Does Texas's low-income housing tax credit plan have to count neighborhood input?

TX AG Opinion GA-0497: Does the housing tax credit plan have to count neighborhood input?

Plain-English summary

A Texas House committee chair asked whether the 2006 Qualified Allocation Plan (QAP) of the Texas Department of Housing and Community Affairs (TDHCA) complies with Government Code section 2306.6710(b). The federal government gives tax credits to private developers to spur low-income housing, allocates them among the states, and has the states award them through a designated agency. In Texas that agency is TDHCA, which must adopt an annual QAP setting the threshold, scoring, and underwriting criteria for applicants. The Internal Revenue Code requires that the credits be allocated according to a QAP, and Texas law layers on specific funding priorities and preferences TDHCA must weigh.

Section 2306.6710(b) requires TDHCA to score and rank applications with a point system that prioritizes certain criteria. One of those, in subsection (b)(1)(B), is "quantifiable community participation" with the development, judged on written statements from neighborhood organizations that are on record with the state or county and whose boundaries contain the proposed development site. The statute does not define "neighborhood organization." TDHCA filled that gap in its 2006 QAP with a definition that includes homeowners associations, property owners associations, and resident councils, but says a resident council counts only when it is commenting on the rehabilitation, or the demolition with new construction, of the property its residents occupy.

The chair asked four questions. First, is section 2306.6710(b) mandatory? Yes. The opinion noted the office had twice (in GA-0455 and GA-0208) concluded that the section requires TDHCA to rank applications using a point system that gives the most points, in descending order, to the nine listed factors. Second, may TDHCA add its own limiting criteria to that section? No. The opinion, again following GA-0208, said the section does not permit TDHCA to adopt additional criteria. Third, does the QAP's resident-council limitation comply? Yes. Because the statute does not define "neighborhood organization," TDHCA could construe it by interpretive rule, and a court gives serious consideration to an agency's reasonable construction that does not contradict the statute and is in harmony with its objectives. The opinion explained that a resident council, by its nature, represents only the property its residents occupy, and cannot represent property that does not yet exist. So limiting a resident council to comments on rehabilitation or demolition-and-rebuilding of the occupied property does not add a criterion; it simply restates, for resident councils, the statute's requirement that the organization represent an area containing the proposed development. That rule is in harmony with section 2306.6710(b)(1)(B). Fourth, the chair asked what steps TDHCA would need to take if the QAP had to change; the opinion did not reach that, because it found no inconsistency.

Currency note

This opinion was issued in 2006. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The Government Code provisions governing TDHCA's housing tax credit program, and the QAP itself, are revised regularly (the QAP is adopted annually). The 2006 plan and the 2006 versions of the statutes cited here have long since been superseded. Anyone dealing with the Texas low-income housing tax credit program today should consult the current statutes and the current year's QAP rather than relying on this 2006 opinion.

Who this opinion affected (as of 2006)

TDHCA: The opinion confirmed that section 2306.6710(b) was mandatory and that TDHCA could not add its own criteria to it, but also confirmed that TDHCA's 2006 QAP definition limiting resident councils was a permissible interpretive rule in harmony with the statute.

Low-income housing developers and applicants: The opinion meant that neighborhood-organization input was a required, ranked scoring factor under the point system, and that resident councils counted as neighborhood organizations only when commenting on rehabilitation or demolition-and-rebuilding of the property their residents occupied.

Neighborhood and resident-council organizations: The opinion clarified which groups TDHCA could treat as "neighborhood organizations" whose written statements counted toward the quantifiable-community-participation score, and on what projects a resident council's comments would count.

Common questions

Is the community-participation scoring factor mandatory or optional?
Mandatory. The opinion concluded section 2306.6710(b) requires TDHCA to rank applications with a point system that gives the greatest number of points, in descending order, to the nine listed factors, including quantifiable community participation.

Can TDHCA add its own extra requirements to that scoring factor?
No. The opinion concluded section 2306.6710(b) does not permit TDHCA to adopt additional criteria for that section.

Why is the resident-council limit allowed if TDHCA can't add criteria?
The opinion explained that the resident-council rule does not add a criterion; it restates the statute's existing requirement that the organization represent an area containing the proposed development. A resident council represents only the property its residents occupy and cannot represent property not yet built, so limiting its comments to rehabilitation or demolition-and-rebuilding of that property tracks the statute.

What is a "neighborhood organization" under the statute?
The statute did not define it, so TDHCA defined it in the QAP as a group of people living near one another within defined boundaries containing the proposed development, with a primary purpose of maintaining or improving the neighborhood. The opinion treated that as a permissible interpretive rule, since a neighborhood organization must be on record with the state or county and must represent an area containing the development site.

Background and statutory framework

Federal law gives low-income housing tax credits to developers, allocates them among the states, and has each state award them through a designated housing credit agency under a qualified allocation plan. Texas designated TDHCA, which must annually adopt a QAP setting threshold, scoring, and underwriting criteria. Section 2306.6710(b) requires TDHCA to score and rank applications with a point system prioritizing certain criteria, including, in subsection (b)(1)(B), quantifiable community participation evaluated on written statements from neighborhood organizations on record with the state or county whose boundaries contain the development site (26 U.S.C.A. § 42, 42(h), (m), 42(m)(1)(B)-(C) (West Supp. 2006); Tex. Gov't Code Ann. §§ 2306.6701-.6734, 2306.053(b)(10) (Vernon 2000), 2306.67022, 2306.6702(a)(10), 2306.6710(b), 2306.6710(b)(1)(B), 2306.6725(a), 2306.111(d), (g), .6704(b), .6718(b) (Vernon Supp. 2006)).

The office had already concluded, in GA-0455 and GA-0208, that section 2306.6710(b) is mandatory and that TDHCA may not add criteria to it. Because the statute does not define "neighborhood organization," TDHCA construed it by interpretive rule in the 2006 QAP. An agency's reasonable construction of a statute it enforces is entitled to serious consideration so long as it does not contradict the plain language, and a rule is valid if it is in harmony with the statute's general objectives and within the agency's authority. The opinion concluded that the resident-council limitation merely restated, for resident councils, the statute's requirement that the organization represent an area containing the proposed development, so it was in harmony with the statute (31 Tex. Reg. 105, 144 (2006) (10 Tex. Admin. Code § 50.9(i)(2)(A)(iv)); 12 U.S.C.A. § 4119(11)(A) (West 2001); First Fed. Sav. & Loan Ass'n v. Vandygriff, 639 S.W.2d 492, 498 (Tex. App.-Austin 1982, writ dism'd); Tarrant Appraisal Dist. v. Moore, 845 S.W.2d 820, 823 (Tex. 1993); R.R. Comm'n v. Arco Oil & Gas Co., 876 S.W.2d 473, 477-78 (Tex. App.-Austin 1994, writ denied); Edgewood Indep. Sch. Dist. v. Meno, 917 S.W.2d 717, 750 (Tex. 1995); Gerst v. Oak Cliff Sav. & Loan Ass'n, 432 S.W.2d 702, 706 (Tex. 1968); Tex. Att'y Gen. Op. Nos. GA-0455 (2006), GA-0208 (2004)).

Citations

Federal statutes and Texas provisions:

• 26 U.S.C.A. § 42, 42(h), (m), 42(m)(1)(B)-(C) (West Supp. 2006); 12 U.S.C.A. § 4119(11)(A) (West 2001)
• Tex. Gov't Code Ann. §§ 2306.053(b)(10) (Vernon 2000), 2306.111(d), (g), 2306.6701-.6734, 2306.6702(a)(10), 2306.67022, 2306.6704(b), 2306.6710(b), 2306.6710(b)(1)(B), 2306.6718(b), 2306.6725(a) (Vernon Supp. 2006)
• 31 Tex. Reg. 105, 144 (2006) (10 Tex. Admin. Code § 50.9(i)(2)(A)(iv))

Cases:

• First Fed. Sav. & Loan Ass'n v. Vandygriff, 639 S.W.2d 492, 498 (Tex. App.-Austin 1982, writ dism'd)
• Tarrant Appraisal Dist. v. Moore, 845 S.W.2d 820, 823 (Tex. 1993)
• R.R. Comm'n v. Arco Oil & Gas Co., 876 S.W.2d 473, 477-78 (Tex. App.-Austin 1994, writ denied)
• Edgewood Indep. Sch. Dist. v. Meno, 917 S.W.2d 717, 750 (Tex. 1995)
• Gerst v. Oak Cliff Sav. & Loan Ass'n, 432 S.W.2d 702, 706 (Tex. 1968)

Attorney General opinions referenced:

• Tex. Att'y Gen. Op. No. GA-0455 (2006)
• Tex. Att'y Gen. Op. No. GA-0208 (2004)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-0497
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2006/ga0497.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain - the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS

GREG ABBOTT

December 22, 2006

The Honorable Ismael "Kino" Flores
Chair, Committee on Licensing and Administrative Procedures
Texas House of Representatives
Post Office Box 2910
Austin, Texas 78768-2910

Opinion No. GA-0497

Re: Whether the 2006 Qualified Allocation Plan of the Texas Department of Housing and Community Affairs complies with Government Code section 2306.6710(b) (RQ-0515-GA)

Dear Representative Flores:

You ask about the Texas Department of Housing and Community Affairs ("TDHCA") and whether its 2006 Qualified Allocation Plan complies with Government Code section 2306.6710(b).[1]

The federal government offers tax credits to private developers to stimulate investment in and construction of low-income housing. See generally 26 U.S.C.A. § 42 (West Supp. 2006). These federal tax credits are allocated among the states and awarded at the state level by a designated housing credit agency. See id. § 42(h), (m). In Texas, the legislature, under Government Code chapter 2306, subchapter DD, has designated the TDHCA to administer the state's low-income housing tax-credit program. See TEX. GOV'T CODE ANN. §§ 2306.6701-.6734 (Vernon Supp. 2006); see also id. § 2306.053(b)(10) (Vernon 2000) (authorizing TDHCA to "administer federal housing, community affairs, or community development programs, including the low income housing tax credit program").

The Internal Revenue Code requires TDHCA, as administrator of this tax-credit program, to allocate tax credits according to selection criteria laid out in a "qualified allocation plan" (a "QAP"). See 26 U.S.C.A. § 42(m)(1)(B)-(C) (West Supp. 2006). Texas law implements the federal law by requiring the TDHCA board to annually adopt a QAP, see TEX. GOV'T CODE ANN. § 2306.67022 (Vernon Supp. 2006), which, among other things, provides the threshold, scoring, and underwriting criteria and procedures for applicants seeking low-income housing tax credits. See id. § 2306.6702(a)(10). While TDHCA has discretion to determine the number of points to assign the underwriting criteria and to score and rank the applications for tax credits, numerous provisions in the Government Code require TDHCA to consider specific funding priorities, information, and preferences in doing so.[2] And it is these prescriptive provisions that give rise to your question. See Request Letter, supra note 1, at 1-2.

Specifically, you ask about Government Code section 2306.6710(b), see id., which requires TDHCA to score and rank tax-credit applications using a point system that prioritizes certain criteria over others. See TEX. GOV'T CODE ANN. § 2306.6710(b) (Vernon Supp. 2006). Subsection (b)(1)(B) of this section, which is at the crux of your question, requires TDHCA to consider and rank

quantifiable community participation with respect to the development, evaluated on the basis of written statements from any neighborhood organizations on record with the state or county in which the development is to be located and whose boundaries contain the proposed development site[.]

Id. § 2306.6710(b)(1)(B) (Vernon Supp. 2006) (emphasis added). "Neighborhood organization" is not defined in the statute. See id. §§ 2306.6701-.6734.

TDHCA, however, has defined the term in its 2006 QAP:

A "neighborhood organization" is defined as an organization of persons living near one another within the organization's defined boundaries that contain the proposed Development site and that has a primary purpose of working to maintain or improve the general welfare of the neighborhood. "Neighborhood organizations" include homeowners associations, property owners associations, and resident councils (only for Rehabilitation or demolition with New Construction applications in which the council is commenting on the rehabilitation or demolition/New Construction of the property occupied by the residents). "Neighborhood organizations" do not include broader based "community" organizations; organizations that have no members other than board members; chambers of commerce; community development corporations; churches; school related organizations; Lions, Rotary, Kiwanis, and similar organizations; Habitat for Humanity; Boys and Girls Clubs; charities; public housing authorities; or any governmental entity. Organizations whose boundaries include an entire county or larger area are not "neighborhood organizations." Organizations whose boundaries include an entire city are generally not "neighborhood organizations."

31 Tex. Reg. 105, 144 (2006) (to be codified at 10 TEX. ADMIN. CODE § 50.9(i)(2)(A)(iv)) (emphasis added) (TDHCA "2006 Housing Tax Program Qualified Allocation Plan and Rules"). You express concern that TDHCA's rule, by limiting resident councils to commenting only on the rehabilitation of or demolition with new construction of the property occupied by the residents, conflicts with Government Code section 2306.6710(b). See Request Letter, supra note 1, at 2.

Based on this information, you first ask:

Whether Section 2306.6710(b) is a mandatory provision that requires the 2006 QAP to rank applications for Low Income Housing Tax Credits by a point system that includes as a factor quantifiable community participation with respect to the development, evaluated on the basis of written statements from any neighborhood organizations on record with the state or county in which the development is to be located and whose boundaries contain the proposed development site?

Id. This office has, on two occasions, determined that Government Code section 2306.6710(b) is a mandatory provision that requires TDHCA to rank applications using a point system that gives the greatest number of points, in descending order, to the nine factors listed in that section. See Tex. Att'y Gen. Op. Nos. GA-0455 (2006) at 2-3; GA-0208 (2004) at 10.

You next ask "[w]hether TDHCA has discretionary authority to impose additional limiting criteria for quantifiable community participation by neighborhood organizations under Section 2306.6710(b)?" Request Letter, supra note 1, at 2. As this office has already said, section 2306.6710(b) does not permit TDHCA to adopt additional criteria for that section. See Tex. Att'y Gen. Op. No. GA-0208 (2004) at 6-7. Therefore, TDHCA may not impose additional limits on quantifiable community participation by neighborhood organizations under section 2306.6710(b).

Third, you ask:

Whether the TDHCA implemented language in Section [50.9(i)(2)(A)(iv)] of the 2006 Qualified Allocation Plan that limits quantifiable community participation by a Resident Council, a qualified neighborhood organization, is in compliance with Section 2306.6710(b) of the Texas Government Code . . . that requires quantifiable community participation with respect to the development, evaluated on the basis of written statements from any neighborhood organizations on record with the state or county in which the development is to be located and whose boundaries contain the proposed development site?

Request Letter, supra note 1, at 2.

Because the term "neighborhood organization" in section 2306.6710(b)(1)(B) is not defined by statute, TDHCA has construed the term by an interpretive rule under the general authority granted to it by the legislature to adopt an annual QAP. See TEX. GOV'T CODE ANN. § 2306.67022 (Vernon Supp. 2006). Interpretive rules are those rules that interpret and apply the provisions of an applicable statute. See First Fed. Sav. & Loan Ass'n v. Vandygriff, 639 S.W.2d 492, 498 (Tex. App.-Austin 1982, writ dism'd). Construction of a statute in agency rules by the administrative agency charged with the statute's enforcement is entitled to serious consideration, so long as the construction is reasonable and does not contradict the plain language of the statute. See Tarrant Appraisal Dist. v. Moore, 845 S.W.2d 820, 823 (Tex. 1993). But a rule may be invalid if the rule's language exceeds the agency's statutory authority. See R.R. Comm'n v. Arco Oil & Gas Co., 876 S.W.2d 473, 477-78 (Tex. App.-Austin 1994, writ denied). In deciding whether an administrative agency has exceeded its rule-making powers, the determinative factor is whether the rule's provisions are "in harmony" with the general objectives of the statute. See Edgewood Indep. Sch. Dist. v. Meno, 917 S.W.2d 717, 750 (Tex. 1995) (citing Gerst v. Oak Cliff Sav. & Loan Ass'n, 432 S.W.2d 702, 706 (Tex. 1968)).

Here, section 2306.6710(b)(1)(B) establishes two requirements that neighborhood organizations must meet in order to have their input count as quantifiable community support for or against a particular low-income housing project: (1) the organization must be on record with the state or county in which the development is to be located; and (2) the organization must represent an area whose boundaries contain the proposed development site. TEX. GOV'T CODE ANN. § 2306.6710(b)(1)(B) (Vernon Supp. 2006). TDHCA interprets these requirements by defining "neighborhood organization" in the 2006 QAP to include, among other things, a resident council, but only to the extent the resident council is commenting on "the rehabilitation or demolition/New Construction of the property occupied by the residents." 31 Tex. Reg. 105, 144 (2006) (to be codified at 10 TEX. ADMIN. CODE § 50.9(i)(2)(A)(iv)) (TDHCA "2006 Housing Tax Credit Program Qualified Allocation Plan and Rules"). That is, for the resident council to satisfy section 2306.6710(b)(1)(B)'s requirement that a neighborhood organization represent an area bounding the proposed development, the proposed development must occur on the property that the resident council represents. A resident council, by definition, represents only the property occupied by its residents.[3] A resident council cannot represent property not yet constructed, unlike existing property to be rehabilitated or to be demolished and then reconstructed. TDHCA is not, therefore, limiting the meaning of neighborhood organization or adding criteria to section 2306.6710(b); rather, TDHCA's rule for resident councils merely restates the statute's requirements in terms specific to a resident council. Thus, in answer to your third question, TDHCA's rule for resident councils is in harmony with Government Code section 2306.6710(b)(1)(B).

Finally, you ask, if any of our above answers would require the TDHCA to modify its 2006 QAP, "what steps must TDHCA take to ensure the 2006 application cycle is conducted in accordance with the law?" Request Letter, supra note 1, at 2. Because we have determined that TDHCA has not, with respect to your questions, interpreted section 2306.6710(b) inconsistent with the statute, we need not address this issue.

SUMMARY

Government Code section 2306.6710(b) is a mandatory provision that requires the Texas Department of Housing and Community Affairs to rank applications using a point system that gives the greatest number of points, in descending order, to the nine factors listed in that section. Section 2306.6710(b) does not permit the department to adopt additional criteria.

Government Code section 2306.6710(b)(1)(B) requires the department to score proposed development projects based on input from "neighborhood organizations," which must be on record with the state or county in which the development is to be located and which must represent an area that contains the proposed development site. The 2006 Qualified Allocation Plan from the department defining "neighborhood organization" to include resident councils, but only to the extent the proposed project is located on property occupied by their residents, is in harmony with section 2306.6710(b)(1)(B).

Very truly yours,

GREG ABBOTT
Attorney General of Texas

KENT C. SULLIVAN
First Assistant Attorney General

ELLEN L. WITT
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

Daniel C. Bradford
Assistant Attorney General, Opinion Committee

Footnotes

[1] See Letter from Honorable Ismael "Kino" Flores, Chair, Committee on Licensing and Administrative Procedures, Texas House of Representatives, to Honorable Greg Abbott, Attorney General of Texas, at 1-2 (June 13, 2006) (on file with the Opinion Committee, also available at http://www.oag.state.tx.us) [hereinafter Request Letter].

[2] See TEX. GOV'T CODE ANN. § 2306.6725(a) (Vernon Supp. 2006); Tex. Att'y Gen. Op. No. GA-0208 (2004) at 9 n.13 (discussing the discretion Government Code section 2306.6725(a) permits TDHCA in assigning points to underwriting criteria); see also, e.g., TEX. GOV'T CODE ANN. §§ 2306.111(d), (g), .6704(b), .6710(b), .6718(b) (Vernon Supp. 2006).

[3] See, e.g., 12 U.S.C.A. § 4119(11)(A) (West 2001) (applying to federal low-income housing preservation and defining the term "resident council" as "any incorporated nonprofit organization or association that . . . is representative of the residents of the housing") (emphasis added).