On July 25, 2024, the Texas Department of Housing and Community Affairs (TDHCA) Governing Board approved a crucial amendment to the reporting requirements for Public Facility Corporations (PFCs). This update has significant implications for the affordable housing sector. Here’s what you need to know:
Understanding Public Facility Corporations (PFCs)
A Public Facility Corporation (PFC) is a nonprofit entity that facilitates the development of mixed-income housing in Texas. PFCs can construct, acquire, and rehabilitate multifamily residential properties. In exchange for contributing to affordable housing, private developers may receive property tax exemptions through PFCs.
Texas Local Government Code, Title 9, Subtitle C, Chapter 303 is the statute under which PFCs are regulated in Texas. The 88th Texas Legislature amended this statute with House Bill 2071 (HB 2071), effective June 18, 2023, enacting certain reporting requirements and tasked the TDHCA with the compliance monitoring oversight. The TDHCA rules on PFC Compliance Monitoring are found in the Texas Administrative Code, Title 10, Part 1, Chapter 10, Subchapter I were adopted Feb. 6, 2024.
New Reporting Requirements
Under the updated rules, PFCs must now submit an Audit Report regardless of when a mixed-income development was acquired, constructed, or rehabilitated, with some notable exceptions. Specifically, developments are exempt from reporting if they:
- Have at least 20% of the development units reserved for public housing;
- Participate in the Rental Assistance Demonstration (RAD) program administered by the U.S. Department of Housing and Urban Development (HUD);
- Receive financial assistance administered under Chapter 1372, Government Code, or receive financial assistance from a tax-exempt bond; o
- Receive financial assistance administered under Subchapter DD, Chapter 2306, Government Code, the Low Income Housing Tax Credit program.
The first report for a PFC-owned multifamily development is due no later than June 1 of the year following either:
- The date of acquisition for an occupied development, or
- The date the first tenant moves in for a newly constructed development.
Impact of the Amendment
Prior to this amendment, there was considerable uncertainty about whether PFC agreements made before June 18, 2023, were subject to the new reporting requirements. Consequently, many PFCs missed the June 1, 2024, deadline for their 2023 reports, risking partial or complete loss of their property tax exemptions.
To address this, TDHCA has granted a one-time extension. PFCs now have until December 1, 2024, to submit their 2023 reports without penalty.
Public Comments and Rule Amendments
TDHCA’s Governing Board has also approved additional amendments to the PFC Compliance Monitoring Rule, effective February 26, 2024. These amendments are open for public comment from August 9, 2024, to September 9, 2024.
The proposed changes require all PFC multifamily residential developments to submit annual Audit Reports to TDHCA by December 1 of each year, starting in 2024. Subsequent reports must be submitted by June 1 annually.
A copy of the current rule is available on the Department’s website here: https://www.tdhca.texas.gov/public-facilities-corporation-compliance-monitoring
The proposed amendments to the PFC rule can be found here: http://www.sos.texas.gov/texreg/pdf/backview/0809/index.shtml
Public comments can be submitted to:
Texas Department of Housing and Community Affairs
Attn: Wendy Quackenbush, Rule Comments
P.O. Box 13941
Austin, Texas 78711-3941
Email: [email protected]
Comments must be received by 5:00 p.m. Central time, September 9, 2024.