State Rep. Gary Gates, the Fort Bend Republican who wrote HB21 to clamp down on so-called “traveling” housing-finance tax deals, is now backing the law in court as a private citizen. Gates has set up a nonprofit and is spending his own money to help defend the statute, a move critics say blurs the line between public policymaking and private financial interests.
What HB21 changed
HB21 rewrote Chapter 394 so that housing finance corporations are largely confined to projects inside the jurisdictions that created them. The law also tightened affordability and audit requirements and gave local governments a say before an out-of-jurisdiction HFC can claim a property tax exemption. The measure was signed and made effective on May 28, 2025, according to Texas Legislature Online.
Developers say the law rewrites old contracts
Developers and syndicators who relied on the traveling-HFC model have gone to court, arguing HB21 is being applied retroactively and is undercutting deals struck under the previous rules. The Texas Workforce Housing Coalition and Post WB Apartments sued the Bexar Appraisal District last year, saying HB21’s implementation has put previously granted tax exemptions and the financing structures built on them at risk, according to PR Newswire.
Gates' private legal push
Gates has not stayed neutral as the law he championed is tested. He formed Concerned Property Tax Payers of Texas in October 2025 and, through his company APTBP LLC (doing business as Bay Pointe Apartments), joined the Bexar lawsuit as an intervenor. The move and Gates’s role were reported by the Houston Chronicle. The Chronicle reports that Gates owns about 10,000 apartment units and has covered roughly $125,000 in legal bills for the nonprofit, plus about $60,000 paid to a lawyer who prepared a brief for the attorney general.
Appraisal districts and counties push back
County and city officials across Texas have launched investigations, appeals and lawsuits aimed at reversing or limiting the tax exemptions claimed through traveling HFCs. Local reporting has highlighted Tarrant and other appraisal districts as central players in that push, and municipal challenges have spread from the Rio Grande Valley to North Texas, as ExpressNews and other outlets have documented.
Scale of the stakes
The sums involved are substantial. During the 140-day 2025 legislative session, traveling HFCs closed on 236 properties appraised at nearly $8 billion, and analysts have estimated the practice could shave roughly $175 million a year from local tax bases. The Houston Chronicle also reports that the Dallas Central Appraisal District denied exemptions for about 120 traveling-HFC properties, immediately restoring nearly $3 billion to the county’s tax rolls, while appeals and related litigation continue.
What the courts will decide
At the center of the litigation are claims that HB21’s retroactive effects impair the obligation of contracts, a constitutional theory that industry groups say is crucial for borrowers and investors, while supporters argue the law simply reins in an abusive tax strategy. Industry coverage and legal analysis indicate that the eventual rulings could reshape financing structures, property valuations and who ultimately shoulders the cost of affordable housing in Texas, according to reporting in Multifamily Dive.
Whether judges side with developers or with Gates and allied local governments, the outcome will help determine how Texas balances tax incentives for affordable housing with the local tax bases that fund everything from schools to public safety. For now, the political, legal and financial battles are only growing more intense.
