CRE Will Take A Backseat To Pandemic, Budget During 2021 Texas Legislative Session

The financial fallout from the coronavirus pandemic and U.S. energy downturn is expected to take center stage during the upcoming 87th Texas legislative session, eclipsing other issues that could impact the state’s commercial real estate sector.

Thousands of bills have already been filed ahead of the session, which commences on Jan. 12. Early submissions indicate few bills that directly relate to CRE in Texas, but there is still room for that to change, as bills are permitted to be filed during the session’s first 60 days.

It is widely anticipated that lawmakers will focus on Texas’ budget deficit, which stands at about $4B, as well as a much larger deficit facing the state over the next two years. Presumptive Speaker of the Texas House of Representatives Dade Phelan has also said that the main focus of the session will be to manage the pandemic and hammer out a new budget.

With social distancing precautions in place, there are expectations that fewer bills will have the opportunity to be heard and passed during the 140-day session, which concludes May 31. Restraints on gatherings will make it harder for the necessary meetings and hearings to take place at the Texas Capitol.

“We think that the wheels of government will be a little sticky because of COVID, and because of the inability to have the efficiency of lots of meetings up close in small quarters. So it is anticipated that the number of bills passed will be significantly reduced,” Wilson Cribbs + Goren Chairman Reid Wilson told Bisnow.

One of the issues expected to have an indirect impact on Texas’ commercial real estate sector is a proposed ban on local government lobbying. City and county governments in Texas have the ability to hire lobbyists to advocate on their behalf at the Capitol, using taxpayer money. The ban would reduce the ability of those entities to impact the legislative process.

A similar ban was proposed during the 2019 legislative session and passed the Texas Senate, but failed to pass the Texas House of Representatives. Wilson said there could be other bills filed during the session that will target the reach of local governments, including their dealings with developers.

“I would say that it is very likely that you're going to see a number of bills introduced and work their way through the process that will limit the authority of local governments,” Wilson said. “Local government control over real estate development is a big deal.”

Another issue expected to gain attention is marijuana. Several bills have been filed that would expand eligibility for participation in the state’s Compassionate Use Program, which provides access to marijuana for medical use. Other bills advocate to legalize the possession of limited amounts of the drug for recreational use or outline the framework for a retail Texas cannabis industry.

The legalization of marijuana for recreational use in Texas is unlikely to pass during the 87th legislative session, as most members of the Republican Party remain staunchly opposed. But if it actually happened, the marijuana industry could be a massive boon for CRE in Texas.

“It would be a big, new industry that would be — I don't want to say welcome, but it would create a lot of demand for retail space and industrial space, no question about it,” Wilson said.

Property tax took the spotlight during the last legislative session, when lawmakers passed a bill that requires local governments to receive voter approval before they can increase property taxes by more than 3.5%. Many of the property tax-related bills filed for the 2021 session relate to limiting additional property tax increases or outlining taxation exemptions.

On an administrative note, the pandemic has forced many processes to become temporarily digital, including the notarization of important documentation. Wilson said he expects legislation will address this trend in the upcoming session.

“The world is moving toward the internet and everything being digital. And so I anticipate that there will be some laws to allow remote notarization and to encourage and support electronic documents, signatures, notarizations and recordings,” Wilson said.