Texas Governor Threatens To Strip Funding From Cities Blocking Housing Development

Texas Gov. Greg Abbott is putting cities on notice that stalling housing development could mean losing tax revenue.

In comments at a press event in Round Rock, the Republican governor took aim at local restrictions that stymie new development, such as one North Texas suburb's requirement that new apartments include an Olympic-size swimming pool.

The state last year passed a few laws, Senate Bills 15 and 840, which limited some municipal zoning powers for Texas cities in a bid to boost new housing construction.

Nonetheless, "one thing that's driving up the cost of housing are local government regulations," Abbott said on Friday, as part of a statewide tour focused on affordability.

And he blamed cities trying to "skirt the laws we've already passed.

"Some local governments are skirting the law, imposing costly mandates," Abbott said. "The legislation I'm proposing now will end those costly local building mandates for good. Going forward, any city or county violating the law will have their sales tax revenue withheld."

Abbott said some regulations like setback, height limits, cover restrictions, and other rules already in place are legitimate. But he said some cities are tacking on extra rules that, in practice, stifle development.

"They will add very costly amenities to what the requirements are," Abbott said. "It could be requiring eight stories for multifamily housing, it could be adding very large swimming pools, it could be adding dog walk parks in areas that are not demanding it.

"Whatever they can find to add on to it, they will drive up the cost of being able to build out the facility so that the project just will not be done," Abbott said.

Those apparently are references to new rules put in place in recent months by Irving and Grand Prairie. Several other cities have followed, the Texas Tribune reports.

Abbott's proposal hasn't yet been formally introduced in the state Legislature.

Affordability push and data centers

The new proposed legislation comes on the heels of Congress passing a comprehensive housing reform package. The 21st Century Road to Housing Act has numerous reforms aimed at making it easier to build new homes, and it encourages states and localities to build more housing.

But the majority of zoning and land use decisions happen at the local level, and Texas was one of the first in a wave of states to curtail local cities' ability to block housing development.

Abbott, running for another term as governor, has also pitched legislation that would cut property taxes and reduce homeowners and auto insurance. Those costs are influenced by hurricane, wind, and hail risk in the state.

On the other hand, he's also expressed skepticism of data center development, which he said should not harm the state's residents.

On Monday, Abbott announced that the Public Utility Commission of Texas and the Electric Reliability Council of Texas must conduct an audit of all data center projects before any more move forward.

Several other states and regions have also announced pauses or moratoriums on data center development, or incentives for data center projects.

Abbott said on Friday that he wants to see data centers offset their power and water impacts in communities and also avoid building in neighborhoods.

"If data centers are going to exist, they have to abide by the guardrails and guidelines that I've established," Abbott said. "One of which is they must bring their own money and fund it themselves. Second, they must provide their own power. Not taking power off the power grid. They must be additive."

The 2026 Realtor.com® Housing Report Card gave Texas an A, lauding its homebuilding efforts.