How Will the Texas Legislature Approach Affordable Housing This Session?

  

The 89th session of the Texas Legislature will gavel in on January 14, but lawmakers began signaling as early as last spring that affordable housing would be a priority topic for 2025. A scan of pre-filed bills related to housing shows that lawmakers likely intend to focus on two longtime favorites to address affordability: property tax reform and telling local governments what they can and cannot do.

The lack of affordable housing—defined as rent or mortgage equal to no more than one-third of a person’s income—has become the rare topic that has the attention of the public as well as legislators on either side of the aisle. Last year, Texas Comptroller Glenn Hagar’s office published a report attempting to quantify the amount of housing the state needed to produce to meet demand. It cited a 2023 analysis by the housing think tank Up For Growth that found Texas was short about 306,000 units. The greatest shortage is for homes affordable to middle-income families. Locally, the Child Poverty Action Lab predicts that by 2035 the shortfall in affordable units in Dallas will reach about 76,000.

Lt. Gov. Dan Patrick’s agenda for the Texas Senate includes a priority to make “recommendations to reduce regulatory barriers and strengthen property rights.” He made the announcement in April on the heels of several conservative groups becoming more vocal about their desire to eliminate zoning rules that make it more difficult to build housing. The Texas Public Policy Foundation has already drafted statewide legislation to pre-empt local regulations.

In May, then-House Speaker Dade Phelan expressed a similar priority, telling lawmakers to “examine factors affecting housing attainability and affordability in Texas, including state and local laws impacting supply and demand for housing, barriers to construction resulting from zoning practices and the availability and costs of housing outputs.”

Lawmakers in November began pre-filing bills, a list that presently totals 2,398. The lowest-numbered bills in both chambers are reserved for the House speaker and lieutenant governor’s priority legislation. Phelan reserved the first 150 spots while Patrick reserved the first 40. Those bills have not been filed yet, but Patrick has indicated that Senate Bill 1 would be the state budget and SB 2 would address private school vouchers, a priority of Gov. Greg Abbott that failed to pass in the last session.

What remains in flux is how many of Phelan’s priorities will end up on the House floor. He dropped out of the speaker’s race, leaving Rep. Dustin Burrows, R-Lubbock, and Rep. David Cook, R-Mansfield, to duke it out over the seat. Both have claimed to have the votes to win, which means that the first day of the 89th session could involve a protracted vote. 

But just about everyone agrees that housing will be a priority—they’re just not sure what the end product will be.

“However the speaker’s race ultimately turns out, the lieutenant governor has talked about housing, the governor has talked about housing, the public is talking about it,” said state Sen. Nathan Johnson, D-Dallas. “Something like 90 percent of the public says it’s an issue. It’s going to be an issue, and the Legislature will do something.”

Jay Blazek Crossley, who runs the Austin-based nonprofit Farm & City, lobbies state and local lawmakers to improve policy and planning around housing, public transit, and pedestrian safety. He agrees with Johnson that most Texans now see housing as a serious issue. The rub is in the approach to solving the problem.

“There’s a broad consensus that actions need to be taken to make things more affordable,” he said. “But then there’s not so much broad consensus about what makes things affordable, or better.” 

Crossley suspects some of the bills addressing how city governments manage land use will land on Abbott’s desk. “I’d be very, very, very, very surprised if something doesn’t go through.”

Of the nearly 2,400 bills filed so far, some address housing affordability.  These seem likely to fall primarily into two distinct buckets: property tax reform and zoning and land use. 

“Something like 90 percent of the public says it’s an issue. It’s going to be an issue, and the Legislature will do something.”

State Senator Nathan Johnson

The state comptroller’s office forecasts a budget surplus of $20 billion. In the last legislative session, lawmakers approved an $18 billion property tax cut that included a buyback plan to reduce school district property tax rates. Despite those cuts, most Texas property owners saw continued increases in their property tax bills. 

This session, there are once again several bills aimed at property tax relief. House bills 1622 and 1430 would address a cap on property taxes. Last session, legislators enacted a 20 percent cap on residential tax increases; these bills would look to extend it to commercial.

Two other house bills—HB 264 and HB 275—would dedicate part of the budget surplus to tax relief in various ways. HB 165 would eliminate property taxes and requires a study of “alternative methods of taxation.” The Legislative Budget Board says no longer collecting state property taxes would cost Texas nearly $82 billion, more than half of its $144 billion two-year budget.

In April, the bill’s author, Rep. Cody Vasult, R-Angleton, called property taxes “one of the worst ways to tax” in a post on X.com. Other lawmakers and officials, including Gov. Greg Abbott, have floated the idea of removing the property tax as well but have not offered a way to replace the lost revenue.

But many question whether fiddling with property taxes in Austin will move the needle for property owners. The Dallas Morning News’ editorial board called election promises of further reforms a “fake ‘conservative’ promise.”  Others, including Johnson, say more property tax relief won’t actually increase affordable housing stock. “We’ve already had a huge property tax buydown,” he says. “I think it’s probably the least effective thing we can do with respect to making housing affordable.”

Johnson sees the true problem as an issue of supply and demand. There isn’t enough housing, so prices continue to rise. This means that no matter how much cities, counties, and schools reduce their property tax rates, the rising property values continue to drive an increase in property tax bills. He also worries that continuing to focus on property tax relief could have a “depressive effect” on real estate as people decide to stay put rather than sell their homes. Thanks to appraisal caps enacted by legislators, a home buyer could end up paying more in property taxes than the previous homeowner because that appraisal cap resets, so to speak, once the house is sold.

The solution, he says, is to build more housing, “not to starve cities of the revenue they need to pay law enforcement and other things.” 

However, some bills will address affordability outright, likely through zoning and other things the lawmakers see as roadblocks to building more housing. 

So far, just a few bills look at land use and zoning specifically. HB 878 would prevent cities from prohibiting accessory dwelling units, or so-called granny flats, on lots zoned for single-family homes or duplexes. It would also limit the city’s control of the size of the ADU and where it can be built on the property. HB 327 would exempt development projects that have applied for or have received Low-Income Housing Tax Credits (abbreviated as LIHTC) from a provision that allows residents to protest a proposed zoning change and force a supermajority of the city council to approve it.

Crossley says his organization aligns with the Texas Public Policy Foundation, the Texas Municipal League, “and a bunch of different people” advocating for more state law reform around protesting zoning and land use changes.

“There was this 1920s, Jim Crow-era law meant to allow people to say, ‘We don’t want those people in our neighborhood,’” he says. It’s now being used by residents to oppose various land use changes and allowed some Austin residents to block changes that could have resulted in thousands more housing units in the city. Crossley and others would like to see that law reviewed since it allows a small group of people to have an outsized impact on a city’s land use.

However, another bill may create barriers to zoning changes intended to create more units. HB 369 would make building duplexes or triplexes in single-family neighborhoods harder for cities. Among other things, it would not allow a city to “adopt or enforce” an ordinance or zoning variance to allow more than one dwelling on a lot zoned for single-family homes 

 “Will the Legislature actually do something about affordable housing after all the talk? I expect that some bills will be passed with the stated purpose of increasing the supply of affordable housing,” Johnson says. He also says that while those bills addressing zoning could be “good policy” if the state works with the cities and takes a careful approach, they probably won’t lead to immediate relief regarding the dearth of affordable housing in the state. 

“I’d be very, very, very, very surprised if something doesn’t go through.”

Jay Blazek Crossley, the executive director of Farm + City in Austin

“I think we’ve got to do something more bold than any of that,” he says. He’s filed SB 234 to establish a workforce housing program overseen by the Texas Department of Housing and Community Affairs. It would provide incentives to developers to build more workforce housing—which impacts households who earn too much for subsidies but cannot afford the market rental rate. Its setup would be similar to the Texas Energy Fund, he says. That fund was created in the last legislative session to help offset the costs of electric generation projects.

“We can throw two, three billion dollars toward very low-interest financing for developers to build units that have specific affordability requirements,” Johnson says. That would “seed the market” for what it isn’t producing currently.

“I’ve talked with developers, and I hear a lot of excitement that they can build—not in some place that requires somebody to commute 23 miles to work—but they can build close to work,” he says. He’s hopeful that Patrick, Abbott, and House leadership will see his bill as way to tell residents that “we’re taking this seriously and we’re doing something about it.”

A few other bills could also impact housing affordability by looking at other issues that impact the development of more housing units and access to housing.

• HB 987, if passed, would require cities to grant or deny building permits within 30 days of applying or provide the applicant with a timeline to get approval. A similar bill, HB 993, would require 45 days, but also says that a city cannot deny a permit just because it can’t comply with the provisions in the bill. 
• SB 210 would expedite the permitting process for affordable housing projects in larger cities. 
• HB 492 would require all LIHTC projects to be within two miles of a grocery store.
• Currently, cities cannot require landlords to accept housing vouchers—state law outlaws income discrimination ordinances. In North Texas, only 7 percent of the surveyed apartment complexes in four counties—Denton, Dallas, Tarrant, and Collin—reported taking vouchers in a 2022 CPAL study. HB 411 would repeal that law to pave the way for cities to pass ordinances preventing landlords from refusing to lease or rent housing to a person because their rent check comes in part from a federal housing assistance program.
• Corporate ownership of single-family homes is in the crosshairs of HB 443, which would require the Texas A&M University Real Estate Research Center to maintain a list of corporate-owned single-family properties. It also says corporate owners cannot have an interest in more than 10 single-family rental homes in Texas at any time. If they do, they can be liable for a civil penalty of up to $100,000 for each property in excess of the amount allowed by law.

Legislators convene on January 14 at noon. The final day to file bills is March 14, and the last day of session is June 2.