HBA-GUM H.B. 3607 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 3607 By: Burnam Urban Affairs 4/12/1999 Introduced BACKGROUND AND PURPOSE Currently, thousands of units of affordable housing developed with federal assistance through loans insured by the federal Department of Housing and Urban Development (HUD) and/or project-based Section 8 contracts are now expiring. In 1996, Congress removed restrictions which discouraged owners from prepaying their low-interest HUD-insured loans. Once a loan is paid off, the owner no longer has a regulatory agreement with HUD, which means the owner is no longer required to rent the apartments at rates affordable to low and moderate income people. As a result, rent increases after prepayment have been dramatic. Similarly, other units are lost as Section 8 contracts expire and are not renewed, either because the owner chooses to opt out or because HUD chooses not to renew due to housing quality violations or other owner mismanagement. H.B. 3607 requires property owners of multifamily developments that are insured or assisted by certain HUD programs to notify tenants and local officials if they intend to sell, lease, or otherwise dispose of the affordable units. This bill provides that the notice must provide the essential terms of the sale, a list of the people who have a right of first refusal, and a list of the residents' rights and sources of technical assistance. This bill also provides residents and the residents' association or a non-profit organization, the local housing authority, and the municipal governing body with a right of first refusal if any of these entities gives the property owner a proposed purchase or lease agreement within 180 days after the notice goes out and is able to finance the purchase or lease within a year. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Chapter 2306, Government Code, by adding Subchapter EE, as follows: SUBCHAPTER EE. AFFORDABLE HOUSING PRESERVATION Sec. 2306.801. APPLICATION. (a) Provides that this subchapter applies to a property owner of a multifamily housing development that is insured or assisted under a federal program. (b) Provides that this section does not apply to the disposal of property due to a governmental taking under this subsection, foreclosure, a transfer by gift, devise, or operation of law, or a sale to a person entitled to an interest in the property under certain specified conditions. Sec. 2306.802. PROPERTY OWNER RESTRICTION. Prohibits a property owner under this subchapter, except as provided by this subchapter, from selling, leasing, or otherwise disposing of a multifamily housing development under this subchapter if that action will cause the disruption or discontinuance of the federal insurance or assistance or of low income housing assistance to residents of the development. Sec. 2306.803. NOTICE OF INTENT. (a) Requires a property owner of a multifamily housing development subject to the restriction under Section 2306.802, as added by this Act, who intends to sell, lease, or otherwise dispose of the development, to provide notice to the residents of the development and the residents of the association of the development, the department, and the governing body of the municipality and local housing authority with jurisdiction over the territory in which the development is located. (b) Requires the required notice under Subsection (a) to provide certain specified information. Sec. 2306.804. RIGHT OF FIRST REFUSAL. (a) Provides that, except as provided by Section 2306.801(b), as added by this Act, the Texas Department of Housing and Community Affairs (department) or a certain specified person has a right of first refusal to purchase or lease the multifamily housing development if the specified conditions under this subsection are met. (b) Prohibits the property owner from unreasonably refusing to enter into or unreasonably delaying the execution of a purchase or lease agreement with the department or person if the department or person has complied with Subsection (a). Authorizes the property owner to require a person offering to lease the development to place in escrow an amount necessary to pay the lease for a period of not more than one year after the effective date of the lease agreement. (c) Authorizes a majority of the residents or the residents association of a development to conclude an agreement with a nonprofit organization or private purchaser in which the nonprofit or private purchaser agrees to represent the residents and maintain the development in a manner that preserves the development's low income housing benefits. Provides that a nonprofit organization or private purchaser under this subsection takes the right of first refusal held by the residents or the residents association of a development and is subject to the requirements of this section. Sec. 2306.805. PRIORITY OF RIGHT OF FIRST REFUSAL. Provides in order of priority the right of refusal under this subchapter to certain specified persons and entities. SECTION 2. Amends Subchapter A, Chapter 2306, Government Code, by adding Section 2306.008, as follows: Sec. 2306.008. FEDERAL MATCHING GRANTS. Requires the department to emphasize the development of programs under this chapter in a manner that maximizes federal matching grants to preserve long-term affordability for low-income housing under federal programs, including certain specified programs. SECTION 3. (a) Effective date: September 1, 1999. Provides that this Act applies to a multifamily housing development described by Section 2306.801, as added by this Act, that a property owner intends to sell, lease, or otherwise dispose of on or after January 1, 2000. (b) Requires the department to prepare the statement required by Section 2306.803(b)(3), as added by this Act, not later than January 1, 2000. SECTION 4. Emergency clause.