Yesterday was the last day of the 89th Texas Legislative Session, during which over 140 days state lawmakers passed a number of bills concerning real estate development and housing.
Here’s some of what we’ve been tracking at the state legislature this year. Mind you that bills in Texas can become law even without the governor’s signature as long as he doesn’t issue a veto.
Texas Curbs Traveling Housing Finance Corporations
A nagging issue that’s resulted in diminishing municipal and county tax rolls has been that of the “traveling Housing Finance Corporation.” Exploiting loopholes in the system and bypassing local review, traveling HFCs have been securing tax exemptions for high-value properties without ensuring meaningful affordability concessions, according to critics.
HFCs are supposed to provide tax-exempt mortgage revenue bonds and other types of support for the acquisition, construction, or substantial rehabilitation of multifamily housing. In exchange for those benefits, projects are supposed to provide a certain number of affordable units. Apparently, a number of “bad actors” have been operating outside of the jurisdiction where they were created and partnering with developers to get tax exemptions without delivering rent reductions.
“These bad actors, like the Cameron County, Maverick County, Pecos, and Pleasanton HFCs, have had an immense impact on the tax rolls of localities throughout Texas,” said a staffer working for Rep. Rafael Anchia (D-Dallas), who supports closing the loopholes traveling HFCs use to operate.
“In the last six months, they have removed approximately $3.6 billion of taxable value from local tax rolls without the consent of the affected municipalities or counties,” the staffer said, pointing to $135 million in losses from Collin County; $93 million from Denton County; and $704 million from Tarrant County.
Rep. Gary Gates (R-Rosenberg) proposed House Bill 21 as a solution to the problem. Passed by both chambers of the Texas legislature and signed into law by Gov. Greg Abbott last week, HB 21 requires local approval for every HFC deal or project, at least 50% of all units set aside for low-income families, rent reductions equal to at least 50% of tax savings, and annual independent audits of HFC deals to be submitted to the state housing agency.
“HB 21 ensures that HFCs that provide a measurable and verified public benefit in the form of actual affordable housing will receive tax exemptions,” Gates said. “The passage of this bill is a major victory for Texas taxpayers and for true housing affordability in Texas.”
New Subdivisions Could Come With Increased Density via Smaller Lots and Homes
A key priority of Lt. Gov. Dan Patrick’s this session has been boosting single-family housing stock, and if Senate Bill 15 becomes law, he will have gotten his wish.
The bill made it out of both chambers on Sunday and awaits Abbott’s signature or lack of action. As long as the governor doesn’t veto it, SB 15 will become law in 20 days.
SB 15 prohibits cities with populations greater than 150,000 in counties with more than 300,000 residents from imposing minimum lot sizes greater than 3,000 square feet for new subdivisions. It purportedly does so without impacting HOA requirements, historic preservation laws, building codes, deed restrictions, or flood regulations.
“The housing affordability crisis in Texas is real and we’re facing it head-on. Removing large lot size requirements has proven to increase home construction and lower prices. This bill simply recognizes the obvious,” said Sen. Paul Bettencourt (R-Houston), the bill’s author. “With the average age of a first-time homebuyer now at 54 and rising, we must act now to bring homeownership back within reach for Texas families.”
Fewer lot size requirements would ostensibly empower developers to build more (albeit smaller) houses on a given piece of land at lower prices.
“Houston proved it works,” Bettencourt claimed. “When lot size restrictions were relaxed, the market responded. More townhomes went up, prices went down, and real housing demand was met. The results were staggering.”
While it’s difficult to disagree with the premise that the delivery of smaller homes will result in more affordable options, some lawmakers have expressed skepticism about the notion of the state stepping on local control over development.
“[Residents] didn’t elect their state representatives to decide how their city would develop, not on that level, not with this kind of density,” said Rep. Ramon Romero (D-Fort Worth), according to The Texas Tribune.
Anti-Squatters Bill Empowers Landlords, Tenant Rights Advocates Grit and Bear It
While Senate Bill 38 didn’t turn out as bad as tenant rights advocates feared, critics of the so-called anti-squatters bill claim it will still ultimately make it easier for landlords to evict renters and increase homelessness in Texas.
SB 38, which was sent to the governor’s desk over the weekend after passing out of both chambers, aims to reform eviction civil proceedings by requiring courts to act within 10-21 days of an eviction filing; streamlining eviction notice delivery; allowing tenants to respond via phone, email, or in person; limiting appeals to stall evictions; limiting summary disposition evictions to squatting cases; and requiring law enforcement to execute visible writs or serving citations in squatting cases.
“Texas ranks #2 in the nation for squatting, that is a crisis,” Bettencourt (the bill’s Senate sponsor) claimed. “Property owners are facing financial devastation and dangerous confrontations, from a $6,000 dental bill after a squatter dropped a refrigerator on a woman, to over $130,000 in legal fees just to evict unlawful occupants. That ends now, as this is a focused anti-squatters bill.”
Instances of squatting in North Texas made headlines last year, but opponents of an overly broad bill claim actual squatting incidents are few and far between. Evictions, however, spiked considerably in Dallas County in recent years, totaling nearly 40,000 in 2023.
Stakeholders and advocates negotiated during the legislative session on the parameters of an anti-squatters bill after House Bill 32 was blasted by tenants rights advocates for allegedly removing most existing requirements for landlords to issue a notice to vacate before initiating eviction proceedings; enabling landlords to obtain a summary judgment for eviction without a hearing; and allowing landlords to file for eviction in neighboring precincts where they might get more favorable treatment.
“I’m celebrating the fact that a significantly worse bill could have passed and didn’t,” said Dallas attorney Mark Melton, who heads up the Dallas Eviction Advocacy Center, according to The Texas Tribune.
Property Tax Relief Is On Its Way, Pending the Next Election
A pair of bills looking to lower property taxes will almost certainly receive Abbott’s signature in the coming days and not a moment too soon as some residents struggle to maintain their housing situation amid swelling valuations. However, voters will still need to approve the measures in the next November election.
SB 4, in conjunction with Senate Joint Resolution 2, would raise the ISD homestead exemption from $100,000 to $140,000, a threshold that would impact some 5.7 million homesteads in the Lone Star State. This amounts to an estimated $484 in property tax relief per homestead annually.
Potentially adding to the savings is SB 23, which, in conjunction with Senate Joint Resolution 85, would bump the additional exemption for Texans with disabilities and those 65 and older from $10,000 to $60,000. This amounts to around $450 in relief for qualifying homeowners.
“In 2023, the Texas Senate delivered a tax cut of $1,266.30 for the average homeowner. When tax cuts from 2023 and 2025 are combined, homeowners will be reviewing a total tax cut of $1,762.87,” said Lt. Gov. Patrick. “Senators from both sides of the aisle understand when increased Homestead Exemption and more compression are combined, homeowners receive maximum tax relief benefit.”
CandysDirt.com will be digging into how this would play out in actuality for North Texas homeowners in conjunction with local taxing entities.
Lawmakers Empower Multifamily Housing Developers
Developers in the state’s biggest cities will be able to avoid rezoning in certain circumstances if Senate Bill 840 becomes law, a scenario that will likely frustrate residents who have been active in opposing multifamily construction near single-family neighborhoods and increased density.
Essentially, SB 840 would allow developers to build multifamily projects by right in areas already zoned for office, commercial, retail, warehouse, or mixed-use while limiting how restrictive density, parking, and dimensional requirements can be. The idea is to make it easier for vacant office buildings and strip malls to be converted into housing, skipping over the costly and sometimes contentious rezoning process.
We’ll definitely be diving into this one at a later date, as the bill could have some serious implications when it comes to historic preservation, public improvement districts, and ongoing litigation related to certain high-profile projects.
