AUSTIN, TEXAS — A new bill introduced in the Texas House and its companion in the Senate aim to close loopholes and reform Housing Finance Corporations (HFCs) in the state. If passed, these bills may reduce the state housing crisis by offering a helping hand to vulnerable low- and moderate-income earners.
Rep. Gary Gates (R-Richmond) filed House Bill 21 (HB 21) to address concerns that certain HFCs have abused property tax exemptions and failed to provide affordable housing to those in need.
The Senate version, Senate Bill 867 (SB 867), was introduced by Sen. Paul Bettencourt (R-Houston), and includes similar provisions.
The two bills seek to restrict HFCs’ geographic reach, ensure that tax exemptions are used properly, and set stricter standards for affordable housing. Their goal is to make sure the organizations are fulfilling their original mission: providing low- and moderate-income Texans with access to affordable housing.
Addressing the Problems
HFCs are designed to help fund affordable housing projects by providing low-interest loans and tax exemptions.
However, critics argue that some HFCs have exploited a loophole that allows them to acquire properties outside their sponsoring municipalities, securing tax exemptions without providing a tangible public benefit.
Rep. Gates said, “The new legislation aims to stop this exploitative practice that deprives local governments of critical tax revenue that could support services such as schools and infrastructure. Through the passage and implementation of HB 21, countless municipalities should regain the opportunity to collect the millions of dollars in tax revenue necessary to fund its residents’ critical services.”
Key Provisions of HB 21
HB 21 introduces several important reforms to ensure that HFCs act in the public’s interest:
- Geographic Limitations
The bill limits HFC operations to the municipality or county that sponsors the corporation. This provision seeks to prevent HFCs from acquiring properties in areas far removed from their sponsoring locality, preventing them from taking advantage of tax exemptions without providing benefits to local communities. - Property Tax Exemptions
HFC-owned properties would only qualify for tax exemptions if they are located within the boundaries of the sponsoring local government or if the local governing body has passed a resolution granting the exemption. This change ensures that tax breaks are used in a way that directly benefits communities. - Rent Restrictions and Housing Standards
The bill requires HFC-owned multifamily housing to adhere to specific affordability standards. At least 10% of units must be reserved for low-income tenants earning less than 60% of the area’s median income (AMI), while 40% of units must be for moderate-income tenants earning less than 80% of AMI. These rent restrictions are designed to make housing more accessible for those who need it most. - Upgrades for Existing Properties
If an HFC acquires an existing apartment complex, it must invest at least 15% of the property’s value in renovations or repairs. Work must begin within one year of acquisition and be completed within three years. This ensures that properties are maintained and improved for residents. - Tenant Protections
The bill includes several provisions to protect tenants, including rules for bedroom distribution, measures to prevent discrimination based on income, and mandates to market housing opportunities to lower-income individuals. Tenants will also be guaranteed fair leasing practices.
The reforms are a crucial step in addressing the state’s affordable housing crisis. Texas has experienced rapid population growth in recent years, and affordable housing options have not kept pace with demand.
Recent findings by leading researchers at Texas A&M Real Estate Research Center, the U.S. Census Bureau and Harvard Joint Center for Housing Studies, collected in a recent research report by the Texas Comptroller, revealed the staggering truth about the Texas housing affordability crisis.
Home prices are soaring at unprecedented rates and the middle class is now unable to keep up. Between 2019 and 2023, median home prices in the state increased by about 40%, with smaller metro areas, like Brownsville-Harlingen, seeing a staggering 73% jump.
As home prices continue to climb, affordability has plummeted. In 2019, the median family income was 62% higher than what was needed to purchase a median-priced home, but by 2023, the gap had narrowed to just 7%.
This shift has left many Texans in a difficult position.
“The rise in housing prices and the decline in affordability have left many Texans struggling to find homes within their means, especially those in lower-income brackets,” the Texas Comptroller reported.
Even middle-class families, who once had the financial ability to purchase a home, are now finding themselves priced out of the market. In cities like Brownsville, McAllen, and El Paso, median-income households can no longer afford to buy a home in their own communities.
Further, the situation is even worse for renters, who are increasingly burdened by high housing costs. In 2022, 34% of Texas households were cost-burdened, meaning they spent more than 30% of their income on housing. More than half of renters faced this challenge, compared to less than a quarter of homeowners.
The problem is especially severe for low-income families, where 88% of those earning less than $20,000 were cost-burdened, making it nearly impossible to cover both housing and other basic needs.
The shortage of affordable housing compounds these struggles. Texas has just 25 affordable rental homes per 100 extremely low-income households, one of the lowest ratios in the nation. As a result, many families are forced to spend a disproportionate amount of their income just to keep a roof over their heads. The state’s supply of low-cost rental units is also shrinking, with units under $1,000 per month falling by 29% from 2012 to 2022.
The crisis has left a growing number of Texans in financial jeopardy, and now, the dream of homeownership is slipping further away for many families across the state.
However, the solution to this crisis may be within reach.
According to Rep. Gates, the integral changes to HFCs that HB 21 proposes will help ensure that HFCs are used for their intended purpose: providing affordable housing to those who need it.
Gates stated, “Currently, many HFCs fail to offer truly affordable housing. As Texas’s population expands, we must create effective strategies to provide affordable housing solutions to those most in need and eliminate unscrupulous actors in the industry.”
The Senate Companion Bill
Sen. Bettencourt’s SB 867 mirrors many of the provisions in HB 21.
In addition to limiting geographic reach and implementing stricter tax exemption rules, SB 867 authorizes a fee for certain actions related to HFCs, though details on the fee are still being refined.
The bill’s goal is to ensure that HFCs are operating transparently and meeting the needs of low-income Texans.
Having both a House and Senate version of the bill increases the chances of swift passage, as the bills can progress through both chambers simultaneously.
Companion bills allow lawmakers to address issues from both sides of the legislature, streamlining the legislative process and increasing the likelihood of success.
Local Impact
The changes proposed in HB 21 could have a significant impact on local communities, particularly in urban areas where affordable housing is in high demand.
By limiting the geographic reach of HFCs and requiring that tax exemptions are used appropriately, the bill aims to keep valuable property tax revenue within local jurisdictions.
“The traveling HFC loophole must be stopped as it has transformed what should be non-profit organizations dedicated to providing affordable housing into for-profit businesses focused on their own financial gain, ultimately pilfering funds from cities across Texas,” Gates remarked.
In Houston, for example, the local Housing Finance Corporation (HHFC) has played a key role in financing affordable housing projects. However, the new legislation seeks to ensure that these organizations continue to serve the public interest and do not exploit tax exemptions for personal gain.
What’s Next?
HB 21 and SB 867 are still in the early stages of the legislative process, with both bills expected to be reviewed by relevant committees in the coming weeks. If the bills are approved, they will move to the full House and Senate for debate before being sent to Governor Abbott for final approval.
Should the bills become law, they will address key issues in Texas’s affordable housing landscape, ensuring that Housing Finance Corporations are held accountable and that tax exemptions are used to provide genuine benefits to the communities that need them most.
This is a developing story. Visit KatyChristianMagazine.com for the latest updates on HB 21 and SB 867.
