The Texas State Affordable Housing Corporation (TSAHC) won a reprieve from the Texas Legislature yesterday. The housing agency, along with four other state agencies, failed to be reauthorized during the regular legislative session to continue to operate.
Because TSAHC was up for Sunset review in 2009, the failure of the Legislature to explicitly reauthorize TSAHC during the general session meant that the agency would be forced to close down in a year.
The Legislature reauthorized TSAHC yesterday to operate until September 1, 2011, forcing the agency to go back through Sunset review this interim.
Senate Bill 2, adopted yesterday, provides…
SECTION 1.04. TEXAS STATE AFFORDABLE HOUSING CORPORATION. Section 2306.5521, Government Code, is amended to read as follows: Sec. 2306.5521. SUNSET PROVISION. The Texas State Affordable Housing Corporation is subject to Chapter 325 (Texas Sunset Act). Unless continued in existence as provided by that chapter, the corporation is abolished and this subchapter expires September 1, 2011 .
TSAHC ran into trouble during the regular legislative session over its bad judgment in awarding tax exempt mortgage bonds several years ago to a number of newly formed nonprofit organizations. The bonds were used to buy older apartment complexes. The transactions attracted the ire of local elected officials when the projects secured exemption from property taxes.
At the time of the transaction, and subsequently, TxLIHIS was critical of the transaction because we could see no public purpose in the deals and because the transactions did not result in the extent of repairs to these older apartments that were needed. A number of the apartment projects financed by TSAHC have since defaulted on their loans.
TSAHC staff testified that these transactions occurred several years ago and that the agency will not provide this type of financing again.
Yet questions about TSAHC’s lending policies will undoubtedly resurface during the upcoming reexamination by the Sunset Commission. Just last month the American Housing Foundation, a large beneficiary of TSAHC bond finance, declared bankruptcy in the wake of a financial scandal following the suicide of the nonprofit corporation’s leader.