AUSTIN, TX — In a landmark bipartisan victory for tax fairness and local control, Governor Greg Abbott has officially signed House Bill 21 (HB 21) into law, authored by Rep. Gary Gates (R-Rosenberg) and sponsored in the Senate by Senator Paul Bettencourt (R-Houston). Effective immediately, the new law closes a $5 billion loophole that allowed out-of-jurisdiction developers to exploit housing tax exemptions, stripping local communities of revenue while delivering no real affordability. HB 21 will fix a $16 billion market by reinstating local government approvals of housing tax exemptions that enforces rent cuts and restores tax fairness.

“What gets measured gets fixed and this bill fixes a $5 billion problem.” Said Sen. Bettencourt. “HB 21 protects our tax rolls, and demands real affordability in return for public tax exemptions not Wall Street shell games. These exemptions should be earned and housing deals should be helping people they claim to serve instead of leaving local taxpayers holding the bill.” He adds.

For years under current law, Housing Finance Corporations (HFCs) entities formed by cities and counties, intended to support low-income housing, have been exploited by developers partnering with out-of-jurisdiction “traveling” HFCs to receive full property tax exemptions for multifamily housing, with no rent reductions, local approval or community benefit.

Developers were openly marketing these so-called “Goldilocks HFC deals” on Wall Street, promising 99-year tax exemptions without lowering rents and in some cases, increasing them. Four entities alone: Cameron County, Maverick County, Pecos City, and Pleasanton, set up shell partnerships acquiring properties across Texas with no local taxing unit approvals and property tax exemptions that last 99 years.

HB 21 stops the abuse with reforms to Chapter 394 of the Local Government Code, requiring:

• Mandatory city or county approval for every HFC deal or project
• At least 50% of all units set aside as affordable for low-income families
• Rent reductions equal to at least 50% of the tax savings
• Annual independent audits submitted to the state housing agency
• Compliance deadlines for existing properties: 2027 for audits, 2035 for affordability

These provisions apply to both new and existing deals, ensuring tax exemptions meet the long- standing legal requirement to serve a public purpose.

“HB 21 ensures that HFCs that provide a measurable and verified public benefit in the form of actual affordable housing will receive tax exemptions. The passage of this bill is a major victory for Texas taxpayers and for true housing affordability in Texas. Thank you to the countless Texans who advocated for this bill, to Speaker Burrows and Lt. Gov. Patrick for making this a priority bill, to Senator Bettencourt for sponsoring the legislation in the Senate, and to Governor Abbott for signing the measure into law.” Rep. Gary Gates on the passage of the bill.

Senator Bettencourt concluded his remarks by especially thanking the Senate Local Government Committee, the Texas Senate and House counterparts who helped turn HB 21 into law.

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