Recap of Sunset Commission Recommendations for TDHCA

Last week the Texas sunset commission adopted its final recommendations regarding the Texas Department of Housing and Community Affairs (TDHCA).  Burying its lead, the final recommendation adopted was to continue the department for another 12 years, recognizing the improvements since the last full sunset review in 2000.

A detailed recap of the full recommendations is after the jump:

The first set of recommendations addressed delays in disaster recovery funding:

1.1  Require TDHCA, in consultation with the Texas Department of Rural Affairs and the Governor’s Office, to develop a comprehensive long-term disaster recovery plan.

1.2  Require the Governor to designate the State’s lead agency for administration of any potential long-term disaster recovery funding by May 1 of every even- numbered year.

1.3 Require communities to add a long-term recovery component to existing emergency management plans.

TxLIHIS and Texas Appleseed jointly filed comments in support of this set of recommendations. We strongly concur with staff recommendations that Texas needs a clear and consistent long-term disaster recovery plan, and that lack of planning has impeded efficient and effective use of long-term disaster recovery funds.

The second set of recommendations addressed the statutory framework of the Low Income Housing Tax Credit (LIHTC) program.

2.1 Change the basis for quantifying a community’s participation in a proposed tax credit development to the receipt of a resolution that is voted on by the local city council or county commissioners court.

(Editorial comment: I’m just going to assume that the statutory language that results from this recommendation is going to clarify that the resolution needs to be approved by a vote, not just subjected to a vote)

2.2 Allow TDHCA to create additional tax credit allocation cycles to take advantage of non-standard federal assistance opportunities.

2.3 Allow TDHCA’s Board to update the qualified allocation plan biennially instead of annually.

New Issue ~2.4: Maintain letters from neighborhood organizations as statutorily required, but move neighborhood letters from second to last on the list of criteria used to score and rank tax credit applicants under Government Code 2306.6710 (b)(1).

New Issue ~2.5: Delete the provision in Sec. 2306.6710 of the Government Code that gives points to low- income housing tax credit applications based on a letter of support from a state senator or state representative.

A group of 11 TDHCA stakeholders, including TxLIHIS, filed comments in support of recommendation 2.1.   As demonstrated in the Austin American Statesman article on the topic last summer, many “neighborhood associations” lack the formal and transparent processes needed to ensure they represent broad-based local interests.  Also, our research earlier this year indicates associations in affluent areas are less likely to support LIHTC developments, preventing LIHTC residents from accessing the public resources in those areas.

(As another minor editorial aside, I see a bit of inconsistency between the strict wording of 2.1 and 2.4 as adopted:  2.1 replaces neighborhood association letters with city council or county commission letters, while 2.4 keeps neighborhood association letters but changes their scoring.  2.4 was adopted after 2.1, so it’s not entirely clear if 2.4 modified and replaced 2.1: i.e. only neighborhood association letters are scored, or added to it: i.e. both City Council or County Commission letters are scored AND neighborhood association letters are scored.  I suspect the later, but we’ll see.)(2/27 update: Sunset staff confirm it is the later.)

TxLIHIS has also long supported changes to the framework for consideration of letters from Elected Officials, including state legislators.  Sen. Whitmire referenced Rep. Terri Hodge, in prison for tax fraud receiving bribes in connection with LIHTC support letters, in justifying the removal of those letters from the application scoring process.

Our hope is that these recommended changes in the statutory framework for the LIHTC program are just the first step towards addressing the inequities caused by its current scoring and allocation process.

The third set of (one) recommendation addresses TDHCA’s single family loan program.

3.1 Direct the Department to overhaul its single-family loan review processes to create a faster and more efficient system.

This management recommendation was supported by a group of 11 TDHCA stakeholders, including TxLIHIS in filed comments.  TDHCA states that a review of how to improve its loan processing activities, including an overhaul of the process with a goal of a faster and more uniform and efficient system, is already underway.

The fourth set of recommendations addressed TDHCA’s contract for deed conversion program.

4.1 Direct the Department to identify, through the legislative appropriations process, a more flexible source of funds for the contract for deed conversion program

4.2 Direct the Department to consider using its existing Colonia Self-Help Centers to help administer the contract for deed conversion program.

4.3 Direct the Department to study the prevalence of contracts for deed in colonias, and report the results to the Legislature.

The fifth set of recommendations addressed the Department’s enforcement process.

5.1            Transfer the Department’s penalty appeals hearings to the State Office of Administrative Hearings.

5.2            Require judicial review of appeals of the Department’s decisions to be based on the substantial evidence rule.

5.3            Authorize the Department to use debarment as a sanction and protection in all its programs.

5.4            The Department should track and timely refer properties that fail to come into compliance for additional enforcement action.

A group of 11 TDHCA stakeholders, including TxLIHIS, filed comments in support of this set of recommendations.

The sixth set of recommendations addressed the inspection of Manufactured Home installations by the Manufactured Housing Division of TDHCA.

New Issue ~6.1 Require the Division to inspect 75 percent of manufactured housing installations.

New Issue ~6.2 Require the Division, before the legislative session in 2015, to report to the Legislative Budget Board, Governor’s Office of Budget, Planning, and Policy and the legislative committees of jurisdiction on meeting the 75 percent inspection goal.   If the Division cannot complete 75 percent of installation inspections by 2015, require the Division to institute a third-party inspection process to supplement existing state inspections, and requires the Division to establish maximum fees, in rule, for third-party installation inspections.

A group of 11 TDHCA stakeholders, including TxLIHIS, filed comments in support of the original staff recommendation, which was to outsource inspections and required 100% inspections.  We’ve written much about manufactured housing installation inspections here at Texas Housers. (see here, here, and here, for example).

While 75% isn’t 100%, and some manufactured homes will remain uninspected and potentially a danger to their residents and neighbors, we recognize that this recommendation is an improvement over the current 25% benchmark and support the incremental improvement.

The seventh set of recommendations addressed the Manufactured Home Division licensing functions.

~7.1            Reduce initial core education requirements for all licensees from 20 to eight hours but require an additional four hours of specialized training for installers and retailers.

7.2            Require a management official at each licensed retailer location to fulfill appropriate education requirements.

7.3            Require the Division to conduct a fingerprint-based criminal background check of all manufactured housing licensees.

7.4            Grant cease-and-desist authority to the Division for unlicensed construction, sale, and installation of manufactured homes.

7.5            Authorize the Division to order direct refunds as part of the manufactured housing complaint settlement process

7.6             Authorize Division staff to administratively dismiss baseless and non- jurisdictional complaints and report these actions to the Division’s Board.

7.7            Eliminate manufactured housing branch and rebuilder licenses from statute.

7.8            Authorize the Division to collect a fee for reprinted manufactured housing licenses.

7.9            The Division should explore offering broader access to license education courses and examination across the state.

7.10             Direct the Division to remove the requirement that manufactured housing complaints filed with the Division be notarized.

7.11             Direct the Division’s Board to make all disciplinary orders and sanctions available to the public on the Division’s website and in an easily accessible format for consumers

(And I’m going to squeeze this additional Sunset recommendation into this set as well:)

8.2            Apply the standard Sunset across-the-board requirement for the Manufactured Housing Division to develop a policy regarding negotiated rulemaking and alternative dispute resolution.

A group of 11 TDHCA stakeholders, including TxLIHIS, filed comments in support of the the seventh set of recommendations.   Recommendation 7.11, the increased disclosure of enforcement actions and sanctions against licensees, has promise to increase the transparency and trust of the Texas manufactured housing market.  While TxLHIS and the other stakeholders believe formal consumer complaints also provide information about the experiences of consumers in this market and should also be published on the MHD website in an easily accessible format, we recognize 7.11 is an incremental improvement over the status quo.

Sunset adopted one new recommendation that did not relate to the above sets of recommendations:

New Issue 17: Clarify in statute that Housing Trust Fund programmed activities funded with less than $3 million are exempt from the Department’s Regional Allocation Formula.

This new issue was submitted by the group of eleven TDHCA stakeholders.  We discussed this issue in detail here, but the short summary is that the Housing Trust Fund should be treated as a source of funds for other programs, rather than a program in itself, under TDHCA’s Regional Allocation Formula.  To do so otherwise needlessly delays the smaller programs funded by the Housing Trust Fund.

The final recommendation is, of course, the big one:

8.1            Continue the Texas Department of Housing and Community Affairs for 12 years.

I’m going to quote the Sunset testimony of John Henneberger, the co-director of TxLIHIS on this recommendation.  (Real Audio link to testimony here, skip forward to 7.36.27)

“I think if the Sunset commission ever published a report and wanted a “poster Agency” as a success story of the Sunset process, I would nominate the Texas Department of Housing and Community Affairs.  I was in this room, as I know a number of you folks were, ten years ago when this agency was severely troubled and challenged.  Your able staff, and the able direction of the members of this commission, have made this agency into a competently administered, transparent agency which is doing good by the people of Texas.”

TxLIHIS supports the continuation of TDHCA for a full 12 years.

In Sum:

While TDHCA has significantly improved since 2000, the Sunset process is an opportunity for continual improvement.  The Sunset Commission has identified and adopted a series of recommendations which promise to further improve this agency going forward.  TxLIHIS supports many of these recommendations.

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