PART 1. TEXAS DEPARTMENT OF HOUSING AND COMMUNITY AFFAIRS

CHAPTER 10. UNIFORM MULTIFAMILY RULES

SUBCHAPTER F. COMPLIANCE MONITORING

10 TAC §§10.606, 10.613, 10.622, 10.626, 10.627

The Texas Department of Housing and Community Affairs (the Department) adopts, with changes to the proposed text as published in the March 24, 2023, issue of the Texas Register (48 TexReg 1608), amendments to 10 TAC §10.606 Construction Inspections; 10 TAC §10.613 Lease Requirements; 10 TAC §10.622 Special Rules Regarding Rents and Rent Limits Violations; 10 TAC §10.626 Liability; and 10 TAC §10.627 Temporary Suspension of Sections of this Subchapter. The rules will be republished. The rule amendments add a new and revised notification requirements regarding rent increases, correct references to other Department rules, add existing and new program requirements to existing subsections of the rule, and delete outdated references to Average Income.

FISCAL NOTE. Mr. Bobby Wilkinson, Executive Director, has determined that, for each year of the first five years the amendment to the rule is in effect, enforcing or administering the rule amendment does not have any foreseeable implications related to costs or revenues of the state or local governments.

GOVERNMENT GROWTH IMPACT STATEMENT. Mr. Wilkinson also has determined that, for the first five years the adopted rule amendment would be in effect:

1. The adopted amendment to the rule will not create or eliminate a government program;

2. The adopted amendment to the rule will not require a change in the number of employees of the Department;

3. The adopted amendment to the rule will not require additional future legislative appropriations;

4. The adopted amendment to the rule will result in neither an increase nor a decrease in fees paid to the Department;

5. The adopted amendment to the rule will create a new regulation; which is needed to provide economic benefit for tenants.

6. The adopted amendment to the rule will not repeal an existing regulation;

7. The adopted amendment to the rule will not increase or decrease the number of individuals subject to the rule's applicability; and

8. The adopted amendment to the rule will neither positively nor negatively affect this state's economy.

PUBLIC BENEFIT/COST NOTE. Mr. Wilkinson also has determined that, for each year of the first five years the adopted amendment to the rule is in effect, the public benefit anticipated as a result of the action will be a clearer and more germane rule. While there may be a theoretical loss of increased rent to the developer, i.e. to not be able to receive rent increases for the notice period, this theoretical loss is difficult to quantify and a simple and reliably accurate model for such loss cannot be created: for every tenant that may remain in the property and could be estimated to pay the increased rent, it may be just as likely that the charged tenant, when learning of a rent increase of that amount (over $900 per year if more than $75 per month) would be unable to pay the increased rent, give notice and move-out, or just moves out -- in all cases creating a different economic impact on the tenant and property. Additionally, to only consider the fiscal impact to the developments limits the analysis to only the property. The fiscal impact on a low-income household of a large rent increase with little to no advance notice cannot be disregarded from this analysis, nor the likelihood of increased evictions. Therefore, the public benefit versus the theoretical cost clearly favors the adoption of this policy, which also falls squarely within the foundational purposes of the Department as seen in Tex. Gov't Code §§2306.001 and .002.

ADVERSE IMPACT ON SMALL OR MICRO-BUSINESSES OR RURAL COMMUNITIES. The Department has determined that there will be no economic effect on small or micro-businesses or rural communities.

SUMMARY OF PUBLIC COMMENT. Public comment was accepted from March 24, 2023, through April 24, 2023. Comment was received from 7 commenters. Comments regarding the proposed amendments were accepted in writing and by e-mail with comments received from:

Executive Vice President, Texas Apartment Association

Program Manager, Supportive Housing and Community Recovery Team

Attorney at Law, Texas RioGrande Legal Aid

Research Analyst, Texas Housers

Resolution Asset Management, Encore Residential

Compliance Director, Dayrise Residential

Compliance Director, Accolade Property Management

Rule Section §10.606.

Comment Summary: No comments received

Rule Section §10.613.

Comment Summary: Commenter 3 proposes a small grammatical adjustment to the second sentence in subsection (n). The sentence should read: "Challenges to evictions or terminations of tenancy must be determined by a court of competent jurisdiction..."

Commenter 4 proposes strengthening tenant protections related to termination of tenancy and applying these protections consistently to all multifamily programs. Their proposals include defining "good cause," requiring all payments apply to rent first and not late fees, and pursuing alternatives to eviction, including providing opportunities to cure lease violations. They propose the following language: "§10.613(a-1) Eviction and/or termination of lease for HTC, TCAP, and Exchange Developments.

(1) The Development must specifically state in the lease or in an addendum attached to the lease that evictions or terminations of tenancy for other than those listed in section §10.613(a-1)(2) are prohibited.

(2) Owner may not terminate the tenancy or refuse to renew the least of a tenant except for:

(i) Serious or repeated violations of the terms and conditions of the lease agreement (e.g., failure to pay rent, or unlawful activity that threatens the health, safety, or right to peaceful enjoyment of the premises by other residents; willful and repeated destruction of rental property or property of other residents; or use of the unit for unlawful purposes);

(ii) Completion of tenancy period for transitional housing in which case at least 30 days before the end of the transitional housing tenancy period, the Owner is required to provide the tenant with written notice that the tenancy period is ending in accordance with subsection (a-2), or

(iii) The temporary or permanent uninhabitability of the Development justifying relocation of all or some of the Development's tenants (except where such uninhabitability is caused by the deferred maintenance, actions or inactions of the Owner). Termination under this provision shall trigger either the Relocation provisions in section 8 of this subsection or grounds for termination of the lease, except in cases where the property becomes uninhabitable due to the tenant's intentional actions.

(3) Owner hereby agrees to apply all partial and/or full payments made by a tenant or on behalf of a tenant to Rent first to reduce the risk of eviction for nonpayment of rent.

(4) Should a tenant become current on Rent prior to the issuance of a judgment for eviction due to nonpayment of Rent, Owner agrees to dismiss the eviction proceeding with prejudice.

(5) Owner may not evict a tenant for nonpayment of Rent after a Payment Plan has been entered into, unless the tenant subsequently violates the Payment Plan.

(6) In the event of an eviction being filed against a tenant, Owner will provide contact information of government-funded legal aid agencies or other legal representation organizations the tenant may contact to request assistance in either understanding or representing them in the eviction process. Owner agrees to work with the legal representative, if one is obtained, to reach an agreement and dismiss the eviction proceeding or take other measures to prevent the court from issuing a judgment in the eviction proceeding.

(7) Once a lease is terminated, Owner may not take, hold, or sell personal property of the tenant, or any occupant of the tenant's dwelling, without written notice to the tenant and a court decision on the rights of the parties except when the property remains in the unit after the tenant has moved out of the unit and the property is disposed of in accordance with State law.

(8) Tenant relocation for HTC, TCAP, and Exchange Developments. If a tenant is required to move out of the Development, or a tenant's individual unit, due to any repair, replacement, renovation of the unit, Owner will provide relocation assistance to the tenant including but not limited to packing, moving, storage and seeking a replacement unit as closely as possible mirroring Development and the living conditions (e.g. location, cost, proximity to community resources, etc.) the tenant enjoyed while residing at the Development. Upon the completion of such repairs or renovations which necessitated the tenant's relocation, Owner agrees to offer the tenant the Right of First Refusal to return to their previous unit or a comparable unit within the Development. If the tenant refuses to return to the Development within thirty (30) business days from the date that the Right of First Refusal was offered, then the Owner is no longer responsible for providing relocation assistance.

§10.613(a-2) Notices regarding eviction and/or termination of lease for HTC, TCAP, and Exchange Developments.

(1) To terminate or refuse to renew a tenancy, the Owner must serve written notice to the tenant specifying the grounds for the action at least 30 days before the termination of tenancy, unless the termination is based on serious violent criminal activity that poses an immediate threat to the safety of staff or other residents.

(2) The written notice shall be served to the tenant by either:

(i) Both first class mail and either certified or registered mail; or

(ii) by personal delivery to the tenant or a household member 16 years or older.

(3) Opportunity to Discuss. The written notice shall also inform the tenant of the right to discuss with the Owner the proposed termination or non-renewal of tenancy. The notice must give the tenant at least ten (10) business days from the date of the notice to request a meeting with the Owner. The tenant may provide written notice of a request to meet with an Owner through mail, text message, e-mail, or any other written communication that the Owner uses for correspondence with tenants. If the tenant makes a timely request, the Owner agrees to meet with the tenant and to discuss the proposed termination or nonrenewal.

(4) Opportunity to Cure Lease Violations. For termination or nonrenewal of tenancy due exclusively to serious or repeated lease violations, excluding drug activity or other serious criminal activity, the written notice shall also inform the tenant of the opportunity to cure any alleged violation of the lease agreement before the effective date of the termination or nonrenewal in the written notice as required by paragraph (1) of this subsection."

Commenter 5 and Commenter 6 oppose adding the CARES Act requirement of a 30 day eviction notice for nonpayment of rent. They argue that this 30 days is in addition to the time it takes to get a court date. They feel this is unreasonable and hinders the owner's ability to pay for rising costs.

STAFF RESPONSE:

Staff agrees with Commenter 3 and proposes their language be adopted.

While staff appreciates Commenter 4's commitment to helping low income Texans, their proposed rewrite of 10 TAC §10.613(a), Eviction and/or termination of lease for HTC, TCAP, and Exchange Developments, would be an overreach of the Department's authority and would cause a financial and administrative burden for the Department's stakeholders. It is not within the Department's purview to define "good cause;" this is the job of the judicial system. The additional clarifications in the rule for federally funded Developments or Developments with HOME Match Units in §10.613(b) are pulled directly from federal regulations, but do not apply to the tax credit program. The Department does not wish to overly regulate. We believe these comments may be more effectively implemented by amending the lease contract, which is a tenant-landlord matter. No changes to this section will be made as a result of this comment.

Staff disagrees with comments made by Commenters 5 and 6. After receiving previous comments in opposition to the CARES Act 30 day eviction notice, staff agreed to add language that would make this provision invalid if additional legislation is passed removing or altering the requirement. In the meantime, staff is required to enforce the requirement and felt that adding it to the compliance rules would add clarity and transparency. No changes to this section will be made as a result of these comments.

Rule Section §10.622.

Comment Summary: Commenter 1 opposes the proposed change requiring 75 days' notice for rental increases of $75 or more as arbitrary. They feel a 30 or 60 day notice is more compatible with the TAA lease and the current practice of most owners. Commenter 5 agrees with Commenter 1 and adds that they should be able to evict people who are just "working the system" and move in people who can actually pay their rent.

Commenter 2 supports this change and asks that language be added to require the notice also be sent to the applicable housing authority if the tenant is a voucher holder. That way the tenant will know whether the increase is covered by the voucher or not, decreasing the risk of incurring late fees or facing eviction.

Commenter 3 feels the proposed change does not go far enough. Ideally rent would be locked in for the entire term of the lease as it is with conventional apartments. Also, the $75 is arbitrary, and the amount should instead be based on a percentage of the current rent. The commenter proposes the following language: "(l) An owner may not increase the rent during the first six months of the lease term. Owners who choose to increase the rent during the lease term must give 75 days' written notice of the rent increase and may not increase the rent by more than 2% of the monthly rent. Tenants who are notified of a rent increase during the term of the lease must also be notified that they have the legal right to terminate their tenancy any time before the effective date of the rent increase. If an owner increases the household rent by more than 2% after the end of the lease term, the owner must give the household 75 days' written notice of the proposed rent increase."

Commenter 4 supports the proposed changes and requests the Department update the "Income and Rent Limit Tenant Handout" and "Income and Rent Limits in TDHCA-Supported Properties" webpage to highlight the new requirements.

Commenter 6 opposes both the 75 day notice requirement and the $75 limit. They argue that most housing authorities require a 60 day notice of increase for their voucher holders, and that should be sufficient across the board. If required to send out a 75 day notice, another notice would still be required at 60 days for voucher holders. Also, they feel rental increases should not be capped at $75 because, due to COVID, many owners have not raised rent in years. Increases of any amount should be allowed as long as the rent remains below the limit.

Commenter 7 opposes the proposed notice requirement because the 75 days does not align with the lease's 35 day notice requirement. They also feel that maximum rent should be available to owners as soon as possible for the long-term viability of the asset.

STAFF RESPONSE:

In response to Commenters 1 and 5, staff does not believe that 60 days is enough time for low income tenants to prepare for a rent increase of $75 or more. As multiple commenters noted, the cost of doing business has increased due to inflation; however, the same can be said for the cost of living for the tenant.

In response to Commenter 2, staff appreciates the intent; however, the relationship between the owner and the housing authority is not regulated by the Department. If Commenter believes strongly in this requirement, it would be best to work with the housing authority or HUD.

In response to Commenter 3, staff agrees that it is an unfair reality that a lease contract for market households locks in a rental rate for the entire term but does not for low income tenants; however, owners of market rate housing do not have rent restrictions. Department programs are already rent restricted under federal and state regulations. It is not the Department's role to implement further rent control. Several bills are currently making their way through the state legislature which if enacted would regulate rental increases during a lease term, and the Department continues to monitor their progress.

Staff appreciates Commenter 4's support and will look into updating the handouts.

In response to Commenter 6, staff is not advocating a cap on rental increases; only a threshold at which the owner must provide extended notice. Staff does not believe the housing authority would oppose notice of an additional 15 days; therefore only one notice at 75 days would need to be given.

In response to Commenter 7, staff feels that while there may be a theoretical loss of increased rent to the developer, i.e. to not be able to receive rent increases for the notice period, this theoretical loss is difficult to quantify and a simple and reliably accurate model for such loss cannot be created: for every tenant that may remain in the property and could be estimated to pay the increased rent, it may be just as likely that the charged tenant, when learning of a rent increase of that amount (over $900 per year if more than $75 per month) would be unable to pay the increased rent, give notice and move-out, or just moves out -- in all cases creating a different economic impact on the tenant and property. Additionally, to only consider the fiscal impact to the developments limits the analysis to only the property. The fiscal impact on a low-income household of a large rent increase with little to no advance notice cannot be disregarded from this analysis, nor the likelihood of increased evictions. Therefore, the public benefit versus the theoretical cost clearly favors the adoption of this policy, which also falls squarely within the foundational purposes of the Department as seen in Tex. Gov't Code §§2306.001 and .002.

Rule Section §10.626.

Comment Summary: No comments received

Rule Section §10.627.

Comment Summary: No comments received

STATUTORY AUTHORITY. The adoption of this action is made pursuant to Tex. Gov't Code §2306.053, which authorizes the Department to adopt rules.

Except as described herein the action affects no other code, article, or statute.

§10.606.Construction Inspections.

(a) Owners are required to submit evidence of final construction within 30 calendar days of completion in a format prescribed by the Department. Owners are encouraged to request a final construction inspection promptly to allow the Department to inspect Units prior to occupancy to avoid disruption of households in the event that corrective action is required. In addition, the Architect of Record must submit a certification that the Development was built in compliance with all applicable laws, and the Engineer of Record (if applicable) must submit a certification that the Development was built in compliance with the design requirements.

(b) During the inspection, the Department will confirm that committed amenities have been provided and will inspect for compliance with the applicable accessibility requirements. In addition, a Uniform Physical Condition Standards inspection may be completed.

(c) IRS Form(s) 8609 will not be released until the Owner receives written notice from the Department that all noted deficiencies have been resolved.

§10.613.Lease Requirements.

(a) Eviction and/or termination of a lease. HTC, TCAP, and Exchange Developments must specifically state in the lease or in an addendum attached to the lease that evictions or terminations of tenancy for other than good cause are prohibited. To terminate tenancy, the Owner must serve written notice to the tenant specifying the grounds for the action. For nonpayment of rent, HTC, TCAP, Exchange, and NHTF Developments require a thirty (30) day written notice. If the CARES Act is modified to eliminate the 30-day notice requirement, HUD or Treasury requirements will supersede this 30-day notice requirement for nonpayment of rent.

(b) HOME, TCAP RF, NHTF, NSP, and HOME-ARP Developments are prohibited from evicting low income residents or refusing to renew a lease except for serious or repeated violations of the terms and conditions of the lease, for violations of applicable federal, state or local law, for completion of the tenancy period for Transitional Housing (if applicable), or for other good cause. It must be specifically stated in the lease or in an addendum attached to the lease that evictions or non-renewal of leases for other than good cause are prohibited (24 CFR §92.253 and 24 CFR §93.303). Owners must also comply with all other lease requirements and prohibitions stated in 24 CFR §92.253 or 24 CFR §93.303, as applicable. To terminate or refuse to renew tenancy in HOME, TCAP RF, NSP, and HOME-ARP Developments, the Owner must serve written notice to the tenant specifying the grounds for the action at least 30 days before the termination of tenancy. For HOME-ARP, Owners may not terminate the tenancy or refuse to renew the lease of the Qualifying Household in any Unit that is supported by capitalized operating costs because of the household's inability to pay rent of more than 30 percent of the qualifying household's income toward rent during the longer of the federal affordability period or the time period identified in the Contract.

(c) In accordance with the Violence Against Women Act, an incident of actual or threatened domestic violence, dating violence, sexual assault, or stalking against the documented victim of such actual or threatened domestic violence, dating violence, sexual assault, or stalking shall not be construed as a serious or repeated violation of a lease or good cause for termination of tenancy. Additionally, it shall not be construed as a serious or repeated violation of a lease or action eligible for termination of tenancy if a person has opposed any act or practice made unlawful by the Violence Against Women Act 2022, or because that person testified, assisted, or participated in any matter covered by the Violence Against Women Act 2022.

(d) A Development must use a lease or lease addendum that requires households to report changes in student status.

(e) Owners of HTC Developments are prohibited from locking out or threatening to lock out any Development resident, except by judicial process, unless the exclusion is necessary for the purpose of performing repairs or construction work, or in cases of emergency. Owners are further prohibited from seizing or threatening to seize the personal property of a resident except by judicial process unless the resident has abandoned the premises. These prohibitions must be included in the lease or lease addendum.

(f) For HOME, TCAP, TCAP RF, NHTF, 811 PRA, NSP, ERA and HOME-ARP Developments, properties that were initially built for occupancy prior to 1978 must include in their lease or lease addendum a Lead Warning Statement. To demonstrate compliance, the Department will monitor that all households at HOME, TCAP, TCAP RF, NHTF, NSP, ERA, and HOME-ARP Developments have signed the Disclosure of Information on Lead-Based Paint and/or Lead-Based Paint Hazards. (24 CFR §92.355, 24 CFR §93.361 and §570.487(c), and Section 1018 of Title X, as applicable). The addendum and disclosure are not required if all lead has been certified to have been cleared from the Development in accordance with 24 CFR §35.130, and the Owner has the required certification in its on-site records.

(g) An Owner may bifurcate a lease to terminate the tenancy of an individual who is a tenant or lawful occupant and engages in criminal activity directly relating to domestic violence, dating violence, sexual assault, or stalking against another lawful occupant living in the Unit or other affiliated individual as defined in the VAWA 2013.

(h) All NHTF, TCAP RF, NSP, HOME, and HOME-ARP Developments for which the contract is executed on or after December 16, 2016, must use the Department created VAWA lease addendum which provides the ability for the tenant to terminate the lease without penalty if the Department determines that the tenant qualifies for an emergency transfer under 24 CFR §5.2005(e). 811 PRA Units are prohibited from using the expired 2005 VAWA lease addendum. After OMB approval of a VAWA lease addendum, all 811 PRA households must have a valid and executed VAWA lease addendum. For the 811 PRA program certain addenda for the HUD model lease may be required such as Lead Based Paint Disclosure form, house rules, and pet rules. No other attachments to the lease are permissible without approval from the Department's 811 PRA staff.

(i) Leasing of HOME, HOME Match, TCAP RF, or NHTF Units to an organization that, in turn, rents those Units to individuals is not permissible for Developments with contracts dated on or after August 23, 2013. Leases must be between the Development and an eligible household. NSP and HOME-ARP Developments may only utilize Master Leases, if specifically allowed in the Development's LURA.

(j) Housing Tax Credit Units leased to an organization through a supportive housing program where the owner receives a rental payment for the Unit regardless of physical occupancy will be found out of compliance if the Unit remains vacant for over 60 days. The Unit will be found out of compliance under the Event of Noncompliance "Violation of the Unit Vacancy Rule."

(k) It is a Development Owner's responsibility at all times to know what it has agreed to provide by way of common amenities, Unit amenities, and services.

(l) A Development Owner shall post in a common area of the leasing office a copy and provide each household, during the application process and upon a subsequent change to the items described in paragraph (2) of this subsection, the brochure made available by the Department, A Tenant Rights and Resources Guide, which includes:

(1) Information about Fair Housing and tenant choice;

(2) Information regarding common amenities, Unit amenities, and services; and

(3) A certification that a representative of the household must sign prior to, but no more than 120 days prior to, the initial lease execution acknowledging receipt of this brochure.

(4) In the event this brochure is not provided timely or the household does not certify to receipt of the brochure, correction will be achieved by providing the household with the brochure and receiving a signed certification that it was received.

(m) For Section 811 PRA Units, Owners must use the HUD Model lease, HUD form 92236-PRA.

(n) Except as identified in federal or state statute or regulation for Direct Loans, or as otherwise identified in this Chapter, the Department does not determine if an Owner has good cause or if a resident has violated the lease terms. Challenges to evictions or terminations of tenancy must be determined by a court of competent jurisdiction or an agreement of the parties (including an agreement made in arbitration), and the Department will rely on that determination.

§10.622.Special Rules Regarding Rents and Rent Limit Violations.

(a) Rent or Utility Allowance Violations of the maximum allowable limit for the HTC program. Under the HTC program, the amount of rent paid by the household plus an allowance for utilities, plus any mandatory fees, 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 an HTC Development, during the Compliance Period, collected rent in excess of the rent limit established by the minimum set-aside, the Owner must correct the violation by reducing the rent charged. The Department will report the violation as corrected on January 1st of the year following the violation. The refunding of overcharged rent does not avoid the disallowance of the credit by the IRS.

(b) Rent or Utility Allowance Violations of additional rent restrictions under the HTC program. If Owners agreed to additional rent and occupancy restrictions, the Department will monitor to confirm compliance. If noncompliance is discovered, the Department will require the Owner to restore compliance by refunding (not a credit to amounts owed the Development) any excess rents to a sufficient number of households to meet the set aside.

(c) Rent Violations of the maximum allowable limit due to application fees. 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.

(1) The amount of time Development staff spends checking an applicant's income, credit history, and landlord references may be included in the Development's application fee. Development Owners may add up to $5.50 per Unit for their other out-of-pocket costs for processing an application without providing documentation. Example 622(2): A Development's out-of-pocket cost for processing an application is $17.00 per adult. The property may charge $22.50 for the first adult and $17.00 for each additional adult.

(2) Documentation of Development costs for application processing or screening fees must be made available during monitoring reviews or upon request. The Department will review application fee documentation during monitoring reviews. If the Development pays a flat monthly fee to a third party for credit or criminal background checks, Owners must calculate the appropriate fee to be charged applicants by using the total number of applications processed, not just approved applications. Developments that pay a flat monthly fee must determine the appropriate application fee at least annually based on the prior year's activity. If the Department determines from a review of the documentation that the Owner has overcharged residents an application fee or collected impermissible deposits, the noncompliance will be reported to the IRS on Form 8823 under the category "gross rent(s) exceeds tax credit limits." The noncompliance will be corrected on January 1st of the next year.

(3) Owners are not required to refund the overcharged fee amount. To correct the issue, Owners must reduce the application fee for prospective applicants. Once the fee is reduced for prospective applicants, the Department will report the affected back in compliance on January 1st of the year after they were overcharged the application fee or an impermissible deposit.

(4) Throughout the Affordability Period, Owners may not charge a deposit or any type of fee (other than an application fee) for a household to be placed on a waiting list.

(d) Rent or Utility Allowance Violations on MFDL programs, the amount of rent paid by the household plus an allowance for utilities, plus any mandatory fees and any rental assistance (unless otherwise described in the LURA) cannot exceed the designated applicable limit published by the Department. If it is determined that the Development collected rent in excess of the allowable limit, the Department will require the Owner to refund or credit the affected residents the amount of rent that was overcharged. The Owner must obtain in writing, from the household, the election to receive a full refund check or to have the entire overpaid amount credited to their household's account. In the absence of a household's election, a full refund check must be presented to the household within thirty days.

(e) Rent or Utility Allowance Violations on HTC Developments after the Compliance Period, HTC properties for three years after the LURA is released as a result of a foreclosure or deed in lieu of foreclosure (as applicable), BOND, and THTF the amount of rent paid by the household plus an allowance for utilities, plus any mandatory fees cannot exceed the designated applicable limit published by the Department. If it is determined that the Development collected rent in excess of the allowable limit, the Department will require the Owner to refund or credit the affected residents the amount of rent that was overcharged. The Owner must obtain in writing, from the household, the election to receive a full refund check or to have the entire overpaid amount credited to their household account. In the absence of a tenant election, a full refund check must be presented to the household within thirty days.

(f) 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 monies must be deposited into a trust account for the household. If the violation effects multiple households, the Owner may set up a single account with all of the unclaimed funds. The account must remain open for the shorter of a four year period, until all funds are claimed, or the expiration of the Extended Use Agreement. If funds are not claimed after the required period, the unclaimed funds must be remitted to the Texas Comptroller of Public Accounts Unclaimed Property Holder Reporting Section to be disbursed as required by Texas unclaimed property statutes. All unclaimed property remissions to the Comptroller must be broken out by individuals and particular amounts.

(g) Rent Adjustments for HOME, TCAP RF, and HOME-ARP Developments:

(1) 100% HOME/TCAP-RF/HOME-ARP assisted Developments. If a household's income exceeds 80% at recertification, the Owner must charge rent equal to 30% of the household's adjusted income;

(2) HOME/TCAP-RF/HOME-ARP Developments with any Market Rate Units. If a household's income exceeds 80% at recertification, the Owner must charge rent equal to the lesser of 30% of the household's adjusted income or the comparable Market rent; and

(3) HOME/TCAP-RF/HOME-ARP Developments layered with other Department affordable housing programs. If a household's income exceeds 80% at recertification, the owner must charge rent equal to the lesser of 30% of the household's adjusted income or the rent allowable under the other Program.

(h) Rent Adjustments for HOME-ARP Qualified Populations:

(1) Units restricted for occupancy by Qualifying Populations with incomes equal to or less than 50% will have rents of 30% of the adjusted income of the household, with adjustments for number of bedrooms in the unit.

(2) Units restricted for occupancy by Qualifying Populations with incomes greater than 50% of median income but at or below 80% of the median income must pay rent not greater than the rent specified in 24 CFR §92.252(a), high HOME rent.

(3) Units restricted for occupancy by Qualifying Populations with incomes greater than 80% of median income will follow the rent adjustments of subsection (g) of this section.

(i) Employee Occupied Units (HTC and THTF Developments). IRS Revenue Rulings 92-61, 2004-82 and Chief Counsel Advice Memorandum POSTN-111812-14 provide guidance on employee occupied units. In general, employee occupied units are considered facilities reasonably required for the project(s) and not residential rental units. Since the building's applicable fraction is calculated using the residential rental units/space in a building, employee occupied units are taken out of both the numerator and the denominator.

(j) Owners of HOME, NSP, TCAP-RF, NHTF, and HOME-ARP must comply with §10.403 of this chapter (relating to Review of Annual HOME, NSP, TCAP-RF, and National Housing Trust Fund Rents) which requires annual rent review and approval by the Department's Asset Management Division or Department-procured vendor. Failure to do so will result in an Event of Noncompliance.

(k) Owners are not permitted to increase the household portion of rent more than once during a 12 month period, even if there are increases in rent limits or decreases in utility allowances, unless the Unit or household is governed by a federal housing program that requires such changes or the household transfers to a Unit with additional Bedrooms. If it is determined that the Development increases rent more than once in a 12-month period, the Department will require the Owner to refund or credit the affected household. The Owner must obtain in writing, from the household, the election to receive a full refund check or to have the entire overpaid amount credited to their household account. In the absence of a tenant election, a full refund check must be presented to the household.

(l) If an Owner is increasing a household's rent $75 or more per month, the Owner is required to provide the household a 75-day written notice of such increase, unless the Unit or household is governed by a federal housing program that requires such a change. If an Owner increases the household's rent more than $75 without providing a 75-day notice, any amounts in excess of $75 per month must be refunded or credited to the affected household(s). The Owner must obtain in writing, from the household, the election to receive a full refund check or to have the entire overpaid amount credited to their household account. In absence of a tenant election, a full refund check must be presented to the household.

§10.626.Liability.

Full compliance with all applicable program requirements, including compliance with §42 of the Code, is the responsibility of the Development Owner. If the Development Owner engages a third party to address any such requirements, they are jointly and severally liable with the Development Owner. By monitoring for compliance, the Department in no way assumes any liability whatsoever for any action or failure to act by the Development Owner, including the Development Owner's noncompliance with §42 of the Code, the Fair Housing Act, §504 of the Rehabilitation Act of 1973, HOME, HOME-ARP, NHTF, TCAP RF, and NSP program regulations, Bond and ERA program requirements, and any other laws, regulations, requirements, or other programs monitored by the Department.

§10.627.Temporary Suspension of Sections of this Subchapter.

(a) Subject to the limitations stated in this section, temporary suspensions of sections of this subchapter may be granted by the Executive Director if there are extenuating circumstances which make it not possible or an undue administrative burden to comply with a requirement of this subchapter as long as substantial compliance is still in effect. For example, the Executive Director could suspend the requirement to report online or use Department approved forms, or alter the sample size for calculating a utility allowance using the actual use method.

(b) Under no circumstances can the Executive Director, the Enforcement Committee or the Board suspend for any period of time compliance with the HOME Final Rule, NHTF Interim Rule, or regulations issued by HUD or any other federal agency when required by federal law.

(c) Under no circumstances can the Executive Director, the Enforcement Committee or the Board suspend for any period of time Treasury Regulations, IRS publications controlling the submission of IRS Form 8823, or any sections of 26 U.S.C. §42.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on June 16, 2023.

TRD-202302177

Bobby Wilkinson

Executive Director

Texas Department of Housing and Community Affairs

Effective date: July 6, 2023

Proposal publication date: March 24, 2023

For further information, please call: (512) 475-3959