The ETJ Freedom Act: What SB 2038 Means for Your Next Development Tract

If you've ever tried to develop a tract just outside city limits, you know the frustration. You're not in the city. You don't get city services. But somehow, you're still stuck navigating the city's subdivision ordinances, platting requirements, and endless rounds of plan reviews that stretch your timeline by months: sometimes years.

Welcome to the Extraterritorial Jurisdiction (ETJ), the invisible regulatory boundary that extends a city's control up to five miles beyond its borders. For decades, Texas landowners and developers have been caught in this limbo: all the regulatory burden, none of the municipal benefits.

That changed on September 1, 2023, when Texas Senate Bill 2038 went into effect. And for anyone holding development-ready land in North Texas, this is one of the most significant shifts in property rights we've seen in a generation.

What SB 2038 Actually Does

Here's the short version: SB 2038 gives property owners the power to unilaterally remove their land from a city's ETJ.

That's right: unilaterally. The city doesn't get a vote. They don't get to negotiate. If you follow the process correctly, they have to let you go.

This is a massive departure from the old system, where cities had near-total control over their ETJ areas. Once you were in, you were stuck. Cities could impose subdivision regulations, control signage, dictate lot sizes, and even participate in the creation of Municipal Utility Districts (MUDs) on your land: all without annexing you or providing services.

SB 2038 flips that script. It shifts control from the municipality to the property owner, and the implications for land development are profound.

The Two Pathways to Freedom

The law creates two distinct routes for landowners to exit an ETJ, depending on how much community support you can muster.

Pathway 1: Direct Petition (The Fast Track)

If you can gather signatures from more than 50 percent of registered voters or represent a majority in property value within the ETJ area, you can file a direct petition with the city. Once the petition is verified, the city has 45 days to release your property: or it releases automatically by operation of law.

There's no hearing. No council vote. No negotiation. It's a done deal.

This pathway works best for larger landowners or developers who control significant acreage within a defined ETJ area. If you own the majority interest, you essentially hold the keys to your own release.

Pathway 2: Election (The Democratic Route)

If you don't control a majority stake but still want out, you can petition for an election. You'll need signatures from at least 5 percent of registered voters in the ETJ area to trigger the vote. If a majority of voters approve the release at the ballot box, the city must comply within the statutory timeframe.

This pathway requires more organizing and community engagement, but it's a viable option in areas where multiple landowners or residents share frustration with ETJ restrictions.

Why This Matters for Developers

Let's talk about what this means in practical terms. When your property exits an ETJ, you're no longer subject to:

• City subdivision and platting regulations – This is the big one. Cities often impose lot size minimums, road standards, and infrastructure requirements that go far beyond county regulations. Exiting the ETJ means you're now under county jurisdiction, which in most North Texas counties translates to significantly more flexibility.
• Sign regulations – Want to put up signage for your development without jumping through endless variance requests? ETJ release simplifies that process.
• MUD participation – Cities can no longer insert themselves into the creation of Municipal Utility Districts on your property, which can streamline the financing and development of infrastructure.

For developers working on the suburban fringe: where every month of delay costs real money: this regulatory relief can shave 6 to 12 months off your entitlement timeline. And in a market where holding costs are compounding daily, that's not just convenience. It's profit.

Where This Is Playing Out in North Texas

We're seeing the most aggressive use of SB 2038 in the outer-ring suburbs where growth is outpacing infrastructure, and city ETJs have become more of a bottleneck than a benefit.

Celina and Prosper – Both cities have expansive ETJs that stretch into rural Collin County. Developers holding large tracts in these areas are evaluating whether it makes sense to stay under city control or pivot to county regulations. The trade-off often comes down to road standards and water/sewer availability. If you've already lined up a MUD or private utility solution, exiting the ETJ becomes a no-brainer.

Anna and Melissa – Similar dynamics are playing out here, especially on the eastern edge where ETJs overlap with rural farmland. Landowners who've been sitting on 100+ acre tracts are now looking at SB 2038 as a way to fast-track residential or commercial development without dealing with city planning departments that are already backlogged.

McKinney's Northern ETJ – This is prime territory for ETJ exits. McKinney's ETJ extends well into Grayson County, but the city's subdivision requirements are significantly more restrictive than what Grayson County imposes. For developers planning Build-to-Rent communities or large-lot rural residential projects, the county route is faster and cheaper.

Sherman and Denison – With the semiconductor boom driving employment growth in Grayson County, developers are circling land near Sherman and Denison. Some of the best remaining tracts sit in ETJs, and we're already seeing landowners file petitions to exit before breaking ground.

The Catch: Fragmentation and Uncertainty

Now, here's where it gets complicated. While SB 2038 provides freedom for individual landowners, it also creates fragmentation. If your neighbor exits the ETJ but you stay in, you're now dealing with different regulatory regimes across property lines. That can complicate infrastructure coordination, MUD creation, and even road connectivity.

Cities are also fighting back. Several municipalities: including some in the Dallas-Fort Worth area: have filed lawsuits claiming SB 2038 is unconstitutional. They argue it represents an improper delegation of legislative power to private property owners. As of now, those cases are working their way through the courts, with cross motions for summary judgment already filed.

The uncertainty cuts both ways. If you're a developer with a multi-phase project, you have to decide: do you exit the ETJ now and lock in county regulations, or do you wait to see if the law gets struck down? There's no universal answer: it depends on your timeline, your capital structure, and your risk tolerance.

How Cooper Land Company Helps Developers Navigate This

At Cooper Land Company, we've been advising clients on SB 2038 strategies since the law went into effect. The calculus isn't always straightforward, and the decision to petition out of an ETJ requires a deep understanding of local county regulations, utility availability, and the development approval process.

We help developers by:

• Mapping ETJ boundaries and identifying release-eligible tracts – Not all ETJ land is a good candidate for release. We analyze your property's location, access, and utility options to determine if exiting makes strategic sense.
• Coordinating petition efforts – If you're pursuing the direct petition route, we help you gather the necessary signatures and navigate the verification process. If you're going the election route, we connect you with community organizers and local stakeholders.
• Comparing county vs. city development standards – We run side-by-side analyses of what development will look like under county jurisdiction versus staying in the ETJ. That includes platting timelines, road standards, utility requirements, and impact fees.
• Advising on MUD and infrastructure planning – Exiting an ETJ changes the calculus for how you finance and deliver water, sewer, and roads. We work with MUD attorneys and civil engineers to make sure your infrastructure plan aligns with your exit strategy.

If you're holding a development tract in an ETJ and wondering whether SB 2038 gives you an edge, let's talk. The window to act is open, but the regulatory landscape is shifting fast.

The Bottom Line

SB 2038 isn't a magic bullet, but it's a powerful tool for developers who've been stuck in ETJ purgatory. For the first time in Texas history, landowners have the upper hand in deciding whether they want to be governed by a city they're not part of.

In North Texas, where growth is pushing city limits farther into the countryside every year, this law is reshaping how land gets developed. If you're strategic about it, SB 2038 can accelerate your timeline, reduce your regulatory burden, and ultimately improve your project's economics.

But it requires local knowledge, legal precision, and a clear understanding of the trade-offs. That's where Cooper Land Company comes in. We've been working the North Texas land market long enough to know which counties are developer-friendly, which cities fight ETJ exits, and where the real opportunities are hiding.

If you've got land in an ETJ and want to explore your options, reach out. We'll walk you through the process and help you decide if breaking free is the right move for your next development tract.