Please see informative article below regarding multi-family tax exemption properties.
~Jerry Homan
HOUSTON CHRONICLE | By R.A. Schuetz, Yilun Cheng and Matt Zdun | March 27, 2025 6:00 a.m.
On paper, the Houston Housing Authority cracked the code to creating affordable housing at breakneck speed, providing 17,000 apartment units in only eight years.
The public agency says it accomplished this monumental task by exempting apartment complexes from property taxes in exchange for making some units affordable.
In Houston, there are over a hundred of these deals, all created under a state program called Public Facility Corporations. The program allows apartment developers to receive 100% property tax breaks in exchange for marking some units as “affordable.”
But are these good deals, and for whom? Who did the millions in tax savings a year actually benefit? And are they allowing Houstonians in need of deeply affordable housing to get a foothold in safe neighborhoods?
AFFORDABILITY CHARTS: Affordable housing tax cuts are helping landlords more than renters. Here’s why.
To identify the winners and losers of this widely used tax break, the Houston Chronicle obtained the rent rolls of five properties that received some of the largest tax breaks, as well as the closing statements of 73 real estate deals made by the Houston Housing Authority.
The Chronicle’s review found that many “affordable” units are actually only affordable to those with middle-class incomes who are already served by the market – in other words, people who could afford $1,500 a month for a one-bedroom apartment.
Meanwhile, some apartment complex owners avoided paying around $1 million in property taxes every year. Additionally, a handful of lawyers, consultants and political insiders are making millions off the deals. Some have strong ties to the Houston Housing Authority and county government.
Companies connected to the 73 deals have made more than $100 million since 2017, including $17 million by law firms and $6 million by consultants. The housing authority itself earned around $73 million in fees from developers, according to data provided by the housing authority.
“Every affordable housing development involves complex legal and financial issues,” the Houston Housing Authority said in a written statement. The agency said that the deals could not be closed without legal counsel, architects, engineers and financial advisers, and said the transactional costs were “reasonable and within industry norms.”
Among the losers: Houstonians with very low incomes who can’t afford these units, as well as local government agencies that can no longer collect property taxes from these complexes to pay for essential services such as policing, education, healthcare, water and sewage.
Ben Martin, research director at the Austin-based nonprofit Texas Housers, said while the program has the potential to help create affordable housing, developers and local officials have misused this tool in ways that do not align with the public interest.
“The Houston Housing Authority’s role, their reason to exist, is to provide housing for people and families in Houston with the lowest incomes,” he said. “And their use of this tool does not appear to be working towards that mission.”
Who are the winners in affordable housing deals?
To many, it makes sense that the owners of public housing – which is taxpayer funded – do not have to pay property taxes.
But that same tax break has been available to private apartment complexes since 2015, after state Sen. Craig Estes introduced a last-minute amendment to finance legislation. In exchange for making some units affordable, a housing authority could take ownership of apartments on paper. Then it would lease them back to the original owners, who would continue operating and profiting from the complex.
The arrangement would mean that the apartment complex, just like a public housing project, would not have to pay any property taxes – even though it had much less stringent affordability requirements or oversight.
Both apartment complexes and government agencies, which took to charging fees that effectively diverted taxes from other entities into their own coffers, stood to profit handsomely.
So did the small crowd of lawyers and consultants who were intimately intertwined with the Houston Housing Authority. They reaped the benefit of understanding how the deals worked and how to push them through.
The Houston Housing Authority
The Houston Housing Authority made over $73 million from these deals as of February, according to its accounting breakdown obtained through a records request.
David A. Northern, Sr., who presided over the Houston Housing Authority during a period when as many as 24 PFC deals could be approved in a single month, praised the speed at which they could create affordable housing in high-opportunity areas and the money that could be made.
“The PFC stuff, I had never heard of that before I got to Texas,” he said in a recorded December 2023 conversation with two officials from an affordable housing nonprofit. “I’m like, damn, this is the best thing I’ve ever seen in my whole career to develop affordable housing.”
The agency said the money is meant to support other housing projects, from land acquisitions to development costs to preserving existing affordable housing.
While the revenues started trickling in back in 2018, the housing authority did not start spending the funds until late 2022, its accounting breakdown shows. So far, the authority has spent $45 million—leaving $28 million on the table. Most of it went toward land deals and development, including a larger effort to bring more affordable housing to Third Ward and turning Cuney Homes into mixed-income apartments as part of its move to phase out public housing.
The breakdown also listed expenditures beyond construction and acquisitions, including $70,000 in legal fees to Coats Rose – a well-connected firm that also represents many developers – $7.6 million in payments to the TexasGeneral Land Office and $40,000 in contributions to golf tournaments hosted by the nonprofit Houston Housing Resource.
Lawyers
Lawyers have made over $17 million from the housing authority’s deals, with Coats Rose – whose attorneys are also under contract with the authority – pulling in $7 million in closing fees.
While the housing authority has its own legal team, it has also contracted with Coats Rose to pay as much as $375 an hour for attorneys to help with affordable housing development and acquisition. Coats Rose attorneys sit in on the agency’s monthly board meetings and helped present the tax break deals to city council members.
Coats Rose then gets paid to iron out the legal details of each deal on behalf of the housing authority. It is paid a flat fee – usually $95,000, though in one case the sum reached $300,000 – through a portion of the developer’s financing.
“Developers like the certainty of knowing what the fees are going to be,” said Barry Palmer, a director of the law firm’saffordable housing section.
He said that Coats Rose processes the property tax exemption application for each apartment complex and provides the property tax opinion that lenders rely upon when financing deals are premised on such exemptions.
“Typically, our fee is the highest of the legal fees at closing, and the reason for that is we do the most work,” he said.
The housing authority told the Chronicle that Coats Rose charges less per hour and per transaction “than many of the other firms that practice in this area.”
Consultants
Consultants who helped developers win tax breaks made $6 million from the housing authority’s deals, closing documents show. Nearly all of that money went to a firm called Waterman Steel Real Estate Advisors.
At the time of most of the deals, the firm’s co-leaders were Licia Green, Harris County Commissioner Rodney Ellis’ wife, and Lance Gilliam, the former chairman of the Houston Housing Authority board from 2010 to 2016.
Green declined to comment and directed the inquiry to Gilliam, saying these PFC projects were under Gilliam’s practice area oversight.
Gilliam, now the sole managing partner of Concentric Community Advisors, said the housing authority did not get into public facility corporation deals until after he left. Nonetheless, he said now he’s one of a small number of people who understand how the deals function, which is why his firm has worked with so many developers.
“There’s a small group of us who understand this and work in this space,” he said, citing the law firms Coats Rose and Locke Lord as others who understand public facility corporation deals. Locke Lord is a politically connected Austin law firm that employed Mayor John Whitmire until recently, and which frequently lobbies at the statehouse.
Gilliamsaid he was proud of his firm’s work, and believes it has helped high quality, affordable housing.
“Our firm advocates for the majority of tax savings being returned to the community in the form of reduced rents,” hesaid.
Who are the losers in affordable housing deals?
While the tax break deals were generating millions of dollars for landlords and political insiders, Houstonians with the lowest incomes and a number of public service providers were losing out.
In the past, participating apartment complexes had to reserve half their units for families earning below 80% of Houston’s area median income—$60,560 annually for a two-person household in 2024. But housing advocates have long argued that the law doesn’t go far enough. In response to mounting criticism, Texas lawmakers in 2023 enacted a series of legislative changes.
The new state rules now require some units to be set aside for families earning below 60% of Houston’s median income, not just 80%. That’s $45,420 for a two-person household. Locally, Houston officials began requiring some units to be affordable to families earning below 30% median income.
These new standards, however, do not apply retroactively to deals approved before the legislative changes. As a result, many properties continue to benefit from the property tax savings while delivering minimal, if any, additional affordability.
Developers are cashing in big, even as renters aren’t saving that much
For instance, Lumen, a 367-unit apartment complex in Montrose that started participating in the program in 2020, avoided $1 million in property taxes in 2024, based on the most recent market value and tax rate data. But a property rent roll dated June 2024 shows it falls far short of the current affordability standards.
That month, only 21 of its 282 occupied units, or 6%, had rents affordable to tenants earning below 80% of the area median income. The complex’s website also continues to advertise designated units at rates well above the affordability threshold.
The NPR Group, the real estate company behind the deal, said the complex is in full compliance. Since the PFC agreement was finalized before the legislative changes, Lumen determines resident eligibility based solely on tenant income, without factoring in federal affordability standards, the company said in a statement.
The company said it is committed to solving Houston’s housing process and “proud that this is helping to increase the apartment homes Houston desperately needs.”
The Chronicle also reviewed rent rolls for four other PFC apartment complexes across the city—Broadstone Toscano, Commons at Hollyhock, North Post Oak Lofts, and Allora New Forest. Along with Lumen, these five properties received the largest tax breaks last year among those for which the Chronicle obtained comparable data.
Some apartment complexes do not offer enough affordable units
The share of their units that would meet current affordability thresholds ranged from 6% to 91%, but one trend is clear: the landlords made few, if any, real concessions. Even in cases when rents were lowered, the reductions were minimal compared to the tax breaks they received. The estimated profits from the tax incentive program—after accounting for lost rental income—totaled at least hundreds of thousands of dollars per year for each project.
Renters with extremely low incomes
Housing authorities have traditionally served those with extremely low incomes – often defined as families who either earn less than 30% of the area’s median income or are living below the poverty line. For a two-person household, that would be $22,710 a year.
The Houston area ranks among the worst in the nation when it comes to providing apartments within these households’ reach, according to the National Low Income Housing Coalition.
Fewer than 1% of the PFC units approved by the Houston Housing Authority serve these households.
Houston housing officials have long argued that serving extremely low-income families under the PFC program is financially unfeasible. But last December, the authority required four new PFC complexes to set aside five apartments each for those with extremely low incomes.
Still, some low-income renters who seek relief from these supposedly affordable units continue to find themselves hitting wall after wall.
In September, Faye Ku, a single mother searching for housing where her son could attend a good school, pulled up the Houston Housing Authority’s list of PFC deals. She had a housing voucher, which meant the clock was ticking – she only had a matter of weeks to find an apartment complex that would accept it, or else she risked losing her voucher altogether. After she hit a few dead ends, a real estate agent finally connected her with the Premier at Katy.
Like many complexes with tax-break deals, it charged community fees on top of its “affordable” rent, so she had to scrape together an additional $100 a month. The housing authority said it does not consider the monthly fees when determining whether a unit is affordable, even when renters cannot opt out of them – such as those charged for administrative work, amenities, trash collection or pest control.
Many apartment complexes charged fees on top of rent. Such fees have been the target of Federal Trade Commission suits, and the U.S. Department of Housing and Urban Development limits the practice at federally subsidized properties.
“I’m really sad that many voucher holders wouldn’t be able to get into my apartment due to all the requirements they have added to the lease,” Ku said.
Schools and local governments
Meanwhile, the property tax breaks for landlords are costing local governments and school districts a substantial amount of revenue — money that could have funded critical services like education, public safety and health care.
The fiscal hit is particularly difficult for a group of tiny taxing entities called municipal utility districts (MUDs) to absorb. Operating as independent government agencies, MUDs offer essential utility services, such as water and sewage, to neighborhood residents.
Last April, the Northwest Harris County Municipal Utility District 36, a MUD that covers less than a square mile in Spring, sued the owner of a 168-unit apartment complex over its bid for a PFC tax exemption. The property had an estimated market value of over $25 million, and taking it off the tax roll would wipe out about 8% of the district’s total tax base.
The district argued in the lawsuit that the project does not provide meaningful public benefits—a key requirement for these exemptions under Texas law. The landlord, on the other hand, said the legal challenge was premature because it was filed before the PFC deal was final.
The district ended up withdrawing the lawsuit but continued its efforts to recuperate the lost funding. Later in the year, it raised water rates for the apartment complex to offset the impact of the tax break. The landlord challenged the rate hike with state regulators, lost, and has since appealed the decision.
Harris County Commissioner Tom Ramsey said he regularly hears similar complaints from the roughly 200 MUDs in his precinct.
“If you take a $50 million property off the books, that will have a major impact on their ability to pay their bills,” Ramsey said. “It’s lining the pockets of some very wealthy folks, and people who can’t afford to go to the grocery store now have to pay more in taxes to make up the difference.”
The housing authority said it now requires developers to make payments to water and sewage providers to offset what they would lose in taxes, but this only applies to new deals.
Local taxing entities are not the only ones feeling the strain. The state has had to allocate tens of millions of dollars in additional funding to local school districts to help them offset the lost revenues, according to a new study by the state legislative budget board. From 2022 to 2023, these costs added up to $34 million. With many more PFC agreements approved since then, that figure is projected to more than triple in the next few years, the study shows.
PFC deals also allow developers to claim state sales tax exemptions on building materials, costing the state roughly $2 million a year, according to the study.
Martin said the public benefit the program provides simply doesn’t justify the cost.
“The PFC tool has been abused for years now, not providing housing that offers any kind of significant amount of affordability in return for an incredible benefit to private developers,” Martin said. “This just illustrates the need for further reform.”
About the data
Closing statements
The Chronicle obtained the closing statements of 73 real estate deals made by the Houston Housing Authority since 2018. Reporters read through the accounting documents and grouped the various closing fees into 21 broad categories: financing, acquisition, legal, insurance, consultant, title, commission, developer, administrative, interest, due diligence, tax, study, permit, bond, architect, closing, appraisal, creative and marketing, other and an unknown category for fees that were not described in detail on the closing statement. We tallied the total fees in each of these categories, as well as the top payees.
Tax exemptions
Using Harris County Appraisal District data, we identified all of the local taxing entities that each of these properties would have had to pay taxes to if they were not tax exempt. We tallied the total tax exemptions using the 2024 market values of the properties and the 2024 tax rates. Some properties had multiple HCAD accounts corresponding to multiple adjoining parcels. The total market value for these properties was the sum of the market values of all of their corresponding accounts.
This process provides a good estimate of the total taxes saved by these properties, even though certain properties are new and were not around for the entirety of 2024.
Unit rents
The Chronicle analyzed the June 2024 rent rolls for five affordable apartment complexes: Commons at Hollyhock, Allora New Forest, North Post Oak Lofts, Broadstone Toscano and Lumen. Rent rolls are documents that list the rent and additional fees charged to every tenant in an apartment complex. We included in the analysis only the units that were occupied as of June 2024 and excluded units that were unoccupied. Of the units that were occupied and pending renewal at a new rate, we used the rent currently being paid by the tenant, not the pending new rate.
The number of bedrooms of each unit was not listed on the rent rolls. This is an important metric for determining affordability since affordable rents for one-bedroom units are different from affordable rents for two- and three-bedroom units. The rent rolls did include unit codes and square feet totals for each unit, which the Chronicle matched with the apartment complexes’ leasing pages to determine the number of bedrooms.
Affordable rates
To determine what was affordable at 80% of the area median income, the Chronicle used the Novogradac rent and income limit calculator. We used the Houston-The Woodlands-Sugar Land, TX Housing and Urban Development metro fair market rents area for 2024.
Limitations and nuances of the analysis
Rent rolls provide a snapshot of the total rents being paid at a given apartment complex at a given point in time: in this case, in a given month. The Chronicle estimated the yearly rents from the June 2024 monthly rents. These yearly rent estimates could differ from the actual yearly rent brought in because one month of data for a given complex might look different from another month.
For many taxing entities, giving out tax exemptions — like those granted to affordable apartment complexes — means the entity brings in less tax revenue overall. Other taxing entities have already hit a legally imposed cap on the amount of tax revenue they can collect in a given year. In such cases, the property tax exemptions shift more of the taxing burden onto others in the community.