Abbott Threatens Sales Tax Cuts for Cities That Undercut State Housing Laws
Gov. Greg Abbott threatened Texas cities with a financial penalty on July 11, 2026: follow state housing laws or lose sales tax revenue. Speaking at a campaign stop in Round Rock, Abbott said he would pursue legislation to withhold sales tax funds from any city or county he accuses of violating the state’s housing statutes.
The target is a group of cities, primarily in the Dallas-Fort Worth region, that passed local rules after Abbott signed bipartisan housing legislation in 2025. That legislation was designed to reduce the state’s housing shortage by allowing more homes to be built. The suburban cities responded with ordinances that restricted how many homes could actually be constructed under those laws.
“We have cities across the state that are finding ways to skirt around the laws that we’ve already passed to rein in all of the costly mandates imposed by cities. Now we’re adding teeth to that.”
Gov. Greg Abbott, campaign stop in Round Rock, Texas, July 11, 2026
Abbott also announced he wants state lawmakers to give homeowners an automatic right to build accessory dwelling units (ADUs) on their property. ADUs are secondary structures on a single-family lot, sometimes called granny flats or casitas. Many Texas cities technically allow ADUs but impose rules that block them in practice. Housing economists widely consider ADUs one of the least disruptive ways to increase housing supply, since they add units without changing neighborhood character.
The conflict is a direct collision between state preemption and local land-use authority. Texas law already limits what cities can do on many fronts, but housing regulation has historically been a local function. Abbott’s proposal would extend that preemption by tying city finances directly to compliance, a strategy that goes beyond the 2025 laws.
No specific cities were named in Abbott’s remarks. The sales tax withholding proposal would require action by the Texas Legislature, which is not currently in session.
What You Can Do Now
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Contact your Texas state representative and senator at capitol.texas.gov/Members/Members.aspx and tell them whether you support or oppose withholding sales tax revenue as an enforcement tool. The next regular legislative session begins in January 2027, and members are taking constituent input now.
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Attend your city council’s next public meeting. Most North Texas suburbs post agendas at their official city websites. Ask your council members directly how they plan to respond to Abbott’s threat and whether they will revise local housing ordinances.
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Contact the Texas Municipal League, which represents Texas cities on state preemption issues, at tml.org. Tell them you want cities to have clear guidance on which local rules comply with state law before the Legislature acts.
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Track the ADU proposal. When the 2027 session opens, LegiScan Texas will list all filed bills. Search “accessory dwelling unit” to find the bill and submit public comment to the relevant House or Senate committee when it is assigned.