As Tax Credit Guidelines Change, Concerns About Fair Housing Mount

Leah Binkovitz | @leahbink | January 10, 2017

The proposed development at 2640 Fountain View. Image via Houston Housing Authority.

The proposed development at 2640 Fountain View in the Galleria area. Image via Houston Housing Authority.

Amid an ongoing debate about affordable housing in Houston, recent changes to how the state administers its low-income housing tax credits have raised more flags for fair housing advocates.

Only a limited number of tax credits are awarded to developers each year, based on a competitive application process in which proposals earn points for everything from locating near a library to being in a lower-poverty neighborhood. When proposals end up in a tie, certain point categories can be used as tie-breakers, including what’s known as the “Opportunity Index.” After a recent court case, that index was reworked to help incentivize the development of affordable housing in low-poverty areas with access to good schools.

But in the latest changes to the point-system, made by the state housing department, the Opportunity Index has been made far less restrictive and removed educational quality from the rubric. That’s a move that will likely open up more neighborhoods to developers seeking those tie-breaking points. But it also de-emphasizes the importance of good schools in affordable housing at a time when a federal investigation into Houston’s affordable housing practices unfolds.

“The more you whittle away at the score for educational quality, the more likely it is someone will choose to overlook it,” said Charlie Duncan, a fair housing planner with the Texas Low Income Housing Information Service, an advocacy group based in Austin.

Duncan was part of the stakeholder meetings that helped guide the changes and he said many of them were meant to expand the areas that would qualify for points.

Under the 2016 guidelines, proposals in the blue areas could have scored the full seven points possible under the Opportunity Index. Map by the Kinder Institute (report forthcoming).

Under the old, 2016 guidelines, proposals in the blue areas could have scored the full seven points possible under the Opportunity Index and would be considered high opportunity. Map by the Kinder Institute (report forthcoming).

Under the old point system, developers complained that there were too few options for places that met those standards in urban areas. “There’s just not a whole lot of areas within the city limits that qualified under those scoring criteria,” Zach Lavender, a developer, told the Houston Chronicle. Developers also said it was difficult to win approval for projects in urban areas  as well as areas undergoing economic changes that didn’t seem to offer enough opportunity under the old system, according to the newspaper.

But Duncan said that’s only part of the story. “I don’t think that was an incorrect claim,” said Duncan, “but a lot of those areas that do meet the criteria, and would be competitive, are roped off because of local opposition — and that’s the real big issue that needs to be tackled before we start rolling back these opportunity criteria that have been so effectual.”

When the Houston Housing Authority had plans, for the first time, to build a development in a high-opportunity neighborhood, vocal opposition complained that it would increase traffic and school overcrowding in the area. In August, Houston Mayor Sylvester Turner refused to bring the proposal before the city council, citing costs and other concerns, in a move that took those tax credits from the state off the table for the Housing Authority. Without those, the Authority decided not to move forward on the project.

Now, Duncan argued, the new point-system goes a step further, diluting the Opportunity Index.

Under the new guidelines, developers can earn Opportunity Index points in a more flexible, a la carte manner after meeting basic income and poverty rate requirements for the area. The new changes would effectively expand the areas considered high-opportunity.

The map shows the location of low-income housing tax credits as well as other public housing, against the racial and ethnic composition of Houston. Source: City of Houston, 2015.

The map shows the location of low-income housing tax credits (green stars) as well as other public housing (yellow stars), against the racial and ethnic composition of Houston. Source: City of Houston, 2015.

But he said, the changes also weaken the importance of good schools for a project proposal. Under the new scoring system, school quality is not part of the rubric. And, because developers can now pick up points here and there more easily for proximity to things like grocery stores, parks and colleges, they are less tied to locating the property in a low-poverty, high-income area.

Educational quality is still counted in a separate part of the plan, but the maximum amount of points developers can get was cut from five to three. “I’m disappointed,” said Duncan. “When we as private citizens look for a place to live, if we have a family, school quality is one of the most important factors in where we look and in determining property values.”

Others are concerned that possible corporate tax cuts under Donald Trump’s administration could undercut the value of such housing tax credits to developers altogether. With lower taxes, tax credits like these would theoretically be less valuable to developers looking for a break.

Though it remains to be seen how the state’s changes will impact where developers apply for low-income housing tax credits, the move highlights the contested definition of a “high-opportunity neighborhood” the has propelled much of the disagreement at the local level, where there’s a shortage of more than 150,00 affordable and available units for people making roughly a third of the area median income or below, according to a 2016 report from the National Low Income Housing Coalition.

“I think it’s undeniable that a good education and being in an area that’s economically vibrant have huge positive impacts on someone’s life outcomes,” said Duncan. “By considering the incomes, the poverty levels and school quality in an area, you’re helping to ensure that those positive neighborhood aspects are made available to not just those who can afford them but also those who are reliant on tax credit housing.”


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Leah Binkovitz

Leah Binkovitz is Senior Editor with the Kinder Institute for Urban Research.

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