Texas CHDO and HOME Set-Aside Mechanics

1. TDHCA State HOME, which TDHCA administers primarily for rural and non-participating jurisdictions.
2. Local participating jurisdictions such as Austin, Dallas, Houston, San Antonio, and Harris County, which can certify CHDOs and commit local HOME funds under their own processes.
3. Texas property-tax-exemption and public-entity ownership tools, which may support affordable housing economics but do not themselves prove CHDO status. Use Texas PFC Affordable Housing Structures, Texas HFC Affordable Housing Structures, and Texas Public-Entity Property Tax Exemption Underwriting for those lanes.

The investment committee question is therefore precise: which PJ certified the CHDO, for which HOME allocation, for which project, and for which owner, developer, or sponsor role?

Core Texas Rule

TDHCA says it certifies CHDOs only in conjunction with funding applications proposing development, sponsorship, or ownership of a TDHCA HOME project using the CHDO set-aside. TDHCA does not certify CHDOs for any other purpose. That makes "Texas CHDO" a misleading shorthand unless the memo identifies the certifying body.

For TDHCA HOME, the usual geography also matters. TDHCA describes its HOME program as serving primarily rural Texas, and state law reserves 95% of TDHCA HOME funds for non-participating jurisdictions that do not receive HOME directly from HUD. A sponsor pursuing an Austin, Dallas, Houston, or San Antonio site should first ask whether the local PJ, not TDHCA, controls the relevant HOME CHDO source.

Population And Service-Area Limits

There is no single "Texas CHDO population limit" that turns an organization on or off. The better underwriting split is service area, low-income community accountability, and HOME participating-jurisdiction geography.

Federal CHDO rules require the organization to maintain accountability to low-income community residents. At least one-third of the board must be tied to low-income neighborhoods, low-income HUD beneficiaries, other low-income community residents, or qualifying community organizations. The CHDO must also serve a defined community. In urban areas, the community may be a neighborhood or neighborhoods, city, county, or metropolitan area. In rural areas, it may be a neighborhood or neighborhoods, town, village, county, or multi-county area, but not the entire state. The organization generally must show a one-year history of serving the community where the HOME-assisted housing will be located.

TDHCA then adds the Texas allocation filter. TDHCA HOME is primarily for non-participating jurisdictions; TDHCA's current HOME page states that 95% of state HOME funds are reserved for non-PJs, and TDHCA publishes a participating-jurisdiction list for areas ineligible for TDHCA HOME funds. County PJs require special care because a city inside a county may be outside the county PJ service area and may still need written confirmation.

Do not substitute CDBG-style shorthand such as "cities over 50,000" or "urban counties over 200,000" for CHDO eligibility. Those population thresholds can be useful background for entitlement-program intuition, but HOME PJ status and TDHCA HOME eligibility should be checked against HUD/TDHCA participating-jurisdiction status, TDHCA's current PJ list, and written PJ confirmation where boundaries are ambiguous.

Federal Baseline Still Controls

The Texas structure still sits on the federal HOME framework. Participating jurisdictions must reserve at least 15% of HOME allocation for housing owned, developed, or sponsored by certified CHDOs. The CHDO must satisfy the federal definition, including private nonprofit status, eligible tax-exempt status, independence from for-profit and government control, financial accountability, affordable-housing purpose, low-income community accountability, demonstrated capacity, and service-area history.

The project role matters as much as entity status:

Do not treat an old certification letter, a nonprofit designation, or a city partner list as enough. HOME rules require capacity documentation when funds are committed.

State HOME Versus Local PJ HOME

Texas has a fragmented HOME map:

This creates a practical underwriting split:

• rural or non-PJ site: start with TDHCA HOME eligibility, NOFA, Reservation System, and CHDO packet;
• major city site: start with local PJ HOME materials and local CHDO certification;
• county-unincorporated or suburban site: confirm whether the county, consortium, city, or TDHCA is the HOME PJ;
• LIHTC deal: separately test QAP/nonprofit rules, HOME CHDO rules, bond rules, and property-tax treatment.

Local PJ Examples

The largest Texas markets show why local evidence matters:

• Houston's CHDO program is focused on single-family home development and homeownership for households under 80% AMI. Houston lists certified CHDOs, specific neighborhood targets, affordability periods tied to subsidy amount, and current application status.
• San Antonio describes CHDO set-aside funds as available to certified nonprofits acting as owner, developer, or sponsor of HOME-eligible projects, and identifies operating-expense support as a separate HOME-permitted source.
• Dallas describes CHDOs as certified nonprofits producing affordable housing with city partnership financing, including construction subsidy, gap financing, land acquisition, and operating assistance; certifications are made in conjunction with funding awards.
• Harris County lists certified CHDOs and separately flags Texas Tax Code Section 11.1825 property-tax-exemption application timing.
• Austin shows HOME CHDO as a line in its FY 2026 housing development assistance funding stack while separately describing AHFC/AHPFC property-tax-exemption partnerships.

These are not interchangeable. A Houston CHDO list does not certify an organization for a Dallas project; an Austin HOME CHDO allocation does not answer a TDHCA State HOME application; and a Harris County tax exemption process does not prove HOME CHDO set-aside eligibility.

Texas CHDO Plus LIHTC

Texas CHDO deals can pair with LIHTC Underwriting and Capital Stack, but the HOME CHDO test and LIHTC tests are different. A Texas LIHTC deal may include:

Project owner = LP/LLC
Managing GP/member = nonprofit, CHDO, CHDO subsidiary, HFC/PFC affiliate, or other mission partner
Investor LP/member = tax credit investor
Public sources = HOME, MFDL, local loans, bonds, CDBG, grants, tax exemption, or deferred fee
Restrictions = HOME agreement, LURA, QAP commitments, bond rules, tax-exemption agreement, local approvals

The hard part is not naming the nonprofit. It is proving that each source has the right role, control, compliance, and restriction stack. A qualified nonprofit for LIHTC or QAP purposes is not automatically a HOME CHDO. A CHDO managing member may still need a co-developer or guarantor, but the operating agreement cannot hand away so much control that the CHDO role becomes fictional.

Rent Limit Underwriting Mechanics

Texas CHDO rent underwriting starts with a unit-by-unit gross rent schedule. The model should not use market rent, LIHTC rent, or HOME rent as a single global cap. Each restricted unit needs its own stack of applicable limits:

Maximum collectible tenant rent
= lowest applicable gross rent cap
- tenant-paid utility allowance
- required concessions or local rent reductions, if any

For HOME-assisted rental units, 24 CFR 92.252 makes the rent cap a gross rent test: rent plus tenant-paid utilities or the PJ-approved utility allowance must fit under the applicable HOME limit. High HOME rent is generally the lesser of HUD fair market rent for comparable existing housing or 30% of adjusted income for a household at 65% of area median income, using HUD's bedroom and occupancy assumptions. Low HOME rent generally uses the 50% AMI standard, and in a HOME rental project with five or more HOME-assisted units at least 20% of HOME-assisted units must satisfy the very-low-income / Low HOME rent requirement unless a project-based rental assistance rule creates a different permitted cap.

For LIHTC units, the rent cap is also a gross rent cap, but it comes from Section 42 income targeting and imputed household size rather than the HOME formula. A Texas CHDO/LIHTC model should therefore calculate:

LIHTC gross rent cap = annual imputed income limit x 30% / 12
HOME gross rent cap = HUD-published High HOME or Low HOME rent limit
Modeled tenant rent = minimum(LIHTC cap, HOME cap, bond cap, local cap, HAP/PBV rules, tax-exemption agreement cap) - utility allowance

Common Texas failure modes:

• using TDHCA's rent limit table without subtracting the correct utility allowance;
• assuming a 60% LIHTC unit can charge the LIHTC rent when a HOME, local, or tax-exemption agreement imposes a lower cap;
• treating voucher payment standards as unrestricted rent rather than checking HOME and LIHTC subsidy-interaction rules;
• applying one AMI/rent table to all units when the project has fixed HOME units, floating HOME units, average-income LIHTC designations, or multiple local affordability tiers;
• modeling rent growth at market rent growth instead of annual limit updates, local approval timing, and the most restrictive source.

The underwriting output should be a rent matrix by unit type, bedroom count, subsidy source, AMI tier, HOME fixed/floating status, LIHTC designation, utility allowance, and final collectible rent. Without that schedule, the model cannot prove NOI, DSCR, tax-credit compliance, or HOME affordability-period economics.

Property Tax Exemption Is A Separate Lane

Texas Tax Code Sections 11.182, 11.1825, and 11.1826 can matter to CHDO/nonprofit affordable housing economics. Section 11.182 uses the federal statutory CHDO concept for certain previously exempt property, while Section 11.1825 creates a broader exemption lane for organizations constructing or rehabilitating low-income housing, including LP or parent-subsidiary structures where the qualifying organization controls the GP or parent role. Section 11.1826 adds audit or reporting delivery to TDHCA and the appraisal district.

This can be powerful because property taxes are often one of the largest controllable expense lines in Texas multifamily. It is also easy to misuse. A property-tax exemption can raise NOI, debt capacity, and bid support, but it does not erase HOME rent limits, LIHTC restrictions, local agreements, audit requirements, appraisal-district review, or public-benefit expectations.

Tax Benefit Calculation

The property-tax benefit is not "taxes go to zero" unless the exact structure and taxing jurisdictions support that conclusion. The underwriting calculation should start with the conventional tax burden and then bridge to the proposed exempt or reduced-tax case:

Baseline annual tax = taxable assessed value x aggregate tax rate
Post-structure tax/PILOT = taxable value after exemption or special appraisal x remaining applicable tax rate + PILOT or public-entity payment
Gross tax savings = baseline annual tax - post-structure tax/PILOT
Net tax benefit = gross tax savings - public-entity fees - compliance/audit cost - required rent reductions - incremental reserves - legal/admin cost

Then translate the net benefit into deal metrics:

NOI lift = net tax benefit that remains with the property
Debt proceeds impact = NOI lift / lender debt constant, subject to DSCR and lender haircut
Value impact = NOI lift / exit cap rate, subject to buyer acceptance and exemption transferability
Rent benefit = required or negotiated share of savings passed to residents

The IC memo should show both a "value retained by the property" case and a "public benefit pass-through" case. If a public entity or statute requires rent reductions, audits, affordability tiers, or public payments, the sponsor cannot capitalize the full tax line as private NOI. If the exemption is not transferable, can be challenged by the appraisal district, or expires with a public agreement, exit value should be haircut rather than capitalized like ordinary recurring NOI.

IC Checklist

1. Identify the HOME participating jurisdiction and confirm whether TDHCA, a city, a county, or a consortium controls the CHDO source.
2. Confirm the CHDO certification is project-specific, role-specific, current, and tied to a HOME commitment.
3. Identify the HOME allocation year, NOFA, written agreement, unit designations, rent limits, affordability period, and repayment terms.
4. Confirm whether the project is in a TDHCA non-PJ eligible area or a local entitlement PJ.
5. If the deal is LIHTC, separate the qualified-nonprofit, CHDO, QAP, bond, and investor-control analyses.
6. If the deal assumes property-tax relief, cite the exact Texas Tax Code provision, ownership structure, appraisal-district application, audit requirements, and local approval or policy.
7. Build a unit-by-unit rent matrix showing gross cap, utility allowance, final collectible rent, and the controlling restriction for every restricted unit type.
8. Bridge baseline property tax to post-structure tax/PILOT, then show gross savings, net savings, resident pass-through, NOI impact, debt impact, and exit-value treatment.
9. Test whether the CHDO has paid staff, development capacity, asset-management capacity, and compliance systems for the role claimed.
10. Underwrite the guaranty package. If the CHDO lacks balance sheet, identify the co-guarantor and make sure the arrangement does not break CHDO control.
11. Build a restriction calendar across HOME, LIHTC, MFDL, local soft funds, tax-exemption agreements, HAP/PBV, and resident-services obligations.
12. Do not book CHDO set-aside proceeds until certification, role, and written funding commitment are supportable.

Related Pages

• CHDO Affordable Housing Structures
• CHDO Underwriting and Partnership Diligence
• Texas PFC and HFC Affordable Housing Structures
• Texas PFC Affordable Housing Structures
• Texas HFC Affordable Housing Structures
• Texas Public-Entity Property Tax Exemption Underwriting
• Affordable and Workforce Housing Underwriting
• LIHTC Underwriting and Capital Stack
• LIHTC Policy and Market Structure
• Texas
• Texas Geography Hub
• Texas Investment Hub
• Multifamily Hub

Sources

• Source: Texas CHDO HOME and Public-Private Affordable Structure Research 2026-05-05
• Source: HOME CHDO Program Mechanics and Affordable Structure Research 2026-05-05

Provenance

Created during the 2026-05-05 Texas CHDO depth pass from TDHCA, eCFR, local Texas PJ, Texas Tax Code, and TDHCA PFC/HFC monitoring sources. Treat certifications, allocations, NOFAs, application windows, and named certified CHDO lists as current-sensitive.