Tax credits are new tool for city in driving affordable housing
Department hopes shift in approvals encourages growth
Houston’s housing department is using its recommendations for tax credits this year to encourage affordable housing developments across the city in a bid to avoid concentrating them in lower-income neighborhoods where they typically are placed.
The result is that a greater share of the private developments set to receive the city’s support this year are in Houston’s more expensive — and affluent — city council districts, where affordable housing projects have been rarer and often a point of contention. The new priority marks a change from past years, when the city would support any proposal that met a base threshold on its scoring criteria. The department this year aims to be more selective, cutting in half the number of projects it is recommending the city support. Officials say it is a strategy meant to maximize local
control of the state process that decides which projects ultimately receives the benefits.
The Texas Department of Housing and Community Affairs doles out the 9 percent tax credits for the projects, but a city resolution of support is seen as critical to compete for them.
“This is a change for the city,” Housing and Community Development director Tom McCasland told council members earlier this month. “If we just gave letters of support to everyone, that puts all of the control at the state level. And we think some of this control appropriately belongs in this horseshoe around the table.”
City council is set to vote on the housing department’s recommendations Wednesday.
Council member Tiffany Thomas, who chairs the council’s housing committee, said the selections strike a healthy balance and represent a good-faith effort toward righting the wrongs of the past. The U.S. Department of Housing and Urban Development found in 2017 that Houston’s housing policy violated the Civil Rights Act, and the city is now part of a voluntary agreement with HUD to change its practices.
“The framework we’re going with is a step in the right direction and aligns us with fair housing practices,” she said. “The other good thing is they’re mixed developments. They’re not the projects of the ‘80s and ‘90s that people envision.”
District C, home to the city’s highest median household income ($97,287 in 2017), has three recommended projects this year. All three fall in the Greater Heights or Rice Military neighborhoods, including a 180-unit family housing building on West 26th Street, a 100-unit facility on Dian Street, and a senior housing building at Center and Moy streets. District G — which has the lowest level of affordable housing — also has three projects, including one on Post Oak Boulevard.
Meanwhile District B, made up of north Houston neighborhoods that have Houston’s highest concentration of affordable housing and lowest median income ($31,925), has one recommended project — an 82-unit family building on West Gulf Bank.
That pattern is not universal. District D, which has the secondhighest concentration of affordable housing, also has three projects; and District E, which has below-average concentration, has none.
It does, however, reflect McCasland’s effort to spread the developments across the city.
“The same people giving back to the neighborhood and community will be able to stay in their communities.” District C council member Abbie Kamin
Not ‘one-size-fits-all’
The strategy was partly born out of last year’s tax credit awards, when several of the Houston developments that won the benefits were concentrated in the Fort Bend County portion of District K, according to housing department assistant director Ray Miller.
“What we are trying to do is prioritize areas that have been underrepresented for awhile,” Miller said.
District C council member Abbie Kamin said the new strategy represents an effort to ensure there are affordable places to live in every Houston community.
“I’m really excited about the opportunity District C is being given,” Kamin said. “The same people giving back to the neighborhood and community will be able to stay in their communities.”
Among some council members, there was concern that the district-level focus fails to account for needs of specific neighborhoods.
District H council member Karla Cisneros expressed concern the new standards may disadvantage her district. While her district has three recommended projects, Cisneros pointed out that Near Northside, one of the areas in the city’s Complete Communities program, did not get any support this year.
“I appreciate your attempt to be equitable but we’re not a one-size-fits-all city,” Cisneros said at the committee hearing.
McCasland said he welcomes such concerns.
“I am thrilled that this conversation we are having today is about the need for more (projects) in your particular districts,” McCasland said. “I can assure you that a few years ago, it was not that conversation. It was about trying to block deals out of particular districts, by and large.”
District A council member Amy Peck said the new policy resulted in unnecessary recommendations. Her district has the third-highest level of affordable housing units in the city, but Peck said most of those buildings are concentrated in one neighborhood: Spring Branch.
Both projects slated to get city approval in District A this year also were in Spring Branch, though the developers ultimately pulled those bids .
“I think that every council district has different needs,” Peck said. “So, to just say we’re going to put the same amount in every council district, I don’t think that accurately fits the needs of each district.”
The tax credits have been the largest driver of affordable housing for decades, empowering private developers to build facilities that offer affordable rents by offsetting a portion of their federal tax liability. Developers sell the tax credits to investors, which allows them to finance the buildings with equity instead of debt, in turn allowing them to charge lower rents. Most of these developments include market-rate units, as well.
In all, 57 projects applied for the city’s support for the tax credits. Just 20 are slated to receive it, down from 40 last year. The city estimates that only around 10 of the projects will ultimately receive the credits, worth a total of about $150 million over 10 years.
Exercising restraint
In the past, the city issued support for any project that scored a minimum of eight points on its criteria, which considers a variety of factors that include the neighborhood’s school quality and poverty level, access to transportation, and how many market-rate units are included in the facility.
This year, the housing department ended that blanket policy, exercising more restraint. The department showed council members a graph displaying how many affordable housing units are in each district.
For the five council districts with above-average levels of affordable units — A, B, D, H and K — housing officials only would endorse projects in state-designated priority areas, like the Complete Communities Program and Tax Increment Reinvestment Zones. Six of those developments are expected to receive support.
While those districts were home to 29 of the 40 recommended projects last year, they received eight of the 20 endorsements this year. For those with below-average housing — Districts C, E, F, G, I and J — there were no location restrictions and a cap of three projects.
“This was an opportunity to say, ‘Where are the areas that we haven’t traditionally supported?’ ” Miller said.