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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.
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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
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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.
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Building Costs Have Nearly Doubled
Saar shared a clear example of how rising construction costs— paired with an outdated perdevelopment 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.
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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:
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“ 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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