Good Day Water Users Coalition,
Below, is a interesting article released yesterday, March 04, 2026, in the Houston Chronicle regarding tax exempt apartments.
Best Regards,
Jerry Homan
Harris County landlords dodged $119M in property taxes last year using controversial tax-break deals
HOUSTON CHRONICLE | By R.A. Schuetz, Staff Writer March 4, 2026
Housing agencies in Texas are cutting deals with developers to arrange tax breaks, catching the attention of legislators in 2023 and 2025. The Baker Institute of Public Policy tallied how much property taxes those deals have allowed developers to dodge in Harris County.
Jon Shapley / Houston Chronicle/Staff illustration, photos by Jon Shapley / Houston Chronicle
Eyes glaze over when you mention the nuts and bolts of housing developer tax-break deals, like public facility corporations (PFCs), traveling housing finance corporations or Chapter 392 of the Texas Local Government Code. But the dollar amount of tax breaks awarded to Harris County apartment owners through such deals is eye-popping, according to an analysis by Rice University’s Baker Institute for Public Policy: $119 million in 2025 alone.
Add in the amount of tax dollars saved by developers in 2020 through 2024, and that number rises to $345 million. In exchange for the savings, landlords promised to rent some units at affordable rates, though the vast majority were not required to lower rents from what they would normally charge for apartments to be considered affordable.
The tax consequences are also difficult to see — after all, they do not appear as a line item in any government budget. Which is why the Baker Institute decided to spend time tallying the tax exemptions of every tax-break property, said Bill King, a fellow in public finance at the Houston nonpartisan think tank, which does research meant to inform policymakers.
“If we’re going to measure the efficacy of (a program), we need to at least start with what the cost is,” King said.
Some of those tax breaks were made up by higher rates levied on other property owners; other parts may have been shouldered by the state’s general revenue budget; and many of them were direct hits to the bottom lines of taxing districts. Districts providing flood control, hospital services, and water and sewage services were all impacted.
“And you can sense the controversy that this sparks,” said Dale Craymer, who long served as the president of the Texas Taxpayer and Research Association, a nonprofit whose members include businesses interested in tax policy. “The entity granting this exemption” — a housing authority or housing finance corporation — “is not the one bearing the tax consequences of that decision.”
What are these tax-break deals?
In 2015, Craig Estes, a state senator from Wichita Falls at the time, introduced a last-minute amendment to a tax law.
The legislation’s 100% tax break for apartment complexes worth tens of millions was an unusually large concession, and the exemptions originally lasted for up to 99 years. Low-income housing tax credits, by contrast, are far less lucrative and require a competitive application process.
Since then, Estes’s public facility corporations have become more tightly regulated, with an interesting result: Housing authorities and finance corporations in Texas have turned to other, long-established laws and are using them in unconventional ways to create new tax-break deals.
On paper, the tax breaks are one of the most successful generators of affordable housing in the country. In eight short years, the Houston Housing Authority alone claimed to have created nearly 24,000 affordable units, according to records obtained by the Chronicle.
But the bulk of those units — more than 12,000 — were for people earning 80% of the Houston region’s median income, which translates to $1,600 for a one-bedroom apartment. Another 11,000 units are set at an affordability level that would allow landlords to charge $1,200 for a one-bedroom. (The median rent for a one-bedroom in Houston is $1,100, according to Apartment List.) And many people who needed the most affordable units created by the program found that leasing offices were unfamiliar with how to navigate them.
While the Houston Housing Authority, which recently rebranded as Housing Alliance HTX, accounted for 71% of Harris County’s tax-break deals, according to the Baker Institute, other local sponsors, including Harris County, accounted for 10% of the deals.
And groups outside Harris County — such as the Pleasanton Housing Authority, located south of San Antonio — were responsible for 19% of Harris County’s tax-break deals.
Such groups raked in fees that developers were willing to pay to avoid property taxes, while being unaccountable to the parties affected hundreds of miles away, such as Houston-area property owners and utility districts.
Where would these lost tax dollars have gone?
While the program’s benefits to renters have been debated, the benefits to landlords have not.
The Baker Institute’s analysis examined the value of the tax exemption for every property claiming it in Harris County. (And since four of the Houston Housing Authority’s tax-break deals were for properties outside of Harris County, the analysis also shows their impact: $3.6 million in Fort Bend County jurisdictions and $1.8 million in Montgomery County jurisdictions in 2025.)
In Harris County, 211 properties worth $5.3 billion had been removed from the tax rolls in 2025, the analysis shows, dodging $119 million in taxes.
More than $25 million of those tax dollars would have gone to the Houston Independent School District. Because of Texas’s “Robin Hood” plan, which “recaptures” funding from property-rich school districts and redistributes it to school districts with lower property values, HISD has not yet seen the impact of the tax-break deals on its bottom line, Craymer said. Instead, the state is paying that $25 million out of general revenues.
Landlords avoided paying Harris County and the City of Houston $21 million and $19 million, respectively, in 2025. Because the law limits how much property tax revenue each government can collect without voter approval, they calculate the revenue they can collect in a given year and set tax rates accordingly. The system means the millions of unpaid dollars aren’t borne by the county’s and city’s bottom lines, but instead by homeowners and other property owners, via higher property tax rates.
According to the Baker Institute analysis, developers avoided paying:
- The Harris County Hospital District: $10 million
- Katy Independent School District: $7 million
- Cypress-Fairbanks Independent School District: $6 million
- Houston Community College: $3 million
- Alief Independent School District: $3 million
- Harris County Flood Control District: $3 million
- Spring Branch Independent School District: $2 million
Municipal utility districts, which provide water and sewer services to small areas, sometimes less than a square mile, saw smaller losses in terms of dollar amounts, the report says. However, these entities often sustained far larger losses in terms of their overall budget. For example, one MUD near the Addicks Reservoir lost 20% of its tax base, or $410,000 a year, to public facility corporations, according to a board member.
Jamie Bryant, the president of Housing Alliance HTX, said he has signed off on amendments to deals made under the previous president that severely impacted utility district budgets so that payments would be made to offset their lost property taxes.
What’s next?
Many of these deals last for 99 years, so the tax implications will only grow with time.
The Baker Institute estimated that, in Harris County, the deals would save developers $1.4 billion in property taxes within a decade.
At Houston’s housing agency, the rate at which deals are being approved has slowed significantly in the past year. The new president changed the focus of the deals from bringing in revenue for the housing authority to focusing on helping existing low-income housing tax credit properties, which have greater affordability requirements than public facility corporation deals, undergo rehabilitation and extend their affordability periods.
“One of my first actions as the CEO here last year was to stop the pipeline of PFC transactions,” Bryant said in an emailed statement. He said that the former real estate team at the agency had over 30 more of these apartment complexes in the approval process when he joined in February of 2025. “None of them provided meaningful public benefit to support granting them a tax exemption. These transactions would have removed another $1B of value from the property tax rolls and reduced tax revenues by another $25 (million, plus or minus) annually. We stopped it!”
But 69 applications for tax-exempt status were pending with the Harris County Appraisal District at the end of 2025. Many of the deals are being sponsored by faraway entities such as the Pecos Housing Finance Corporation and the Pleasanton Housing Finance Corporation, a practice that state legislators targeted in 2025, leading to a rush of deals before the loophole closed. The loophole, known as traveling housing finance corporations (HFCs), allowed housing finance corporations in one part of the state to grant property tax breaks to properties anywhere in Texas. They were usually granted in secret and rarely created affordable housing, but were lucrative for the HFCs, to which the developers paid fees in exchange for the tax break.
Bryant said the agency believes the tax-break deals will be a target for reform once again during the next legislative session. For example, he thinks legislators will likely say that a certain percentage of the taxes saved by a developer must go toward lowering rents — something legislators enacted in 2023 for PFC deals but not for the deals housing authorities have pursued under a different chapter of state law.
Sidney Beaty, a research analyst with the tenant advocacy nonprofit Texas Housers, also pointed out that past legislative reforms to tax-break deals had not focused on tenant protections.
“I think folks would assume that if there’s a lot of public subsidy going into a building that there’d be stability,” she said. “That we’d be getting something in return.”
But in fact, her analysis of evictions in Harris County found that two of the properties with the highest eviction rates were both tax-break deals sponsored by housing finance corporations outside of the region. The two properties, Sterling Point and the Redford, filed to evict over 300 households in 2025, she said.
Bryant argued that tax exemptions were a valuable tool for housing authorities to use to create much-needed affordable housing.
“However, we must be prudent in the use of that tool to ensure the public benefit of additional affordable housing stock for the residents of Houston outweighs the loss of tax revenue,” he said.
“Unfortunately, in the past, many of these transactions did not provide meaningful public benefit to justify the tax exemption and ended up only providing benefit to the consultants and developers/investors who sponsored them.”