Texas shut the door on an affordable housing loophole that drained millions from local tax rolls.
Gov. Greg Abbott signed House Bill 21, closing the property tax loophole that allowed housing finance corporations to partner with investors on apartment deals far outside their home jurisdictions, the San Antonio Express-News reported.
Dozens of small-town housing finance agencies across Texas have been teaming up with investors to snap up apartment complexes hundreds of miles away in cities like Dallas, granting those properties tax-exempt status under the agencies’ nonprofit umbrella.
The arrangement drew criticism from local officials and housing advocates, who argued the deals bled tax revenue from cities, counties, school districts and hospitals, often without delivering meaningful affordable housing benefits.
HB 21 won bipartisan support and was signed into law Wednesday. Housing finance corporations will now be restricted to operating within the city or county that created them, unless they receive approval from local officials for any out-of-area deals.
The legislation also sets stricter affordability mandates, requires annual independent audits and demands that owners pass along at least half of the tax savings to renters or local taxing entities.
In Bexar County alone, out-of-area corporations had been working to take more than two dozen properties — representing $21.5 million in annual taxes — off the local tax rolls. Recent deals involving Pleasanton, Maverick County, Cameron County, Pecos, La Villa and Edcouch sparked local backlash.
Housing finance corporations have existed in Texas for years, but the use of so-called “traveling” corporations spiked after lawmakers restricted public facility corporations two years ago. Both types offered property tax exemptions to investors in exchange for affordability commitments.
Supporters of the legislation say it will ensure only projects delivering “measurable and verified” affordable housing benefits receive exemptions. Critics warn it could spark financial turmoil for projects that already secured tax breaks, potentially leading to foreclosure or a slowdown in affordable housing production.
Properties already under these arrangements face deadlines in the coming years to comply, including a Jan. 1, 2027, deadline to secure local approvals if they want to retain their tax-exempt status.
— Judah Duke
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