A legal challenge has been filed against Texas’ new affordable housing law, House Bill 21, by the Texas Workforce Housing Coalition and the ownership entity of Willowbend Apartments in San Antonio. The lawsuit targets the Bexar Appraisal District, which oversees property tax assessments in San Antonio.
House Bill 21 was introduced to address the use of “traveling” housing finance corporations, a method that allowed developers to secure tax-exempt status for properties outside their home jurisdictions. The law not only closes this loophole but also imposes new affordability requirements on future deals and mandates that existing agreements comply with these standards.
The coalition argues that HB 21 is unconstitutional under Texas law because it impairs existing contracts and retroactively affects prior agreements. According to the lawsuit: “To be clear, the Texas Legislature is free to amend Chapter 394 to create a different affordable-housing regime in Texas going forward.”
The Willowbend Apartments case involves Post Investment Group from Los Angeles, which partnered with a Brownsville housing finance corporation for tax-exempt status in San Antonio. The lawsuit claims appraisal districts are already challenging exemptions granted before HB 21 takes effect in 2027, threatening exemptions for 2025 and 2026. The Bexar Appraisal District has asked Post Investment Group to submit a renewal request for its exemption but has not yet made a decision.
The suit asks the court to restore previously granted tax exemptions and rule that HB 21 violates the state constitution.
HB 21 followed concerns about widespread use of traveling housing finance corporations by multifamily investors seeking relief as rising interest rates increased debt costs and new supply put pressure on rents across major cities like Dallas, Houston, and Austin. These partnerships significantly reduced property tax revenue in those areas.
John Drachman of Waterford Property Company criticized HB 21 as “anti-Texas,” saying it undermines local control over housing policy decisions. On the other hand, Rep. Gary Gates defended his legislation: “red herrings.”
