If you’re a longtime BattleSwarm reader, then you know that I’ve been pretty critical of Republican State Representative Gary Gates of Richmond. Before winning Texas House District 28 to fill the unexpired term of John Zerwas in 2019, Gates was best known as a seven-time loser, his most prominent flame-out being an underhanded, dishonest campaign against Wayne Christian for Railroad Commissioner in 2016. Before that he was behind the suspiciously squishy (and now apparently moribund) Texas Citizens Coalition. More recently he’s played footsie with the social justice set by voting for a bill to create an Office of Health Equity within the Texas Department of Health and Human Services.
So Gates has done little to endear himself to me. But recently he did good by cracking down on “affordable housing” tax giveaways.
Rep. Gary Gates (R-Richmond) took to the back microphone this week to make the case for greater regulation of a controversial state program offering millions in tax exemptions to developers for affordable housing.
One of several lawmakers to propose reforms to the Public Facility Corporation (PFC) program, Gates had introduced a reform bill with tough standards, but allegedly former Speaker Dennis Bonnen repeatedly pressured him to drop his proposals.
Gates told The Texan he was urged by Bonnen to sign on to arguably weaker reforms authored by Rep. Jacy Jetton (R-Richmond) — House Bill (HB) 2071 — and warned that although his own legislation had been approved by the House Committee on Urban Affairs, it would be killed in the powerful Calendars Committee.
Instead, Gates successfully tacked on multiple amendments to HB 2071 during Tuesday’s floor session.
“I’m pleased with these amendments, but I still have my own PFC reform bill, HB 3568, which I hope to get to the floor in short order. It has 69 authors and co-authors, while HB 2071 had only 10.”
Under the PFC program, local government officials may offer a 100 percent tax exemption to developers who build or purchase multifamily housing, as long as some rental units are set aside for “affordable” reduced rent. But both Jetton and Gates acknowledged there have been abuses of the system; in some cases, PFCs have been authorized with only 10 percent of units designated for low-income families.
On the House floor, Gates queried Jetton about whether his reforms set new minimum standards and noted that the current system took tax revenue from public school districts without their approval. He also pointed out that in some cases developers were already charging below-market rents before transitioning to PFC status and were therefore not obligated to demonstrate a public benefit.
“This is hurting our schools, this is hurting our counties and our cities,” said Gates. “This [tax revenue] is being taken from our fire departments, our police departments, our neighborhood schools. They are getting their taxes wiped out and we can’t determine if there’s any public benefit.”
In response to Gates’ questions, Jetton acknowledged that other taxpayers or the state’s general funds would have to make up the loss in revenue to school districts.
Gates’ first proposed amendment, opposed by Jetton, mandates that 60 percent of the developer’s tax savings must be dedicated to reducing rents. It was approved in a bipartisan vote of 87 to 54, with two members registered as “present, not voting.”
Under the formula, 12 percent of units must be set aside for those earning 50 percent of the Area Median Income (AMI), 12 percent for those at 60 percent AMI, and 12 percent at 80 percent AMI.
After the House voted for a second Gates amendment requiring approval from counties and school districts for any new PFCs, Jetton gave up his opposition and accepted four more revisions as friendly amendments.
Noting that some PFCs had been granted 100 percent sales and property tax exemptions for up to 99 years, Gates also questioned Jetton about HB 2071’s language setting a minimum tax exemption period of 10 years while removing even the 99-year limit.
Among revisions accepted by Jetton, the tax-exempt status will be limited to 12 years for new construction and 10 years for the conversion of existing properties.
So one cheer for Gary Gates for getting rid of a tax kickback.
Ideally, government should get entirely out of the business of giving different types of tax breaks for different rental housing. Get out of regulating any but the most essential safety and business standards and let the free market come up with solutions. The main obstacles to building actual affordable housing are too many regulations, not too few.
But we shouldn’t disdain even baby steps of reform in the right direction.
Tags: 88th Texas Legislative Session, Gary Gates, Holly Hansen, Regulation, Republicans, Taxes, Texas
Cities are always ready to subsidize affordable housing, but they never seem to consider what elements of their own regulations make the subsidies necessary. Unnecessarily rigid building codes and land-use regulations all need rethinking. Mexico, for example, builds middle-class housing with far less land per house than we do in the US. All our rules have costs.