Builders Outlook 
Published by the El Paso Association of Builders:
National, State and Local Home Building Industry News
National, State and Local Home Building Industry News
A global trade war is underway, causing significant economic and financial market disruptions. As initially announced, the U.S. imposed trade sanctions including a 10% minimum tariff rate on virtually all U.S. trading partners, combined with higher “reciprocal” tariff rates — which were, in fact, taxes on bilateral U.S. goods deficits rather than tied to specific foreign tariff or non-trade-based rules. However, even those rates were four times higher than they should have been, given the equation specified. It appears these higher rates were designed as leverage for negotiations.
As these rates were set to apply on the evening of April 8, financial markets shuddered. The 10-year Treasury rate spiked to 4.5%, alarming investors as a bond market repricing occurred. On April 9, President Trump set a general 90-day pause on the applicable reciprocal rates (leaving in place the 10% baseline tariffs on all countries except for Canada and Mexico), subject to bilateral trade negotiations.
However, this pause also excluded China, which is now subject to a prohibitive (perhaps a virtual trade embargo) 145% tariff rate. This rate will disrupt supply chains for Chinese goods, raise prices for these items, and cause financial market repricing. Recognizing this risk, an exemption of this tariff was set on Friday of last week for computer chips and other electronic items.
For financial markets, the 10-year Treasury rate is settling at near 4.5%, as an additional risk premium for U.S. government debt is imposed by investors. The rate has also increased due to expectations for higher inflation in 2025. Separately, duties on Canadian lumber are set to rise from 14.5% to 34.5% later this year.
Treasury rates are worth watching in the weeks ahead. There remains a liquidity risk if a significant portfolio reshuffling occurs. Such liquidity risks can produce significant financial and economic distress. However, the bond market appears orderly, for the time being. The other risk for bonds, including mortgage-backed securities and mortgage interest rates, remains a political retaliation via a large-scale sale of foreign-owned debt. Such an action would spike interest rates.
Although the negotiations may yield growth opportunities for U.S. energy firms and other exporters, most forecasters are now saying a recession is more likely than not for 2025. NAHB’s forecast for GDP growth in 2025 has been revised lower to near 1%, with flat readings for several quarters as we believe negotiations and carveouts will continue. Our probability for a 2025 recession is a smaller, one-in-three chance. Nonetheless, we expect inflation to rise in the quarters ahead above a 3% annual rate and for the unemployment rate to approach 5% as a growth slowdown occurs.
While we expect distress as trade flows from China are interrupted, it is important to recall recent data that showed solid economic momentum. Inflation data surprised to the good side for March: The Consumer Price Index measure of inflation slowed to a 2.4% year-over-year rate, with shelter inflation slowing to 4%. Absent the trade war, these data would have set the Federal Reserve on pace for additional short-term interest rate cuts. And while overall producer prices fell in March, the prices for residential construction materials rose just 1.3% year over year.
And despite recent government job cuts, the economy created 228,000 jobs in March, with home builders and remodelers adding 13,000 positions. The job openings count for construction remained low, at just 242,000.
Also, NAHB Remodelers continue to report relatively good market conditions. The NAHB Westlake/Royal Remodeling Market Index declined five points in the first quarter, but fell to an otherwise positive reading of 63. NAHB is bullish on the future of the home improvement sector for a variety reasons, including an aging housing stock. New NAHB research finds that almost half of owner-occupied homes were built before 1980.
NAHB Chief Economist Robert Dietz provided this economic and housing industry overview in the bi-weekly newsletter Eye On the Economy.
PRESIDENTS MESSAGE
El Paso's homebuilding sector is currently contending with significant economic pressures, notably elevated interest rates and broader financial uncertainties. These factors are reshaping the construction landscape, influencing both builders and prospective homeowners.
Interest Rates and Housing Affordability
The surge in mortgage interest rates, now averaging around 6.4%, has markedly affected housing affordability in El Paso. This increase translates to higher monthly payments for homebuyers, thereby reducing the pool of qualified purchasers and dampening demand for new homes. Consequently, builders are exercising caution, reassessing project viability in light of these financial constraints.
Construction Slowdown and Permit Decline
The impact of these economic conditions is evident in the construction sector's slowdown. Multifamily housing permits in El Paso County have plummeted by nearly 90% compared to 2022, signaling a significant retreat in new developments. This decline reflects both the challenges in securing affordable financing and the hesitancy of builders to initiate projects amid uncertain market conditions.
Economic Indicators and Labor Market Dynamics
Despite these challenges, El Paso's economy exhibits signs of resilience. Employment has grown at an annualized rate of 3.9%, with notable gains in professional and business services. However, the unemployment rate has edged up to 4.5%, and average hourly earnings have experienced a slight year-over-year decline, indicating ongoing labor market adjustments.
Strategic Responses and Future Outlook
In response to these headwinds, the El Paso Association of Home Builders is advocating for initiatives that promote workforce development and regulatory reforms to ease construction barriers. Emphasizing innovation and sustainability, the association aims to navigate the current economic landscape while laying the groundwork for future growth.
While the homebuilding industry in El Paso faces immediate challenges, strategic adaptation and collaborative efforts can position it for recovery and long-term success. By addressing affordability issues and fostering a conducive environment for construction, El Paso can continue to thrive as a vibrant and growing community.
We need to be prepared and think outside the box in order to thrive in these current markets. By looking for alternative resources and embracing innovation, we can reduce costs, remain competitive, and continue building strong communities while staying profitable.
EXECUTIVE'S MESSAGE
New Association Management Platform: NOVI Systems
Our association is evolving to better serve you. We’ve partnered with NOVI Systems, a cutting-edge platform that will streamline administrative functions and enhance your membership experience. This transition will empower you to manage your membership profile, access resources, and engage with the association more effectively. Expect additional details in the coming weeks as we integrate with NOVI. I’m thrilled about this step toward a more connected and efficient future for our association.
Advocating for You in the 89th Texas Legislative Session
The Texas Association of Builders is actively engaged in the 89th Texas Legislative Session, which began in January 2025. Our team is working tirelessly to protect the gains achieved in the 88th session and oppose numerous proposed bills that could hinder builders and developers. As Texas attracts new residents from more regulated states, the political landscape is shifting, requiring increased vigilance to preserve our industry’s interests. I’ve testified at the Capitol on your behalf, often in challenging settings, and I’m reminded of the importance of strong advocacy and strategic alliances.
Our members’ contributions, whether testifying, volunteering, or contacting legislators—are invaluable. Your efforts reinforce that housing is our mission and make membership meaningful. On behalf of the association, thank you for your dedication. To continue this critical work, I encourage you to stay engaged and reach out with any questions or ideas for advocacy.
Together, we’re building a stronger future for Texas housing. Thank you for your continued support.
Help may not be on the way for first-time homebuyers frustrated by high mortgage rates and even higher home prices.
Economists at Bank of America warned this week that the US housing market is “stuck and we are not convinced it will become unstuck” until 2026 — or later.
The bank said home prices will stay high and go even higher. The housing shortage will persist. And mortgage rates may not fall much — even if the Federal Reserve finally delivers long-delayed interest rate cuts.
“It’s been a weird combination. Mortgage rates rose substantially but so did home prices. That typically doesn’t happen,” said Gapen.
The supply of homes simply cannot keep up with demand. Prices have had nowhere to go but up.
The median price of a previously owned US home climbed in May for the 11th month in a row to a record $419,300 — up 6% from a year earlier.
Bank of America expects home prices will climb by 4.5% this year and then by another 5% in 2025 before eventually dipping by 0.5% in 2026.
‘Lock-in effect’ could persist for eight years
One major problem hurting supply is the “lock-in effect.”
People who already own their home are effectively locked into their property after refinancing or getting a mortgage during the pandemic when ultra-low rates were available. Buying now at current rates would require them to pay hundreds of dollars more per month on interest alone. Plus, home prices have gone up.
For many, it just doesn’t make sense to move. And because those homeowner are not moving, the supply of existing homes on the market is limited.
“Why would I sell unless I have to?” said Gapen. “Prices have gone up and the mortgage rate is a lot higher. So, I’m content to stay where I am.”
Bank of America warns the lock-in effect could persist for another six to eight years, keeping a lid on supply during that time.
That’s because the mortgage rate of people who already own is historically low. And the rate for new buyers is elevated. Bank of America doesn’t think that gap will shrink much for years.
This problem helps explain why pending home sales fell in May to a record low, according to data released on Thursday. Pending sales, tracked by the National Association of Realtors since 2001, are a forward-looking gauge of home sales that measures contract signings.
‘They can’t take their mortgage rate with them’
Dave Liniger, who co-founded real estate giant RE/MAX with his wife in 1973, said the lock-in effect means people who want to size up to a bigger home can’t, and the next generation can’t even get their foot in the door for a starter property.
“The move-up market does not exist,” Liniger told CNN. “Starter homes have doubled in value and the owners would like to move up but the problem is they can’t take their mortgage rate with them.”
Liniger agrees that the housing market is stuck, for now at least.
“We have to muddle our way through this for a period of time,” he said.
But Liniger urged first-time homebuyers to remain patient. “Don’t give up the dream,” he said.
In theory, a flood of supply of new homes would help unstick the market.
However, Bank of America expects housing starts — which is a measure of newly constructed homes — to remain flat for the coming years. And housing starts have still not recovered from the bursting of the housing bubble in the mid-2000s.
Divide between haves and have-nots
The forecast for a “stuck” housing market cuts both ways.
The spike in home prices has padded the net worth of existing homeowners and given them additional financial flexibility.
But there are many Americans who are on the outside looking in. They’d like to buy but can’t afford to at these prices and these mortgage rates.
The longer they are prevented from buying, the more time they miss out on wealth creation.
In a recent Gallup poll, just 21% of Americans said it is a good time to buy a house, tied for the worst reading in Gallup history. An overwhelming majority — 76% — say it’s a bad time to buy.
Gapen, the Bank of America economist, said if the US economy achieves the soft landing that he expects, meaning that inflation cools without triggering a recession, there is a risk that home prices will rise even more than anticipated.
On the other hand, if the durability of the recovery has been overestimated and a recession is on the way, home prices could tumble and affordability would ease.
“But, obviously, you don’t want to go through a recession to have better housing affordability,” he said.
—New York CNN
Advice for Builders
Rethinking Pricing as Tariffs Hit
Some actionable advice for contractors about reassessing pricing policies
Trump’s election will likely improve demand conditions for construction spending but also include risks based on tariffs, project timing, and completion due to labor and supply implications from policies.
Early themes from builders, remodelers, and contractors indicate optimism from the election outcome partly due to clarity and certainty of administration tone for the next four years but also due to the memory of Trump's first administration’s pro-construction industry perspective. For us, the outlook for the industry includes several upside conditions.
The administration is focused on the reduction of waste and inefficiency in favor of growth and expansion of GDP over the next four years. This will likely stimulate long-term residential, nonresidential, and infrastructure construction. A key signal to watch is the impact and affect of reduced regulations and government oversight across the construction services and projects value chain. Builders and developers have been asking for lower permitting costs and timing to help accelerate profitable construction.
A focus on tax cuts and inflation reduction through economic policy can create real dollar expansion for spending on construction and major renovation or expansion projects for the small to medium developer or asset owner looking to improve facilities or expand capabilities.
The America First platform and corresponding tariffs will create an expansion of domestic manufacturing, warehouse, and logistics facilities as well as a repurpose or redesign of existing, low-occupant buildings to support supply chains and inventory. Additionally, we anticipate continued growth in data centers and the AI ecosystem facilities, including both new and repurposed.
The proposed Department of Government Efficiency may have the potential to have a significant impact to the remodeling segment of the nonresidential building industry. Early strategies aimed at reducing working from home and mandating in-office work will create a near-term impact on facility upgrades and optimization; just after Covid-era redesigns for less in-office work or shared work environments. Today, the Federal government operates over 360,000 nonresidential buildings (of all types) that will need upgrades or enhanced repairs due to a resurgence of use.
There are further benefits beyond improved demand for spending on projects but also help the business operators and owners in the construction industry. Many contractor associations are anticipating benefits due to tax code and structure as well as regulatory process which can create more simplicity and certainty in managing their business.
Tariff & Price Implications
While there are many reasons for optimism and excitement, the new Trump administration also comes with some risks and downside potential, particularly in the areas of tariff and price implications as well as of immigration impact to labor supply and tariff implications to select product prices and availability of critical offshore products or components.
• Tariff and anti-dumping policies can disrupt supply chains and reduce product availability for selecting products, particularly categories which lack domestic production.
• High tariffs also may create short-term price inflation in building materials due to increases in products and materials from cross-border suppliers but also as domestic producers respond to price opportunities with tariffs in place
• Immigration policy may reduce construction workers resulting in slow growth of new projects or extend time to complete projects
Actionable Items
The concrete, infrastructure, and tool/equipment rental industry are not immune to these challenges or impact from tariffs, despite much of the industry sourcing and producing within our borders. In order to properly mitigate any risk and or improve your business’s ability to succeed with tariffs, keep in mind the following:
Stay calm and study the tariff language, timing, and country-targeted response. In order to manage through tariffs, know the details on type, level, class, intent, exclusion, and implication—including the behaviors or triggers which can cancel the tariffs.
Assess the risk level to your business across your network. Determine the origin of your inputs, supply sources, tools, and materials and understand if they are from the tariffed countries impacted. Evaluate your risk exposure of not just price impacts but also limits in supply. Anticipate customer response including General Contractors and Asset Owners to expectations on price pass-throughs, mix, quality, and lead times.
Prepare scenarios and mitigation options. Understand your operating and financial performance in detail to accurately determine where you can withstand supply-based priced increases and absorb in order to win more projects or plan price increases in your bid packages and compete based upon non price factors.
Be agile and focus on adaptability with multiple options as the tariff levels and enforcement will be changing as will competing contractor bid packages as well as GC and asset owner expectations.
Upgrade product pricing, bid package, and service strategies:
• Rebalance product assessment and mix redesign
• Elevate procurement and sourcing options
•Explore projects and workflows that are less sensitive or impacted by tariff activity. Typical government work and DOT projects or public facilities have clear standards for US products and supply which may reduce the overall impact.
• For concrete products, tools, and technical solutions that may have components sourced overseas, be sure to develop redundant suppliers and or safety stocks (especially for critical equipment)
• Work together as a unified team and contractor organization to increase analysis and decision-making regarding tariff-impacted bids and decisions you chose to make to absorb partial or none of the tariff price impacts from your suppliers
• Focus on the long term. The dynamic tariff confusion and activity of today is not sustainable; however strong business development, commercial activities, quality project execution, and services or portfolio expansion all aid in creating a strong business to weather dynamics out of your control
Overall, external dynamics require businesses to remain laser-focused on data-driven decisions to prepare their business to respond to areas they cannot control. While the near term may remain volatile and confusing, our construction industry is a steadfast, critical economic driver of our GDP with a healthy, long-term outlook.
For Construction Pros.com March, 2025
ECONOMIC OUTLOOK
Federal Funding
As of 2022, federal funding made up 40% of overall revenue in nearly half of US states. Federal funding accounted for the greatest share of state revenue, 50.5%, in Louisiana, 50.2% in Alaska, and 49.7% in Arizona. By contrast, it accounted for just 22.2% of ND state revenue, 25.9% in HI, and 27.6% in VA. With Republicans looking to cut federal spending, some states will be more vulnerable than others.
Fed Freedom
Recently, President Trump suggested firing Fed Chair Powell. A decision in a SCOTUS case may give Trump his wish. If granted, Fed independence will be gone, investors will expect the Fed to do the President’s bidding, short-term rates will fall and inflation will rise, pushing up long-term rates. The market reaction to firing Powell will make the ugly aftermath of what happened after “Liberation Day” look like a party.
Easter Eggselence
Iowa produces more eggs than any state, the next biggest states: Ohio, Indiana, and Pennsylvania. Total US 2024 table egg production was 93.1 billion, down 1% from 2023. The daily rate of lay averaged 82.5 eggs/100 table egg layers, or 301 eggs/hen, up 1% from 2023. In March, a dozen eggs cost a record $6.23.
Data Dichotomy
Hard data like March retail sales remain solid, rising 1.4% M-o-M. The car segment jumped 5.3% M-o-M, building materials surged 3.3%, the biggest jump since 2021, sporting goods gained 2.4%. But households were front-running tariffs. Conversely, soft data like the NY Fed’s business services (survey) index was dismal, contracting sharply for the second straight month. The hard/soft data battle rages, with hard fortunately holding sway. But will it hold on?
Discount Dominance
In 2019, the percentage of apparel trips to off-price stores was 28.1%. In 2024, 35.1%. Similarly, thrift store trips rose from 9.4% to 12.2%. However, trips to traditional department stores and general apparel stores declined from 28.5% to 21.1%, and 17.8% to 15.8%, respectively. Activewear/athleisure stores slipped from 13.8% to 13.7%, luxury slid from 2.4% to 2.1%. Discounters rock, high end is OK, the middle struggles, echoing the overall economy.
Data Distraction
Usually, stellar CPI numbers would have resulted in melting Treasury yields, but due to tariffs the report was utterly ignored. That said, M-o-M CPI fell 0.1%, the first decline since 6/24, and core CPI rose 0.1%, the smallest rise since 1/21. Y-o-Y, CPI and core rose 2.4% and 2.8% respectively. Moreover, the declines were breathtakingly broad-based. Absent tariff concerns, I bet the Fed would cut rates in May.
Market Mysteries
April 9’s 9.52% S&P 500 increase was the third largest since WWII. The largest boost was an 11.58% rise on 10/13/08 followed by a 10.79% updraft on 10/28/08. Both jumps occurred during the Housing Bust. The fourth biggest rise was on 3/24/20 and was 9.38%, the fifth biggest was on 3/13/20 and saw the index percolate 9.29%. These two were both during Covid. The biggest jumps occur during bad volatile times.
Troubled Treasuries
The recent steepening of the yield curve and the astounding and quick rise in 10-year and 30-year Treasury rates suggest several all-bad possibilities. Is there concern that a recession could strain federal government resources? Is China selling Treasuries? Is everyone deleveraging Treasury trades all at once, and thus is everyone looking for cash simultaneously? Who knows, but this is potentially terrifying. Maybe it helps explain the sudden 90-day tariff pause.
Elliot Eisenberg, Ph.D. is an internationally acclaimed economist and public speaker specializing in making economics fun, relevant and educational. Dr. Eisenberg earned a B.A. in economics with first class honors from McGill University in Montreal, as well as a Master and Ph.D. in public administration from Syracuse University. Eisenberg is the Chief Economist for GraphsandLaughs, LLC, a Miami-based economic consultancy that serves a variety of clients across the United States. He writes a syndicated column and authors a daily 70-word commentary on the economy that is available at www.econ70.com.
A New Chapter for EPAB:
Navigating with the Member Compass
The El Paso Association of Builders is always looking for ways to build smarter, stronger, and better—this year, we’re laying the foundation for a whole new kind of member experience with the launch of our new management software. At the center of it all is a powerful tool designed to make your life easier: the Member Compass.
So, what is the Member Compass?
Think of it as your personal dashboard, your digital guide, your compass in the world of EPAB. It's your online profile—but it’s also much more. It’s where you’ll find everything you need to stay informed, connected, and in control of your engagement with the association.
How It Works
To begin using the Member Compass, an individual must first create a user account. Once logged in, they’ll instantly have access to a personalized view of their activity within the association.
From the Member Compass, users can:
•View and update their personal and company information
•Check their membership status
•Review transaction history and ecommerce orders
•See upcoming and past event registrations
•Manage communication preferences
•And more!
Accessing the Member Compass is easy—just click your name in the top-right corner of the screen, just like on many popular social platforms.
Whether you're a builder, developer or associate, the Member Compass is built with you in mind. It’s your go-to resource to keep tabs on what matters most to you and your business within EPAB.
Start by creating your user account, feel free to call us at (915) 778-5387 if you have any questions.
This is just the first step in a larger journey as we roll out more features and tools designed to better serve our members. Stay tuned—and get ready to build a better EPAB, together.
TEXAS OUTLOOK
Can Texas eliminate Property Taxes?
By Joshua Fechter and Jasper Scherer, Texas Tribune
The Texas House is considering a budget that would shell out $51 billion — 15% of the state's total two-year spending plan — to maintain and provide new property tax cuts. That number, more than the state allocates to transportation or higher education, is making even some Republicans nervous about the state’s ability to afford the tax relief if there’s an economic downturn.
If it were its own agency, Texas’ property tax budget would be the third costliest agency in the state, more than double what the state spends on public safety and criminal justice. The allocation exceeds the operating budget to run Texas A&M System’s 11 university campuses for two years. And it’s more than enough money to cover the estimated cost of a high-speed rail line from Dallas to Houston.
Texans pay among the highest property taxes in the country. The state doesn’t have an income tax and relies heavily on property taxes to pay for public services, especially public schools. For the last several years, lawmakers have sought to rein in those bills by sending billions of dollars to school districts to reduce how much in property taxes they collect from homeowners and businesses — a strategy they’re keen on duplicating this year.
“It's something that we can afford to do now,” said Rahul Sreenivasan, director of government performance and fiscal policy at Texas 2036, a nonprofit public policy group. “I don't know if it's something that we can afford to do on this scale every session.”
Lawmakers have drawn on massive state budget surpluses in recent years to pay for property tax cuts. A $33 billion surplus helped cover the $18 billion tax-cut package legislators greenlit two years ago. This time, lawmakers have eyed a $24 billion surplus to help pay for new cuts and maintain existing ones.
Budget analysts have warned that those surpluses were out of the ordinary — and will soon be a thing of the past. The injection of tens of billions of federal dollars into state coffers during the COVID-19 pandemic and higher-than-usual growth in sales taxes, driven by inflation, formed those surpluses, they said. Today, those COVID relief dollars are gone or spoken for. Sales tax collections, which make up more than half of the state budget, have slowed as higher housing costs and grocery bills — costs that don’t generate sales tax revenue — have bitten into Texas households’ budgets.
“Because of very specific, very unusual circumstances, we had a lot of money that we didn't expect to have,” said Shannon Halbrook, a fiscal policy expert at the left-leaning think tank Every Texan. “My fear is we're assuming that that money is permanent, or that we're going to have that kind of money going forward to keep paying for these recurring tax cuts every budget, every session. And that's just simply not the case.”
The state’s economy already had been projected to slow this year, and President Donald Trump’s tariffs have introduced a fresh round of economic uncertainty. And on Thursday, the U.S. Energy Information Administration said it expects demand for oil to shrink and gasoline prices to fall through 2026 — both of which would affect the state’s tax revenue collections from oil and gas production.
Meanwhile, it’s unclear just how deeply the Trump administration’s efforts to cut federal spending will hit the state budget going forward. Federal funds account for roughly 30% of Texas’ upcoming two-year budget.
Of the $51 billion in the budget set aside for tax cuts, some $44.5 billion will go toward maintaining property tax cuts lawmakers have enacted since 2019. That includes billions of dollars sent to school districts to replace funds districts would have otherwise collected in property taxes, thus lowering tax rates — a tax-cut method known as “compression.” It also includes billions of dollars lawmakers greenlit to raise the state’s homestead exemption for public schools — or the amount of a home’s value that can’t be taxed to pay for public schools. Voters decided to raise that exemption to $100,000 in 2023.
Lawmakers plan to put another $3 billion toward compression. State law requires Texas to put more money toward compressing school districts’ tax rates every two years as long as property values grow, so the $51 billion tax-cut tab is expected to grow in the future.
Legislators also have $3.5 billion set aside to pay for new cuts — expected in the form of another bump in the homestead exemption, more compression and tax cuts for businesses.
Lt. Gov. Dan Patrick said he favors further boosting the state’s homestead exemption because it would be harder for lawmakers to claw back those cuts versus other methods, like compression. Senators passed a proposal earlier this year to raise the homestead exemption from $100,000 to $140,000, and to $150,000 for older Texans. Patrick said he and House Speaker Dustin Burrows have discussed raising the exemption even further for Texans age 65 and above, to $200,000.
“One of the many reasons I favor the homestead exemption over increasing compression is that the homestead exemption is codified in the Texas Constitution by voters so future legislatures can never take property tax cuts away from Texas homeowners,” Patrick said in a statement, alluding to the two-thirds vote required in both chambers to repeal a constitutional amendment.
In contrast, Patrick said, “Future legislatures can decrease, or entirely eliminate, the amount of compression at any time,” as they are not baked into the constitution and could be rolled back with only a majority vote.
Cutting property taxes has been a major priority among Texas Republican lawmakers. But even some Republicans are sounding the alarm about how much tax cuts cost.
Senate lawmakers passed their proposal to raise the homestead exemption in February, with a unanimous vote and little fanfare. Still, some senators sounded a note of caution about the state’s ability to continue paying for tax relief into perpetuity.
“We’re building a large obligation, and it’s going to detract from things we absolutely can’t afford not to do, if we’re not careful,” said Sen. Charles Perry, R-Lubbock.
The tax cuts have provided some relief for homeowners: a Texas Tribune analysis of more than 50 property tax bills from 2023 found that those homeowners saw their bills fall nearly 28% from the year before. When adjusted for inflation, most homeowners’ tax bills were lower in 2023 than in 2018, the year before GOP legislators passed the first major round of relief.
But growth in property values in 2024 has eaten into those gains, with some areas seeing the typical homeowner’s bill increase by more than it fell the year before. After falling by more than 10% in 2023, schools’ property tax collections grew by more than 6% last year, according to estimates from the Texas Comptroller’s office.
As they were taking up their main tax-cut measures earlier this year, Senate lawmakers griped that, even after billions of dollars in relief, many of their constituents feel as though they are not getting tangible relief as local tax increases and rising insurance costs bite into progress made by the Legislature.
At the same time, lawmakers have effectively boxed themselves in. Voters would have to sign off on reducing the state’s homestead exemption, which would require a constitutional amendment. State lawmakers could theoretically reduce how much they spend on compression, but doing so would prove difficult if not impossible to sell politically.
That means lawmakers would have to make cuts elsewhere in the budget to sustain tax cuts should the economy hit a rough patch. For Halbrook, the fear is those cuts would come out of programs that serve low-income families.
“The sad fact of the matter is there’s not a lot of money spent on programs like that,” Halbrook said.
Move to Increase the Per Development Cap for 9% Housing Tax Credit Applications Takes Center Stage 
By Whitney Parra, TAAHP Policy Manager
In a major step toward meeting the needs of affordable housing providers developing through the 9% housing tax credit program in high-cost areas, Senate Bill 898, which aims to increase the development cap for 9% housing tax credits, received a public hearing last week. The bill is authored by Senator César Blanco.
SB 898 proposes an increase in the federal housing tax credit cap from $2 million to $3 million per development, one of TAAHP’s legislative priorities. This change would assist in addressing rising construction costs and inflation by enabling the creation of more affordable units within a single development. This measure is expected to counteract the declining number of units being constructed in 9% housing tax credit developments located in high-cost areas throughout the state.
Senator Blanco Frames the Urgency: Texas Is Building Fewer Homes
Senator Blanco opened the hearing with a candid, clear-eyed explanation of what’s changed — and why this bill can’t wait.
Senator Blanco’s point landed: we’re trying to solve 2025’s housing crisis with rules written for 2011. It’s not working — and it’s costing us homes. In his own district of El Paso, the average number of units per development has plummeted from 94 in 2019 to just 40 in 2024—a startling statistic that tells a broader story happening across Texas.
Stuck at $2 Million: A Cap That No Longer Fits the Market
Inflation and construction costs have soared — but the per-project cap on 9% housing tax credit allocations is still stuck at $2 million. That cap was set back in 2011 and hasn’t moved since — even as the costs of land, labor, insurance, and materials have climbed dramatically.
TAAHP Voices in the Room: Bobby Bowling & Kathryn Saar Testify
Representing TAAHP, Bobby Bowling of Tropicana Properties in El Paso (and TAAHP Past President) and Kathryn Saar of The Brownstone Group (and TAAHP QAP Committee Chair) delivered powerful, data-driven testimony in support of SB 898. They painted a clear picture of what today’s development reality looks like—and why Texas can no longer afford to stand still.
Larger Developments, Lower Costs
Bowling highlighted the economic aspects with clarity. He stressed that with a fixed pool of tax credits available each year, the most efficient way to create more homes is to build bigger developments that benefit from economies of scale.
Bowling also shared findings from a 2018 national study of over 2,500 Housing Tax Credit (HTC) developments that found increasing the number of units in a development is statistically associated with a decrease of $3,000 per unit in total development costs (TDC). As the development size increases, fixed costs like legal fees, engineering, and site preparation are spread more thinly across the development, significantly lowering the per-unit cost. Larger developments benefit from economies of scale, which reduce both construction and operational costs.
As seen in the chart below, the study found that developments in the 101–200 unit range hit the ‘ideal scale’ for cost efficiency, coming in just under the overall median of $164,757 per unit. The trend is unmistakable: the more units you build, the lower the cost per unit becomes.
Building Costs Have Nearly Doubled
Saar shared a clear example of how rising construction costs — paired with an outdated per-development credit cap — are shrinking the scale of affordable housing developments in Texas.
In 2013, Saar’s team built a 152-unit development in Laredo with just $1.4 million in housing tax credits. With construction costs at roughly $95 per square foot, developments of that size were achievable under the $2 million cap.
Fast forward to 2024, and the landscape has completely changed. Saar is now working on a development with costs nearly doubling at almost $195 per square foot. Even with land donated by a housing authority, the development only pencils out to 104 units, and only after significant value engineering to stay under budget.
A Cautionary Tale: When Undercapitalization Becomes a Crisis
Saar warned of a deeper structural risk: failing to fund developments properly today can lead to a wave of problems tomorrow. It’s not just about producing more units — it’s about making sure those developments remain stable and affordable over time. She pointed to aging properties that are now struggling financially because they were undercapitalized at the outset. Without enough upfront funding, we risk losing affordability down the line when these properties fall into distress or foreclosure.
Chairman’s Closing Thought
As the hearing wrapped up, Chairman Bettencourt offered a practical reminder of what’s at stake:
“If the economies of scale do increase the number, then effectively assuming you’ve got a zero sum game on your monies.…”
Translation: If the math works out — if bigger developments mean more homes for the same pot of money — then this is a policy worth pursuing.
What’s Next?
SB 898 was left pending in committee—a typical part of the legislative process—but the strong testimony and member engagement behind the bill are clear signs of momentum.
TAAHP will continue to monitor the bill’s progress and provide updates. In the meantime, check out the full hearing or watch the highlight clips above to see the TAAHP team in action.
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