PART 1. TEXAS DEPARTMENT OF HOUSING AND COMMUNITY AFFAIRS
SUBCHAPTER A. GENERAL
The Texas Department of Housing and Community Affairs (the Department) adopts amendments to 10 TAC §53.1 and §53.8, concerning the HOME Program, without changes to the proposed text as published in the January 2, 2009, issue of the Texas Register (34 TexReg 15), and will not be republished.
The amendments make changes to the existing rule to ensure compliance with all statutory requirements, formalize existing policy and guidelines contained in the HOME program manuals and include revisions of necessary policy and administrative changes to further enhance operations.
No comments were received concerning the proposed amendments.
The Board approved the final order adopting the amendments on February 5, 2009.
The amendments are adopted pursuant to the authority of the Texas Government Code, Chapter 2306 which provides the Department with the authority to adopt rules governing the administration of the Department and its programs.
This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on February 11, 2009.
TRD-200900552
Michael Gerber
Executive Director
Texas Department of Housing and Community Affairs
Effective date: March 3, 2009
Proposal publication date: January 2, 2009
For further information, please call: (512) 475-3916
The Texas Department of Housing and Community Affairs (the Department) adopts an amendment to 10 TAC §53.30, concerning the HOME Program, without changes to the proposed text as published in the January 2, 2009, issue of the Texas Register (34 TexReg 16), and will not be republished.
The amendment makes changes to the existing rule to ensure compliance with all statutory requirements, formalize existing policy and guidelines contained in the HOME program manuals and include revisions of necessary policy and administrative changes to further enhance operations.
No comments were received concerning the proposed amendment.
The Board approved the final order adopting the amendments on February 5, 2009.
The amendment is adopted pursuant to the authority of the Texas Government Code, Chapter 2306 which provides the Department with the authority to adopt rules governing the administration of the Department and its programs.
This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on February 11, 2009.
TRD-200900553
Michael Gerber
Executive Director
Texas Department of Housing and Community Affairs
Effective date: March 3, 2009
Proposal publication date: January 2, 2009
For further information, please call: (512) 475-3916
The Texas Department of Housing and Community Affairs (the Department) adopts an amendment to 10 TAC §53.47, concerning the HOME Program, without changes to the proposed text as published in the January 2, 2009, issue of the Texas Register (34 TexReg 17), and will not be republished.
The amendment makes changes to the existing rule to ensure compliance with all statutory requirements, formalize existing policy and guidelines contained in the HOME program manuals and include revisions of necessary policy and administrative changes to further enhance operations.
No comments were received concerning the proposed amendment.
The Board approved the final order adopting the amendments on February 5, 2009.
The amendment is adopted pursuant to the authority of the Texas Government Code, Chapter 2306 which provides the Department with the authority to adopt rules governing the administration of the Department and its programs.
This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on February 11, 2009.
TRD-200900554
Michael Gerber
Executive Director
Texas Department of Housing and Community Affairs
Effective date: March 3, 2009
Proposal publication date: January 2, 2009
For further information, please call: (512) 475-3916
The Texas Department of Housing and Community Affairs (the Department) adopts an amendment to 10 TAC §53.80, concerning the HOME Program, without changes to the proposed text as published in the January 2, 2009, issue of the Texas Register (34 TexReg 17), and will not be republished.
The amendment makes changes to the existing rule to ensure compliance with all statutory requirements, formalize existing policy and guidelines contained in the HOME program manuals and include revisions of necessary policy and administrative changes to further enhance operations.
No comments were received concerning the proposed amendment.
The Board approved the final order adopting the amendments on February 5, 2009.
The amendment is adopted pursuant to the authority of the Texas Government Code, Chapter 2306 which provides the Department with the authority to adopt rules governing the administration of the Department and its programs.
This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on February 11, 2009.
TRD-200900555
Michael Gerber
Executive Director
Texas Department of Housing and Community Affairs
Effective date: March 3, 2009
Proposal publication date: January 2, 2009
For further information, please call: (512) 475-3916
SUBCHAPTER A. COMPLIANCE MONITORING
The Texas Department of Housing and Community Affairs (the Department) adopts amendments to 10 TAC Chapter 60, Subchapter A, §§60.101 - 60.124, concerning Compliance Monitoring Rules. Sections 60.102, 60.103, 60.107, 60.108, 60.111, 60.116, and 60.118 are adopted with changes to the proposed text as published in the November 28, 2008, issue of the Texas Register (33 TexReg 9625.) Sections 60.101, 60.104 - 60.106, 60.109, 60.110, 60.112 - 60.115, 60.117, and 60.119 - 60.124 are adopted without changes and will not be republished.
These sections are amended to improve the definition of Substantial Construction, improve the selection of units for physical inspections, and allow for compensation of staff time in checking resident applications.
The proposed amendments were available for public comment until December 18, 2008. In addition to publishing the proposed amendments in the Texas Register, they were made available to the public on the Department's website. Written comments on the proposed amendments were received by email.
Public comments and the Department's responses are presented in the order in which the sections appear in the chapter. The numbers in parentheses by the section titles correspond to the name of the person or entity that made the comment. The summary of each comment is followed by a staff response and the reasons the Department agreed or disagreed with the comment.
Public comments on the proposed amendments were received by: (1) HFI Management/Encore Residential; (2) Aspen Square Management; (3) Texas Affiliation of Affordable Housing Providers; (4) Rural Rental Housing Association of Texas; and (5) individual.
GENERAL COMMENT (4): Comment received suggesting that the Department's Issues of Noncompliance report be modified to indicate the number of points allotted to violations. Currently, the report only shows the cumulative total.
DEPARTMENT RESPONSE: Department staff attempted to accommodate this request. Compliance Monitoring staff members are always available to help owners and managers calculate their compliance score.
GENERAL COMMENT (4): Comment received noting that owners and managers must review their Uniform Physical Condition Standards (UPCS) inspection report to determine why the inspection resulted in Major or Minor violations findings.
DEPARTMENT RESPONSE: The cover letter sent with the report specifies one of the following reasons for the appropriate finding: For Major violations at least one of the following was observed: Exigent Fire and Safety Hazards were not corrected with 24 hours, 20 percent or more of buildings or dwelling Units inspected had a level three violation; or the property scored below 60 percent. For Minor violations at least one of the following was observed: 20 percent or more of the buildings or dwelling Units inspected had any level two violation; or the property scored between 60 percent and 79 percent.
Owners and managers must look at the report to determine what needs to be corrected. It would be redundant for the Department's cover letter to list all violations. The Compliance Monitoring staff is available to help owners and managers understand their UPCS report. No change recommended.
§60.102. Definitions.
COMMENT (3, 5): Comment received regarding the definition of commencement of substantial construction. Specifically, the commenter suggested that the industry would have difficulty adhering to the section of the proposed definition that requires "all major underground utility transmission in place." The commenter stated that utility companies require sidewalks before transformers can be installed and therefore it would not be possible to meet this requirement by the commencement of substantial construction. Another commenter suggested that major utility transmission infrastructure cannot be completed until near the end of construction.
DEPARTMENT RESPONSE: The Department concurs with the difficulty in requiring all major utility transmission infrastructure to be in place. As utilities are required to construct the development, however, Department staff expects that all necessary utilities be available at the property to commence substantial construction and has amended the section accordingly. No change recommended.
COMMENT (3, 5): Comment also suggested that the definition of commencement of substantial construction has become complex and that the standard should be reverted to spending a percentage of the construction contract.
DEPARTMENT RESPONSE: Staff concurs that the definition has become more complex. Staff believes that physical standards are better measures of progress than financial ones. Unfortunately, this makes the definition more complex. In order to provide some flexibility, staff recommended the following change to the definition which still requires owners to meet some physical tests but will also allow progress to be documented by expending funds.
(22) Substantial Construction--
(A) The minimum activity necessary to meet the requirements of substantial construction for new construction Developments will be defined as:
(i) Delivery of an executed partnership agreement with the investor;
(ii) Delivery of the executed construction loan and construction loan agreement;
(iii) completion of the foundation of the clubhouse (if applicable);
(iv) having all permits;
(v) all grading completed (not including landscaping);
(vi) all necessary utilities available at the property; and
(vii) all Right of Way access and one of the following:
(I) 20 percent of the construction contract amount for the development expended, adjusted for any change orders and certified by the inspecting architect; or
(II) 100 percent of the foundations in place and 50 percent of the framing completed; or
(III) 25 percent of all residential buildings roofed.
§60.109. Utility Allowances.
COMMENT (1): Comment made suggesting that provisions of the rule contradict the Texas Commission on Environmental Quality (TCEQ) rules regarding submetering. In addition, the commenter suggested that the new rule will encourage wastefulness of a natural resource.
DEPARTMENT RESPONSE: Staff disagreed with the comment suggesting a contradiction between the Compliance Monitoring rules and the TCEQ rules. The Compliance Monitoring rules allow owners to submeter and charge residents for water and wastewater usage. However, the amount is capped by the Housing Tax Credit rent limit. The TCEQ Rules do not require owners to bill residents for the full amount of water or wastewater they use. It is permitted, not required; therefore, no contradiction exists. Furthermore, the Compliance Monitoring rules reflect the federal requirements of Treasury Regulation 1.42-10; the Department must require owners to comply. No change recommended.
§60.116. Property Condition Standards.
COMMENT (4): Comment received suggesting that vacant units should not be inspected unless 15% or more of a property's units are vacant. The commenter noted that there are often "make ready" issues with vacant units.
DEPARTMENT RESPONSE: Staff agreed that special consideration be given to vacant units. However, owners and managers must turn units within a reasonable period. Staff recommended the addition of the following subsection:
(h) Selection of units for inspection:
(1) Vacant units will not be inspected (alternate units will be selected) if a unit has been vacant for fewer than thirty (30) days.
(2) Units vacant for more than thirty (30) days are assumed to be ready for occupancy and will be inspected. No deficiencies will be cited for inspectable items if utilities are turned off and the inspectable item is present and appears to be in working order.
COMMENT (5): Comment received requesting clarification on the cure period for certain physical violations.
DEPARTMENT RESPONSE: Under the Uniform Physical Condition Standards, inspection protocol deficiencies are classified as level one, two or three. However, there is a special class of level three violations called Exigent and Fire Safety Hazards. Those special level three violations are separately noted for the property representative, in writing, the day of the inspection. The property representative must sign a form acknowledging those violations, correct them within twenty-four (24) hours, and notify the Department of the correction within seventy-two (72) hours. By far, the most common Exigent and Fire Safety Hazards noted are inoperable smoke detectors and blocked fire egresses due to resident furniture.
The Department recognizes that owners have little control over these issues. Therefore the Department does not take these violations into consideration, as long as they are corrected within the required timeframes. However, other types of level two and level three violations are more indicative of the overall condition of the property and will be taken into consideration, even if corrected within twenty-four (24) hours. No change recommended.
§60.118. Special Rules regarding Rents and Rent Violations.
COMMENT (2): Comment received suggesting the Compliance Monitoring rules "have taken a very narrow interpretation of the 8823 Audit Guide" regarding allowable fees that prospective residents can be charged. In addition, the commenter suggested that the Department approve a standard dollar amount that can be added to the application fee to cover staff time spent checking an applicant's qualifications. The commenter suggested that staff time averages one hour per application and that an hour of staff time is $30, which includes payroll overhead. The commenter also suggested that the Department annually pre-approve the application fee charged by each apartment complex the Department monitors.
DEPARTMENT RESPONSE: Staff conferred with the Internal Revenue Service on this issue and the IRS agreed that staff time spent checking the applicant's income, credit history, and landlord references can be included in the application fee. However, payroll overhead cannot be included.
In addition, Department staff reviewed the time study, submitted by the commenter, which indicated the average time spent checking an applicant's income, credit history, and landlord references to be under 30 minutes. Department staff also surveyed several affordable housing management companies who reported an average leasing consultant salary of approximately $11.00 per hour. Further, the approval of application fees on an annual basis for all properties would be an onerous task for the Department and owners. Staff recommended the following change to subsection (c) following the sentence "Owners must only charge…:"
(c) Rent Violations of the maximum allowable limit due to application fees (HTC). Under the HTC program, Owners may not charge tenants any overhead costs as part of the application fee. Owners must only charge the actual cost for application fees as supported by invoices from the screening company the Owner uses. The amount of time Development staff spends on checking an applicant's income, credit history and landlord references may be included in the Development's application fee. Development owners may add $5.50 to their other out of pocket costs for processing an application without providing documentation. Should an owner desire to include a higher amount to cover staff time, wage information and a time study must be supplied to the Department upon request. Documentation of Development costs for application processing or screening fees must be made available during onsite visits or upon request. The Department will review application fee documentation during onsite monitoring visits. If the Department determines from a review of the documentation that the Owner has overcharged residents an application fee, the noncompliance will be reported to the IRS on Form(s) 8823. The noncompliance will be corrected on the later of January 1st of the next year or as of the date the application fee is reduced and evidence of a reduced application fee is supplied to the Department. Owners are not required to refund the overcharged fee amount. If the Development refunds the overcharged fee in full or in part, the units will remain out of compliance until January first of the next year or until the application fee is reduced.
§60.121. Material Noncompliance Methodology.
COMMENT (4): Comment received stating that it is unfair for noncompliance events to have a corrected point value that remains on the property's score for three years. The commenter stated "Some issues should remain on the score, some which are simple clerical or lease wording issues should be removed as soon as they are corrected."
DEPARTMENT RESPONSE: Since specific suggestions as to which issues should remain on a property's score and which should be dropped was not provided, no change was recommended. Owners and managers are encouraged to provide specific comment on this issue during the roundtables held prior to each rule cycle.
The Board approved the final order adopting these amendments, as well as minor clerical corrections, on February 5, 2009.
The amended sections are adopted pursuant to authority granted in §2306.053 of the Texas Government Code, which grants the Department general rulemaking authority to carry on the powers expressly granted or necessarily implied by Chapter 2306.
§60.102.Definitions.
The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise.
(1) Affordability Period--The Affordability Period commences as specified in the Land Use Restriction Agreement (LURA) or federal regulation, or commences on the first day of the Compliance Period as defined by §42(i)(1) of the Internal Revenue Code (IRC) and continues through the appropriate program's affordability requirements or termination of the LURA, whichever is earlier. The term of the Affordability Period shall be imposed by the LURA or other deed restriction and may be terminated upon foreclosure. The Department reserves the right to extend the Affordability Period for HOME properties that fail to meet program requirements. During the Affordability Period the Department shall monitor to ensure compliance with programmatic rules, regulations, and Application representations.
(2) Application--An Application, in the form prescribed by the Department, filed with the Department by an Applicant, including any exhibits or other supporting material. (§2306.6702)
(3) Architect of Record--The architect licensed in the jurisdiction that the project is located in, who prepares, stamps and signs the construction documents, and is legally recorded as the architect for the project.
(4) Board--The governing Board of the Texas Department of Housing and Community Affairs.
(5) Code--The U.S. Internal Revenue Code of 1986, as amended from time-to-time, together with any applicable regulations, rules, rulings, revenue procedures, information statements or other official pronouncements issued by the United States Department of the Treasury or the Internal Revenue Service.
(6) Compliance Period--With respect to a Housing Tax Credit building, the period of fifteen (15) taxable years, beginning with the first year of the Credit Period, pursuant to the Code §42(i)(1).
(7) Continuously Occupied--The same household has resided in the Unit for at least twelve (12) months.
(8) Credit Period--With respect to a Housing Tax Credit building, the period of ten (10) taxable years, beginning with the taxable year the building is placed in service or at the election of the Development Owner, the succeeding taxable year, as more fully defined in the Code §42(f)(1).
(9) Department--The Texas Department of Housing and Community Affairs, an official and public agency of the State of Texas pursuant to Chapter 2306, Texas Government Code.
(10) Development--A property or work or a project, building, structure, facility, or undertaking, whether existing, new construction, remodeling, improvement, or rehabilitation, that meets or is designed to meet minimum property standards required by the Department and that is financed under the provisions of Chapter 2306, Texas Government Code.
(11) Extended Use Period--With respect to a Housing Tax Credit building, the period beginning on the first day of the Compliance Period and ending the later of:
(A) the date specified in the Land Use Restriction Agreement, or
(B) the date which is fifteen (15) years after the close of the Compliance Period.
(12) Historically Underutilized Business (HUB)--Any entity defined as a historically underutilized business with its principal place of business in the State of Texas in accordance with Chapter 2161, Texas Government Code.
(13) Housing Quality Standards--The property condition standards described in 24 CFR §982.401.
(14) HTC Development--Sometimes referred to as "HTC Property." A Development using Housing Tax Credits allocated by the Department.
(15) HUD--The United States Department of Housing and Urban Development.
(16) HUD-regulated Building--The rents and utility allowances of the building are reviewed by HUD on an annual basis.
(17) Low Income Unit--A Unit that is intended for occupancy by an income eligible household, as defined by the Department or the Code.
(18) Land Use Restriction Agreement or LURA--An agreement between the Department and the Development Owner which is a binding covenant upon the Development Owner's successors in interest that encumbers the Development with respect to the requirements of Chapter 2306 of the Texas Government Code, the Code, and the requirements of the various programs administered or funded by the Department.
(19) Material Noncompliance--
(A) A Housing Tax Credit Development located within the state of Texas will be classified by the Department as being in Material Noncompliance status if the noncompliance score for such Development is equal to or exceeds a threshold of 30 points in accordance with the Material Noncompliance provisions, methodology, and point system of this title.
(B) Non HTC Developments monitored by the Department with 1 to 50 Low Income Units will be classified as being in Material Noncompliance status if the noncompliance score is equal to or exceeds a threshold of 30 points. Non HTC Developments monitored by the Department with 51 to 200 Low Income Units will be classified as being in Material Noncompliance status if the noncompliance score is equal to or exceeds a threshold of 50 points. Non HTC Developments monitored by the Department with 201 or more Low Income Units will be classified as being in Material Noncompliance status if the noncompliance score is equal to or exceeds a threshold of 80 points.
(C) For all programs, a Development will be in Material Noncompliance if the noncompliance is stated in §60.121 of this chapter to be Material Noncompliance.
(20) Non HTC Development--Sometimes referred to as Non HTC Property. Any Development not utilizing Housing Tax Credits.
(21) Owner--An individual, joint venture, partnership, limited partnership, trust, firm, corporation, limited liability company, other form of business organization or cooperative that is approved by the Department as qualified to own, construct, acquire, rehabilitate, operate, manage, or maintain a housing Development, subject to the regulatory powers of the Department and other terms and conditions.
(22) Substantial Construction--
(A) The minimum activity necessary to meet the requirements of substantial construction for new construction Developments will be defined as:
(i) Delivery of an executed partnership agreement with the investor;
(ii) Delivery of the executed construction loan and construction loan agreement;
(iii) completion of the foundation of the clubhouse (if applicable);
(iv) having all permits;
(v) all grading completed (not including landscaping);
(vi) all necessary utilities available at the property; and
(vii) all Right of Way access and one of the following:
(I) 20 percent of the construction contract amount for the development expended, adjusted for any change orders and certified by the inspecting architect; or
(II) 100 percent of the foundations in place and 50 percent of the framing completed; or
(III) 25 percent of all residential buildings roofed.
(B) The minimum activity necessary to meet the requirement of Commencement of Substantial Construction for rehabilitation Developments will be defined as having:
(i) building permits issued or a clearance from the City stating that building permits are not required;
(ii) a certification that there are no reasonably foreseeable issues or circumstances which may prevent or delay the start and progress of construction or the timely successful completion of rehabilitation; and
(iii) at least 20 percent of the construction budget expended as documented by the inspecting architect.
(23) Unit--Any residential rental Unit in a Development consisting of an accommodation, including a single room used as an accommodation on a non-transient basis that contains complete physical facilities and fixtures for living, sleeping, eating, cooking, and sanitation.
(24) Unit Type--Units will be considered different Unit Types if there is any variation in the number of bedroom, bathrooms or a square footage difference equal to or more than 120 square feet. Example 102(1): A two bedroom one bath Unit is considered a different Unit Type than a two bedroom two bath Unit. A three bedroom two bath Unit with 1,000 square feet is considered a different Unit Type than a three bedroom two bath Unit with 1,200 square feet. A one bedroom one bath Unit with 700 square feet will be considered equivalent to a one bedroom, one bath Unit with 800 square feet.
(25) UPCS--Uniform Physical Condition Standards as developed by the Real Estate Assessment Center of the Department of Housing and Urban Development.
§60.103.Construction Monitoring.
(a) The Department will monitor the entire construction phase for all applicable requirements according to the level of risk. After Final Construction during the Affordability Period, the Department will periodically monitor the Development to assure that the initial compliance review was correct.
(b) The Department will not provide any funding to any Development unless the Owner certifies that the housing Development is, or will be upon completion of construction, in compliance with the following housing laws:
(1) state and federal fair housing laws, including Chapter 301, Property Code, the Texas Fair Housing Act, Title VIII of the Civil Rights Act of 1968 (42 U.S.C. §§3601, et seq.), and the Fair Housing Amendments of 1988 (42 U.S.C. §§3601, et seq.);
(2) the Civil Rights Act of 1964 (42 U.S.C. §§2000a, et seq.);
(3) the Americans with Disabilities Act of 1990 (42 U.S.C. §§12101, et seq.); and
(4) Section 504, Rehabilitation Act of 1973 (29 U.S.C. §§701, et seq.). (§2306.257)
(c) Evidence of Commencement of Substantial Construction must be submitted no later than the deadline established in the Development's Commitment Notice. Four percent BOND properties are not required to submit evidence of Substantial Construction.
(d) Copies of any construction reports supplied to a syndicator must be supplied to the Department upon request.
(e) Copies of any reports issued during construction that indicate changes that affect the representations made during the Application process must be supplied to the Department upon request.
(f) Owners are required to submit evidence of construction completion within thirty (30) days of completion in a format prescribed by the Department. In addition, the Architect of Record must submit a certification that the Development was built in compliance with all applicable laws.
(g) The Department will conduct a final inspection after receipt of notification of construction completion. During the inspection, the Department will confirm that committed amenities have been provided and will inspect for compliance with the applicable laws referenced in subsection (b) of this section. In addition, a UPCS inspection may be completed.
(h) Owners will be provided a written notice after the final inspection. If any deficiencies are noted, a ninety (90) day corrective action period will be provided.
(i) Forms 8609 and final retainage will not be released until the Owner receives written notice from the Department that all noted deficiencies have been resolved.
(j) During any construction inspection, if the Owner and the Department are unable to agree that an identified issue is a violation, the Owner must request Alternative Dispute Resolution. The process for engaging ADR is outlined in §60.123 of this chapter.
§60.107.Notices to the Department.
(a) If any of the events in paragraphs (1) - (3) of this subsection occur, written notice must be provided to the Department within the timeframes as follows:
(1) Any sale, transfer, exchange, of the Development or any portion of the Development. Notification must be provided at least thirty (30) days prior to this event.
(2) The Development suffers in whole or in part a casualty loss. Notification must be provided within thirty (30) days following the event of loss using the Department's Notice of Casualty Loss (for general casualty losses) or Notice of Disaster Casualty Loss (specific to loss as a result of a Presidentially Declared Disaster).
(3) Owners of Bond Developments shall notify the Department of the date 10 percent of the Units are occupied and the date 50 percent of the Units are occupied within ninety (90) days of such dates.
(b) Owners are responsible for maintaining current information (including contact persons, physical addresses, mailing addresses, email addresses, and phone numbers) for the Ownership entity and management company in the Department's Compliance Monitoring and Tracking System (CMTS). Treasury Regulations require the Department to notify Housing Tax Credit Owners of upcoming reviews and instances of noncompliance. The Department will rely on the information supplied by the Owner in CMTS to meet this requirement.
§60.108.Determination, Documentation and Certification of Annual Income.
(a) For all programs administered by the Department, annual income shall be determined consistent with the Section 8 Program, using the definitions of annual income described in HUD Handbook 4350.3 as amended from time to time. At the time of program designation as a low income household, owners must certify and document household income. In general, all low income households must be certified prior to move in.
(b) The Department permits Owners to use check stubs or other documentation of income and assets provided by the applicant or household in lieu of employment verification forms. It is not necessary to first attempt to obtain an employment verification form as required by the HUD 4350.3.
(c) The Department requires the use of the TDHCA Income Certification form, unless the property also participates in the Rural Development or a project Based HUD program, in which case, the other program's income certification form will be accepted.
§60.111.Income at Recertification (Housing Tax Credit Properties).
(a) Under the Code, HTC Development Owners elect a minimum set aside requirement of 20/50 or 40/60 (20 percent of the Units restricted to the 50 percent income and rent limits or 40 percent of the Units restricted to the 60 percent income and rent limits). The minimum set aside elected by the Development Owner sets the maximum income and rent limits at the property. The Housing Tax Credit program requires mixed income properties to comply with the Available Unit Rule. Regardless of this section if a household's income exceeds 140 percent of the income limit elected by the minimum set aside, owners must comply with the Available Unit Rule. Many HTC Development Owners agreed to lease Units to households with an annual income and rent lower than the maximum limits (for example at the 30 percent, 40 percent or 50 percent income and rent limits) established by the minimum set aside election of the Owner. This requirement is referred to as "additional occupancy restrictions" and is reflected in the Development's Land Use Restriction Agreement. When monitoring, the Department will examine the actual rent and income levels of all tenants to determine if additional rent and income requirements in the LURA are being met. Household income at recertification for the additional occupancy restrictions will be monitored as follows:
(1) Households initially designated at the 30 percent income and rent limits. If upon recertification, the household's income exceeds the 30 percent limit, the Unit will continue to meet the 30 percent set aside requirement provided that the Owner does not charge rent in excess of the 30 percent rent limits. The household will not be required to vacate the Unit for other than good cause. The Owner will not be found in noncompliance provided that when the household moves out, the next available Unit on the property is leased to a household with an income and rent less than the 30 percent limits. If the household is replaced, the rent for the previously qualified Unit may be increased to the limit established by the minimum set aside, subject to applicable HTC requirements, lease provisions and local tenant-landlord laws.
(2) Households initially designated at the 40 percent income and rent limits. If upon recertification, the household's income exceeds the 40 percent limit, the Unit will continue to meet the 40 percent set aside requirement provided that the Owner does not charge rent in excess of the 40 percent rent limits. The household will not be required to vacate the Unit for other than good cause. The Owner will not be found in noncompliance, provided that when the household moves out, the next available Unit on the property is leased to a household with an income and rent less than the 40 percent limits. If the household is replaced, the rent for the previously qualified Unit may be increased to the limit established by the minimum set aside, subject to applicable HTC requirements, lease provisions and local tenant-landlord laws.
(3) Households initially designated at the 50 percent income and rent limits (for HTC properties with the 40/60 minimum set aside). If upon recertification, the household's income exceeds the 50 percent income limit, the Unit will continue to meet the 50 percent set aside provided that the Owner does not charge rent in excess of the 50 percent rent limits. The household will not be required to vacate the Unit for other than good cause. The Owner will not be found in noncompliance provided that when the household moves out, the next available Unit on the property is leased to a household with an income and rent less than the 50 percent limits. Once the household has been replaced, the rent for the previously qualified Unit may be increased to the limit established by the minimum set aside, subject to applicable HTC requirements, lease provisions and local tenant-landlord laws.
(b) This section does not apply to households designated at the maximum income and rent limits required by the Code. Nor does this section in any way require a Development to lease more Units under the additional occupancy restrictions than established in the LURA.
(c) For those properties that are not required to perform recertifications, households will maintain the designation they had at move in. Owners must ensure that lower rent restrictions are adhered to throughout the household's occupancy.
(d) Preservation, HTF, HOME and BOND Developments, with any market units in one or more buildings (as evidenced in their LURA) must continue to perform annual recertifications of all households residing in program units. Owners of 100 percent low income Developments are not required to perform annual income recertifications. HTC Owners must perform annual income recertifications if the project has any market rate units. For HTC Developments, the election made on Part II of the 8609 will determine if a building is part of a project. HTC Development Owners must submit Forms 8609 with Part II completed. The Department may also require HTC Owners to complete Form 8821 to permit the Department to confirm the elections with the IRS.
(e) For HTC, Preservation, HTF, and/or BOND Developments in which the LURA requires 100 percent of the units to be leased to income eligible families, the following recertification requirements apply:
(1) To comply with HUD reporting requirements, once every calendar year, the Development must collect a self-certification form from each household that reports the number of household members, the age of each household member, disability status, monthly rental assistance amounts received (if any), and race and ethnicity. In addition, the self certification will collect information about student status to establish ongoing compliance under the HTC and BOND programs. The Development must use the Department's Annual Eligibility Certification to collect this information and must maintain the certification in all household files.
(2) On 100 percent low income Housing Tax Credit developments, households may transfer to any unit within the same project (as determined on Part II of the 8609 for HTC Developments). On mixed income Housing Tax Credit Developments, households may transfer to any unit within the Development if as of their most recent (re) certification, their income was less than 140 percent of the maximum allowable limit. If the owner of a Housing Tax Credit development elected to treat each building as a separate project, households must be certified and low income to transfer to another building.
(3) Owners must review the Annual Eligibility Certification for the following items which would require further action:
(A) Changes in household composition. If members are added to an existing household, Owners must determine eligibility and complete a certification. The new household must be screened for income, assets, and student status and the existing Income Certification form must be updated. Owners must obtain first hand or third party verification of income and assets.
(i) If the Development becomes aware of the additions to households during the year, this action must be taken at the time the new household member moves in; Owners may not wait until the Annual Eligibility Certification is completed to take action. The Unit Status Report must be updated to reflect current circumstances as the property becomes aware of changes in household size.
(ii) If all original tenants have vacated the unit, the remaining tenants must be certified as a new income-qualified household unless the tenants were income qualified at the time of move in. HTC Units in noncompliance will be reported to the IRS on Form(s) 8823 and/or scored in the Department's Compliance Status System as applicable.
(B) Student status. Developments must use a lease addendum (or incorporate into their lease) a requirement for households to report changes in student status. If at any time the household reports a change in student status or discloses a change on the Annual Eligibility Certification form, the Owner must determine if the household is still eligible under the program. If the household meets one of the exceptions, documentation supporting eligibility must be gathered and retained in the lease file. Units in noncompliance will be reported to the IRS on Form(s) 8823 and/or scored in the Department's Compliance Status System as applicable.
(4) Failure to complete the Annual Eligibility Certification and maintain the form in household files will result in an issue of noncompliance that will be scored as shown in Figure: 10 TAC §60.121(l) under "Failure to maintain or provide Annual Eligibility Certification". No Form(s) 8823 will be filed with the IRS for the noncompliance.
(5) If a 100 percent low income Development continues to complete full recertifications, the Annual Eligibility Certification form must still be completed and the Unit Status Report must be updated at the completion of the recertification. The Department will not review the recertification paperwork during monitoring visits unless noncompliance is identified with the initial certification.
(f) For HOME Investment Partnership Developments, in accordance with 24 CFR §92.252 and §92.203 of the HOME Final Rule, the following recertification requirements apply:
(1) Once every calendar year, the Development must collect a self-certification form from each household that reports the household's income, number and ages of household members, student status, disability status, monthly rental assistance amounts received (if any), and race and ethnicity. The Development must use the Department's Income Certification form to collect this information and must maintain the certification in all household files. Failure to complete the Income Certification and maintain the form in household files will result in an issue of noncompliance that will be scored as shown in Figure: 10 TAC §60.121(l) under "Failure to maintain or provide Annual Eligibility Certification".
(2) HOME Developments must also complete full recertifications of each HOME Unit in every sixth year of the Development's Affordability Period. Example 111.1: A HOME property with an affordability period beginning in 2010 must perform full recertifications of all HOME households in 2015. All households must be re-certified, even households that moved in during 2014. Full recertifications at any other time are not required unless, the household self reports an annual income in excess of the 80 percent Area Median Income or as stated in 24 CFR §92.252, there is evidence that the tenant's written statement failed to completely and accurately state information about the family's size or income or the property has otherwise been directed to institute full recertifications by the Department.
§60.116.Property Condition Standards.
(a) All Developments funded by the Department must be decent, safe, sanitary in good repair, and suitable for occupancy throughout the Affordability Period. The Department will use HUD's Uniform Physical Condition Standards (UPCS) to determine compliance with property condition standards. In addition, Developments must comply with all local heath, safety, and building codes. The Department may contract with a third party to complete UPCS inspections.
(b) Housing Tax Credit Development Owners are required by Treasury Regulation 1.42-5 to report (through the Annual Owner's Compliance Report) any local health, safety, or building code violations. HTC Developments that fail to comply with local codes shall be reported to the IRS.
(c) The Department will evaluate UPCS reports in the following manner:
(1) A finding of Major Violations will be cited if:
(A) life threatening health, safety, or fire safety hazards are reported on the Notification of Exigent and Fire Safety Hazards Observed form and are not corrected within twenty-four (24) hours of the inspection with notification submitted to the Department within seventy-two (72) hours of the inspection. Failure to notify the Department within seventy-two (72) hours of the correction of any exigent health and safety or fire safety hazards listed on the Notification will result in a finding of Major Violations of the Uniform Physical Condition Standards for the Development;
(B) 20 percent of the violations noted are level three deficiencies other than level three deficiencies reported on the Notification of Exigent and Fire Safety Hazards Observed form and corrected in the seventy-two (72) hour limit; or
(C) an overall UPCS score of less than 60 percent (59 percent or below) is reported.
(2) A finding of Pattern of Minor Violations will be assessed if:
(A) 20 percent of the violations noted are level two deficiencies; or
(B) An overall score between 60 percent and 79 percent is reported.
(3) Findings of both Major and Minor Violations will be assessed if deficiencies reported meet the criteria for both.
(d) The Department is required to report to the Internal Revenue Service on Form 8823 any HTC Development that fails to comply with any requirements of the UPCS or local codes at any time (including smoke detectors and blocked egresses). Accordingly, the Department will submit Form(s) 8823 for any UPCS violation. However, if the violation(s) do not meet the conditions described in subsection (c)(1) or (2) of this section, the issue will be noted in the Department's compliance status system as Administrative Reporting and no points will be assigned in the Department's compliance status evaluation of the Development. Non HTC properties that do not meet thresholds for Major and Pattern of Minor Violations as described in subsection (c)(1) or (2) in this section and correct all life threatening health, safety, and fire safety hazards noted at the time of inspection as directed in subsection (c)(1)(A) of this section will not receive findings for UPCS inspections. Items noted that do not exceed thresholds for Major and Pattern of Minor Violations must be corrected by submission of an Owner's Certification of repair within the ninety (90) day corrective action period.
(e) Acceptable evidence of correction of deficiencies is a certification from an appropriate licensed professional that the item now complies with the inspection standard or other documentation that will allow the Department to reasonably determine when the repair was made and whether the repair sufficiently corrected the violation(s) of UPCS standards (examples of such documentation includes work orders, photographs, and/or invoices to third party repair specialists).
(f) The Department will provide a ninety (90) day corrective action period to respond to a notice of noncompliance for violations of the Uniform Physical Condition Standards. The Department will grant up to an additional ninety (90) day extension if there is good cause and the Owner clearly requests an extension.
(g) 24 CFR §92.251 of the HOME Final Rule requires rental property assisted with HOME funds to be maintained in compliance with all local codes and Housing Quality Standards (24 CFR §982.401). To meet this requirement, all HOME rental Development Owners must annually complete an HQS inspection of all HOME assisted Units. The Department will review HQS inspection sheets for all units for compliance with this requirement during onsite monitoring visits.
(h) Selection of units for inspection:
(1) Vacant units will not be inspected (alternate units will be selected) if a unit has been vacant for fewer than thirty (30) days.
(2) Units vacant for more than thirty (30) days are assumed to be ready for occupancy and will be inspected. No deficiencies will be cited for inspectable items if utilities are turned off and the inspectable item is present and appears to be in working order.
§60.118.Special Rules Regarding Rents and Rent Limit Violations.
(a) Rent or Utility Allowance Violations of the maximum allowable limit (HTC). Under the HTC program, the amount of rent paid by the household plus an allowance for utilities, plus any mandatory fees, such as utilities paid to the owner, cannot exceed the maximum applicable limit (as determined by the minimum set aside elected by the Owner) published by the Department. If it is determined that a HTC Development, during the Compliance Period, collected rent in excess of the rent limit established by the minimum set aside, the Department will report the violation as corrected on the date that the rent plus the utility allowance, plus fees, is less than the applicable limit. The refunding of overcharged rent does not avoid the disallowance of the credit by the Internal Revenue Service.
(b) Rent or Utility Allowance Violations of additional rent restrictions (HTC). If the Owner agreed to lease Units at rents less than the maximum allowed under the Code (additional occupancy restrictions), the Department will require the Owner to refund to the affected residents the amount of rent that was overcharged. This applies during the entire Affordability Period. The noncompliance event will be considered corrected on the date which is the later of the date the overcharged rent was refunded/credited to the resident or the date that the rent plus the utility allowance is equal to or less than the applicable limit. Example 118(1): For Internal Revenue Code §42 purposes, the maximum allowable limit is 60 percent. However, the Owner agreed to lease some Units to households at the 30 percent income and rent limits. It was discovered that the 30 percent households were overcharged rent. The Owner will be required to reduce the current amount of rent charged and refund the excess rents to the households.
(c) Rent Violations of the maximum allowable limit due to application fees (HTC). Under the HTC program, Owners may not charge tenants any overhead costs as part of the application fee. Owners must only charge the actual cost for application fees as supported by invoices from the screening company the Owner uses. The amount of time Development staff spends on checking an applicant's income, credit history, and landlord references may be included in the Development's application fee. Development Owners may add $5.50 to their other out of pocket costs for processing an application without providing documentation. Should an Owner desire to include a higher amount to cover staff time, wage information and a time study must be supplied to the Department upon request. Documentation of Development costs for application processing or screening fees must be made available during onsite visits or upon request. The Department will review application fee documentation during onsite monitoring visits. If the Department determines from a review of the documentation that the Owner has overcharged residents an application fee, the noncompliance will be reported to the IRS on Form(s) 8823. The noncompliance will be corrected on the later of January 1st of the next year or as of the date the application fee is reduced and evidence of a reduced application fee is supplied to the Department. Owners are not required to refund the overcharged fee amount. If the Development refunds the overcharged fee in full or in part, the units will remain out of compliance until January 1st of the next year or until the application fee is reduced.
(d) Rent or Utility Allowance Violations on Non Housing Tax Credit properties. If it is determined that the property collected rent in excess of the allowable limit, the Department will require the Owner to refund to the affected residents the amount of rent that was overcharged.
(e) Trust Account to be established. If the Owner is required to refund rent under subsection (b) or (d) of this section and cannot locate the resident, the excess rent collected must be deposited into a trust account for the tenant. The account must remain open for a four (4) year period, until all funds are claimed, or for four (4) years. If funds are not claimed after the four year period, the unclaimed funds must be remitted to the Texas Comptroller of Public Accounts Unclaimed Property Holder Reporting Section to be dispersed as required by Texas unclaimed property statutes.
(f) Rent Adjustments for HOME properties. 24 CFR §92.252 of the HOME Final Rule requires Owners to charge households with an income in excess of 80 percent at recertification, a rent equal to the lesser of 30 percent of the household's adjusted income or the market rent for comparable unassisted Units in the neighborhood. If at recertification the household self certifies an income in excess of the 80 percent limit, documentation of all income, assets and allowable deductions must be obtained by the owner. The Department will find a HOME property in noncompliance with this section if the Owner fails to determine the over income household's adjusted income and maintain documentation of market rents for comparable unassisted Units in the neighborhood.
(g) Special conditions for CDBG properties. To determine if a Unit is rent restricted, the amount of rent paid by the household, plus an allowance for utilities, plus any rental assistance payment must be less than the applicable limit.
This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on February 11, 2009.
TRD-200900571
Michael Gerber
Executive Director
Texas Department of Housing and Community Affairs
Effective date: March 3, 2009
Proposal publication date: November 28, 2008
For further information, please call: (512) 475-3916
CHAPTER 307. INSPECTIONS OF HOMES IN AREAS WITHOUT MUNICIPAL INSPECTIONS
The Texas Residential Construction Commission (commission) adopts the amendment made to 10 TAC §307.3, concerning qualified fee inspectors, with minor grammatical changes to the proposed text as published in the December 26, 2008, issue of the Texas Register (33 TexReg 10395). Due to relationships of consanguinity (kinship), affinity (marriage), and business affiliations, a builder/remodeler's interests may be adverse to or in conflict with a fee inspector's professional responsibility to conduct a thorough inspection of residential construction and review of construction practices.
In accordance with Property Code §446.004 and §307.3, fee inspectors may include a professional engineer licensed by the Texas Board of Engineering, an architect registered with the Texas Board of Architectural Examiners, a professional inspector licensed by the Texas Real Estate Commission, or a third-party inspector registered with the commission. To varying degrees, these professionals are required to maintain certain levels of ethical business practice and to make known to their clients conflicts or potential conflicts of interest.
The adopted amendment to §307.3 does not lessen the ethical consideration or professional standards required by 22 TAC Chapter 137 applicable to licensed engineers, by 22 TAC §1.145 applicable to registered architects, or by 22 TAC §535.220 applicable to licensed real estate inspectors. Instead, when conducting residential construction inspections as a fee inspector, these professionals are still held to their required professional standards.
The adopted amendment establishes whether a relationship creates a conflict of interest. The adopted amendment eliminates from eligibility as a fee inspector those persons who reside in the same household as the builder/remodeler or builder/remodeler's spouse, are related to the builder/remodeler or builder/remodeler's spouse within the fourth degree by consanguinity or affinity, or who have a fiduciary or ownership interest in each other's businesses or their spouse's business. The adopted amendment establishes the framework for determining conflicts of interest due to relationships of consanguinity, affinity, and affiliate businesses. However, the adopted amendment is not exhaustive and obligates the builder/remodeler and inspector to determine whether factors other than those expressly enumerated in the proposed amendment or whether any additional relationship creates a conflict of interest or the appearance of impropriety.
The adopted amendment will aid the commission in administration of the fee inspection program. The adopted amendment will promote inspections conducted by an unbiased inspector and will cultivate stakeholders' confidence in the residential dwelling inspection outcome. It is in the public interest that fee inspectors conduct an inspection upon which the builder/remodeler and homeowner may rely. The adopted amendment advances this public interest by requiring the builder/remodeler to fulfill his obligations under Chapter 307 using a fee inspector who has no conflict of interest with the builder/remodeler of the home. Most builder/remodelers already recognize that it is in their interest, in the interest of the homeowner, and in the public interest that the inspections required under Chapter 307 be conducted by a fee inspector without a conflict of interest. Most fee inspectors also recognize that, to remain in good standing as a professional, it is necessary to conduct business in a manner that is above reproach.
The adopted amendment implements new legislation enacted during the 80th Legislative Session, Regular Session, House Bill 1038 (Act effective September 1, 2008, 80th Legislature, Regular Session), which includes changes to Title 16, Property Code. More specifically, the amendment is adopted under Property Code §408.001, which provides general authority for the commission to adopt rules necessary for the implementation of Title 16 of the Property Code and under chapter 446 of the Property Code, which requires inspection of residential construction that is located in unincorporated areas and areas not otherwise subject to municipal inspections.
The commission received no comments on the proposed amendment.
The rule amendment is adopted pursuant to Property Code §408.001, which provides general authority for the commission to adopt rules necessary for the implementation of Title 16 of the Property Code; Property Code §446.001, which gives the commission the authority to inspect homes in unincorporated areas; the commission's enabling act; and the Administrative Procedures Act, Texas Government Code, Chapter 2001.
No other statutes, articles, or codes are affected by the proposed rule amendment.
§307.3.Qualified Fee Inspectors.
(a) To serve as a fee inspector under this chapter, an individual must be one of the following:
(1) a professional engineer licensed by the Texas Board of Engineering;
(2) an architect registered with the Texas Board of Architectural Examiners;
(3) a professional inspector licensed by the Texas Real Estate Commission; or
(4) a third-party inspector registered with the commission under Chapter 303, Subchapter C of this title.
(b) The license or registration issued by one of the state governmental bodies listed in subsection (a) of this section must be in an active status of good standing with the issuing body at the time of hire, for the individual to be eligible to serve as a fee inspector under this chapter.
(c) A builder/remodeler may not engage a fee inspector if:
(1) the fee inspector or fee inspector's spouse is related to the builder/remodeler or the builder/remodeler's spouse within the fourth degree of consanguinity or affinity, as determined by the following chart:
(2) the builder/remodeler or builder/remodeler's spouse resides in the same household as the fee inspector or fee inspector's spouse;
(3) the builder/remodeler or builder/remodeler's spouse, directly or indirectly, owns or controls any interest ownership in the business or businesses of the fee inspector or fee inspector's spouse;
(4) the fee inspector or fee inspector's spouse, directly or indirectly, owns or controls any interest ownership in the business or businesses of the builder/remodeler's spouse;
(5) the builder/remodeler or builder/remodeler's spouse is a director or office holder of any business of the fee inspector or fee inspector's business;
(6) the fee inspector or fee inspector's spouse is a director or office holder of any business of the builder/remodeler or builder/remodeler's spouse;
(7) if there is any reciprocity of services between the builder/remodeler, builder/remodeler's spouse, fee inspector, or fee inspector's spouse; or
(8) there is a relationship between the builder/remodeler, builder/remodeler's spouse, fee inspector, or fee inspector's spouse, directly or indirectly, that creates any conflict of interest or the appearance of impropriety.
This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on February 11, 2009.
TRD-200900573
Susan K. Durso
General Counsel
Texas Residential Construction Commission
Effective date: March 3, 2009
Proposal publication date: December 26, 2008
For further information, please call: (512) 463-3926