Texas Housing Board Awards 9% Tax Credits to 68 of 117 Competing Multifamily Projects
Feature Photo: Cynthia Bast, attorney for Madhouse Development, addresses the TDHCA Board of Directors in Austin during a July 25 appeal of a 9% housing tax credit application that was rejected.
UPDATE: 8-2-2019 — This article was updated to include comment from TDHCA officials.
by Adolfo Pesquera
Austin (Travis County) — The Texas Department of Housing and Community Affairs approved 68 of the 117 competing multifamily project applications to the 9% low income housing tax credit program.
The 2019 cycle of funding will provide Texans more than 5,500 affordable housing rental units and more than 5,000 of the units will be of new construction, said Sharon Gamble, the TDHCA 9% tax credit program administrator. Gamble presented staff’s recommendations to the TDHCA Board of Directors at their Thursday, July 25 meeting.
“As Texas continues to outpace other states in terms of job creation and livability, TDHCA’s multifamily financing remains an important component to ensuring our expanding workforce has adequate, high quality housing in which to live,” said TDHCA Acting Director David Cervantes. “The housing tax credit program is a remarkable example of how public and private dollars can serve all Teans and benefit the overall economic health of our state.”
The credits are expected to help finance the building of 52 new properties with a total of 3,822 units, and the rehabilitation of 16 properties offering 1,148 units.
The presentation required a last minute adjustment to two San Antonio projects. The developers of The Legacy at Piedmont, a $14 million, 49-unit development for the elderly, successfully appealed a dispute over how their project was scored. As a result, the Village at Nogalitos, a 78-unit complex for families, was bumped from the award list and put on the agencies waiting list.
The dispute over The Legacy at Piedmont centered on how to interpret a new Trump Administration policy change on the use of income averaging when considering prospective tenant incomes. Staff claimed that the applicant should have excluded the 30% of average median income rent controlled units being used to qualify for “the basis boost” in scoring.
Henry Flores, president of Madhouse Development Services Inc., the developer, argued the exclusion didn’t apply to income averaging–“Income levels of tenants only requires that the average income for the proposed development be less than or equal to 54%.”
Staff noted that of all the 2019 cycle applications, The Legacy at Piedmont was the only applications to use the basis boost and Average Income. The Board concluded that the policy language interpreting the new Average Income rule was unclear and granted The Legacy at Piedmont its appeal.
Cynthia Bast of the Lock Lord firm, attorney for Madhouse Development, told the board, “When we have language of a rule that doesn’t meet the intended result, we still have to follow the rule and fix it in the next application cycle.”
The federal 9% tax credits that are administered by the states are capped each year. The number of applications filed annually are typically about twice the available funding. Gamble said the credits requested this year were about $138 million, while the state’s allocation was $79,109,460.
A tax credit award is used as leverage to secure private sector financing and to keep the rents below market rate for future low income tenants. A tax credit award is usually about 10 percent of the total financing. For instance, a $1.5 million award may result in a $15 million construction project.
Of the 68 award projects, Tarrant County had the most success with 10 developments being approved. Their sector (Region 3/Urban) had projects go forward in Fort Worth (4); Arlington (4), Hurst (1); and Kennedale (1). An eleventh project in Region 3/Urban was also awarded in Johnson County.
Harris County, with 2.5 times the population of Tarrant, received tax credit awards on nine projects, of which three were special set-asides for “at-risk” communities.
Dallas County did not receive a single tax credit award for a project.
Bexar County submitted 10 applications and received awards for three. Hidalgo County in the Rio Grande Valley, however, secured tax credits on five projects.
The graphics below list the names of each award project, the counties where they will be constructed, and the award amount. The first 16 projects listed (highlighted in blue) are “at-risk set aside” projects totaling more than $11.9 million and are used for the rehabilitation or reconstruction of againg housing development that could soon lose rental subsidies. Many of these are in rural areas.
“For the second year in a row, every eligible at-risk application we received will be awarded tax credits,” explained Marni Holloway, TDHCA director of multifamily finance. “Because of this, TDHCA’s efforts will help preserve housing affordability for some of our most vulnerable Texans in rural communities.”
The number of units refer only to those dedicated for low income renters. It is typically the case that a small percentage of units (from 5 to more than 15%) in the total development will be leased at market rates.
Adolfo Pesquera (Reporter/Editor) is a veteran news journalist. He has worked for Hearst Corp., American Lawyer Media, News Corp and Freedom Communications. His work has been published in newspapers and magazines across the USA. He is a journalism graduate of UT-RGV. He writes, edits and creates digital pages for VBX.