A quiet change in Texas law this past spring could ignite a crisis in affordable housing – and send a chilling signal to investors nationwide.
House Bill 21 (HB 21), passed in May, drastically rewrites the rules for how affordable housing partnerships in Texas qualify for property tax abatements. For years, those abatements have been one of the few effective tools local governments had to make below-market housing financially feasible amid Texas’ severe housing shortage.
These exemptions 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 understanding.
The new law imposes new, more stringent affordability mandates, annual audits, and – most significantly – forces every project to secure the blessing of local politicians. Even more troubling, the law applies retroactively to agreements made years ago. Some counties have already used it to revoke exemptions that developers and investors relied upon for existing developments. Dallas County is doing just that, leaving property owners and working-class renters stuck in limbo.
This isn’t just a bureaucratic headache. Retroactive policy changes undermine the bedrock principle of stable expectations. Housing is capital-intensive. Projects require financing that’s predicated on clear, durable rules. When those rules shift after the fact, capital dries up, projects stall, and housing supply shrinks.
That’s exactly what’s now at risk. The Texas Workforce Housing Coalition recently filed suit against the Bexar Appraisal District, arguing that HB 21’s retroactivity violates basic constitutional protections and amounts to a “war on Texas’ affordable-housing developers.”
But make no mistake – this isn’t just about developers. It’s about tenants, too.
At San Antonio’s Willowbend Apartments – one of the properties caught up in the dispute – families who moved in under long-term affordability commitments may now face steep rent hikes or even displacement if the project suddenly becomes taxable. That means fewer affordable units, higher costs, and more instability for vulnerable households.
Supporters of HB 21 claim it reins in “traveling” development entities, which set up in one jurisdiction but grant tax breaks in another. But HB 21’s cure is worse than the disease.
By requiring 50% of units in new projects to be affordable – far beyond the threshold of financial viability – the law is likely to stop more housing from being built than it creates. And it doesn’t just punish developers, but also the low-income tenants now living in these properties.
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 boom and economic success. But HB 21 undermines that progress, replacing predictability with uncertainty and threatening the very housing supply Texas so desperately needs.
If the Legislature wants more accountability in this system, there are better tools: prospective-only changes, stricter reporting requirements, and targeted oversight could address abuses without destabilizing existing contracts. Many in the industry would actually welcome that clarity. But HB 21, as written, isn’t reform. It’s a rupture.
The law tells investors that Texas’s word is no longer its bond. 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 department and its owners. To contact the editor responsible for this piece: zeb@hwmedia.com.
