5 days ago
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Financing the future: How special districts are shaping the path to attainable housing in Texas
Texas is in the midst of a housing attainability crisis — one that's growing more acute by the year, particularly in rapidly developing regions like North Texas. As the median home price pushes past $400,000 and the average first-time homebuyer approaches age 39, the long-held perception of Texas as a haven for affordable housing is being challenged. According to Steve Robinson, founding partner at Allen Boone Humphries Robinson (ABHR), these pressures are not just reshaping the real estate landscape — they're threatening the very foundation of the so-called 'Texas Miracle.'
'If we can't house our people — if workers can't afford to live where the jobs are — it's going to stifle the economy,' Robinson says. 'What we do at ABHR is help build great communities. We use innovative financing tools to make those communities more attainable for more Texans.'
One of the most powerful tools in Texas' housing development toolbox? The Municipal Utility District, or MUD — a mechanism Robinson and his team have helped deploy across the state to fund critical infrastructure and enable large-scale, master-planned developments.
What exactly is a MUD?
At its core, a MUD is a governmental entity empowered to levy taxes in order to finance public infrastructure — think water, sewer, drainage and roads. Originating in the Houston area more than 60 years ago, MUDs were initially developed to address the city's explosive growth. Today, they've become a cornerstone of real estate development across Texas.
'MUDs allow developers to shoulder the upfront costs of infrastructure in areas where cities aren't extending services yet,' says Kelsey Taylor, attorney at ABHR. 'That means development can proceed where demand exists, instead of waiting years for a city to act.'
Importantly, MUDs also promote long-term planning by allowing developers to phase infrastructure alongside home construction, resulting in cohesive, high-quality communities. These districts are governed by locally appointed boards and regulated by the Texas Commission on Environmental Quality (TCEQ), which provides layers of public oversight that enhance accountability and quality control.
Texas vs. the nation: What makes our system different?
While special districts are common across the U.S. — with California's Mello-Roos districts, Florida's Community Development Districts (CDDs) and Colorado's Metropolitan Districts — Texas' MUD system stands out for its financial structure and regulatory rigor.
'Texas' system is unique in that it is reimbursement-based,' Robinson explains. 'The developer takes the risk — building the public infrastructure and private development first — and is only repaid after performance.'
This structure, paired with tax-based financing rather than assessments, results in lower borrowing costs and greater financial stability. Since the current rules were implemented in 1989, Texas MUDs have maintained a 0% default rate.
'This is a performance-based system with very high oversight,' Robinson notes. 'It's efficient, it's stable, and it's the largest and most robust system of its kind in the country.'
Speed, scale and attainability
While MUDs don't directly shorten development timelines — they generally take about a year to form — they dramatically improve the financial feasibility of development by decoupling public infrastructure costs from home prices.
'If you can remove $100,000 in infrastructure costs from the lot price, there's a broader group of people who will qualify for a $400,000 mortgage instead of a $500,000 one,' Robinson says. 'That increases attainability, which in turn increases the velocity of development.'
Taylor agrees. 'In many areas, without a MUD, development wouldn't happen at all. Developers would simply pass on the opportunity. With a MUD, they can move forward, and that speeds up access to housing.'
Funding amenities and green space
Although certain counties — primarily in South and Central Texas — allow MUDs to issue bonds specifically for park development, North Texas does not currently have that capability. Still, MUDs play a significant role in creating amenitized communities by reallocating reimbursed infrastructure dollars toward parks, trails and public gathering spaces.
'Today's buyers expect more than just a home — they want vibrant communities,' Taylor says. 'While we can't use tax-secured park bonds in North Texas, we can leverage other financing tools to support those amenities. That's part of what we love to do: find creative solutions that enhance quality of life.'
A North Texas transformation
While MUDs have long been embraced in the Houston area, their use in North Texas has historically been limited. That's changing — and fast.
'There are more than 200 cities in North Texas, most with their own water and sewer systems,' Robinson explains. 'Development used to be constrained to areas where those services were available. But with rising land prices, interest rates and infrastructure costs, developers began asking why comparable homes in Houston were significantly less expensive. One big answer was the use of MUDs.'
Over the last decade, legislative changes and market forces have paved the way for widespread adoption of MUDs in the Dallas-Fort Worth metroplex. Today, virtually every major master-planned community in North Texas is using a special district to finance infrastructure — something that would have been rare just 10 years ago.
Spotlight: Viridian in Arlington
One standout example is Viridian, a master-planned community in Arlington that was made possible through a Municipal Management District (MMD) — a cousin of the MUD structure that offers expanded flexibility. Developed on challenging land within the Trinity River floodplain and adjacent to a landfill, the project faced steep financial and logistical hurdles.
"It is critical that cities and counties invest in their community development. These district tools can achieve best in class environments for cities with the right developers. Viridian is one great case study of PPP success," says Robert Kembel, partner and president of The Nehemiah Company.
Unlike traditional MUDs, MMDs can levy assessments to reimburse costs for features like parks and public amenities — expenses that are difficult to fund through bond financing in North Texas. That gave Viridian the resources to create a highly amenitized, high-quality community complete with trails, green space and even a 90-acre lake where residents can sail.
'Arlington didn't have much new single-family housing stock,' adds Robinson. 'Viridian brought it in at scale, in a part of town that had been previously overlooked. The district financing model made it all possible.'
The path forward
As Texas continues to grow, MUDs will play an increasingly vital role in ensuring that housing remains accessible, communities remain livable and economic growth remains sustainable. In Robinson's words, the model is the ultimate public-private partnership.
'Cities can't always move fast enough to meet demand,' he says. 'MUDs allow the private sector to take that risk, while still complying with public oversight. It's a powerful model that allows Texas to keep growing — and to keep the dream of homeownership within reach for more families.'
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