HB 3534

relating to multifamily residential developments financed, owned,
or operated by public facility corporations.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1.  Section 303.0421(b), Local Government Code, is
(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;
(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
(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
(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 multifamily residential
development that is acquired by a corporation and not otherwise
subject to a land use restriction agreement under Section 2306.185,
(A)  not less than 15 percent of the total gross
cost of the existing development, as shown in the settlement
statement, is expended on rehabilitating, renovating,
reconstructing, or repairing the development, with initial
expenditures and construction activities:
(i)  beginning not later than the first
anniversary of the date of the acquisition; and
(ii)  finishing not later than the third
anniversary of the date of the acquisition; or
(B)  at least 25 percent of the units are reserved
for occupancy as lower income housing units, 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
(6)  not less than 30 days before final approval of the
(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
(i)  for an occupied multifamily residential
development acquired by a 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
(ii)  for a newly constructed multifamily
residential development, the development would not be feasible
without the participation of the corporation; and
(B)  the corporation publishes on its Internet
website a copy of the underwriting assessment described by
SECTION 2.  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
(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)  A public facility user of any [a] multifamily
residential development claiming an exemption under Section
303.042(c) [and to which Section 303.0421 applies] 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 public facility
user and conducted by an independent auditor or compliance expert
with an established history of providing similar audits on housing
(1)  determine whether the public facility user and
development is in compliance with Sections 303.0421 and 303.0425,
(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
(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
(2)  be issued to a public facility user that has an
interest in a development that is the subject of an audit, the
comptroller, the applicable corporation, the governing body of the
corporation's sponsor, and, if the corporation's sponsor is a
housing authority, the elected officials who appointed the housing
authority's governing board; and
(3)  describe in detail the nature of any failure to
comply with the requirements in Sections 303.0421 and 303.0425, if
(d)  If an audit report submitted under Subsection (b)
indicates noncompliance with Sections 303.0421(b)(2),
(1)  a public facility user[:] [(1)]must be given[:
(A)] written notice from the department or appropriate appraisal
(A) [(i)]is provided not later than the 60th
[45th] day after the date a report has been submitted under
(B) [(ii)]specifies the reasons for
(C) [(iii)]for noncompliance with Section
(i)  contains at least one option for a
corrective action to resolve the noncompliance; and
(ii) [(iv)]  informs the public facility
user that failure to resolve the noncompliance will result in the
loss of an exemption under Section 303.042(c); and
(2)  If the audit report indicates noncompliance for
noncompliance with Section 303.0425, a public facility user must
(A)[(B)] 60 days after the date notice is received
under [this] subdivision (1), to resolve the matter that is the
(B)[(C)] if a matter that is the subject of a
notice provided under [this]subdivision (1) is not resolved to the
satisfaction of the department and the appropriate appraisal
district during the period provided by Paragraph (A) [(B)], a
second notice that informs the public facility user of the loss of
the exemption under Section 303.042(c) due to noncompliance with
Section [Sections 303.0421 and] 303.0425.[; and (2) is considered
to be incompliance with Sections 303.0421 and 303.0425 if notice
under Subdivision (1)(A) is not provided as specified by
Subparagraph (i) of that paragraph.]
(e)  An exemption under Section 303.042(c) does not apply to
a multifamily residential development owned by a public facility
corporation for a tax year in which:
(1)  the department determines that the public facility
user for the development is not in compliance with the audit report
requirements of Subsection (b); or
(2)  based on the audit conducted under Subsection (b),
the department complies with the applicable notice requirements in
(i)  the department determines that public
facility user or development is not in compliance with the
requirements of Section 303.0425 and the matter is not resolved to
the satisfaction of the department within 60 days after the date
notice is received under Subsection (d); or
(ii)  the department determines that the
development is not in compliance with the requirements of Sections
303.0421(b)(2) or 303.0421(b)(5). [a multifamily residential
development that is owned by a public facility corporation created
under this chapter is determined by the department based on an audit
conducted under Subsection (b) to not be in compliance with the
requirements of Section 303.0421 or 303.0425.]
(e-1)  Notwithstanding Subsection (e), a public facility
user and development is considered to be in compliance with:
(1)  Section 303.0425 to the extent the applicable
notice required under Subsections (d)(1) and (d)(2) is not
(2)  Sections 303.0421 (b)(2) and (b)(5) to the extent
the applicable notice required under Subsection (d)(1) is not
(f)  Notwithstanding Subsection (g), the [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
(2)  the date a new multifamily residential development
first becomes occupied by one or more tenants.
(g)  An audit report required by this section is [Subsequent
audit reports following the issuance of the initial audit report
under Subsection (f) are] due not later than June 1 of each year.
SECTION 3.  Subchapter B, Chapter 303, Local Government
Code, is amended by adding Section 303.0427 to read as follows:
Sec. 303.0427.  ADDITIONAL REQUIREMENT FOR BENEFICIAL TAX
TREATMENT APPLICABLE TO CERTAIN MULTIFAMILY RESIDENTIAL
DEVELOPMENTS.  (a)  In this section, "public facility user" has the
meaning assigned by Section 303.0425.
(b)  A multifamily residential development owned by a public
facility corporation to which Section 303.0426 applies is
ineligible for an exemption under Section 303.042(c) unless the
corporation, the corporation's sponsor, or public facility user for
the development 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.
SECTION 4.  (a)  Section 303.0421(b), as amended by this Act,
applies to all multifamily residential developments, regardless of
the date they were acquired or approved by a public facility
corporation or sponsor of the public facility corporation.
(b)  Notwithstanding Section 10(d)(1), Chapter 1169 (H.B.
2071), Acts of the 88th Legislature, Regular Session, 2023, Section
303.0426, Local Government Code, as amended by this Act, applies to
all multifamily residential developments claiming an exemption
under Section 303.042(c), Local Government Code, regardless of when
the developments were approved or acquired and regardless of
whether Sections 303.0421 and 303.0425, Local Government Code,
(b)  Section 303.0427, Local Government Code, as added by
this Act, applies to all multifamily residential developments
claiming an exemption under Section 303.042(c), Local Government
Code, regardless of when the developments were approved or acquired
and regardless of whether Sections 303.0421 and 303.0425, Local
Government Code, apply to those developments.
SECTION 6.  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.