HBA-ATS C.S.H.B. 2281 76(R)BILL ANALYSIS


Office of House Bill AnalysisC.S.H.B. 2281
By: Garcia
Urban Affairs
5/7/1999
Committee Report (Substituted)



BACKGROUND AND PURPOSE 

Currently,  the state has loans available to help working families purchase
homes, but builders generally do not build the types of homes that workers
earning $12 to $14 an hour, who need the loans, can afford.  C.S.H.B. 2281
creates a builder incentive partnership program which calls for the Texas
Department of Housing and Community Affairs (TDHCA) to guarantee each
participating builder a share of the purchase price for a certain number of
homes built that do not exceed $70,000.  

The incentive program will feature a cost plus profit structure that will
offer builders a flat fee for each completed home, rather than a
percentage-based profit based on the home's sale price.  This will provide
incentives for builders to work in the lowest end of the market, while the
guaranteed purchase arrangement would minimize the risk for the builder.
The program allows builders to market their product directly to buyers as
they do now.  Qualified buyers would meet first-time home buyer criteria.
Additionally, homes built under this program would be required to meet
housing and design standards developed by TDHCA.  C.S.H.B. 2281 requires
TDHCA to implement a program promoting the construction of affordable homes
for low-wage workers. 

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 in SECTION 1 (Section 2306.710, Government Code) in this
bill. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Chapter 2306, Government Code, by adding Subchapter EE,
as follows: 

SUBCHAPTER EE.  BUILDER INCENTIVE PARTNERSHIP PROGRAM

Sec. 2306.701.  DEFINITIONS.  Defines "builder," "cooperative purchase
agreement," "corporation," "cost plus profit structure," and "program." 

Sec. 2306.702.  BUILDER INCENTIVE PARTNERSHIP PROGRAM.  (a) Requires the
Texas Department of Housing and Community Affairs (department) to develop
and maintain a builder incentive partnership program (program) that
provides for the development of affordable housing subdivisions and does
not encourage the further growth of colonias. 

(b) Requires the department to determine geographic areas that are in need
of affordable housing.  Requires the department to provide for affordable
housing development projects in those areas, by entering into a partnership
agreement (agreement) with an eligible builder or developer and housing
assistance agencies or other nonprofit entities that provide housing
assistance to low and very low income homebuyers (low income agencies or
entities).  Requires the department to work with the Texas State Affordable
Housing Corporation (corporation), the builder or developer, or low income
agencies or entities to obtain housing assistance for homebuyers who
purchase homes built under the program. 


 Sec. 2306.703.  COOPERATIVE PURCHASE AGREEMENT.  (a) Requires the
department to negotiate and conclude a cooperative purchase agreement with
a housing assistance agency (agency) or other nonprofit entity for each
project under the program. 

(b) Provides that, under the cooperative purchase agreement for a specific
project under the program, an agency or other nonprofit entity must agree
to use funds that the department may provide or funds maintained by the
agency or entity from other sources to guarantee a negotiated portion of
the purchase price of a negotiated number of houses to be built under the
project, and, at the option of the builder, to purchase homes built under
the project at cost if the homes do not have a qualified purchaser within
30 days of construction being completed. 

(c) Authorizes the department to provide alternative or additional
conditions under the cooperative purchase agreement as needed. 

Sec. 2306.704.  BUILDER PARTNERSHIP AGREEMENT.  (a) Enumerates the
provisions to which the department and a builder must agree under an
agreement for a specific project. Those mandatory provisions include: the
terms of a cooperative purchase agreement between the department and a low
income agency or entity; the type, style, and number of houses to be built
under the partnership; the types of housing assistance to be applied for
eligible low and very low income homebuyers who purchase homes built under
the program; and any other term that the department determines appropriate. 
  
(b) Requires the builder to market the homes built under the program to
individuals and families who qualify for housing assistance under
department programs in the same manner in which private housing
developments are marketed to the general public. 

(c) Prohibits the department from entering into an agreement for a specific
project with a builder unless the builder agrees to issue the builder's
standard warranties for materials and labor to the first owner-occupant of
a home purchased under the program. 

Sec. 2306.705.  COST PLUS PROFIT STRUCTURE.  (a) Authorizes the builder in
an agreement to require homebuyers to purchase a home under a cost plus
profit structure (profit structure). 

(b) Provides that the department and a builder who requires a profit
structure must agree to a reasonable profit for the builder for each type
of home built under the program. 

(c) Provides that the profit set under the profit structure for a home
built under the program is part of the purchase price of the home, for the
purposes of the agreement and housing finance assistance by the department
or the corporation. 

Sec. 2306.706.  FUNDING.  Prohibits the department and the corporation from
spending state money to fund the guaranteed purchase agreement.  Requires
the department and the corporation to cooperate to identify appropriate
funding sources. 

Sec. 2306.707.  HOUSING STANDARDS.  (a) Requires the department to
establish and maintain standards for the homes built under the program.
Enumerates the required minimum standards, which include the minimum
quality of construction and amenities required, a cost not to exceed
$70,000, a style and type of home that can accommodate additional
construction, but that is flexible enough to serve one family, and other
criteria that the department may provide. 

(b) Authorizes the department to require the construction of a specific
number of homes to be determined by the department that must meet  access
standards, including  doors that are 32 inches wide, hallways that are 36
inches wide, light switches that are 15 inches above the floor, and one
entrance to the home that is without steps. 

Sec. 2306.708.  HOMEBUYER PROGRAMS.  Requires the department and the
corporation  to cooperate to identify private lenders to provide private
market-rate mortgages for low and very low income homebuyers who purchase
homes under the program and housing assistance programs for low and very
low income homebuyers who do not qualify for private marketrate mortgages.
Requires the department and the corporation to provide other necessary
housing assistance for low and very low income homebuyers. 

Sec. 2306.709.  SUSTAINABLE BUILDING.  Requires the department, in
cooperation with other parties involved in the development and promotion of
sustainable construction, to assist in identifying information on
sustainable building resources and techniques to encourage the use of
sustainable products and techniques in the construction of affordable
housing. 

Sec. 2306.710.  RULEMAKING AUTHORITY.  Authorizes the department to adopt
rules necessary to accomplish the purposes of this subchapter. 

SECTION 2.  Effective date: September 1, 1999.

SECTION 3.  Emergency clause.  

COMPARISON OF ORIGINAL TO SUBSTITUTE

C.S.H.B. 2281 differs from the original bill in the caption by providing
that this Act relates to a program of the Texas Department of Housing and
Community Affairs (department) to promote forprofit construction of
affordable homes for low and very low income homebuyers, rather than for
low income homebuyers. 

C.S.H.B. 2281 differs from the original bill in SECTION 1 (proposed
Subchapter EE, Chapter 2306, Government Code) by making a conforming change
in the definition of "cooperative purchase agreement." 

In proposed Section 2306.702(a), the substitute differs from the original
by adding the provision that the builder incentive partnership program
required to be developed and maintained by the department be a program that
does not encourage the further growth of colonias in this state.  In
proposed Section 2306.702(b), the substitute differs from the original by
specifying that the housing assistance be provided to very low income
homebuyers, in addition to low income homebuyers.  The substitute also
makes conforming changes. 

The substitute redesignates proposed Section 2306.705 of the original to
Section 2306.703.  In redesignated Section 2306.703(a), the substitute
specifies that the cooperative purchase agreement (agreement) is for a
specific project under the builder incentive partnership program (program).
In redesignated Section 2306.703(b), the substitute incorporates proposed
Section 2306.703(a)(1) of the original into new Section 2306.703(b)(1) of
the substitute to provide that under the agreement 
the housing assistance agency or other nonprofit entity must agree to use
funds that the department may provide or funds maintained by the agency or
entity from other sources to guarantee a negotiated portion of the purchase
price of a negotiated number of houses to be built under the project.  The
substitute makes conforming changes. 

The substitute redesignates proposed Section 2306.703 of the original to
Section 2306.704.  In redesignated Section 2306.704(a), the substitute
redesignates proposed Subdivisions (2)-(5) of the original to Subdivisions
(1)-(4) because of the incorporation of proposed Subdivision (1) of the
original into new Section 2306.703(b)(1) of the substitute, and makes
conforming changes.  In redesignated Section 2306.704(c), the substitute
prohibits the department from entering into an agreement for a specific
project with a builder unless the builder agrees to issue the builder's
standard warranties for materials and labor to the first owner-occupant of
a home purchased under the program, rather than to issue warranty deeds for
the homes purchased under this program. 

The substitute redesignates proposed Section 2306.704 of the original to
Section 2306.705. 

In proposed Section 2306.707(a), the substitute differs from the original
by providing that one of the standards for the homes built under the
program is that a home's cost is not to exceed $70,000, rather  than a
home's average cost is between $30,000 and $50,000.  The substitute differs
from the original by adding Section 2306.707(b) to authorize the department
to require the construction of a specific number of homes to be determined
by the department that must meet  access standards, including doors that
are 32 inches wide, hallways that are 36 inches wide, light switches that
are 15 inches above the floor, and one entrance to the home that is without
steps. 

In proposed Section 2306.708, the substitute makes conforming changes.

The substitute redesignates proposed Section 2306.709 of the original to
Section 2306.710.  In new Section 2306.709, the substitute requires the
department, in cooperation with other parties involved in the development
and promotion of sustainable construction, to assist in identifying
information on sustainable building resources and techniques to encourage
the use of sustainable products and techniques in the construction of
affordable housing.