This may be the most anxious time of year for affordable-housing developers in Texas. In a few weeks, they'll find out whether their applications for low-income housing tax credits have been approved, and the decision could spell life or death for their proposed projects.
The federal government distributes money for affordable housing to states and local housing authorities, which in turn award the funds to builders in the form of tax credits. Tax credits are the primary government resource for building more affordable rental housing – but the competition is fierce.
In order to score these federal tax deductions, developers need to gain approval from both state and local governments. But in Texas, some critics say, the system gives undue authority to state representatives.
The Dallas Women’s Foundation recently released a report that calls for changes to the tax credit system.
“The local government, neighborhood associations, and also statehouse representatives, not senators, are able to put in points, and they add up, and we see who is able to be awarded tax credits,” Dena Jackson, the foundation's senior vice president of grants and research, said.
The Texas Department of Housing and Community Affairs, which awards competitive tax credits, scores projects on a range of criteria, including government support. At the local level, developers must gain approval in the form of an ordinance from a city council. But at the state level, that authority is in the hands of a single representative.
“This, in effect, gives the House representatives the veto power over where affordable housing is going to land in their jurisdictions,” Jackson said.
This matters because those representatives have constituents to answer to – constituents who desperately need affordable housing, as well as those who don’t want it in their neighborhoods. Last year, state Rep. Celia Israel made the controversial decision not to endorse the Elysium affordable housing development in her Central Texas district. The move came after nearby property owners raised concerns about the proposed project, namely increased traffic and flooding.
Developers say they ultimately gained Israel’s approval this year, as well as that of the Austin City Council. But across the state, industry representatives say some legislators simply refuse to get involved.
“So you’re finding entire areas of the state now essentially redlined out of the program,” said Sarah Anderson, who runs a tax credit consulting firm in Austin.
Anderson has also worked with developers who have had state representatives' support pulled at the last minute, seemingly because of neighborhood opposition.
“We’ve seen it where we’ve gone all the way till 4:30 on the day that they’re due, and we’re told that they’re going to write the letter,” Anderson said. “And then after everything’s done, the money is spent, and then they just say, ‘Yup, I’ve changed my mind.’”
The Texas House did consider a bill to change the system this session. It proposes allowing state senators to weigh in, in addition to state representatives, but that bill has been left pending in a House committee. Texas will award this year’s round of low-income housing tax credits in July.