Affordable housing coalition files lawsuit over housing reform

Audio By Carbonatix

(The Center Square) – The Texas Workforce Housing Coalition is suing the Bexar Appraisal District in Cameron County District Court claiming the implementation of House Bill 21 violates the Texas Constitution and threatens affordable housing across the state.

The lawsuit, filed with Post WB Apartments, LLC, says HB21 will worsen the housing crisis in Texas and could spark mass evictions of working families, including teachers, nurses and first responders.

For decades, Texas law, under Chapter 394, gave developers a clear deal: partner with a Housing Finance Corporation, rent to low- or moderate-income Texans, and receive a full property tax exemption. Developers say they relied on that promise when signing contracts and investing billions of dollars into long-term affordable housing projects.

HB21, passed in May 2025, changed Chapter 394 and, according to the lawsuit, violated the Constitution by creating a retroactive law that undermines existing contracts. Though the law will not take effect for current affordable housing developments until Jan. 1, 2027, appraisal districts have already moved to withdraw tax-exempt status from properties.

“The State of Texas lured billions of dollars worth of investments from real estate developers to build affordable housing for working class Texans with the promise of favorable tax treatment only to now pull the rug out from under those developers,” Trey Cox, a partner at Gibson Dunn & Crutcher and lead attorney in the case, said in a news release. “The unconstitutional implementation of HB21 is nothing less than the breakdown of the rule of law in Texas. Worse yet, the teachers, nurses, first responders, and other essential workers who currently benefit from affordable housing will be the ones hurt most as they will likely be forced to move from their homes when affordable housing units across the State begin to evaporate.”

The coalition and Post WB Apartments will ask the court to declare HB21 unconstitutional and affirm that Chapter 394 allowed housing finance corporations to own property outside their local areas.

The lawsuit comes as housing advocates across the state warn that HB21 could destabilize the affordable housing market.

Last week, the Texas Workforce Housing Coalition tried to intervene in a Williamson County case against the Cameron County Housing Finance Corporation, which could impact the same contracts relied upon by coalition members.

"Because some of TWHC’s members have partnered with the CCHFC to acquire, lease, and operate properties in Williamson County, such a judgment would harm those members’ interest in securing the tax exemptions promised by Chapter 394 and all of their contractual rights premised on the CCHFC’s part in the transaction,” the release said.

Gibson, Dunn & Crutcher LLP and Chasnoff | Stribling LLP represent TWHC in the lawsuit.