A quiet change in the law in Texas last spring could trigger an affordable housing crisis — and send a chilling message to investors across the country.
House Bill 21 (HB 21), May is overdrastically rewrites the rules for how affordable housing partnerships in Texas qualify for property tax reductions. For years, these cuts have been one of the few effective tools local governments had to make below-market housing financially viable amid the Texas crisis. serious housing shortage.
These waivers were not giveaways. Developers agreed to build and maintain affordable units; in return, they got predictable tax incentives that made the math work.
HB 21 blows up that concept.
The new law imposes new, stricter affordability mandates, annual audits, and – most importantly – forces every project to secure the blessing of local politicians. Even more troubling, the law applies retroactively to agreements made years ago. Some provinces have already made use of it withdraw exemptions that developers and investors relied on for existing developments. Dallas County does do exactly thatleaving property owners and working-class tenants in limbo.
This isn’t just a bureaucratic headache. Retroactive policy changes undermine the fundamental principle of stable expectations. Housing is capital intensive. Projects require financing based on clear, sustainable rules. When those rules change afterwards, capital dries upprojects are stalling and the housing supply is shrinking.
That is exactly what is now in danger. The Texas Workforce Housing Coalition recently filed a lawsuit against the Bexar Appraisal District, arguing that HB 21’s retroactive effect violates fundamental constitutional protections and amounts to a “war on Texas’ affordable housing developers.”
But make no mistake: this isn’t just about developers. It’s also about tenants.
Bee Willowbend Apartments in San Antonio — one of the properties embroiled in the dispute — families who moved here with long-term affordability commitments could now face steep rent increases or even displacement if the project suddenly becomes taxable. That means fewer affordable units, higher costs and more instability for vulnerable households.
Proponents of HB 21 argue that it will rein in “travelling” development entities, which locate in one jurisdiction but provide tax breaks in another. But the cure from HB 21 is worse than the disease.
By requiring that 50% of housing in new developments be affordable – well above the threshold of financial viability – the law will likely prevent more housing from being built than it is being created. And it punishes not only developers, but also the low-income tenants who now live in these buildings.
Texas has long prided itself on being a stable, pro-growth environment – a state that welcomes investment with clear, consistent rules. That reputation has fueled the state’s population growth and economic success. But HB 21 undermines that progress, replacing predictability with uncertainty and threatening the very housing supply Texas so desperately needs.
If legislatures want more accountability in this system, there are better tools: forward-looking changes, stricter reporting requirements, and targeted oversight can address abuse without destabilizing existing contracts. Many in the industry would actually welcome that clarity. But HB 21, as written, is not reform. It’s a break.
The law tells investors that Texas’ word is no longer its alliance. And once that trust is broken, both markets and tenants pay the price.
Kevin C. Gillen is a senior research fellow at the Lindy Institute for Urban Innovation and an adjunct professor of finance at Drexel University. This column does not necessarily reflect the opinion of HousingWire’s editorial staff and its owners. To contact the editor responsible for this piece: [email protected].
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