Can Texas housing developments converting under HUD's RAD program qualify for the at-risk low-income housing tax credit set-aside?

Plain-English summary

J. Paul Oxer, chair of the governing board of the Texas Department of Housing and Community Affairs, asked the Attorney General a question about who qualifies for a slice of the state's low income housing tax credits. TDHCA runs the state's low income housing tax credit program, awarding the credits competitively to developers of low income housing. The program carves out "set-asides," reservations of part of the credits for particular kinds of housing, and one of them, under Government Code section 2306.6714, is reserved for "at-risk developments." The board wanted to know whether it could treat public housing developments going through a federal conversion as eligible to compete for that at-risk set-aside.

The background is a federal program. The U.S. Department of Housing and Urban Development created the Rental Assistance Demonstration (RAD) program, which lets a public housing operating subsidy under Section 9 of the United States Housing Act of 1937 convert into a rental subsidy under Section 8 of the Act. TDHCA expected many Texas public housing authorities to make that switch, and the question was whether a development going through a RAD conversion could still compete for the at-risk credits.

The AG worked through the statute's structure. Section 2306.6702(a)(5) defines "at-risk development" in two ways: subsection (A) covers developments tied to a Section 8 subsidy, and subsection (B) covers developments tied to a Section 9 subsidy. Section 2306.6714(a-1) adds extra eligibility conditions, but it applies only to the Section 9 category in subsection (B); it does not touch subsection (A). So a development that completes a RAD conversion and no longer fits subsection (B) can still be eligible under subsection (A) if it has received a Section 8 rental subsidy or housing assistance payment. The AG noted that TDHCA, as the administering agency, has discretion to decide whether a development meets the eligibility requirements, and that if TDHCA reasonably determines a RAD-converting development received Section 8 assistance and qualifies, a court is unlikely to disturb that call. The bottom line was that a court would likely find it within TDHCA's authority to treat a RAD-converting development as eligible for the at-risk set-aside, provided TDHCA finds all the applicable requirements satisfied.

Currency note

This opinion was issued in 2014. Subsequent statutory amendments, court decisions, or later Attorney General 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.

What the opinion meant for those who asked

The TDHCA governing board (as the opinion described it): The opinion answered that a court would likely conclude it is within TDHCA's authority to consider a development undergoing a RAD conversion as eligible to compete for the at-risk set-aside under section 2306.6714, if TDHCA determines all applicable eligibility requirements are satisfied.

Public housing authorities converting under RAD (as the opinion described it): The opinion described a development that converts from a Section 9 subsidy to a Section 8 subsidy as potentially still eligible for the at-risk set-aside under the subsection 2306.6702(a)(5)(A) definition, because the extra conditions in section 2306.6714(a-1) apply only to the Section 9 category.

Developers competing for the at-risk set-aside (as the opinion described it): The opinion described TDHCA as having discretion to determine eligibility, and described courts as generally deferring to a reasonable agency interpretation of the statute it administers, so a TDHCA determination of eligibility would likely stand.

Common questions

Can a development going through a RAD conversion still compete for Texas's at-risk housing tax credit set-aside?
Likely yes, under this opinion, if TDHCA finds the requirements met. The AG concluded a court would probably uphold TDHCA treating such a development as eligible under section 2306.6714.

Why does the RAD conversion not disqualify the development?
The AG explained that the statute defines "at-risk development" two ways, and the extra conditions added by section 2306.6714(a-1) apply only to the Section 9 definition. A development that converts to a Section 8 subsidy can still qualify under the Section 8 definition.

Who decides whether a development is eligible?
TDHCA. The AG explained that, as the agency administering the low income housing tax credit program, TDHCA has discretion to determine whether a development satisfies the eligibility requirements for a set-aside.

Would a court second-guess TDHCA's eligibility decision?
Probably not, if it is reasonable. The AG explained that courts generally uphold an agency's interpretation of a statute it is charged with administering, as long as the construction is reasonable and not contrary to the statute's language.

What is the at-risk set-aside?
Under section 2306.6714(a), the AG noted, TDHCA must set aside not less than 15 percent of the housing tax credits available for allocation in a calendar year for eligible at-risk developments.

Background and statutory framework

TDHCA administers the state's low income housing tax credit program under chapter 2306, subchapter DD, awarding credits competitively to low income housing developers (Tex. Gov't Code Ann. §§ 2306.6701-.6735 (West 2008 & Supp. 2013); 26 U.S.C.A. § 42 (West Supp. 2013)). A "set-aside" reserves part of the available credits for specific housing or applicants (id. § 2306.6702(a)(14) (West Supp. 2013)), and section 2306.6714 reserves at least 15 percent for eligible at-risk developments (id. § 2306.6714 (West Supp. 2013); id. § 2306.6714(a)). Reading the statute for legislative intent from its plain language (Entergy Gulf States, Inc. v. Summers, 282 S.W.3d 433, 437 (Tex. 2009)), the AG explained that the eligibility conditions in subsection (a-1) apply to an at-risk development described by subsection 2306.6702(a)(5)(B) (id. § 2306.6714(a-1)).

Section 2306.6702(a)(5) defines "at-risk development" two ways, distinguished by the form of federal subsidy: subsection (A) for a Section 8 subsidy and subsection (B) for a Section 9 subsidy (id. § 2306.6702(a)(5); id. § 2306.6702(a)(5)(A); id. § 2306.6702(a)(5)(B)). Because subsection (a-1) limits only the subsection (B) category, a RAD-converted development that no longer fits subsection (B) can still qualify under subsection (A) if it has received a rental subsidy or Section 8 housing assistance payment (id. § 2306.6702(a)(5)(A)(i)). TDHCA has discretion to determine eligibility (id. § 2306.6701 (West 2008); id. § 2306.67022 (West Supp. 2013)), and a reasonable determination would likely be upheld (R.R. Comm'n of Tex. v. Tex. Citizens for a Safe Future and Clean Water, 336 S.W.3d 619, 624 (Tex. 2011)).

Citations

Statutory provisions:

• Tex. Gov't Code Ann. §§ 2306.6701-.6735 (West 2008 & Supp. 2013) (low income housing tax credit program)
• Tex. Gov't Code Ann. § 2306.6702(a)(14) (West Supp. 2013) (definition of "set-aside")
• Tex. Gov't Code Ann. § 2306.6714 (West Supp. 2013) (at-risk development set-aside)
• Tex. Gov't Code Ann. § 2306.6714(a) (15-percent at-risk set-aside)
• Tex. Gov't Code Ann. § 2306.6714(a-1) (eligibility conditions for Section 9 at-risk developments)
• Tex. Gov't Code Ann. § 2306.6702(a)(5) (definition of "at-risk development")
• Tex. Gov't Code Ann. § 2306.6702(a)(5)(A) (Section 8 at-risk development)
• Tex. Gov't Code Ann. § 2306.6702(a)(5)(A)(i) (rental subsidy or Section 8 housing assistance payment)
• Tex. Gov't Code Ann. § 2306.6702(a)(5)(B) (Section 9 at-risk development)
• Tex. Gov't Code Ann. § 2306.6701 (West 2008) (program administration)
• Tex. Gov't Code Ann. § 2306.67022 (West Supp. 2013) (program administration)
• 26 U.S.C.A. § 42 (West Supp. 2013) (federal low income housing tax credit)

Cases:

• Entergy Gulf States, Inc. v. Summers, 282 S.W.3d 433, 437 (Tex. 2009)
• R.R. Comm'n of Tex. v. Tex. Citizens for a Safe Future and Clean Water, 336 S.W.3d 619, 624 (Tex. 2011)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-1060
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2014/ga1060.pdf

Original opinion text

Best-effort transcription from the official PDF. Minor extraction artifacts were corrected; the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT

May 20, 2014

Mr. J. Paul Oxer, Chair Opinion No. GA-1060
Governing Board
Texas Department of Housing and Re: Authority of the Texas Department of
Community Affairs Housing and Community Affairs over
Post Office Box 13941 implementation of the at-risk development set
Austin, Texas 78711-3941 asides under the low income housing tax credit
program in Government Code sections
2306.6702(a)(5) and 2306.6714 (RQ-1167-GA)

Dear Mr. Oxer:

You ask whether the governing board of the Texas Department of Housing and Community Affairs ("TDHCA") is authorized to treat certain housing developments as eligible to receive a tax credit that has been set aside for "at-risk developments" under Government Code section 2306.6714.[1] You explain that TDHCA administers the state's low income housing tax credit program[2]—governed by chapter 2306, subchapter DD, of the Government Code—under which tax credits are competitively awarded to developers of low income housing. Request Letter at 1; see generally TEX. GOV'T CODE ANN. §§ 2306.6701-.6735 (West 2008 & Supp. 2013). You state that subchapter DD "provides for the establishment of certain set-asides." Request Letter at 1. A "set-aside" is defined under chapter 2306 as "a reservation of a portion of the available housing tax credits to provide financial support for specific types of housing ... or serve specific types of applicants." TEX. GOV'T CODE ANN. § 2306.6702(a)(14) (West Supp. 2013). Your question concerns the set-aside for "at-risk developments" under section 2306.6714. See id. § 2306.6714(a).

As background, you explain that the United States Department of Housing and Urban Development created the Rental Assistance Demonstration ("RAD") program, by which a "public housing annual operating subsidy ... under Section 9 of the United States Housing Act of 1937 ... converts to a rental subsidy under Section 8 of the Act." Request Letter at 1. You describe TDHCA's belief that "many of the [public housing authorities] in Texas will be seeking to convert operating subsidies [to rental subsidies] under the RAD program." Id. at 2. Your question is whether TDHCA may, as the administrator of the low income housing tax credit program, treat public housing developments undergoing a RAD conversion as eligible to compete for the at-risk set-aside under section 2306.6714. Id.

Like the courts, when construing a statute we seek to draw the Legislature's intent from the statute's plain language. See Entergy Gulf States, Inc. v. Summers, 282 S.W.3d 433, 437 (Tex. 2009). Section 2306.6714 provides in relevant part:

(a) [TDHCA] shall set aside for eligible at-risk developments not less than 15 percent of the housing tax credits available for allocation in the calendar year.

(a-1) An at-risk development described by Section 2306.6702(a)(5)(B) is eligible for housing tax credits set aside under Subsection (a) if:

(1) a portion of the public housing operating subsidy received from [TDHCA] is retained for the development; and

(2) a portion of the units of the development are reserved for public housing as specified in the qualified housing plan.

TEX. GOV'T CODE ANN. § 2306.6714 (West Supp. 2013). Subsection (a) provides that tax credits shall be set aside for "eligible at-risk developments." Id. § 2306.6714(a). Subsection (a-1) then imposes conditions for eligibility on "[a]n at-risk development described by Subsection 2306.6702(a)(5)(B)." Id. § 2306.6714(a-1). Subsection 2306.6702(a)(5) contains two possible definitions of "at-risk development" that are differentiated by the form of federal subsidy assistance a development receives. See id. § 2306.6702(a)(5)(A) (describing, in part, a development that receives federal subsidy under Section 8); (a)(5)(B) (describing, in part, a development that receives or has received federal subsidy under Section 9).

Subsection 2306.6714(a-1) limits the eligibility of subsection 2306.6702(a)(5)(B) developments, but it does not affect, much less eliminate, the eligibility of subsection 2306.6702(a)(5)(A) developments. Thus, a development that undergoes a RAD conversion and no longer satisfies subsection 2306.6702(a)(5)(B) would still be eligible for the at-risk set-aside if it satisfied subsection 2306.6702(a)(5)(A).

As the administering agency of the low income housing tax credit program, TDHCA has discretion to determine whether a development has satisfied the eligibility requirements for competing for a set-aside. Id. §§ 2306.6701 (West 2008), .67022 (West Supp. 2013). A development is an at-risk development under subsection 2306.6702(a)(5)(A) if it "has received the benefit of a subsidy in the form of a ... rental subsidy, [or] Section 8 housing assistance payment." Id. § 2306.6702(a)(5)(A)(i). If TDHCA determines that a development undergoing a RAD conversion has received assistance under section 8 of the Act and consequently is eligible for the at-risk set-aside, a court is not likely to disturb that determination. See R.R. Comm'n of Tex. v. Tex. Citizens for a Safe Future and Clean Water, 336 S.W.3d 619, 624 (Tex. 2011) (stating that courts will generally uphold a state agency's interpretation of a statute it is charged with administering, so long as the construction is reasonable and not contrary to the statute's language).

SUMMARY

A court would likely conclude that it is within the authority of the Texas Department of Housing and Community Affairs ("TDHCA") to consider a development undergoing a conversion pursuant to the United States Department of Housing's Rental Assistance Demonstration program as eligible to compete for the at-risk set-aside under Government Code section 2306.6714 if TDHCA determines that all applicable eligibility requirements have been satisfied.

Very truly yours,

GREG ABBOTT
Attorney General of Texas

DANIEL T. HODGE
First Assistant Attorney General

JAMES D. BLACKLOCK
Deputy Attorney General for Legal Counsel

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

Stephen L. Tatum, Jr.
Assistant Attorney General, Opinion Committee

[1] See Letter from Mr. J. Paul Oxer, Chair, Tex. Dept. of Housing & Cmty. Affairs, to Honorable Greg Abbott, Tex. Att'y Gen. at 1 (Nov. 13, 2013), http://www.texasattorneygeneral.gov/opin ("Request Letter").

[2] Federal law provides for the allocation and awarding of federal tax credits at the state level to developers of low income housing. See generally 26 U.S.C.A. § 42 (West Supp. 2013).