Affordable housing caught in a Texas showdown

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The popularity of socially responsible investing in areas such as affordable housing has run headlong into the nation’s culture wars in Texas. 

Four leading municipal bond underwriters recently chose to pull out of the Lone Star State’s municipal bond market — among the biggest in the nation — on the heels of two laws that went into effect in September. 

Texas Senate Bill 19 (SB 19) requires companies doing business with state agencies, including bonding authorities, to certify that they do not “discriminate against the firearm or ammunition industries,” according to a research report issued by the Kroll Bond Rating Agency. SB 13 similarly seeks to protect Texas’ energy industry by barring “state investments in companies that restrict business activities with the oil and gas industry,” Kroll reports.

In reaction to SB 19, JPMorgan Chase, Citigroup and Bank of America recently elected to pause participating in the Lone Star State’s municipal bond market because “they could not certify compliance with the new law,” according to Kroll. All three have adopted investment or other policies in the wake of mass shootings that set restrictions on the firearms industry. A recent report by Bloomberg indicates Goldman Sachs, likewise, has elected to pause activity in the Texas’ municipal bond market.

The affordable-housing market in Texas is supported, in part, by tax-exempt bonds issued by the Texas Department of Housing and Community Affairs (TDHCA) and the nonprofit Texas State Affordable Housing Corp. (TSAHC). Their programs help to fund first-time homebuyer initiatives as well as single-family and multifamily affordable-housing projects, among other efforts. 

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