Legislative Blog

J.B. Williams, J.D.

2 bills that modify the Local Government Code

A Blog about 88th Legislature Laws

A Bit of Background

The following backgrounds help summarize the author's views on both the general topic: Texas and more specifically 88th Legislature Laws as it relates to that topic.

Brief Summary of Texas

Texas is truly a Republic. There are a multitude of items that to modify the state constitution must be modified. So there are times when Constitutional amendments are on the voting ballots. While I sometimes abhor the wording, the concept that all of those legally able to vote in Texas must vote on the change is a good one. And bills in Texas are generally short, making it easier for everyone to understand.

Summary of 88th Legislature Laws

The blogs here will discuss the laws passed by Congress and signed into law, as well as those, passed by Congress and approved by the voters to become law. There are a multitude of laws and each time I post blogs I will notate here the current effective date if it is different from prior blogs. I am currently posting bills that took effect immediately - those bills total 336. I am currently posting regarding larger bills, so each blog covers a single bill.

Blog Summary

HB 1526 - Setting fees and including parklands in development projects for municipalities with a population larger than 800,000

HB 2071 - Partial or full tax exemptions for affordable housing entities.

2 bills that modify the Local Government Code

Published: 2024-05-16

HB 1526

Parkland dedication for multifamily, hotel, and motel property development by certain municipalities, authorizing a fee

This is for municipalities with a population exceeding 800,000.

First a few terms defined.

• Affordable dwelling unit is a residential unit offered at below market rate for rent or sale under a municipal, county, state or federal program
• Multifamily unit is a residential unit that is not a detached single-family or two-family dwelling.
• Parkland is an area designated as a park for recreational facilities.
• Parkland dedication fee is a fee imposed for acquisition, development, repair, and maintenance of parkland.
• Plan is a subdivision development plan proposing development of multifamily, hotel or motel units.

Municipalities have the exclusive right, within their boundaries, to require dedication of parkland, impose parkland dedication fee, or both. The municipality may require a landowner to dedication a portion of the land for parkland use. The fee may be set according to other sections of the local code or they may have a larger size dedication with a reduced fee. The municipality may not require more than 10% to be dedicated as parkland.

The landowner can request in writing a timely notice of the parkland dedication fee. The municipality can request the necessary information to set the fee and ensure it is publicly and readily available. Once the information is provided, the municipality has 30 days to respond. A failure to respond means the municipality may not require a parkland dedication fee to approve a plan.

Parkland dedication fees may not be imposed on land for commercial use. This does not include multifamily, hotel or motel use. If only a portion of the plan includes multifamily, hotel or motel use; then the fee is pro rata based upon the portion of land used for these.

Each municipality shall designate areas as suburban, urban, or central business districts. Once every 10 years, the appraisal district shall calculate the average land value for each area of designation. In the remaining 9 years, the municipality shall take the average land value provided by the appraisal district and multiply that by 1 plus the aveage consumer price index for the previous year for each month. The dwelling unit factor may not be more than:

1. .005 for multifamily units; and
2. .004 for rooms in a hotel or motel ordinarily used for sleeping

The fee shall be determined by the following:

• adding the number of multifamily units and the number of hotel/motel rooms ordinarily used for sleeping (this must exclude the number of affordable dwelling units in the plan);
• multiply the above by the average land value; and
• dividing by the applicable density factor
  • A density factor for an suburban area may not be less than 1;
  • A density factor for an urban area may not be less than 4;
  • A density factor for a central business district may not be less than 40

If a municipality sets the fee greater than 2% of the municipality's median family income, then they must follow the fee structure set out in the Local Government Code Section 212.210 (the fee structure set out above).

The first level of appeal for a landowner is the municipal planning commission. From their they may appeal to the governing body for the municipality. The decision to uphold, reverse, or modify the prior decision must be made within 60 days of the appeal. If no decision is made, then the decision is considered resolved in favor of the landowner.

These type of fees are the reason property is more expensive in larger municipalities. That costs gets past through to the end consumer. I'm not saying that isn't fair but it is what it is. Land in rural areas does not have the requirement of parkland, but then there is less multi-family dwellings.

HB 2071

Certain public facilities, including public facilities used to provide affordable housing

My issues with those receiving partial or full tax exemptions while receiving Federal financial assistance is that the federal government is forever modifying their terms. And they set values based upon states where the cost of living is substantially higher. That could potentially mean more entities receiving reduced or complete property tax exemptions. This means the remaining property tax payers pick up the balance of these in higher taxes. While I understand the need for creating systems where those who need assistance can get it, and providing for entities that will provide housing at lower rates; inevitably it means the remaining tax payers will pick-up the bill.

I do know that there are several churches in my area that have built apartment complexes to help those less fortunate. They are meant as transitional living, and not meant to be where someone resides for a multitude of years. I also know they did not request a tax exemption when building the properties. I do not know if they can now take advantage of the new rules to get the tax exemption. But they obviously felt they could provide this housing, pay the taxes and still help those in need. I also know of individuals that own smaller homes that rent at reduced rates for those that qualify for rental vouchers. They collect some funds from the county and the remaining from the tenant. They all pay the property taxes on the properties that they own and rent. It seems that they are doing this without a tax write off, so it should be able to continue to be done that way.

And make no mistake this can reduce the taxes paid for schools as well. Which means less money for the schools until such time as the money can be shifted to the remaining tax payers. I would guess that within 1 -2 years at most, the income will be replaced by the remaining taxpayers.

The continuation of adding more and more entities to the partial or full tax exemption has gotten completely out of control. I don't see wanting pat my representatives on the back for wanting to help those less fortunate with everyone's tax money. I would suggest getting rid of the property tax system in it's entirety, and shifting to a straight sales tax. I understand it would remain at the rate we currently have, but also be applied to services. That means those spending more pay more, and those spending less pay less. And yes everyone pays. But there remains tax-exempt items just like there are now. It's a much better system.

A board member or member of a sponsor's board is subject to the same restrictions as local public officials for affordable housing under Chapter 171.

A corporate owned multifamily residential development, except those that:

1. have at least 20% reserved for public housing units;
2. participate in Rental Assistance Demonstration program administered by the US Department of Housing and Urban Development;
3. receives financial assistance from the Government under specific terms or receives it through a tax-exempt bond; or
4. received financial assistance under the low-income housing credit

They are eligible for a partial tax exemption for 30 years after acquisition for an occupied multifamily residence and for 60 years after approval of development of a multifamily residence. This assumes that meet, and continue to meet, all of the requirements for receiving the exemption.

For a new development they must meet the following requirements:

1. requirements previously outline in Section 303.042 of the Local Government Code;
2. at least 10% are multifamily residential reserved for lower income housing units;
3. 40% (previously 50%) are multifamily residential reserved for moderate income housing units;
4. they must deliver to the housing authority, at least 30 days prior to a request for approval will be submitted and any public hearings are held

For an acquisition of a occupied multifamily residential development, they must meet the following requirements:

1. not less than 15% of total gross cost is expended on rehabilitation, renovating, reconstruction, or repairing the development within 3 years of purchase;
2. at least 25% of the units are reserved for lower income housing units;
3. not less than 30 days before final approval the corporation conducts an underwriting assessment to make a good faith determination that:
   • the total amount of rent reduction on income-restricted units will not be less than 60% of the estimated amount of the annual ad valorem taxes that would be imposed without exemption for the 2nd, 3rd, and 4th years;
   • the development would not feasible without the corporation;
4. the corporation publishes on its Internet website a copy of the underwriting assessment;

This does not cover units for which payment is made under Section 8 Housing Choice Voucher Program.

Lower income housing unit for a family earning not more than 60% of the area median income. Moderate income housing until for a family earning not more than 80% of the area median income. The monthly rent charged per until may not exceed:

1. lower income housing unit: 30% of 60% of the area median income, adjusted for family size;
2. moderate income housing unit: 30% of 8% of the area median income, adjusted for family size;

They may not require a family using a housing voucher to earn more than 250% of their share of the total monthly rent. They may require the family to pay the difference between the monthly applicable rent and the amount of the voucher if the voucher is less than the rent.

Each lease must provide that the landlord cannot retaliate against a tenant because they established or attempt to establish or participated in a tenant organization. The landlord may only choose to not renew if the tenant is in material noncompliance with the lease (this includes not paying rent), committed one or more substantial lease violations, failed to provide requirement information (income, composition, or eligibility of their household), or committed repeat minor violations that:

• disrupt the livability of the property;
• adversely affect the health and safety of any person to enjoy the quiet enjoyment of the premises;
• interfere with management; or
• have an adverse financial effect on the development (this includes failure to pay rent in a timely manner)

The landlord must notify the tenant 30 days prior to renewal if they choose not to renew.

There are guidelines for the annual notice, by June 1, regarding compliance to the taxing authority. As well as guidelines for notice of non-compliance and time for correcting same.

A board is to conduct a study to determine the long-term effects of this on state's funding and revenue. This includes affects on public education, ad valorem tax exemptions and sales and use tax exemptions for multifamily housing developments. No later than 12/10/24 the board shall submit their report on the results of the study. This section expires 1/1/25. It must include the following:

1. funding or revenue that the state has lost as a result of exemptions;
2. potential increase in funding or revenue that would result from the repeal of exemptions

To receive a complete tax exemption, it needs to be a multifamily residential development owned by a housing development corporation or similar entity created by a housing authority, other than a public facility corporation. And they do not have at least 20 percent of their units reserved for public housing, then they must:

1. hold a public hearing to approve the development;
2. have at least 50% of the units for those earning less than 80% of the area median income, adjusted for family size

For a public facility corporation to receive the complete tax exemption, they must:

1. at least 50% of the units reserved for those earning not more than 80% of the area median income, adjusted for family size; and
2. have at least 20% reserved for public housing units; or
3. participate in the Rental Assistance Demonstration program administered by HUD; or
4. receive financial assistance from the Government Code, Chapter 1372 or tax-exempt bonds; or
5. received finanical assistance under the low-income housing credit

 

J.B. Williams, J.D.

4,312 federal laws were passed from 1995 through December 2016.
Along with 88,819 federal rules and regulations.