The Houston Housing Authority is moving from the PFC tax exemption to a very similar one
Earlier this year, Texas lawmakers overhauled the tax code that lowered property tax bills for apartment complexes to $0 in exchange for making some units affordable — a term previously defined so loosely that many market-rate units Eligible.
Since the new law regulating deals using what are known as utility companies, the Houston Housing Authority has instead turned to another part of state law that would make an apartment complex tax-exempt in exchange for making some units “affordable.”
At the October meeting, they voted in favor of a tax break for Trails at City Park, an apartment complex located south of Loop 610 and west of 288. A Houston Housing Authority spokesman said the deal made a greater share of apartments affordable to low-income families. Income lower than what the amended law requires.
A quarter of the units will be affordable to those earning 60% of the Houston area median income (about $45,000 for a family of two in the Houston area). The other quarter will be accessible to those earning 80% of the Houston area median income. The reforms require PFCs to own at least 10% and 40% of the units in each affordability level. As part of the deal, the Houston Housing Authority will retain a management stake, giving it the right to direct day-to-day operations — a major difference from the Houston Housing Authority.
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University of Texas law professor Heather Way, an expert on affordable housing whose research has played a role in generating interest for the reform, said she was surprised and disappointed to see the resolution approved by the Houston Housing Authority.
“I thought the Legislature was very clear about cracking down on the FCA structure — it had absolutely no appetite for these types of practices,” she said.
When asked why it used a different part of state law instead of the newly reformed social housing law, the housing authority responded: “We are currently using state-provided tools available to create affordable housing.”
Recent years have shown strong demand for such tax relief deals among developers, housing authorities and other tax entities. When the reform legislation was proposed, more than 200 PFC deals had been concluded All over the state of Texas It was in the pipeline, according to Way.
The owner of a multifamily apartment complex could save nearly $1 million in annual property taxes through such a deal. The housing authority or other body facilitating the deal can also charge a fee and quickly add affordable units to its track record. The budgets of many jurisdictions may not directly feel the cost of tax relief deals. For example, voters set a cap on the property tax revenue Houston can collect, and the city hits that cap every year, typically forcing it to lower its property tax rate.
However, the deals have drawn fire. Some neighbors said their communities cannot support low-income people. Others who advocate for providing affordable housing in opportunity-rich neighborhoods believe that deals often don’t create meaningful housing, especially because market prices on some units are already low enough to be considered affordable for families earning 80% of the area median income. . Other jurisdictions — especially municipal utility districts that fund the development of water and sewer facilities and other infrastructure — are not protected from severe budget revenue shortfalls when commercial properties within their boundaries stop paying taxes.
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An overhauled state law effective this summer also requires that agencies granting such tax breaks to developers provide advance notice to all tax entities involved that there will be audits about how much of the tax break has been spent toward reducing rents and that at least 10% of the units are affordable to those earning 60% of the area median income.
Lawmakers said this summer’s reforms are intended to give the public more transparency about how much affordability deals create and allow jurisdictions that might be affected the opportunity to weigh in.
The Houston Housing Authority said it has “no immediate plans” to conduct or share an analysis of how much of the tax break will go toward reducing rents. It did not comment on how long the units would be required to remain affordable under the October deal. “Our primary goal is to ensure that every deal we engage in provides a significant public benefit,” she said in an email statement.
The Houston Housing Authority used a state law that applies only to housing authorities in the Trails at City Park deal approved in October. The Housing Authority purchases the property, then leases the land and sells the buildings to a party in which the original owners and the Housing Authority share ownership. The Housing Authority will also have the administrative interest and right to direct day-to-day operations.
On voting day, advertised rents on the Trails at City Park webpage started at $1,090 for a one-bedroom. According to Novogradac’s rent calculator, an affordable one-bedroom for a family of two would earn 80% of the Houston area median income if renting for $1,492. It is considered affordable for a family earning 60% of the area median income if renting for $1,119.
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Ben Martin, research director at the housing advocacy group Texas Housers, is a critic of this type of tax-break deal. He says they are not creating very affordable housing.
“Looking further, housing authorities are arguably the best place to serve very low-income people and create very low-income housing,” he said. “It’s a question of where you spend your time and resources.”
Martin pointed to a Texas Housers analysis of Texas Workforce Commission data that showed that by 2030, the largest number of jobs expected will include fast food and office workers, home health and personal care aides, retail sales representatives, office staff and customers. . Service representatives, all of whom make less than $37,000 a year. That income represents roughly 50% of the median income in the median Houston area for a family of two, which is precisely where the Houston area falls short on affordability, Martin said.
Public housing has long helped meet this need. At the October Housing Authority meeting, staff said that even at this price point, renters are struggling in the current economy. In the third quarter, there was a 30% increase in unpaid rent compared to the previous quarter, which one employee attributed to the economic climate.
The housing authority is trying to make home visits and offer payment plans for those who are behind on rent. However, it expects uncollectible rent to rise next quarter.
This story has been updated to show that the Housing Authority will maintain the managing member’s interest in Trails at City Park.
