 very low income housing unit, 30

percent of 50 percent of the area median income, adjusted for family

size, as defined by the United States Department of Housing and

Urban Development;

(B)

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;

(C)

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; or

(D)

for a middle income housing unit, 30 percent

of 100 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 user and the

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 user 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)

the housing finance corporation user for 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 an income-restricted

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 very low, lower, moderate, or middle income housing unit, the

housing finance corporation user 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 very low, lower,

moderate, or middle income housing unit.

(e)

A housing finance corporation user 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 user 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 tax years following the date of the acquisition,

regardless of whether the development complies with the conditions

prescribed by Subsections (c)(1), (3), (4), and (5), if the

development comes into compliance with Subsections (c)(1), (3),

(4), and (5) not later than the end of the second tax year after 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 must

annually submit to the department an audit report for a compliance

audit, prepared at the expense of the housing finance corporation

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 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 the housing finance corporation that

owns or is associated with the development that is the subject of an

audit, the housing finance corporation user of the development, the

comptroller, and the governing body of the sponsoring local

government or governments of the housing finance corporation; 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, a housing finance

corporation user, the associated housing finance corporation, and

the chief appraiser of the appraisal district in which the

development is located 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. For a finding of noncompliance with

any provision of Section 394.9026(c), a housing finance corporation

user and the associated housing finance corporation must be given:

(1) additional written notice that:

(A)

otherwise complies with the notice

requirements of this section;

(B)

contains at least one option for a corrective

action to resolve the noncompliance; and

(C)

informs the housing finance corporation user

and associated housing finance corporation 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;

(2)

a period of 180 days after the date notice is

received under Subdivision (1) to resolve the matter that is the

subject of the notice; and

(3)

if a matter that is the subject of a notice

provided under this subdivision is not resolved to the satisfaction

of the department during the period provided by Subdivision (2), a

second notice that informs the housing finance corporation of the

loss of the ad valorem tax exemption for the development due to

noncompliance with Section 394.9026.

(e)

The initial audit report required by Subsection (b) is

due not later than June 1 of the tax year following:

(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.

(f)

Subsequent audit reports following the issuance of the

initial audit report under Subsection (e) are due not later than

June 1 of each year.

(g)

The department may extend the deadline for submitting

any audit required under this section for good cause shown, as

determined by the department.

(h)

An independent auditor or compliance expert may not

prepare an audit under Subsection (b) for more than three

consecutive tax 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)

shall adopt rules necessary to implement this

section and Section 394.9026.

(j)

Rules adopted under Subsection (i)(3) must include

administrative processes and a process by which a housing finance

corporation user may appeal a finding of noncompliance made under

this section or a loss of a tax exemption due to a finding of

noncompliance with Section 394.9026 or any other provision of this

chapter.

(k)

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.

(l)

This section does not apply to a multifamily residential

development during any period that the development is the recipient

of a low income housing tax credit allocated under Subchapter DD,

Chapter 2306, Government Code.

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.
Subject to Sections

394.031(c) and (d), a
[
(a) A residential development covered by

this chapter must be located within the local government.

[
(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 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) Subject to compliance with the requirements of this chapter, a

[
The
] housing finance corporation
and
[
,
] all property owned 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)

A multifamily residential development owned by a

housing finance corporation is eligible for an exemption from ad

valorem taxes, and the materials used to improve the applicable

property are eligible for an exemption from sales and use taxes,

only if:

(1)

the property is located in an area in which the

housing finance corporation is authorized to own real property or

engage in residential development under Section 394.031(c) or (d);

(2)

the board of directors of the 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

corporation or the applicable development, developer, or

investors, an underwriting assessment of the proposed development

that is dated not earlier than 180 days before the date of the board

resolution;

(B)

based on the underwriting assessment, makes a

good faith determination that the total amount of annual rent

reduction applicable to the development, as defined by Section

394.9026(a), will be not less than 50 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 this section:

(i)

for a development that is acquired by

the corporation, 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), each of the first, second, and

third tax years after the tax year in which the development first

achieves an occupancy rate of 90 percent; 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 exemption application on a form promulgated by

the comptroller.

(c)

Notwithstanding Subsections (a) and (b), and subject to

Section 394.9027, a multifamily residential development owned by a

housing finance corporation or a housing finance corporation user

is not entitled to an ad valorem tax exemption for any given tax

year in which:

(1)

the corporation or the housing finance corporation

user is not in compliance with any provisions of Section

394.9026(c) 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 department within the period provided by

Section 394.9027(d)(2); or

(2)

the corporation or the housing finance corporation

user has not timely submitted the audit report required by Section

394.9027.

(d)

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.

(e)

Subsections (b)(3), (b)(4), and (c) do not apply to a

multifamily residential development that is:

(1) owned by a housing finance corporation; and

(2)

the recipient of a low income housing tax credit

allocated under Subchapter DD, Chapter 2306, Government Code.

(f)
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) Subject to Subsection (i) of this section,

Sections 394.031(c) and (d), Local Government Code, as added by

this Act, and Section 394.903, Local Government Code, as amended by

this Act, apply only to the ownership of real property that is

acquired by a housing finance corporation on or after the effective

date of this Act. The ownership of real property acquired by a

housing finance corporation before the effective date of this Act,

and the authority of a housing finance corporation to own that

property or to engage in residential development with respect to

that real property in an area outside the areas authorized by

Sections 394.031(c) and (d), Local Government Code, as added by

this Act, are governed by the law in effect on the date the property

was acquired by the housing finance corporation, and the former law

is continued in effect for that purpose.

(b) Section 394.037(a-1), Local Government Code, as added

by this Act, and Section 394.9025, Local Government Code, as

amended 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) 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.

(d) Subject to Subsections (e) and (f) of this section,

Sections 394.9026 and 394.9027, Local Government Code, as added by

this Act, apply to all multifamily residential developments

claiming an exemption under Section 394.905, Local Government Code,

regardless of when the developments were approved or acquired.

(e) A multifamily residential development that was acquired

by a housing finance corporation before the effective date of this

Act is not eligible for an exemption under Section 394.905, Local

Government Code, as amended by this Act, unless the housing finance

corporation that owns the development and any housing finance

corporation user, as defined by Section 394.9026, Local Government

Code, as added by this Act, associated with the development come

into compliance:

(1) not later than January 1, 2026, with Sections

394.9026(c)(6), (7), (8), and (9), Local Government Code, as added

by this Act; and

(2) with Sections 394.9026(c)(1), (2), (3), (4), and

(5), Local Government Code, as added by this Act, not later than the

earlier of:

(A) the end of the 10th tax year following the

effective date of this Act; or

(B) the end of the first tax year following a tax

year in which:

(i) existing mortgage indebtedness of the

development is refinanced;

(ii) title to the development is conveyed;

or

(iii) a sale, conveyance, transfer or

assignment, or series of sales, conveyances, transfers or

assignments, results in a change in a majority of the beneficial

ownership interests of any housing finance corporation user

associated with the development.

(f) 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(e), Local

Government Code, as added by this Act; or

(2) June 1, 2026.

(g) Subject to Subsections (e), (h), and (i) of this

section, Section 394.905, Local Government Code, as amended by this

Act, applies to all multifamily residential developments owned by a

housing finance corporation, regardless of when the developments

were approved or acquired.

(h) Sections 394.905(b)(1), (2), and (3) and (d), Local

Government Code, as added by this Act, apply only to multifamily

residential developments that are acquired by a housing finance

corporation on or after the effective date of this Act.

(i) A residential development that is owned by a housing

finance corporation on September 1, 2025, and is located outside an

area in which the corporation is authorized to own real property or

engage in residential development under Section 394.031(c), Local

Government Code, as added 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, unless the

corporation obtains the appropriate resolutions or orders required

under Section 394.031(d), Local Government Code, as added by this

Act, before that date.

(j) 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.

______________________________

______________________________

President of the Senate

Speaker of the House

I certify that H.B. No. 21 was passed by the House on May 10,

2025, by the following vote: Yeas 115, Nays 13, 3 present, not

voting.

______________________________

Chief Clerk of the House

I certify that H.B. No. 21 was passed by the Senate on May 14,

2025, by the following vote: Yeas 30, Nays 1.

______________________________

Secretary of the Senate

APPROVED: _____________________

Date

_____________________

Governor