1. (a) The objectives of the Department in performing regular monitoring of affordable rental housing are:

   1. (1) To provide for monitoring that meets applicable requirements of:

      1. (A) The U.S. Department of Housing and Urban Development (HUD);
      2. (B) The U.S. Department of the Treasury (Treasury);
      3. (C) The Internal Revenue Service (the IRS); and
      4. (D) Applicable state laws and rules;
   2. (2) To enable the Department to report information to HUD, Treasury, the IRS, and the Governing Board, as required, regarding the condition and operations of such developments;
   3. (3) To enable the Department to communicate with responsible persons regarding the condition and operation of their developments and understand clearly, with a documented record, how they are performing in meeting their obligations;
   4. (4) To identify matters of noncompliance so that they can be appropriately addressed and to assist in targeting issues that may require compliance assistance education;
   5. (5) To ensure that responsible persons understand the compliance status of their developments and the implications of such status;
   6. (6) To articulate and communicate clear standards to promote the maintenance and operation of such developments in a manner that meets the high standards of the Department's affordable rental programs; and
   7. (7) To provide a transparent system whereby all interested parties, including residents, community organizations, local governmental entities, and the affordable housing industry, may find accountability, consistency, and an awareness of the high quality standards of affordable housing in the State of Texas.

2. (b) This subchapter applies to the monitoring of affordable rental housing under the programs described in paragraphs (1) - (11) of this subsection:

   1. (1) The Housing Tax Credit Program (HTC);
   2. (2) The HOME Investment Partnerships Program (HOME), inclusive of HOME Match Units;
   3. (3) The Tax Exempt Bond Program, inclusive of 501c3 bonds (Bond);
   4. (4) The Texas Housing Trust Fund Program (HTF, SHTF, or THTF), inclusive of Preservation;
   5. (5) The Tax Credit Assistance Program (TCAP);
   6. (6) The Tax Credit Exchange Program (Exchange);
   7. (7) The Neighborhood Stabilization Program (NSP);
   8. (8) Section 811 Project Rental Assistance (811 PRA or 811) Program;
   9. (9) Tax Credit Assistance Program Repayment Funds (TCAP RF);
   10. (10) The National Housing Trust Fund (NHTF)
   11. (11) HOME American Rescue Plan (HOME-ARP); and
   12. (12) Emergency Rental Assistance (ERA).
3. (c) Monitoring activity evaluates the physical condition of the Developments and whether they are being operated in documented compliance with program requirements.
4. (d) The results of the Department's monitoring activities will be documented and, communicated to the owner in writing within 90 days of the monitoring visit.
5. (e) The Department may contract with an independent third party to monitor a Development during its construction or rehabilitation and during its operation for compliance with any conditions imposed by the Department in connection with the award of any Department funds, including allocations of housing tax credits, and appropriate state and federal laws, rules, regulations, orders, and other applicable legal requirements.
6. (f) The capitalized terms or phrases used herein are defined in this title. Any other capitalized terms in this subchapter shall have the meaning as defined in Tex. Gov't Code Chapter 2306, Internal Revenue Code (the Code) §42, the HOME Final Rule, and other federal or Department rules, as applicable. Defined terms, when not capitalized, are to be read in context and construed according to common usage.
7. (g) A Development with one or more HOME, TCAP-RF or HOME Match Units is subject to the 2025 HOME Final rule if a Contract with the Department is executed by both Parties on or after April 30, 2026; a Development with HOME, HOME-ARP, TCAP-RF and HOME Match Units with a Contract or a LURA executed prior to April 30, 2026, that has executed the applicable amendment(s) to opt-in the entirety of rule (to the extent allowed under federal or state law determined by the Department's Legal Division) are also subject to the HOME Final Rule. A Development with one or more NSP Units with a Contract executed on or after April 30, 2026, may be subject to elements of the HOME Final rule as further described in the Department's Consolidated Plan Amendment, and as outlined in the Contract and the LURA. A Development with one or more NSP Units with a Contract executed prior to April 30, 2026, that also has one or more Units subject to the 2025 HOME Final Rule may be allowed to opt into elements of the HOME Final rule, as determined by the Department's Legal Division.

Source Note:The provisions of this §10.601 adopted to be effective January 2, 2025, 49 TexReg 10513; amended to be effective April 29, 2026, 51 TexReg 2714.