According to the Legislative Budget Board (LBB), the fiscal implications of SB 867 include a short-term cost to the state’s General Revenue Fund and longer-term operational efficiencies with potential local property tax benefits. According to the Legislative Budget Board, the bill is projected to result in a net negative impact of approximately $188,884 to General Revenue through the 2026–2027 biennium. This is primarily due to initial implementation costs, including staffing, database development, and cybersecurity enhancements at the Texas Department of Housing and Community Affairs (TDHCA).

The bill mandates that housing finance corporations (HFCs) seeking property-based tax exemptions must submit annual audits to TDHCA and local appraisal districts. To cover the costs associated with reviewing these audits, TDHCA is authorized to collect a fee, estimated at $20 per income-restricted unit. This is expected to generate about $243,200 annually in revenue, helping to offset the costs of compliance monitoring. TDHCA would require an additional full-time auditor and incur technology and infrastructure costs totaling over $350,000 in FY 2026, with decreasing costs in subsequent years.

Significantly, the bill is expected to reduce the number of developments eligible for property tax exemptions by tightening eligibility criteria and geographic limitations on HFC activities. As a result, more properties would remain on local tax rolls, thereby increasing taxable property value. This would generate additional local revenue and reduce the state’s obligations under the Foundation School Program through school finance formulas. While these savings are acknowledged, the precise fiscal benefit to the state cannot be estimated at this time due to data limitations on the scope of existing and pending HFC projects.

In summary, while the bill imposes upfront costs on the state for oversight and system implementation, it is anticipated to yield longer-term fiscal benefits by preserving local tax bases and reducing the state’s share of school funding obligations through increased property valuation.

SB 867 is a well-targeted reform that addresses growing concerns over the use of housing finance corporations (HFCs) to grant property tax exemptions for multifamily housing developments without sufficient public benefit. The bill strengthens oversight, restores local control, and ensures that tax breaks are tied to measurable affordability outcomes for renters.

SB 867 improves transparency by subjecting HFCs to open meetings and public information laws and requiring annual compliance audits to be submitted to the Texas Department of Housing and Community Affairs (TDHCA) and local appraisal districts. It ensures that developments receiving property tax exemptions actually provide reduced rents for low- and moderate-income tenants, and mandates that at least 60% of the value of the tax break is returned to the public in the form of rent savings. It also establishes minimum affordability standards, limits out-of-area operations by HFCs, and includes basic tenant protections, particularly for voucher holders.

While the bill introduces new compliance and reporting requirements, these are narrowly focused on developments receiving public subsidies and are designed to prevent misuse of tax exemptions, not to burden general housing development. Fiscal analysis suggests a short-term cost to the state for oversight and IT infrastructure, but also long-term savings through increased taxable property values and reduced school finance obligations.

By tightening standards for public benefit, increasing local and state oversight, and protecting renters, SB 867 upholds the principles of fiscal responsibility, limited government, and taxpayer protection. For these reasons, Texas Policy Research recommends that lawmakers vote YES on SB 867.

• Individual Liberty: The bill promotes individual liberty by enhancing transparency in how housing finance corporations (HFCs) operate. It subjects HFCs to Texas open meetings and public records laws, giving residents more access to information about local development decisions and public subsidies. It also protects tenants, especially low-income families and voucher holders, by requiring fair treatment in lease renewals and prohibiting discrimination based on participation in the Housing Choice Voucher program. These measures strengthen civic oversight and housing stability.
• Personal Responsibility: The bill maintains a neutral stance on individual behavior while reinforcing institutional accountability. It does not interfere with tenants’ responsibilities, such as paying rent or adhering to lease terms. However, by tying tax exemptions to verifiable rent reductions and local approval, it ensures that developers and HFCs are held accountable for delivering promised public benefits. This supports a responsible framework where public support is earned through meaningful contributions to affordability.
• Free Enterprise: The bill imposes a significant regulatory framework on developers seeking tax exemptions through HFCs. New requirements include strict rent and income thresholds, annual independent audits, compliance documentation, and affirmative marketing to voucher holders. While these conditions apply only to projects seeking public subsidies, not to all private development, they may reduce flexibility, raise compliance costs, and disincentivize some private-sector participation. This represents a constraint on free enterprise, albeit targeted at tax-advantaged ventures.
• Private Property Rights: The bill limits where HFC-sponsored developments can operate and imposes conditions on properties receiving tax exemptions, such as occupancy rules and rent ceilings. While these conditions are tied to the receipt of public benefits and not forced on all property owners, they do affect how owners can use or manage their property if they participate in such programs. On the other hand, the bill helps protect the rights of taxpayers and local communities by preventing the misuse of public subsidies on developments that do not deliver real affordability benefits.
• Limited Government: The bill significantly strengthens the principle of limited government by curbing the expansive and sometimes opaque activities of HFCs. It restores local control by requiring city or county approval for any project outside an HFC’s home jurisdiction and enforces clearer standards for tax exemption eligibility. Although it adds an oversight role for the Texas Department of Housing and Community Affairs, this is narrowly focused on ensuring transparency and enforcing compliance, not expanding general regulatory authority. The bill reins in government overreach and ensures that tax incentives serve public purposes.

• HB 21 (Same As)