A new lawsuit has been filed challenging the constitutionality of Texas’ recently enacted House Bill 21, which changes how affordable housing developments are taxed and regulated. The Texas Workforce Housing Coalition, joined by the ownership entity of Willowbend Apartments in San Antonio, brought the case against the Bexar Appraisal District.
House Bill 21 was introduced to address what lawmakers saw as abuse of a provision from the 1970s that allowed developers to obtain tax exemptions through so-called “traveling” housing finance corporations. These arrangements involved partnerships between property owners and housing authorities in different parts of the state, which led to significant reductions in property tax revenues for cities such as Dallas, Houston, and Austin. The law closes this loophole and imposes stricter affordability requirements on both future and existing deals that used this mechanism.
The coalition argues that HB 21 is unconstitutional because it retroactively applies new rules to agreements made under previous laws. The lawsuit states that the Texas Constitution forbids laws “impairing the obligation of contracts” and those that “extend in scope or effect to matters which have occurred in the past.” It further reads: “To be clear, the Texas Legislature is free to amend Chapter 394 to create a different affordable-housing regime in Texas going forward.”
Post Investment Group, based in Los Angeles and owner of Willowbend Apartments—a property structured under a traveling housing finance corporation deal—joined as a plaintiff. Their partnership with a Brownsville-based housing finance corporation had enabled them to secure tax-exempt status for their San Antonio complex.
According to the suit, appraisal districts have started challenging these properties’ exemptions even before HB 21 takes full effect in 2027. For example, Bexar Appraisal District has asked Post Investments Group to renew its exemption request but has not yet issued a decision. The plaintiffs are seeking reinstatement of previously granted tax exemptions and want the court to rule HB 21 unconstitutional.
Supporters of HB 21 say it was necessary due to concerns that some multifamily investors were using affordable housing programs mainly for financial relief amid rising interest rates and lower rental incomes. By exploiting partnerships with distant housing agencies, they eliminated their local property taxes.
However, debate over the legislation has split those who advocated reform. John Drachman from Waterford Property Company criticized HB 21 as “anti-Texas,” saying it removes control from local authorities. On the other hand, Rep. Gary Gates—who operates multifamily properties himself—dismissed critics’ concerns as unfounded: “red herrings.”
