Governor Greg Abbott signed House Bill 21 (HB 21) into law on May 28, 2025. Effective immediately, the bill delivers blanket reform for Chapter 394 of the Local Government Code—Housing Finance Corporation (HFC) operations in Texas. Driven by increasing concerns over out-of-jurisdiction, or “traveling,” HFCs exploiting tax exemptions without adhering to affordability requirements, HB 21 introduces stricter provisions for existing and future deals, including tighter eligibility requirements, mandatory city/county approval, and increased accountability through annual auditing. The updated legislation has major implications for multifamily developers relying on HFC structures to secure property tax exemptions.
New Compliance Hurdles
Texas HFCs can no longer partner on developments outside their residing city or county without full approval from every affected local government—a condition that will be difficult to meet. Further, all HFC projects must now set aside at least 50% of units for low-income households and provide rent reductions equal to 50% of the tax savings, which will likely require detailed documentation. Under this policy shift, developers must complete an annual independent audit through an unbiased third party and submit it to the relevant state housing authority. Any existing projects without such approval or criteria met will lose their exemption by January 1, 2027. Failing to meet these requirements may result in losing the exemption altogether.
KEA Compliance Management Can Help Your Projects
For developers and HFC partners, these new rules introduce significant compliance risk. Even diligent developers risk losing exemptions if they fail to meet the new documentation, reporting, or affordability requirements. Now more than ever, developers need a trusted partner—KE Andrews is ready to step in. Let our compliance team help navigate your HB 21 increased compliance by offering independent audit services, affordability compliance tracking, and comprehensive documentation support. Our team brings expertise in property tax compliance and public-private housing incentives, ensuring you meet all state requirements and maintain your exemptions with confidence. Contact us today to learn more about how we can support your HFC projects.