Grand Prairie council hears overview of Housing Finance Corporation rules, HB 21 changes and local impacts

Grand Prairie city officials presented an overview of the Grand Prairie Housing Finance Corporation (HFC) and recent state law changes during a council meeting, outlining new limits on where HFCs may own or develop property, added affordability rules for tax exemptions and new reporting and audit requirements.

City Attorney Melissa McGinnis told the council the Texas Local Government Code authorizes cities and counties to create HFCs to “promote the public health, safety and welfare of the citizens” and to finance residential development on behalf of their sponsoring local government. McGinnis said HB 21 made several “significant changes” to HFC law, including geographic limits, an affordability threshold and new transparency obligations.

The changes matter because they directly affect whether HFC-owned properties can be tax exempt and where bonds may be issued, McGinnis said. “The new law limits the areas in which an HFC may own real property for residential development or engage in residential development,” she said, adding that projects outside a sponsoring city’s boundaries now require a separate local-government resolution to proceed.

Under HB 21, HFC developments seeking property-tax abatement must meet an affordability test that includes a 50% affordability threshold and a rent-reduction calculation that shows public savings compared with leaving properties on the tax rolls, McGinnis said. The law also expressly subjects HFCs to the Texas Open Meetings Act and the Public Information Act, requires underwriting assessments and annual audits to be submitted to the Texas Department of Housing and Community Affairs (TDHCA), and limits consecutive audits by the same auditor to three years followed by a two-year gap.

Esther Coleman, Grand Prairie’s housing director and the HFC staff liaison, told the council the local HFC was created in 1980 and is governed by articles of incorporation and bylaws. She said the Grand Prairie HFC currently has a five-member board; members must be city residents, are appointed by the city council and may be removed by council majority. Board members are reimbursed for expenses but do not receive compensation.

Coleman said the HFC is administering multiple projects. At the time of the presentation the HFC had nine closings in its portfolio, with La Paz under construction and Prairie Gate phases 1 and 2 included among projects in the list. She described the typical professional support structure for the HFC: legal counsel (Coats, Rose), a financial adviser (Hilltop Securities) that performs the public-benefit analysis and calculates public savings, and an asset manager (Jackson Properties).

Council members pressed staff for additional detail about which properties are already receiving tax abatement, which are owned by the HFC but still on the tax rolls, and which lie in Dallas County versus elsewhere. Councilwoman Shatwell asked for a breakdown “of which ones of these are in the county and which ones are in Dallas County,” and Coleman said she would provide that information.

Council discussion also covered deadlines and compliance timelines explained by staff. Coleman said existing HFC properties have a 10-year period to come into compliance with the new affordability rules — a timeline staff described as giving older projects time to meet requirements without displacing current residents — and that traveling HFCs that operate across multiple jurisdictions must obtain local approval to continue or risk losing tax-exempt status; staff cited a January 1, 2027 deadline for traveling HFC approvals under the new law. The council discussed litigation challenging portions of the law and noted those schedules are subject to change.

Several council members and staff raised questions about how HFC decisions are made. Coleman said HFC decisions typically begin with the financial adviser’s public-benefit analysis, which models reduced rents, anticipated tax abatements and the financing structure; the financial adviser brings that analysis to the HFC board for its decision. Council members expressed concern that by the time the council sees a closing the HFC decision and financing are often already complete, limiting the council’s ability to influence outcomes.

A recurring theme in the discussion was the local fiscal effect of properties removed from the tax rolls. Council members asked whether payments in lieu of taxes (PILOTs) from HFC projects count against the city’s tax-cap calculation (the local revenue cap tied to property-tax revenue growth). Staff did not provide a definitive answer during the meeting and said the council would need additional research. One council member noted that in at least one development the annual payment was roughly $3,500 and that the HFC had previously received an approximately $2 million contribution, of which $1.7 million was repaid, according to remarks during the meeting.

The council also discussed governance and independence. One council member emphasized that the HFC is an independent nonprofit corporation and said, “We cannot instruct them to do anything. They’re independent board just like the sports board is,” noting the city cannot direct HFC decisions though council appointments and removal power remain.

Council members asked staff to return with more detail, including: a city-by-city and county-by-county listing of HFC-owned properties in Grand Prairie’s portfolio; a schedule and explanation of when and how the HFC’s underwriting and public-benefit analysis is performed and shared; which properties currently receive tax abatement versus those that remain on the tax rolls; and clarification on whether PILOT payments affect the city’s tax-cap calculation.

No formal vote on HFC policy or specific projects occurred during the presentation. Council members also scheduled follow-up briefings and said they would review upcoming deadlines tied to HB 21 as litigation proceeds and administrative guidance is issued.

Ending — Council members thanked staff for the presentation and asked that staff provide the requested lists and analyses at a future date so the council could consider the local fiscal effects and the operation of the Grand Prairie HFC under the new state law.