A contentious system designed to grant tax exemptions for multifamily housing projects with affordable units is being targeted by some lawmakers as Texas’ next legislative session gets underway on January 14.
Through the system, government organizations called Housing Finance Corporations (HFCs) are able to provide tax exemptions in areas that are outside of their purview. For instance, apartment complexes in Houston have been removed from the municipal tax registers because to HFCs in central and south Texas.
“It’s a flaw in the legislation,” Houston Housing and Community Development Department chief Mike Nichols stated. “It s obviously, clearly a flaw in the law, and the legislature did not fix it.”
Before the legislative session begins, Fort Bend County state representative Gary Gates, who owns apartment buildings in the Houston region, intends to file legislation to change the system. In an effort to strike down current exemptions retroactively, he is also requesting the Texas attorney general’s opinion.
“We’re using these entities that are setting up, going around the state of Texas, and wiping out local property taxes,” Gates stated. “They don t have that authority to do that.”
According to the Houston Chronicle, Paul Bettencourt, a state senator from Houston, advocates for systemic change, saying, “The idea that [they] can parachute into major cities is very bad public policy and needs to be stopped.”
Although the tax exemption is intended to keep rental prices low, some participating apartment complexes are charging prices that are close to market value. One property in north Harris County stressed that the tax exemption had no effect on its revenue in a presentation given to potential investors that Houston Public Media was able to access.
“They receive a 100% tax write-off, but their income is unaffected. “That’s the loophole,” Gates remarked, contending that the system increases developer profits without bringing rents down to levels that are actually affordable.
An HFC in South Texas granted the tax exemption to the aforementioned property, The Pines at Woodcreek in Humble. Rent is about $1,200 on average. Harris County will no longer be allowed to collect property taxes from the project while the property pays a charge to that HFC.
The complex belongs to Avid Realty Partners. CEO Craig Berger contended that the exemption will deter future rent increases while increasing the property’s appeal to investors.
“Those that invest money into the deal are going to require a return, and the reality is we don t have to pressure rents, push rents, chase higher rents nearly as aggressively as if we didn t have the structure, so it does benefit residents,” Berger stated. In the future, we hope to provide our renters, who are occasionally blue-collar, gray-collar, and somewhat working-class, with a high-quality living environment at a very affordable price. This application will enable us to accomplish that.
According to Berger, if an attorney general’s decision were to reverse these kinds of agreements, it would cause “mass chaos.”
“Institutional investors think about stability in the rule of law with the state of Texas,” he stated. “We see Texas as a stable, reliable, and business-friendly state, which is why my investors and I invest there. I would invest in New York City if I desired unpredictability, volatility, and things altering after the fact.
For his part, Gates maintained that those agreements should never have been made in the first place and that he is willing to tolerate turmoil in the process of trying to reverse them.
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