A legal battle is heating up a new Texas law that advocates say is closing the tax-free curtains that developers have under the guise of providing affordable housing across the state.
The Texas Labor Housing Coalition, a coalition of low-income housing providers, filed a lawsuit this month challenging the constitutionality of the law, which advocates say closed a loophole that outside groups use to get 100% property tax breaks without following up and not having to deal with affordable housing.
The improved law targets out-of-town agencies, known as travel housing finance companies, which will work with developers to acquire real estate in other parts of the state.
The Texas Labor Housing Alliance lawsuit argues that the new law is unconstitutional because it attempts to disrupt contracts signed by developers, often allowing investors to push investors to raise billions of dollars in long-term affordable housing projects based on an understanding that the project will be tax-free.
“Texas has attracted billions of dollars in investment from real estate developers to build affordable housing for working-class Texans and promise good tax treatment, but has now pulled carpets out of the domination of these developers. “The unconstitutional implementation of HB21 is nothing more than a collapse of the rule of law in Texas. ”
“What’s worse is that teachers, nurses, first responders and other important workers who currently benefit from affordable housing will be the biggest harm because they may be forced to move out of their homes when affordable housing units across the state start to evaporate,” Mr Cox said.
Supporters of the new law say bad actors are providing less property tax revenue to schools, police and hospitals, while providing little affordable housing.
The Texas Labor Housing Alliance lawsuit was filed against the Bexar Central Assessment District in San Antonio for avoiding tax exemptions.
Attorneys in the Bexar Central Assessment District did not respond to a request for comment.
But, according to state Rep. Gary Gates, hundreds of deals have been reached under the new law.
“The lawsuit is nonsense,” he said. “We will be able to knock it down very easily.”
Republican Governor Greg Abbott signed the law in May. The law, known as HB21, will fully take effect in 2027.
The problem, Mr. Gates said, is that developers have been abused by the system so that places don’t have lower housing and less property tax revenues they rely heavily on to cover the costs of schools, roads and police.
“These guys are becoming greedy,” he said.
After Republican Mr. Abbott signed the law, real estate developers and investors predicted a large amount of legal deductions.
“Many people would say it’s unconstitutional,” Rob Beardsley, head of the Lone Star Building in Texas, said on the company’s podcast shortly after the law completed the book. “People will simply say you can’t have a law that says one thing, and then you basically kill the law and that’s not grandfather.”
Mr. Beardsley’s corporate portfolio does not include deals with targeted travel housing finance companies, which he said is a bit “a bad look to Texas” which could make good affordable housing developers think twice.
“If you do business in Texas, it shows the world, we might flip the scripts and change the game on you,” he said.
•This story includes a wire service report.
