Mayor assails HHA tax break vote
He wants to examine whether number of affordable units is worth loss in revenue
Mayor Sylvester Turner sent the Houston Housing Authority a stern rebuke Thursday, saying that a Tuesday vote on 14 new tax break deals went against his instructions to hit the brakes.
At question are deals in which housing authorities can remove apartment complexes from the tax rolls in exchange for making a portion of their units affordable. A number of Houstonians and politicians have begun examining whether these tax breaks are good deals — in other words, whether apartment owners are providing enough public benefit to justify exempting them from millions of dollars in property taxes every year.
The deals have drawn public attention since the Tanglewood Homes Association, belonging to a wealthy neighborhood with a history of protesting affordable housing, began pushing back on a deal in the neighborhood this winter. Soon after, the group brought the issue to the mayor, who in January said that he was pausing such deals until he could get a better understanding of the tradeoffs.
The Houston Housing Authority voted Tuesday on 24 new proposals to take apartment complexes off of the tax rolls in exchange for making a number of units affordable.
Ten of the deals, which use what are known as public facility corporations, received final approvals. The mayor said that he had been fine with those 10 because they were already in progress.
However, 14 properties were given memorandums of understanding, indicating the Houston Housing Authority intended to go through with the deals, pending negotiation over the specific terms. Turner took issue with
these deals and directed the housing authority not to take any further action on the tax break, specifying that no staff time should be spent on them on moving them forward.
“The priority at this point is to ensure that we establish and publish guidelines with criteria that is in the best interest of the city of Houston and its residents by ensuring housing affordability for those who need it most,” he said.
The housing authority and the property owners being impacted — which include the Morgan Group, the Houston-based real estate company behind the Pearl brand apartments; Howard Real Estate Holdings, a company based in Fort Worth with communities in Spring and Missouri City; and Commerce Equities, a Houston-based company with “ranch style” apartments near Almeda Mall — did not respond to requests for comment.
There were an additional eight deals on Tuesday’s agenda that were tabled until next month.
The final approvals represented a 13 percent increase in the number of such tax break deals that had been approved by the Houston Housing Authority since 2015, when the state law allowing local housing authorities to make such deals was enacted. Before Tuesday’s meeting, the Houston Housing Authority had approved 77 public facility corporation deals.
The Houston Housing Authority said the tax breaks have allowed the agency to create thousands of affordable units in desirable locations. In mid-February, housing authority officials reported the agency’s public facility corporation agreements had created 12,600 apartments with discounted rents, 5,000 of which were reserved for households earning 60 percent of the Houston area’s median income or less. The deals they have negotiated go well beyond the minimum required by law.
How affordable the units are matters, because the market already provides units affordable to households earning 80 percent — and often 60 percent — of the area’s median income.
The housing authority has said a one-bedroom apartment could rent for as much as $1,262 for a family earning up to 80 percent of the Houston area’s median income or $1,081 for a family earning up to 60 percent of the Houston area’s median income.
At Madison at Bear Creek, one of the approved tax break deals, the advertised market rent this Thursday for a one-bedroom apartment started at $956.
At Broadstone Briar Forest, it was $1,005.
At 5 Oaks Apartments, it was $1,050.
None of the 10 approved deals appeared to have market rents at rates above what was considered affordable to a household earning 80 percent of the area’s median income, although one did not appear to have a website at all, another did not advertise rents and third has yet to be built.
The affordable units are not advertised on the Houston Housing Authority’s website. Many of the developments that have been approved for tax breaks also do not advertise on their websites that they have units reserved for people of certain incomes.
The Houston Housing Authority said it will begin listing the affordable units on its website, housingforhouston.com, by the end of March.
Whatever rent discounts apartment owners provide are purchased at a hefty price to taxing entities. The average property saves roughly $1 million every year in property taxes, David A. Northern Sr., the housing authority’s chief executive, told members of the Houston City Council’s Housing Committee.
That money may not be felt directly by Houston or local school districts’ budgets. Voters have capped the property tax revenue the city can collect — and the city hits that cap every year, usually forcing it to reduce its property tax rate. And the state’s “Robin Hood” system for funding school districts, which tries to even out how much every school gets per student, means that revenue reductions may not always be felt by Houston’s school districts.
But municipal utility districts — which finance the development of water and sewage facilities and other infrastructure — will feel a direct impact.
Melissa Parks, an attorney who represents multiple municipal utility districts, worried about the impact deals that were approved Tuesday would have. During public comment, she pointed to two deals in MUD No. 185, in the Bear Creek area, which were later approved. She said the deals would remove 24 percent of the district’s taxable property values, significantly impacting the MUD’s budget in the largely commercial district.
“Even if we have a way to possibly make up for it, possibly in the water and sewer rates that are charged for these entities that go tax exempt, this is going to affect other taxpayers in the district, customers in the district,” she said.
As for other taxing entities, the tens of millions of dollars in tax breaks come from somewhere. For Houston’s taxes, owners without the tax break make up the difference. And if a revenue loss is not felt by a local district, such as Houston ISD, directly, it would then fall upon the less wealthy school district that would have otherwise received the funds.