TAAHP Legislative Priorities - Setting the Stage for the 89th Legislative Session

By Whitney Parra-Gutiérrez, TAAHP Policy & Regulatory Manager

On the heels of a successful effort in the 88th Texas Legislative Session in 2023, TAAHP immediately turned its focus to preparing for the 89th Legislature beginning January 2025. There is much more work to be done and expectations are high. TAAHP has been working diligently to address housing affordability challenges statewide, focusing on building relationships, and crafting a legislative agenda that will advance vital policy solutions to some of the greatest issues facing the affordable housing industry. Given the current political environment, any legislative success will require the support of the entire industry and links with partners who understand that affordable housing is a common thread for economic success.

Internal divisions within the Texas GOP and changes in House and Senate committee assignments present new challenges, and possible opportunities, for TAAHP to reshape perceptions of affordable housing. Both the Lt. Governor and the House Speaker have released interim study charges which acknowledge both the need to increase housing supply and the risks that issues like insurance costs are posing to the industry. TAAHP will soon launch several advocacy initiatives and education campaigns aimed at communicating these legislative priorities to every legislator as part of a solution to address the critical shortage of housing. Through these efforts, TAAHP will maintain its role as a pivotal resource for affordable housing and solidify its position as the primary voice for housing affordability matters in Texas.

88th Legislative Session Recap

During the 88th Texas Legislative Session in 2023, TAAHP embarked on a mission to tackle housing affordability challenges across the state. With a strategic focus on fostering relationships, advocating for legislative priorities, and actively opposing detrimental bills, TAAHP members worked tirelessly throughout the 140-day session to champion policies conducive to affordable housing.

One significant component of TAAHP’s legislative efforts was the biennial TAAHP Rally Day, where over 80 TAAHP members met with all 181 Texas legislators to deliver TAAHP's message and legislative priorities. These efforts bore fruit as the Texas Legislature approved bills crucial to the industry, including the establishment of a new state housing tax credit program, reforms for public facility corporations which kept the program from being eliminated, and efficiencies in the private activity bond program. Despite not achieving all legislative priorities, TAAHP's concerted efforts during the session represented significant progress in making affordable housing a key priority for the Texas Legislature.

TAAHP MEMBERS MAKE SURE LEGISLATORS ARE INFORMED OF INDUSTRY ISSUES

New Challenges for the 89th Legislative Session

Internal dynamics within Texas politics have intensified as leaders aim to recalibrate their party’s legislative priorities for 2025 following a contentious primary election. This past spring, primary challengers unseated 15 Republican incumbents from the State House of Representatives- nine in the March primaries and six more in the May runoffs.

As Texas prepares for the legislative session starting in January 2025, this evolving landscape presents new challenges and opportunities. For instance, early in 2024, multiple House and Senate Committees received housing-related interim charges—directives to study special policy issues and provide recommendations for future legislation. Notably, the House Urban Affairs Committee, historically responsible for most affordable housing legislation, did not receive any interim charges. The housing-related interim charges were instead assigned to other House committees, some of which haven't typically been responsible for housing-related legislation. This presents TAAHP with a strategic opportunity to cultivate new relationships with influential committees and legislators beyond their traditional areas of focus.

Process for Setting Legislative Priorities

A multitude of stakeholders participate in vetting TAAHP’s legislative priorities. TAAHP’s Government Affairs and Legislative Affairs Committee (GALA) is dedicated to making a substantial impact on the 89th Legislative session. Comprised of more than 40 members, GALA and its five legislative subcommittees are currently engaged in drafting proposed legislation and identifying housing champions to advocate the necessary messages to the Texas Legislature. These legislative subcommittees serve as the platforms where TAAHP priorities are established, drawing on the diverse backgrounds of members to craft initiatives beneficial to the entire industry. Following deliberations and voting within these subcommittees, proposed legislative priorities undergo evaluation by the Government Affairs Committee, ensuring thorough vetting by many TAAHP members and different TAAHP committees before formal adoption into the official legislative agenda for the 89th Legislative Session. Five overall legislative priorities have been formed, including modernizing Section 2306, streamlining Private Activity Bonds, providing insurance relief to affordable housing developers, protection of existing tax exemption programs, and ensuring that property appraisals are conducted in an equitable manner.

TAAHP's Legislative Priorities

SECTION 2306: Modifying the Requirement for a Resolution of No Objection (RONO) for 4% Housing Tax Credits One of TAAHP’s most consistent policy priorities has been to remove or limit the requirements for obtaining a Resolution of No Objection (RONO) for 4% Tax Credit developments. As introduced in the last three sessions, TAAHP plans to advocate for legislation that would restrict the requirement of RONOs to only the largest metropolitan governments. Currently, applicants seeking to utilize the non-competitive 4% Housing Tax Credits (HTC) are required to provide notice of their proposed developments to each governing body. The governing body must also hold a hearing and affirmatively pass a Resolution of No Objection, or RONO. Failure to do so renders the proposed housing development ineligible for credits with no opportunity to appeal. But the statutorily required RONO process is not practiced in a consistent manner across all jurisdictions. While most major metropolitan governments have established protocols for evaluating and recommending support or denial of these developments, their policies still differ among themselves. Meanwhile, many smaller suburban and mid-sized local jurisdictions lack any guidelines for evaluating them at all.

The TAAHP bill proposes that only major metropolitan cities and counties retain the requirement to hold a hearing and adopt a RONO within 90 days of receipt of notification for developments proposing the use of 4% HTCs. If the municipality or county fails to meet that 90-day deadline, TDHCA shall deem the application as satisfying the “no objection” requirement and the development will be able to move forward. This rule would only apply to counties with a population more than 1.2M and municipalities with a population more than 600,000. This bill would help combat “NIMBYism” (Not In My Back Yard) that is still a strong factor in some jurisdictions, as there are some council members and/or commissioners who will simply not vote for any affordable or workforce housing in their districts. With lengthy development timelines and stringent investment requirements, it is essential that municipal approval be received in an efficient and time-sensitive manner in the affordable housing development process.

SECTION 2306: Modernizing the Two Mile Rule

Currently, statute prohibits more than one housing tax credit applicant from being awarded credits within two linear miles of each other. This rule was originally enacted more than 20 years ago to avoid the over-concentration of affordable housing in high poverty areas. However, in dense urban areas in Texas’s largest cities, this rule drastically limits the development of affordable housing near dense job centers, neighborhood empowerment zones, and transit-oriented development areas. A two-mile radius within an urban city could exclude entire neighborhoods, including those with a high demand for housing. A more precise approach would better address the specific needs of each city’s local landscape.

TAAHP’s anticipated bill would reduce the two mile requirement to one mile, subject to approval of the municipality or county in which the application is located. This bill will focus on counties with a population of one million or more and municipalities with populations over 750,000. Growing cities know their local landscape best and should be empowered to waive this rule if it is in the best interest of the city.

SECTION 2306: Ensuring Consistency with Neutral State Rep Letters for 9% Housing Tax Credits The current requirement for state representative letters discourages high-quality housing tax credit developments in communities where they are needed. This scoring category alone has significant influence on the award process because a state representative’s negative or neutral letter can singlehandedly derail a development, even if local officials and community advocates have endorsed it. TAAHP proposes a modification to this requirement as a way to meet local housing demand across Texas.

A TAAHP supported bill signed by the governor in the 86th Session changed statute by stating that if no written statement is received from a state representative, the corresponding points would then be attributed in the direction of the locality’s support or opposition. In awarding points under the bill's provisions, TDHCA must award positive points for positive resolutions adopted, negative points for negative resolutions adopted, and zero points for neutral resolutions adopted, but only when no written statement is received from a state representative. If a neutral statement is received from a state representative, no points are awarded even if the locality supports the development.

TAAHP MEMBERS WORK HARD TO BE A VALUABLE RESOURCE FOR TEXAS LEGISLATORS

TAAHP seeks consistency in the statute so that a letter of neutrality is treated the same as no written statement, whereby the locality determines the direction of those respective points. This reallocation of available points to local governments where the state representative chooses to not provide a statement or provide a neutral statement provides for a consistent outcome in cases where the state representative does not either support or object to a certain development.

SECTION 2306: Addressing Educational Quality Requirements in Housing Tax Credit Applications

In Texas, the housing tax credit program heavily relies on educational quality as a determinant for evaluating applications, effectively excluding many urban areas in dire need of affordable rental housing. This stringent requirement exacerbates housing shortages in neighborhoods that could benefit most from increased housing availability. TAAHP's proposed bill would aim to address this issue by advocating for the removal of educational quality as a threshold criterion in the application process for low-income housing tax credits. By eliminating this barrier, the bill would significantly broaden the geographic areas where developers can qualify to build affordable housing developments. This strategic shift is particularly crucial for urban regions experiencing rapid population growth and increasing demand for affordable housing options. By allowing development in areas previously deemed ineligible due to school performance metrics, the bill ensures that housing initiatives are better aligned with community needs and socioeconomic realities.

Private Activity Bonds

The Private Activity Bond (PAB) program, governed by Chapter 1372 of the Texas Government Code and administered by the Texas Bond Review Board (“BRB”), plays a vital role in financing the needs of the state, including the development of affordable and workforce housing. The previous 88th Legislature made progress on this front with the passage of House Bill 1766, which instituted a cap on the percentage of housing development costs that may be financed with PABs. When properly implemented, this change will result in more housing being built without additional PAB resources.

For the 89th Legislature, TAAHP will monitor and support legislation that aims to modernize the PAB program, providing more time and opportunity for additional units to be developed within the same volume cap. TAAHP supports all procedural and administrative improvements that leverage state resources to add desperately needed supply for the expanding Texas workforce.

Rising Insurance Costs

Affordable housing developers, owners, and operators are grappling with unprecedented increases in property casualty, general liability, and builders risk insurance premiums. Recent research reveals that over the past three years, these premiums have surged dramatically, with annual hikes ranging from 30 percent to 100 percent for affordable housing communities. This surge in costs is particularly problematic for the affordable housing industry due to capped rents, which are challenged to keep pace with all escalating expenses, especially insurance. Consequently, owners and operators are compelled to reduce resident services and delay essential repairs and upgrades to manage financial strain, posing a significant threat to the long-term financial viability of properties and even sponsors or owners in some cases.

If left unaddressed, the inflation of insurance premiums will have severe consequences, , potentially causing housing providers to find operational cost savings in ways that harm existing affordable housing communities or to ultimately opt-out of the affordable housing market altogether.

TAAHP has been monitoring the impact of higher insurance costs on affordable housing developments in Texas and is studying innovative state-level strategies that could address the issue. Some potential solutions include: 1) Expanding the Fair Access to Insurance Requirements (FAIR) Program to ensure coverage is available for multi-family affordable housing, 2) Prohibiting insurance providers from using neighborhood crime scores to determine coverage options for affordable housing developments, 3) Mandating that insurance companies offer premium discounts for policy owners who implement certain risk reduction measures and 4) Providing grants or tax credits for improving a building’s resilience to flooding, winds, etc.

Monitoring the Preservation of Tax Exemption Programs

The 88th Legislature nearly eliminated the Public Facility Corporation (PFC) tax exemption program due to concerns about loopholes that undermined the program's original goal of promoting the development of workforce housing units. Lawmakers specifically cited the ability of corporations to extend tax breaks beyond their initial locations and a lack of transparency in the program. TAAHP successfully worked to save the PFC program, securing a major victory for workforce housing. Now, in the upcoming 89th Legislature, similar concerns are surfacing regarding other tax exemption programs that support affordable housing, such as those offered by Housing Finance Corporations (HFCs). While TAAHP doesn't plan to sponsor a bill directly related to these programs, its staff and GALA subcommittees will closely monitor relevant legislation and actively advocate for the preservation of all programs that benefit affordable housing.

Special Issues – Improving Appraisals and Limiting Development Fees

During any given legislative session, topics and bills arise which require special attention and expertise to address. The newly established Special Issues Subcommittee is charged with leveraging the subject matter expertise of TAAHP members to assist in establishing position statements and sponsoring bills which would benefit the industry. For the upcoming 89th Legislature, this committee will be focused on addressing the inconsistency of tax appraisals for tax credit properties. Each year, developers spend millions to protest inequitable appraisals for affordable housing properties because of inconsistent methodologies used across the various appraisal districts in Texas. A TAAHP supported bill would seek to provide standards for achieving equitable consistency for the evaluation of all tax credit properties in the same manner. This alone would save the industry millions in protests which could otherwise be spent on adding housing supply. This subcommittee will also be considering legislation to address the negative impacts of local development fees, which are reaching a level that is impeding the development of safe, high quality affordable housing.

How to Get Involved

Advocating for such a robust agenda requires significant legwork and support from TAAHP’s GALA committee, legislative subcommittees, lobby team, staff and the entire membership. TAAHP’s goal is to connect with as many legislators as possible before the session begins and will provide one-on-one presentations to elected officials, specifically those in priority committees such as the Senate Committee on Local Government and the House Committee on Urban Affairs. Other initiatives include hosting housing workshops for freshman legislators, publishing legislative white-papers, testifying before House and Senate committee, and ensuring that TAAHP is at the table during the bill-making process.

Members are encouraged to utilize TAAHP's Advocacy Center, which facilitates coordinated communications and grassroots advocacy campaigns. The Advocacy Center will also provide ready to use collateral for all TAAHP members who may seek on their own to meet with elected officials at all levels of government. Through email, e-newsletters, and alert messages, members can actively participate in the legislative process. Additionally, TAAHP will host Rally Day on February 18, 2025, bringing together legislators, housing advocates, and stakeholders to discuss legislative issues affecting affordable housing in Texas. The intention of these advocacy initiatives is to foster a coalition of advocates dedicated to developing high-quality affordable housing for low- to moderate-income individuals and families in the state, solidifying TAAHP's position as the primary voice for housing affordability matters in Texas.