HBA-CCH H.B. 2441 77(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 2441 By: Ehrhardt Urban Affairs 3/26/2001 Introduced BACKGROUND AND PURPOSE A federal increase in the state allotment for low-income housing tax credits (LIHTC) has provided the state of Texas with approximately $620 million dollars for the development of affordable multi-family housing in the next biennium. During the last four years the Texas Department of Housing and Community Affairs (TDHCA) has been criticized for its management of the LIHTC program. For example, developers receive multi-million dollar awards to develop housing in high income areas in Texas that fail to produce affordable housing. Consequently, less profitable rural and low income counties have been under served by the LIHTC program. Excessive profits have encouraged corrupt practices and recently resulted in the criminal conviction of one of TDHCA's board members. House Bill 2441 requires TDHCA to administer the LIHTC program in a way that produces the highest quality housing for the lowest income tenants, and restructures the provisions for the administration of the LIHTC program. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Texas Department of Housing and Community Affairs (TDHCA) in SECTION 1 (Section 2306.674, Government Code) and the board of TDHCA in SECTION 1 (Section 2306.679, Government Code) of this bill. ANALYSIS House Bill 2441 amends the Government Code to clarify the purpose of the low-income housing tax credit (LIHTC) program and to set forth provisions regarding the administration of the program. The bill requires the Texas Department of Housing and Community Affairs (TDHCA) to administer LIHTC to produce the highest quality housing that serves the lowest income tenants for the longest period of time, to maximize the number of affordable rental housing units in the state's housing stock, to encourage the development, preservation, and rehabilitation of existing rental housing, to prevent losses of at-risk apartments, to maximize the term of affordability of the housing created, and to provide an equitable distribution of tax credits across Texas (Sec. 2306.672). The bill sets forth provisions regarding the eligibility for a housing tax credit allocation, the pre-application process, application fees, and the appeal of a housing tax credit decision (Secs. 2306.673-2306.676). The bill requires TDHCA to establish, by rule, a pre-application process and to provide an incentive through the award of points in the scoring process as an incentive for applicants to participate. The bill sets forth required elements of the application including a description of the applicant's financing plan, a justification of syndication costs, terms of the syndication agreement, a description of subsidies, evidence of zoning, a tenant relocation plan, and a nonprofit set-aside application. The bill sets forth provisions relating to the prohibition of application changes after the filing deadline, the disclosure of the identity of persons or entities that will provide development or operational services, the processing of applications, application scoring, the modification of an application subsequent to an award, deadlines for the allocation housing tax credits by TDHCA, submission of application scores to the TDHCA board, duties of the TDHCA board in administering housing tax credits, set-asides for at-risk developments, and prohibitions against attempts to influence the board (Sec.2306.674). The bill requires TDHCA to develop a sliding scale fee schedule for applications that encourages increased participation by nonprofit community housing development organizations (Sec. 2306.676). The bill requires TDHCA to provide public information related to the LIHTC program, including notices of public hearings, meetings, opening and closing dates for applications, completed copies of applications, and the results of application scoring, underwriting, and awards. The bill requires TDHCA to hold at least three public hearings in different regions to receive public comments on applications, and to provide written notification that an application has been filed to specified officials where a proposed development is to be located (Sec. 2306.677). The bill requires TDHCA to assign staff independent of Housing Tax Credit division staff or to hire independent contractors to oversee and monitor the housing tax credit developments during construction. The bill requires the monitors to supply the board with an analysis and recommendations concerning any proposed substantive modifications to an application prior to board consideration (Sec. 2306.678). The bill requires the TDHCA board to adopt a department policy by rule to bar from submitting an application, an applicant who has in the past failed to adhere to the conditions of an LIHTC award. The bill sets forth provisions prohibiting discrimination against persons receiving federal housing assistance and regarding the board's coordination with the Rural Development Agency for the portion of the LIHTC program set aside for rural areas (Sec. 2306.679). EFFECTIVE DATE On passage, or if the Act does not receive the necessary vote, the Act takes effect September 1, 2001.