Texas Proposes Changes to LIHTC Allocation, Occupancy Priorities

Legislation focuses on access to groceries and teacher housing.

Two bills recently were introduced in the Texas Legislature seeking to influence how LIHTCs are allocated and used in the state. These two measures, one introduced in the Texas House of Representatives and the other in the Senate, indicate a growing effort to align affordable housing policies with community needs, such as access to essential services and support for public education employees.

Under H.B. 492, sites would be eligible for LIHTC allocations only if they’re located within two miles of a grocery store. The proposed change would apply to applications submitted to the Texas Department of Housing and Community Affairs during application cycles based on the 2026 Qualified Allocation Plan or subsequent plans.

While some state housing finance agencies include proximity to grocery stores as a scoring criterion in their Qualified Allocation Plans (QAPs) for LIHTC sites, it’s been uncommon for states to mandate this proximity as a requirement for LIHTC allocation. Typically, being near a grocery store enhances a project's competitiveness by awarding additional points during the evaluation process.

For instance, the Ohio Housing Finance Agency's QAP includes a "Proximity to Amenities" attribute as a competitive criteria, specifically highlighting grocery stores. And, similarly, the Georgia Department of Community Affairs' QAP includes "Desirable/Undesirable Activities" as a scoring criteria, where proximity to amenities such as grocery stores can influence a project's competitiveness.

The other bill introduced in the Texas Senate, S.B. 368, would allow LIHTC sites to give occupancy preferences to teachers and other employees of the school district in which the site is located, as well as their household members, provided all other occupancy requirements under state and federal law are satisfied.

This proposed change aligns with Section 42(g)(9) of the Internal Revenue Code, which permits LIHTC developments to offer occupancy preferences to certain groups such as those involved in artistic or literary activities. If enacted, the changes would apply to applications for LIHTC submitted during an application cycle based on the 2026 qualified allocation plan or a subsequent plan adopted by the Texas Department of Housing and Community Affairs.