title
Presentation, discussion, and possible action on the adoption of the repeal of 10 TAC Chapter 11 concerning the Housing Tax Credit Program Qualified Allocation Plan, adoption of new 10 TAC Chapter 11 concerning the Housing Tax Credit Program Qualified Allocation Plan, and directing their publication for adoption in the Texas Register following the statutory opportunity for gubernatorial acceptance, revision, or rejection.
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RECOMMENDED ACTION
recommendation
WHEREAS, the Texas Department of Housing and Community Affairs (the Department) is authorized by Tex. Gov’t Code Ch. 2306, Subchapter DD, to make Housing Tax Credit allocations for the State of Texas;
WHEREAS, pursuant to Tex. Gov’t Code §2306.053, the Department is authorized to adopt rules governing the administration of the Department and its programs;
WHEREAS, the Department, as required by Internal Revenue Code §42(m)(1) and Tex. Gov’t §2306.67022, developed this proposed Qualified Allocation Plan (QAP) to establish the procedures and requirements relating to an allocation of Housing Tax Credits;
WHEREAS, after approval with modifications by the Department’s Board on September 5, 2024, the rule was made available for public comment in Texas Register and on the Department’s website through October 11, 2024;
WHEREAS, public comment was received from 54 commenters, staff has prepared a reasoned response to those comments summarized in the preambles attached, and where applicable, has proposed responsive revisions for adoption;
WHEREAS, pursuant to Tex. Gov’t Code §2306.6724, the Board shall adopt the QAP and, on or before November 15, submit it to the Governor to approve, reject, or modify and approve not later than December 1; and
WHEREAS, upon action by the Governor, the Department will submit the QAP for its publication in the Texas Register;
NOW, therefore, it is hereby
RESOLVED, that the adoption of the repeal of 10 TAC Chapter 11, and adoption of new 10 TAC Chapter 11 concerning the Housing Tax Credit Qualified Allocation Plan together with the preambles presented to this meeting, are hereby approved and recommended to the Governor; and
FURTHER RESOLVED, that the Executive Director and his designees be and each of them are hereby authorized, empowered, and directed, for and on behalf of the Department, to cause the Qualified Allocation Plan, together with the changes, if any, made at this meeting and the preambles, in the form presented to this meeting, to be delivered to the Governor, not later than November 15, 2024, for his review and approval, and to cause the Qualified Allocation Plan, as approved, approved with changes, or rejected by the Governor, to thereafter be published in the Texas Register for adoption and in connection therewith, make such non-substantive technical corrections as they may deem necessary to effectuate the foregoing.
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BACKGROUND
Comment Period: The Board approved the proposed 10 TAC Chapter 11, the QAP, on September 5, 2024. The draft of the QAP was made available on the Department’s website on September 19, 2024, and was published in the Texas Register edition dated September 20, 2024. Staff hosted an in-person roundtable discussion on May 22, 2024, in Austin to discuss a variety of QAP topics. The round table was not considered hearings for accepting comment, but rather served as a forum at which staff could engage with potential commenters and stakeholders to answer questions and brainstorm ideas, with the intent that each attendee could then make informed comment prior to the comment deadline.
It should be noted that staff of the Texas Register has required Changes to the QAP - these are purely administrative, syntactical, or grammatical preferences of the Secretary of State and are reflected in the document attached.
The document attached has “accepted the changes proposed in the draft QAP and now is presented as only a black-line that reflects changes made to the draft.
Staff received written comments from 54 commenters by the deadline. Staff has reviewed all comments and provided a reasoned response to these comments in the following preamble.
Rule-Making Timeline: Upon Board approval, the QAP will be submitted to the Office of the Governor no later than November 15, 2024, for him to approve, approve with changes, or reject. Upon the Governor’s approval, approval with modifications, or rejection, which occur no later than December 1, 2024, the 2025 QAP will be published in the Texas Register and posted to the Department’s website.
Summary of Changes from Draft: While not inclusive to all changes recommended in response to comment, a brief description of the primary revisions made are described below. A more thorough recounting is provided in the preamble. In May 2024, staff met with stakeholders to discuss the 2025 QAP. Discussions occurred both in-person. Staff and stakeholders discussed items such as Administrative Deficiencies, neighborhood risk factors, financial feasibility and construction costs, Quantity of Low-Income Units, and Tie Breakers.
Summary of Proposed Changes:
While not inclusive of all changes proposed, a description of the more significant recommendations that are considered changes of policy are described below. Citation is included for ease of reference.
10 TAC Chapter 11, Subchapter A
§11.1(a) Authority - Language added indicating This chapter is subject to change based on any changes in applicable rule or law.
§11.1(d)(5) Definitions: Applicable Percentage - Removed (B) regarding Applicable Percentage for making credit recommendations.
§11.1(d)(21) Definitions: Common Area - Clarified Language regarding other similar areas to those that should not be included in the Common Area Calculation
§11.1(d)(125) Definitions: Supportive Housing - Added Common area minimum. Revised financing requirements
§11.1(e) Data - section is modified to reflect dates for the 2025 Application round. Additional language added regarding the process for dealing with Census Tract income quartiles when the number of tracts is not divisible by 4. Changed deadline for some data.
§11.2(a) Program Calendar for Housing Tax Credits - This section is modified to reflect dates for the 2025 Application round. The Request of Administrative Deficiency (RFAD) deadline has been moved up from 5/03 to 4/15.
§11.2(b) Third Part Report Delivery Date - If Applicable added to Scope and Cost Review (SCR)
§11.3(b) Two Mile Same Year Rule (Competitive HTC Only) - Section revised to specify that the priority for the Two Mile Same Year rule will follow the Award Recommendation Methodology stated in §11.6(3). If two applications are considered for review at the same time, the higher scoring of the two will have priority.
§11.5(3)(A) At-Risk Set-Aside - Language introduced to limit Applications that qualify for both the USDA and At-Risk set-aside from competing in both set-asides at once.
§11.6(1) Regional Allocation Formula - Change made to Increase the minimum amount made available initially to each subregion from $600,000 to $750,000
§11.6(3)(C)(iii) Initial Application Selection for Each Subregion - Subsection has been revised to also include Rural subregions. Restriction on percent of credits in a subregion that can go to Rehabilitation developments has been adjusted.
§11.6(3)(C)(iv) Initial Application Selection for Each Subregion - population threshold for Neighborhood Planning or Implementation grant automatic award reduced to allow more subregions to qualify.
§11.6(3)(C)(vi) and (vi) Initial Application Selection for Each Subregion - Subsections added to establish limits for how many Supportive Housing Applications may be awarded in each subregion.
§11.6(3)(D) Rural Collapse - Section revised to specify that the priority for the Two Mile Same Year rule will follow the Award Recommendation Methodology stated in §11.6(3).
§11.6(3)(E) Statewide Collapse - This section is modified to reflect dates for the 2025 Application round. Section revised to specify that the priority for the Two Mile Same Year rule will follow the Award Recommendation Methodology stated in §11.6(3). Remove caveat for Applications not selected or eliminated in the prior step.
§11.6(5) Credit Returns Resulting from Force Majeure Events - Requests will only be presented to the Board within 180 days of the applicable Placed in Service deadline.
§11.7(2)(A)(i) Tie Breaker Factors - Language added to specify that Each feature’s location may be used only once for tie breaker purposes regardless of the number of categories it fits. Parks definition revised to exclude school campus facilities and features that charge admission.
§11.9(b)(2)(A) HUB - When more than one HUB is included, each individual HUB is not required to participate in each category, nor is each HUB required to meet the minimum 5% in a category in which it does not participate.
§11.9(b)(3) Quantity of Low-Income Units - item adjusted to use the average of units from 2022 and 2023. Thresholds to qualify for points reduced to 9% and 18%.
11.9(c)(4) Section 811 Project Rental Assistance (811 PRA) and Residents with Special Housing Needs - Updated language for Residents with Special Housing Needs to include a new scoring item pertaining to the recently allocated 811 Project Rental Assistance Program. Applicants may receive up to (3) points for serving this population through the program.
§11.9(c)(6) - Underserved Area
§11.9(c)(6)(C) Change language to say a Development that was awarded 20 years ago, instead of 30 years. Change point value for item from 4 points to 5 points.
§11.9(c)(6)(D) Change point value for item from 3 points to 4 points.
§11.9(c)(6)(E) Change point value for item from 2 points to 3 points.
§11.9(c)(6)(F) Added (5) point item for a development locating in the highest income quartile census tract in the uniform service region.
§11.9(c)(7) Proximity to Job Areas - Expanded distance threshold for Urban and Rural subregions. Reduced jobs threshold for Rural subregions.
§11.9(c)(7)(C) Access to Jobs - Added language regarding the requirements for a paved path between the development site and the nearest transit stop or station.
§11.9(e)(1) Financial Feasibility - Specify that points for this item will be awarded based on successful completion of Underwriting.
§11.9(e)(2) Cost of Development per Square Foot - Pursuant to the passage of HB 4550, Eligible building costs has increased for all point thresholds.
§11.9(e)(4) Leveraging of Private, State, and Federal Resources - Applications submitted in the USDA or At-Risk Set-Asides that propose 50 or fewer units may add an additional 1% to each point threshold.
§11.9(e)(9) Readiness to Proceed - Specify acknowledgment from lenders needed for the Site Acquisition closing date.
10 TAC Chapter 11, Subchapter B
§11.101(a)(3)(D) Neighborhood Risk Factors - Added language to clarify the type of Rehabilitation development that is exempt from the requirement.
§11.101(a)(3)(E)(iii)Neighborhood Risk Factor; School Mitigation - Removed the requirement for schools with a violation to provide a Campus Improvement letter as part of the mitigation.
§11.101(b)(1)(A)(vii) - General Ineligibility Criteria - Acceptable percentage of efficiency and/or one-Bedrooms increased to 35%
§11.101(b)(4) Mandatory Development Amenities - Language clarified to specify that connections must be made available using current technology for data and phone. Removed mentions of wired and cabling as many systems are now wireless.
§11.101(b)(6)(ii)(VI)(-a-) Green Building Features - loosened minimum requirements to earn points to be at parity with other options in category.
§11.101(b)(7)(C)(vii) Resident Supportive Services - New Eviction Protection item worth 5 points. The program will be operated by a case manager who will work with households that are at risk of eviction for nonpayment of rent.
10 TAC Chapter 11, Subchapter C
§11.201 Procedural Requirements for Application Submission - Added language to specify that the Withdrawal of an Application is permanent.
§11.201(2)(F) Multifamily Management Systems (MMS) - language added to address the Department’s Multifamily Management System currently under development.
§11.204(6)(A) Financing Requirements - Removed the clause “The income and corresponding rent restrictions that impact the Units also restricted by the Department will be reflected in the LURA” Term sheet requirements altered for interim and permanent loans and Equity Financing.
§11.204(6)(E) Financing Narrative - Several requirements removed or altered.
§11.204(7)(A) Operating and Development Cost Documentation - Removed requirement for Tax-Exempt Bond Developments to have a pro forma signed by the lender and syndicator.
§11.204(10) Zoning - Added language related to the use of Specific or Special Use Permits as acceptable zoning classifications.
§11.204(14) Feasibility Report - Added language regarding submission requirements. Updated language regarding requirements for Direct Loan applications and Tax-Exempt Bond Developments where the Department is the bond issuer.
§11.204(15) HOME Match Requirements - Section removed in its entirety.
10 TAC Chapter 11, Subchapter D
§11.302(a)(2) Oversourcing of Funds - Changed language specifying that Department-allocated funds combined with any additional soft funds that are specifically provided for the financing of affordable housing may not exceed the total cost of all non-market units.
§11.302(d)(2)(K) Resident Services - In lieu of Financial Obligation letters from the permanent lender, state or local government documentation must be provided in the Application.
§11.302(d)(4) Debt Coverage Ratio - Remove language regarding DCR requirements on the term sheet. (A) Additional language added in regard to Developments financed with a Direct Loan subordinate to FHA financing.
§11.302(e)(1) Total Housing Development Costs; Acquisition Costs - Specify that the appraised values must be the as-is values of the property at the time of Application.
§11.302(e)(1)(A)(ii) Total Housing Development Costs; Acquisition Costs; Identity of Interest - For an identity of interest transaction where the most recent arms-length transaction occurred within five years of the application submission date, the settlement statement for the most recent third-party acquisition must be included with the site control documents
§11.304(C)(10) Appraisal Contents; Value Estimates - Specify that the appraised values must be the as-is values of the property at the time of Application.
10 TAC Chapter 11, Subchapter E
§11.901(14) Ownership Transfer Fee. - Add requirement for Developments with previously issued bonds and developments with an Assignment, Assumption and Consent Agreement must cover outside council costs.
10 TAC Chapter 11, Subchapter F
§11.1001-1002 State Housing Tax Credits - This section is modified to reflect dates for the 2025 Application round.
§11.1003 State Housing Tax Credit Allocation Process Associated with Competitive HTC Allocations - Removed all references to the Set-Aside for Previously Awarded Deals
§11.1004 Set Aside for Previously Awarded Developments for Competitive HTC Applications - Removed section in its entirety. Priority Allocation established under Tex. Tax Code §171.566 specifies that this allocation is only available in the first year of the State Housing Tax Credit program.
§11.1006 State Housing Tax Credits Underwriting and Loan Policy Associated with Competitive HTC - Developer fee limitation clarified.
§11.1008(f) State Housing Tax Credits for Tax-Exempt Bond Developments - Updated to state that an Allocation Certificate will be issued instead of a Determination Notice. This will have only the State Housing Tax Credit amount recommended by the Department, rather than both the State and Federal Housing Tax Credit.
Attachment 1: Preamble, including required analysis, for proposed repeal of 10 TAC Chapter 11, Qualified Allocation Plan
The Texas Department of Housing and Community Affairs (the Department) proposes the repeal of 10 TAC Chapter 11, Qualified Allocation Plan (QAP). The purpose of the proposed repeal is to eliminate an outdated rule while adopting a new updated rule under separate action.
The Department has analyzed this proposed rulemaking and the analysis is described below for each category of analysis performed.
a. GOVERNMENT GROWTH IMPACT STATEMENT REQUIRED BY TEX GOV’T CODE §2001.0221.
Mr. Bobby Wilkinson, Executive Director, has determined that, for the first five years the proposed repeal would be in effect, the proposed repeal does not create or eliminate a government program, but relates to the repeal, and simultaneous readoption making changes to an existing activity, concerning the allocation of Low Income Housing Tax Credits (LIHTC).
The proposed repeal does not require a change in work that would require the creation of new employee positions, nor is the proposed repeal significant enough to reduce work load to a degree that any existing employee positions are eliminated.
The proposed repeal does not require additional future legislative appropriations.
The proposed repeal does not result in an increase in fees paid to the Department or in a decrease in fees paid to the Department.
The proposed repeal is not creating a new regulation, except that it is being replaced by a new rule simultaneously to provide for revisions.
The proposed action will repeal an existing regulation, but is associated with a simultaneous adoption of the subchapters in 10 TAC Chapter 11, the Qualified Allocation Plan, in order to better address the requirements of Tex. Gov’t Code Ch. 2306 Subchapter DD.
The proposed repeal will not increase or decrease the number of individuals subject to the rule’s applicability.
The proposed repeal will not negatively or positively affect this state’s economy.
b. ADVERSE ECONOMIC IMPACT ON SMALL OR MICRO-BUSINESSES OR RURAL COMMUNITIES AND REGULATORY FLEXIBILITY REQUIRED BY TEX GOV’T CODE §2006.002.
The Department has evaluated this proposed repeal and determined that the proposed repeal will not create an economic effect on small or micro-businesses or rural communities.
c. TAKINGS IMPACT ASSESSMENT REQUIRED BY TEX GOV’T CODE §2007.043.
The proposed repeal does not contemplate or authorize a takings by the Department; therefore, no Takings Impact Assessment is required.
d. LOCAL EMPLOYMENT IMPACT STATEMENTS REQUIRED BY TEX GOV’T CODE §2001.024(a)(6).
The Department has evaluated the proposed repeal as to its possible effects on local economies and has determined that for the first five years the proposed repeal would be in effect there would be no economic effect on local employment; therefore no local employment impact statement is required to be prepared for the rule.
e. PUBLIC BENEFIT/COST NOTE REQUIRED BY TEX GOV’T CODE §2001.024(a)(5).
Mr. Wilkinson has also determined that, for each year of the first five years the proposed repeal is in effect, the public benefit anticipated as a result of the repealed section would be an updated and more germane rule for administering the allocation of LIHTC. There will not be economic costs to individuals required to comply with the repealed section.
f. FISCAL NOTE REQUIRED BY TEX GOV’T CODE §2001.024(a)(4).
Mr. Wilkinson has determined that for each year of the first five years the proposed repeal is in effect, enforcing or administering the repeal does not have any foreseeable implications related to costs or revenues of the state or local governments.
SUMMARY OF PUBLIC COMMENT. The public comment period was held September 20, 2024, to October 11, 2024, to receive stakeholder comment on the repealed section. No comments on the repeal were received.
STATUTORY AUTHORITY. The repeal is made pursuant to Tex. Gov’t Code §2306.053, which authorizes the Department to adopt rules.
Except as described herein the repealed sections affect no other code, article, or statute.
10 TAC Chapter 11, Qualified Allocation Plan
SUBCHAPTER A
§11.1 General
§11.2 Program Calendar for Housing Tax Credits
§11.3 Housing De-Concentration Factors
§11.4 Tax Credit Request and Award Limits
§11.5 Competitive HTC Set-Asides. (§2306.111(d))
§11.6 Competitive HTC Allocation Process
§11.7 Tie Breaker Factors
§11.8 Pre-Application Requirements (Competitive HTC Only)
§11.9 Competitive HTC Selection Criteria
§11.10 Third Party Request for Administrative Deficiency for Competitive HTC Applications
SUBCHAPTER B
§11.101 Site and Development Requirements and Restrictions
SUBCHAPTER C
§11.201 Procedural Requirements for Application Submission
§11.202 Ineligible Applicants and Applications
§11.203 Public Notifications (§2306.6705(9))
§11.204 Required Documentation for Application Submission
§11.205 Required Third Party Reports
§11.206 Board Decisions (§§2306.6725(c); 2306.6731; and 42(m)(1)(A)(iv))
§11.207 Waiver of Rules
SUBCHAPTER D
§11.301 General Provisions
§11.302 Underwriting Rules and Guidelines
§11.303 Market Analysis Rules and Guidelines
§11.304 Appraisal Rules and Guidelines
§11.305 Environmental Site Assessment Rules and Guidelines
§11.306 Property Condition Assessment Guidelines
SUBCHAPTER E
§11.901 Fee Schedule
§11.902 Appeals Process
§11.903 Adherence to Obligations
§11.904 Alternative Dispute Resolution (ADR) Policy
§11.905 General Information for Commitments or Determination Notices
§11.906 Commitment and Determination Notice General Requirements and Required Documentation
§11.907 Carryover Agreement General Requirements and Required Documentation
SUBCHAPTER F
§11.1001 General
§11.1002 Program Calendar for State Housing Tax Credits Associated with Competitive HTC Applications
§11.1003 State Housing Tax Credit Allocation Process Associated with Competitive HTC Applications
§11.1004 Set-Aside for Previously Awarded Developments for Competitive HTC Applications
§11.1005 Procedural Requirements for Requests for State Housing Tax Credits Associated with Competitive HTC Applications
§11.1006 Required Documentation for State Housing Tax Credit Request Submission Associated with Competitive HTC Applications
§11.1007 State Housing Tax Credits Underwriting and Loan Policy Associated with Competitive HTC
§11.1008 State Housing Tax Credits Selection Criteria Associated with Competitive HTC Applications
§11.1009 State Housing Tax Credits for Tax-Exempt Bond Developments
Attachment 2 Preamble, including required analysis, for proposed new 10 TAC Chapter 11, Qualified Allocation Plan
The Texas Department of Housing and Community Affairs (the “Department”) proposes new 10 TAC Chapter 11, Qualified Allocation Plan (QAP). The purpose of the proposed new section is to provide compliance with Tex. Gov’t Code §2306.67022 and to update the rule to: clarify multiple definitions; update the Program Calendar; introduce a new tenant-focused tie breaker; revise underserved area and opportunity index so more potential Development sites will be competitive; increase Eligible building costs to respond to inflation; create a new scoring item to incentivize larger developments; eliminate Experience Certificates; Add automatic High-Quality Pre-Kindergarten awards for specified regions of the State; and provide for the use of 2024 State Housing Tax Credits.
Tex. Gov’t Code §2001.0045(b) does not apply to the rule proposed for action for two reasons: 1) the state’s adoption of the QAP is necessary to comply with IRC §42; and 2) the state’s adoption of the QAP is necessary to comply with Tex. Gov’t Code §2306.67022. The Department has analyzed this proposed rulemaking and the analysis is described below for each category of analysis performed.
a. GOVERNMENT GROWTH IMPACT STATEMENT REQUIRED BY TEX GOV’T CODE §2001.0221.
Mr. Bobby Wilkinson, Executive Director, has determined that, for the first five years the proposed new rule would be in effect:
1. The proposed rule does not create or eliminate a government program, but relates to the readoption of this rule which makes changes to an existing activity, concerning the allocation of Low Income Housing Tax Credits (LIHTC).
2. The proposed new rule does not require a change in work that would require the creation of new employee positions, nor are the rule changes significant enough to reduce work load to a degree that eliminates any existing employee positions.
3. The proposed rule changes do not require additional future legislative appropriations.
4. The rule changes will not result in any increases or decreases in fees, with the exception of proposed language that requires owners of certain Department-funded Developments that voluntarily request an ownership transfer to be responsible for any costs incurred for the preparation of those documents by outside bond counsel. The estimated cost of this fee is $5,000 per ownership transfer.
5. The proposed rule is not creating a new regulation, except that it is replacing a rule being repealed simultaneously to provide for revisions.
6. The proposed rule will not limit or repeal an existing regulation, but can be considered to “expand” the existing regulations on this activity because the proposed rule has sought to clarify Application requirements.
Some “expansions” are offset by corresponding “contractions” in the rules, compared to the 2024 QAP. Notably, the Department has sought to remove superfluous language wherever possible and to consolidate rules to reflect current process. These additions, removals, and revisions to the QAP are necessary to ensure compliance with IRC
§42 and Tex. Gov’t Code §2306.67022, among other federal and state requirements.
7. The proposed rule will not increase or decrease the number of individuals subject to the rule’s applicability; and
8. The proposed rule will not negatively affect the state’s economy, and may be considered to have a positive effect on the state’s economy because changes at 10 TAC §11.9(c)(7), Proximity to Job Areas, may help to encourage the Development of affordable multifamily housing in robust markets with strong and growing economies.
b. ADVERSE ECONOMIC IMPACT ON SMALL OR MICRO-BUSINESSES OR RURAL COMMUNITIES AND REGULATORY FLEXIBILITY REQUIRED BY TEX GOV’T CODE §2006.002. The Department, in drafting this proposed rule, has attempted to reduce any adverse economic effect on small or micro-business or rural communities while remaining consistent with the statutory requirements of Tex. Gov’t Code §2306.67022. Some stakeholders have reported that their average cost of filing an Application is between $50,000 and $60,000, which may vary depending on the specific type of Application, location of the Development Site, and other non-state of Texas funding sources utilized. The proposed rules do not, on average, result in an increased cost of filing an application as compared to existing program rules.
1. The Department has evaluated this rule and determined that none of the adverse effect strategies outlined in Tex. Gov’t Code §2006.002(b) are applicable.
2. There are approximately 100 to 150 small or micro-businesses subject to the proposed rule for which the economic impact of the rule may range from $480 to many thousands of dollars, just to submit an Application for Competitive or non-Competitive HTCs. The Department bases this estimate on the potential number of Applicants and their related parties who may submit applications to TDHCA for LIHTC. The fee for submitting an Application for LIHTC is $30 per unit, and all Applicants are required to propose constructing, at a minimum, 16 Units. While, in theory, there is no limit to the number of Units that could be proposed in a single Application, practically speaking, the Department sees few proposed Developments larger than 350 Units, which, by way of example, would carry a fee schedule of $10,500. These Application Fee costs are not inclusive of external costs required by the basic business necessities underlying any real estate transaction, from placing earnest money on land, conducting an Environmental Site Assessment, conducting a market study, potentially retaining counsel, hiring an architect and an engineer to construct basic site designs and elevations, and paying any other related, third-party fees for securing the necessary financing to construct multifamily housing. Nor does this estimate include fees from the Department for Applications that successfully attain an award.
There are 1,376 rural communities potentially subject to the proposed rule for which the economic impact of the rule is projected to be $0. The proposed rule places no financial burdens on rural communities, as the costs associated with submitting an Application are born entirely by private parties. If anything, a rural community securing a LIHTC Development will experience an economic benefit, not least among which is the potential increased property tax revenue from a large multifamily Development.
3. The Department has determined that because there are rural tax credit awardees, this program helps promote construction activities and long term tax base in rural areas of Texas. Aside from the fees and costs associated with submitting an Application, there is a probable positive economic effect on small or micro-businesses or rural communities that receive LIHTC awards and successfully use those awards to construct multifamily housing, although the specific impact is not able to be quantified in advance
c. TAKINGS IMPACT ASSESSMENT REQUIRED BY TEX GOV’T CODE §2007.043. The proposed rule does not contemplate or authorize a takings by the Department. Therefore, no Takings Impact Assessment is required.
d. LOCAL EMPLOYMENT IMPACT STATEMENTS REQUIRED BY TEX GOV’T CODE §2001.024(a)(6).
The Department has evaluated the rule as to its possible effects on local economies and has determined that for the first five years the rule will be in effect the proposed rule may provide a possible positive economic effect on local employment in association with this rule since LIHTC Developments often involve a total input of, typically at a minimum, $5 million in capital, but often an input of $10 million - $30 million. Such a capital investment has concrete direct, indirect, and induced effects on the local and regional economies. However, because the exact location of where program funds and development are directed is not determined in rule, there is no way to determine during rulemaking where the positive effects may occur. Furthermore, while the Department knows that any and all impacts are positive, that impact is not able to be quantified for any given community until a proposed Development is actually awarded LIHTC, given the unique characteristics of each proposed multifamily Development and region in which it is being developed. Texas Gov’t Code §2001.022(a) states that this “impact statement must describe in detail the probable effect of the rule on employment in each geographic region affected by this rule…” Considering that significant construction activity is associated with any LIHTC Development and that each apartment community significantly increases the property value of the land being developed, there are no probable negative effects of the new rule on particular geographic regions. If anything, positive effects will ensue in those communities where developers receive LIHTC awards.
e. PUBLIC BENEFIT/COST NOTE REQUIRED BY TEX GOV’T CODE §2001.024(a)(5). Mr. Wilkinson has determined that, for each year of the first five years the new section is in effect, the public benefit anticipated as a result of the new section will be an updated and more germane rule for administering the allocation of LIHTC with considerations made for applicants as it relates to the impact of the COVID-19 pandemic on the application process. Other than the fees mentioned in section a4 above, there is no change to the economic cost to any individuals required to comply with the new section because the same processes described by the rule have already been in place through the rule found at this section being repealed. The average cost of filing an application remains between $50,000 and $60,000, which may vary depending on the specific type of application, location of the development site, and other non-state of Texas funding sources utilized. The proposed rules do not, on average, result in an increased cost of filing an application as compared to the existing program rules.
f. FISCAL NOTE REQUIRED BY TEX GOV’T CODE §2001.024(a)(4). Mr. Wilkinson also has determined that for each year of the first five years the new section is in effect, enforcing or administering the new section does not have any foreseeable implications related to costs or revenues of the state or local governments because the same processes described by the rule have already been in place through the rule found at this section being repealed. If anything, Departmental revenues may increase due to a comparatively higher volume of Applications, which slightly increases the amount of fees TDHCA receives.
SUMMARY OF PUBLIC COMMENT. The public comment period was held September 20, 2024, to October 11, 2024, to receive public comment on the proposed new sections of rule. Comment was received from 54 commenters, and a summary of these comments and the Department’s reasoned response is included with the Board Item.
STATUTORY AUTHORITY. The adoption of these sections of rule is made pursuant to Tex. Gov’t Code §§2306.053 and 2306.67022, which authorize the Department to adopt rules and, specifically, this Qualified Allocation Plan. Except as described herein the repealed sections affect no other code, article, or statute. The rule proposed for adoption by the Board has been reviewed by legal counsel and found to be a valid exercise of the Department’s legal authority.