How the deal unfolded
The Pecos HFC approved the deal with the Dallas-based real estate developer.
Because HFCs can legally operate beyond the boundaries of the governments that created them, Pecos' HFC quickly expanded its reach and approved several real estate deals across North Texas.
One of them is the complex in Arlington, which has been renamed Zenith. And, by law, the owners don’t even need to reduce any of the residents’ rents to meet the HFC affordability criteria — the only requirement is that at least half the tenants in the complex have a household income below $88,000.
The legality of these cross-jurisdictional operations has been questioned. In the meantime, the practice has spread. Even as HFCs operate far outside their original borders, more small governments have embraced the "travelling HFC" to raise money.
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Learn MoreWhat are Housing Finance Corporations (HFCs)?
HFCs intend to support affordable housing development for low-income communities.
They can issue bonds, offer property tax exemptions, and provide other financial incentives in exchange for long-term revenue agreements with developers.
In many cases, HFCs partner with private developers to "own" properties on paper. They allow developers to claim public tax exemptions while operating as a for-profit business.
Unlike city councils or other public agencies, HFCs are often not required to hold public meetings or disclose detailed records. As a result, it’s challenging to track the amount of affordable housing built.
Critics say the consequences are significant. Every project that shifts onto an HFC’s books removes valuable properties from the tax base, depriving cities of crucial revenue for public services like schools, emergency response and infrastructure repairs.
The CBS News Texas I-Team in the area found that Pecos' HFC has approved similar deals across North Texas — in Fort Worth, Grand Prairie, Lewisville, Haltom City and Azle — amounting to more than $500 million in forfeited taxes.
The impact on residents
When cities lose primary sources of tax revenue, the burden can shift to residents. Homeowners and small businesses may face higher tax bills, while public services — from school funding to street repairs — may see cutbacks.
Across Texas, local governments are increasingly sounding alarms about HFCs being used to shield private developments from taxes.
Officials are now calling for state lawmakers to reform the system. The loophole could continue to drain city budgets when many communities struggle to make ends meet.
"In hindsight, it's gonna be one of the greatest frauds put on the Texas taxpayers — the introduction of this program and how it's being abused," said Texas Rep. Gary Gates.
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