Texas lawmakers would have a huge say in whether developers receive an award of low-income housing tax credits (LIHTCs) under a bill passed by the state House of Representatives.
Letters of support or opposition from legislators would be highly scored in the fierce competition for housing credits awarded by the Texas Department of Housing and Community Affairs (TDHCA) under the bill.
When housing credit awards are often decided by just a few points, these letters can decide the fate of a development.
The move goes against the state Sunset Advisory Commission’s recommendation to eliminate letters of support from legislators as a required scoring item. A legislative body, the commission reviews the policies and programs of more than 150 state agencies, questioning the need for each agency and considering changes to improve their operations.
The House passed an amendment that not only maintains the legislator letters in the LIHTC scoring process but increases their significance. The move seeks to elevate the state senator and representative letters from being the sixth-highest scoring item in the current qualified allocation plan (QAP) to the second-highest priority scoring item.
"We think it gives effective veto power to a single representative," says John Henneberger, co-director of the watchdog Texas Low Income Housing Information Service.
Legislators would have unprecedented authority over affordable housing developments, according to Henneberger, who notes that officials don’t have the same authority over other types of projects.
He says it is a dangerous formula when a single legislator can give a thumbs-up or down on a project or is in the position of picking one development over another.
He only has to look back a few years ago when several Dallas officials and their associates were found guilty and sentenced to prison in a high-profile corruption case in which they were alleged to have received payment in exchange for their support of a developer’s affordable housing deals. A developer involved in the bribery scheme also went to prison.
Under the House proposal, if neither a state representative nor a senator provides a written statement of support or opposition, a developer could get a resolution from the appropriate city council or county commission regarding the development to still be able to capture some points.
But, it appears that local boards would have little say if a state legislator takes a stand, according to observers, who were still digesting the new proposals.
They were also worried that local bodies would have to hold new public hearings on the housing proposals, and for the large cities this could mean dozens of public hearings on proposals that are still in the very preliminary stages, says Henneberger.
This could be burdensome on the local boards and add more fuel to NIMBY opposition.
In another move, House members said the agency should adopt a policy for disbarring a person from participating in TDHCA programs if the person has failed to comply with any conditions imposed by the department in the past.
The bill was in the Senate for consideration at press time.
Any changes in the LIHTC program will be closely watched in the wake of a federal judge’s ruling that TDHCA unintentionally discriminated in its allocation of housing tax credits.
Last year’s ruling by Judge Sidney Fitzwater, chief judge of the U.S. District Court for the Northern District of Texas, came as a result of a lawsuit filed by the nonprofit Inclusive Communities Project (ICP), which challenged TDHCA’s allocations of tax credits in the Dallas area.
ICP alleged that TDHCA discriminated based on race by disproportionately approving LIHTC developments in predominantly minority neighborhoods and disproportionately denying LIHTC developments in predominantly Caucasian neighborhoods.
Fitzwater ruled that ICP had proved its "disparate impact" claim under the Fair Housing Act. However, the court found that there was no intentional discrimination based on race.
The lawsuit is still pending, so both sides declined to discuss the case.
However, TDHCA did point out several changes in its new 2013 QAP, which includes a number of new rules. The latest QAP was rewritten to provide consistency among the different multifamily housing programs administered by TDHCA, but the changes also go toward addressing the requirements of the court’s order in the ICP lawsuit.
Most significant, the latest allocation plan has scoring incentives for proposed developments in areas characterized by such features as higher incomes, lower poverty levels, and higher-quality schools.
For example, certain developments in a census tract that is in the top quartiles of median household income for the county or area and the site is within the attendance zone of an elementary school that is rated exemplary are eligible for additional points.
TDHCA also strengthened the requirements for proposed developments that contribute to a concerted revitalization plan.
The QAP also provides scoring incentives for developments in underserved areas, including a colonia, an economically distressed area, or a place that has never received a LIHTC allocation.