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PUBLIC CHAPTER NO. 1037
HOUSE BILL NO. 2509
By Mr. Speaker Sexton, Representatives Faison, Gillespie, Williams, Reedy, Miller,
Alexander, Haston
Substituted for: Senate Bill No. 2410
By Senators Powers, Gardenhire, Stevens
AN ACT to amend Tennessee Code Annotated, Title 7, Chapter 53; Title 13; Title 48,
Chapter 101, Part 3; Title 56 and Title 67, relative to housing.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
SECTION 1. Tennessee Code Annotated, Title 13, Chapter 23, Part 1, is amended by
adding the following as a new section:
(a) As used in this section:
(1) "Essential services personnel" means persons in need of affordable
housing who are employed in occupations or professions in which they are
considered essential services personnel, including law enforcement and public
safety officers, grocery store and restaurant employees, pharmacy employees,
healthcare providers, emergency personnel, and transportation and energy
sector employees;
(2) "Public-private partnership" means any form of business entity that
includes substantial involvement of at least one (1) county, one (1) municipality,
or one (1) public entity, such as an industrial development corporation, a health,
educational, and housing facility corporation, a school district, or other unit of the
local government in which the project is to be located, and at least one (1) private
sector for-profit or not-for-profit business or charitable entity, and may be any
form of business entity, including a joint venture or contractual agreement; and
(3) "Workforce housing" means housing affordable to natural persons or
families whose total annual household income is more than eighty percent (80%)
but does not exceed one hundred fifty percent (150%) of area median income,
adjusted for household size.
(b) There is established the community workforce housing innovation pilot
program, referred to in this section as the "pilot program," to be administered by the
agency.
(c) The purpose of the pilot program is to provide affordable rental and home
ownership community workforce housing for persons affected by the high cost of
housing, using regulatory incentives and state and local funds to promote local public-
private partnerships and leverage government and private resources.
(d) The agency may provide community workforce housing innovation pilot
program loans to an applicant for construction or rehabilitation of workforce housing in
this state. This funding is intended to be used with other public and private resources.
(e) The agency shall establish a loan application process that includes selection
criteria, an application review process, and a funding process. The agency shall
determine which approved applicants will become program participants and determine
the maximum loan amount for each program participant. Applications must be received
on or before March 31, 2027.
(f) The agency shall provide incentives for local governments in eligible areas to
use local affordable housing funds to assist in meeting the affordable housing needs of
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persons eligible under this program. Local governments are authorized to use any
available state affordable housing funds for persons or families whose total annual
household income is more than eighty percent (80%) but does not exceed one hundred
fifty percent (150%) of the area median income, adjusted for household size.
(g) Loans must be targeted to innovative projects in areas where the disparity
between the area median income and the median sales price for a single-family home is
greatest, and where population growth as a percentage rate of increase is greatest. The
agency may also fund projects in areas where innovative regulatory and financial
incentives are made available. The agency shall provide a loan for at least one (1)
eligible project in the western grand division, one (1) eligible project in the middle grand
division, and one (1) eligible project in the eastern grand division.
(h) Projects must receive priority consideration for loans where:
(1) The local jurisdiction has adopted, or is committed to adopting,
appropriate regulatory incentives, or the local jurisdiction or public-private
partnership has adopted or is committed to adopting local contributions or
financial strategies, or other funding sources to promote the development and
ongoing financial viability of such projects. Local incentives include such actions
as expediting review of development orders and permits, supporting
development near transportation hubs and major employment centers, and
adopting land development regulations designed to allow flexibility in densities,
use of accessory units, mixed-use developments, and flexible lot configurations.
Financial strategies include such actions as promoting employer-assisted
housing programs, providing tax increment financing, entering into an agreement
for payments in lieu of taxes, and providing land;
(2) Projects are innovative and include new construction or rehabilitation;
mixed-income housing, commercial and housing mixed-use elements, innovative
design, or other elements that reduce long-term costs relating to maintenance,
utilities, or insurance and promote homeownership. The program funding may
not exceed the costs attributable to the portion of the project that is set aside to
provide workforce housing; and
(3) Projects that set aside at least eighty percent (80%) of units for
workforce housing and for projects that require the least amount of program
funding compared to the overall housing costs for the project.
(i) The agency may provide interest-free loans when long-term affordability is
provided and when at least eighty percent (80%) of the units are set aside for workforce
housing.
0) All eligible applications shall:
(1) Demonstrate that the applicant is a public-private partnership in an
agreement, contract, partnership agreement, memorandum of understanding, or
other written instrument signed by all the project partners;
(2) Have grants, donations of land, contributions from the public-private
partnership, property tax savings resulting from execution of an agreement for
payments in lieu of taxes, or other sources collectively totaling at least ten
percent (10%) of the total development cost or two million dollars ($2,000,000),
whichever is less. Such grants, donations of land, contributions, tax savings, or
other sources must be evidenced by a letter of commitment, agreement, contract,
deed, memorandum of understanding, or other written instrument at the time of
application. Grants, donations of land, contributions, tax savings, and other
sources in excess of ten percent (10%) of the development cost must increase
the application score;
(3) Demonstrate how the applicant will use the regulatory incentives and
financial strategies outlined in subsection (h) from the local jurisdiction in which
the proposed project is to be located;
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(4) Demonstrate that the applicant possesses title to or site control of land
and evidences availability of required infrastructure;
(5) Demonstrate the applicant's affordable housing development and
management experience;
(6) Identify the applicant's plan to market units to essential services
personnel; and
(7) Provide any research or facts available that support the demand and
need for rental or home ownership workforce housing for eligible persons in the
market in which the project is proposed.
(k) The agency may promulgate rules to effectuate this section. The rules must
be promulgated in accordance with the Uniform Administrative Procedures Act, compiled
in title 4, chapter 5.
(I) On or before January 1, 2029, the agency shall review the success of the pilot
program to ascertain whether the projects financed by the program are useful in meeting
the housing needs of eligible areas and submit a report with its finding and
recommendations to the state and local government committee of the senate and the
committee of the house of representatives having jurisdiction over housing matters.
(m) It is the legislative intent to fully fund the pilot program with a one-time,
nonrecurring appropriation of twenty million dollars ($20,000,000) in the appropriation
act for fiscal year 2026-2027.
SECTION 2. Tennessee Code Annotated, Section 48-101-312(b)(4), is amended by
deleting "tax-credit housing project" wherever it appears in subdivisions (A), (C), and (D) and
substituting instead "tax-credit housing project or workforce housing project".
SECTION 3. Tennessee Code Annotated, Section 48-101-312(b)(4)(8), is amended by
deleting the subdivision and substituting instead:
(8) As used in this subdivision (b)(4):
(i) "Public-private partnership" has the same meaning as defined in
Section 1;
(ii) "Tax-credit housing project" means a project that has received an
allocation of low-income housing tax credits under Section 42 of the Internal
Revenue Code of 1986 (26 U.S.C. § 42), or any successor provision, from the
Tennessee housing development agency or is otherwise eligible for the tax
credits as the result of the issuance of bonds, the interest on which is not subject
to federal income taxation;
(iii) "Workforce housing" has the same meaning as defined in Section 1;
and
(iv) "Workforce housing project" means a project financed, in whole or in
part, by a community workforce housing innovation pilot program loan provided
to a public-private partnership by the Tennessee housing development agency
pursuant to Section 1 for construction or rehabilitation of workforce housing in
this state.
SECTION 4. Tennessee Code Annotated, Section 7-53-305(a)(2), is amended by
deleting "tax-credit housing project" wherever it appears in subdivisions (A) and (B) and
substituting instead "tax-credit housing project or workforce housing project".
SECTION 5. Tennessee Code Annotated, Section 7-53-305(a)(2), is amended by
deleting subdivisions (C) and (D) and substituting instead:
(C) As used in this subdivision (a)(2):
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(i) "Public-private partnership" has the same meaning as defined in
Section 1;
(ii) "Tax-credit housing project" means a project that has received an
allocation of low-income housing tax credits under Section 42 of the Internal
Revenue Code of 1986 (26 U.S.C. § 42), or any successor provision, from the
Tennessee housing development agency or is otherwise eligible for the tax
credits as the result of the issuance of bonds, the interest on which is not subject
to federal income taxation;
(iii) "Workforce housing" has the same meaning as defined in Section 1;
and
(iv) "Workforce housing project" means a project financed, in whole or in
part, by a community workforce housing innovation pilot program loan provided
to a public-private partnership by the Tennessee housing development agency
pursuant to Section 1 for construction or rehabilitation of workforce housing in
this state.
(D) The corporation may acquire and lease a tax-credit housing project or
workforce housing project as authorized in this chapter, notwithstanding any limitations
in this chapter on the power of the corporation to purchase or otherwise acquire
apartments or other rental property.
SECTION 6. For the purpose of promulgating rules, this act takes effect upon becoming
a law, the public welfare requiring it. For all other purposes, this act takes effect July 1, 2026,
the public welfare requiring it.
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HOUSE BILL NO. 2509
PASSED: April 23, 2026
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CAMERON SEXTON, SPEAKER
HOUSE OF REPRESENTATIVES
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SPEAKER OF THE SENATE
1 APPROVED this J.( "':5T day of (V\o,.,., 2026
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BILL LEE, GOVERNOREvery fact on this page links to its source, starting with the official bill record.