Key Takeaways:

• On Dec. 12, 2024, the Texas Department of Housing and Community Affairs (TDHCA) approved a proposed rule change that would require local government approval for the transfer of any TDHCA-regulated property that would result in a property tax exemption.
• If the rule goes into effect, it would affect the ability of developers to obtain property tax exemptions, a tool that has been increasingly relied on to preserve affordable housing.
• The proposal has been included in the Texas Register for public review and comment.

At its Dec. 12, 2024 board meeting, the TDHCA included on its board agenda a proposed change to Section 10.406 of the Texas Administrative Code (Section 10.406). Under the proposed change, prior to an ownership transfer of a TDHCA-regulated property (TDHCA Property) that would result in a property tax exemption, the owner of the TDHCA Property must provide to TDHCA evidence of local government support for the transfer.

The evidence of local support must take the form of a "resolution of support from the municipality or a letter of support from the mayor" or, for properties not located within a municipality or extra-territorial jurisdiction, "a resolution of support from the commissioners court or letter of support from the county judge."

This evidence of local support would be included in the ownership transfer package that must currently be submitted to TDHCA under Section 10.406.

Property tax exemptions can be an essential tool for preserving affordable housing developments and ensuring their continued financial feasibility. Developers have increasingly relied on such exemptions as financing and construction costs have risen in recent years. TDHCA's proposal was announced shortly before the Texas Legislature is expected to consider legislation that would add a more robust regulatory framework to property tax exemptions for public-private partnerships.

TDHCA's proposal was approved for publication in the Texas Register for public comment. The public comment period on the proposed rule change will continue until 5 p.m. CT on Jan. 27. Written comments may be submitted by mail to Texas Department of Housing and Community Affairs, Attn: Lee Ann Chance, Asset Management Rule Comments, P.O. Box 13941, Austin, TX 78711-3941 or by email to [email protected].