“Historically, housing has played a very important role in the story of affordability in Texas, but restrictive land use policies and other disruptions to the creation of this supply have eroded the benefits.” – Nathan Kelley, President of the GALA.
TAAHP was invited to testify before the Texas Senate Committee on Local Government in Austin on September 13 regarding the Committee’s interim charge on affordable housing. The charge aims to study issues related to affordable housing, homelessness, and methods of providing and financing affordable housing and make recommendations for improving transparency and accountability, as well as making better use of federal, state programs and existing premises.
This is the first interim affordable housing charge ever taken by the Senate Committee. Its importance to the industry is evident from the large number of people present, who eventually fill the auxiliary room. For more than five hours, affordable housing experts, organizations and key stakeholders shared details about housing affordability issues in Texas, ideas for possible legislative solutions. Senate Committee members actively responded to questions, information and requests for resources and shared their own stories of how the affordability crisis has affected their constituents.
The hearing began with public testimony from various experts in the affordable housing industry. TAAHP Board Chairman Jean Latsha was among those testifying alongside TDHCA Executive Director Bobby Wilkinson. Latsha described ongoing issues in the housing industry and shared TAAHP’s legislative priorities regarding Section 2306 with the committee. TAAHP Government Affairs Committee Chairman Nathan Kelley followed with testimony primarily focused on utility companies.
The Texas Senate isn’t the only Texas legislative body to include an interim affordable housing fee. Last July, TAAHP testified at the Texas House Urban Affairs Committee hearing regarding its interim labor housing charge.
Key points to remember
TAAHP outlined proposed legislation to remove regulatory barriers to increase the supply and improve the distribution of housing tax credit development. Here are the legislative priorities of the TAAHP [click here to see legislative priorities document] which have been discussed.
Streamline Section 2306 – QAP
TAAHP seeks to support legislation that would streamline certain regulations in Sec. 2306, which governs the tax credit program. The following recommendations were mentioned at the hearing by Jean Latsha.
- Removal of the two-mile rule – The two-mile rule aims to prevent the concentration of affordable housing developments in the same area. In practice, this rule prevents developers from building in high-income areas. When asked what the impact of eliminating the two-mile rule would be, Latsha said, “I think it would give developers more options when deciding where to go to place development credits. housing tax, then reduce land costs as there are more sites to compete with. for.”
- Census tract limitations removed – “Developers competing for 9% credits all tend to search for the same site in the same census tract, which dramatically increases the cost of land.” Sellers understand that when tax credit developers search for their land, they can get the highest prices for it. That’s a huge inefficiency for the tax credit program – because it could produce over 13,000 units if we didn’t spend half of that on expensive land because we’re driven to the same place.
- Increased funding limits per development – Increasing the developer cap from $3 million to $4 million gives developers more flexibility to create economies of scale and have more financially feasible developments.
- Removal of cost/square foot limits
- Fixing the No Objection Requirement (RONO) Required for 4% Tax Credit Developments
Long waiting period to receive HTCs
Senator Menendez was also interested in discussing the time it takes to close the deal and how that affects the relationship between seller and buyer. Latsha described the current situation with 4% bond trades and how they are extremely oversubscribed. She gave an example of one of her own 4% developments that waited 11 months to get a bond reservation and then would have to wait 90 days for TDHCA to consider the tax credit claim. In total, this development will take 15 months to complete. Several committee members agreed that this was too long a waiting period.
Public equipment companies (PFC)
Created in 2015, the Public Facilities Corporations (PFC) tool has been used to stimulate growth and revitalization in targeted areas and has encouraged private investment in areas that have not otherwise attracted private capital. In its essence, the PFC is an economic development tool used to stimulate the creation of housing in rural markets and put housing on the ground for the workforce. Small and medium-sized municipalities can then use this as part of their economic development strategy to attract jobs to these markets. As a component of this, it can be used to revitalize or rehabilitate existing housing stock which is naturally affordable housing.
However, the public amenities program has recently come under scrutiny when questions have been raised about properties being removed from tax rolls via tax exemptions and not returning a significant public benefit. The current law creates opportunities for abuse, which violate its original intent as a tool for economic development and revitalization.
Senator Menendez expressed concern about the CPD program and its effects on other affordable housing programs. He said: “When one tool is abused, it hurts all affordable housing… We need every tool possible to create affordable housing, but we also need to provide protections against any abuse or exploitation of this program or of any other program.
During the hearing, Nathan Kelley stated that “TAAHP will focus on amending the PFC statute to incorporate some of the best practices that are already present and prevalent in the affordable housing space, ensuring better transparency among sponsors of the PFC, implement more stringent liability and compliance requirements, and further encourage the rehabilitation of such aging rolling stock or provide greater accessibility within existing communities acquired using this tool specific.