Affordable-Housing Coalition Files Lawsuit Over Unconstitutional Housing Reform

The Texas Workforce Housing Coalition is suing the Bexar Appraisal District, alleging violations of the Texas Constitution in the implementation of HB21 housing reforms

Lawsuit says unconstitutional attempts to revoke properties' tax-exempt status will exacerbate State's affordable-housing crisis and spark mass evictions of middle- and working-class families

AUSTIN, Texas, Sept. 9, 2025 /PRNewswire/ -- The Texas Workforce Housing Coalition ("TWHC"), a group representing affordable-housing stakeholders, and Post WB Apartments, LLC, today filed suit against the Bexar Appraisal District, challenging the constitutionality of House Bill 21 ("HB21"). The lawsuit says the implementation of the reforms sparked by HB21's passage earlier this year will exacerbate the affordable housing crisis in Texas and spark mass evictions of middle- and working-class families, including teachers, nurses, and first responders.

For decades, Texas law (Texas Local Government Code § 394, or "Old Chapter 394") offered real estate developers a straightforward deal: partner with a publicly-sponsored Housing Finance Corporation (HFC), rent to low- or moderate-income Texans, and receive a 100% property tax exemption. Developers relied on Old Chapter 394 to invest billions of dollars in Texas on long-term projects that provide affordable housing for families, including teachers, nurses, first responders, and other essential workers – allowing them to live in the same communities where they work.

But HB21, passed in May 2025, changed the laws governing these deals and applied them retroactively, impairing the contracts that were signed under Old Chapter 394, all in violation of the Texas Constitution. And even though HB21 does not go into effect for existing affordable-housing developments until Jan. 1, 2027, appraisal districts, including the Defendant, have begun weaponizing HB21 by reversing their own prior approvals of deals they now say were never legal to begin with, even under Old Chapter 394.

"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," says Gibson Dunn & Crutcher Partner Trey Cox, lead attorney in the case. "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."

Plaintiffs will seek a declaration from the Court that HB21 violates the Texas Constitution and that Old Chapter 394 allowed HFCs to own property outside of their home jurisdictions in these prior deals.

Put simply, in addition to the constitutional violations, Plaintiffs argue that if the laws of the State of Texas can be changed at any time and applied retroactively to already closed deals, destroying the contracts and the economics of those deals, it will have a catastrophic chilling effect on investment in the State, as no developer, lender, or investor can reasonably justify investing in Texas in the future.

Last week, TWHC also filed a petition to intervene in Williamson County's lawsuit against the Cameron County Housing Finance Corp. ("CCHFC"). That lawsuit seeks a judgment that the CCHFC lacked legal authority to "acquir[e] property outside of Cameron County" or "obtain tax exemptions for property outside of Cameron County." Because some of TWHC's members partnered with the CCHFC to acquire, lease, and operate properties in Williamson County, such a judgment would harm those members' contractual rights under Old Chapter 394.

TWHC is represented by Gibson, Dunn & Crutcher LLP and Chasnoff | Stribling LLP.

About The Texas Workforce Housing Coalition

TWHC is a coalition of Texas affordable housing providers who are united by the same mission: creating and preserving affordable housing across Texas. We partner with industry peers, policy advocates and best-in-class partners to fulfill our mission.

About Post WB Apartments, LLC

Post WB Apartments, LLC is a Texas limited liability company doing business in Bexar County at 8330 Potranco Road, San Antonio, TX 78251, at the apartment complex commonly known as "Willowbend Apartments." Post WB Apartments, LLC is a joint venture between entities created by the Cameron County Housing Finance Corporation, Post Willow Bend MM, LLC, and Commonwealth Texas, Ltd.

SOURCE Texas Workforce Housing Coalition