In a strong bipartisan vote, the Texas House approved a bill Monday aimed at curbing one of the most controversial practices in the state’s affordable housing financing landscape: the ability of Housing Finance Corporations (HFCs) to grant 100 percent property tax exemptions to developments far outside their own jurisdictions.
The bill, House Bill 1585, authored by Rep. Cecil Bell (R-Magnolia), passed overwhelmingly by a vote of 133 to 13. It would prohibit so-called “traveling HFCs” from awarding full tax breaks to apartment complexes that lie beyond the borders of the local governments that created them. But while lawmakers hailed the measure as a first step toward accountability, a more comprehensive reform bill remains stuck in committee.
“This is a good first step, but it’s only part of the solution,” said Rep. Gary Gates (R-Richmond), a longtime critic of the HFC model. “These corporations are wiping out property taxes in communities that never agreed to these deals, and too often, they aren’t delivering true affordable housing in return.”
Under current Texas law, HFCs can negotiate with property developers to grant property tax exemptions — sometimes for up to 99 years — in exchange for reserving a portion of rental units as "affordable." Critics argue the process has become a loophole-laden system where developers reap massive tax benefits while offering little in return.
Since August 2024, Bell said, the tax revenue removed from local rolls due to traveling HFCs is estimated at $3.6 billion. Cities and counties, including Pleasanton, Pecos, Cameron, and Maverick, have collaborated with developers and out-of-state agents to create HFCs that operate in major urban centers like Houston and Dallas — far from their own communities — without seeking permission from the local school districts, municipalities, or counties that bear the burden of providing services to these developments.
A broader fix may soon come in the form of House Bill 21, authored by Gates. The bill, which has over 100 bipartisan co-sponsors, would introduce stricter requirements for how HFCs operate and distribute benefits. It mandates:
That developers set aside at least 50 percent of units for low- and moderate-income families.
That total rent discounts must amount to at least 60 percent of the tax savings.
That local governments must approve the projects before exemptions are granted.
That all HFCs undergo annual compliance audits, shared with state housing authorities and appraisal districts.
That HFCs adhere to open records and open meetings laws, ensuring greater public oversight.
Additionally, Gates’ bill would close loopholes that have allowed developers to designate only small or undesirable units for affordable housing. It mandates that income-restricted units be comparable in quality and amenities to market-rate units and requires a mix of unit sizes to serve families — not just single tenants.
Sen. Paul Bettencourt (R-Houston) filed a matching bill in the Senate, SB 867, which cleared the Senate Committee on Local Government unanimously on Tuesday. Bettencourt has also sought a legal opinion from Attorney General Ken Paxton on whether the revenue-sharing deals struck by traveling HFCs comply with state law, which requires funds to be used to support low- and moderate-income housing.
“What we’ve seen is some local governments treating this as a way to pad their budgets, not as a housing policy,” Bettencourt said, referencing statements from officials in Pleasanton and Maverick County who have promoted HFC participation as a revenue-generating tool.
Houston Housing Authority CEO Jamie Bryant recently confirmed the city will no longer accept new HFC or Public Facility Corporation (PFC) applications, citing concerns over the lack of meaningful rent relief despite the significant tax breaks.
The politics behind the reform efforts are complicated. Bell’s bill mirrors a version introduced by Rep. Rafael Anchia (D-Dallas), co-founder of Civitas Capital Group — a firm that manages HFC-funded properties valued at over $136 million. These properties, authorized through the Houston Housing Authority, have erased nearly $3 million in annual taxes from local rolls. Anchia’s company also benefited from the acquisition of Arlington’s Center Place Apartments last year, a $30 million property now shielded from traditional oversight mechanisms.
Though Bell’s HB 1585 takes aim at the traveling HFC model, it omits many of the tougher provisions found in Gates’ HB 21 — including auditing requirements and caps on how long exemptions can last. Gates questioned Bell about this on the House floor, asking, “You and I are going to work together to do the other necessary reforms?”
“Absolutely,” Bell replied.
HB 21 was approved in committee late Monday with a 9 to 2 vote, but has not yet been reported out for a full House vote.
The debate over how best to structure affordable housing incentives is likely to intensify in the weeks ahead. Supporters of HB 21 argue that unless strong accountability measures are implemented, HFCs will continue to function as tax shelters rather than tools for addressing Texas’ housing affordability crisis.
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