My compliments to the Texas Department of Housing and Community Affairs (TDHCA) board of directors who rejected pleas from low income housing tax credit developers for an across the board increase the in amount of public funds the developers receive. The board acted in a fiscally responsible manner to ensure that the public funds were actually needed to make the apartment developments financially feasible.
Here is the background.
The recent federal housing bill grants state’s some extra low income housing tax credits for the next couple of years and gives state housing agencies discretion on how to spend the funds. With the ongoing turmoil in the housing finance markets low income housing tax credit developers are not getting as much money as they used to when they sell the tax credits the state awards them. Developers use the funds from the sale of credits as equity in the development of their apartment projects and to pay themselves a “developer fee”.
When the developers got wind of the extra money coming down from Washington they showed up before the state housing agency this week with their hands out asking that the extra credits be given to the developers who were already awarded tax credits in 2007 and 2008. Their reasoning was that since they are not getting as much from the sale of credits as some of them had planned on, given current housing finance markets, the taxpayers should give them more money.
Now some of the developers who were awarded government tax credits in 2007 have moved forward with selling their tax credits and building their apartments anyway. Some of these developers made better economic assumptions in their proposals to the state than others who are unable to move forward with construction. Some reduced their developer fees and put those funds into their projects to get them built. Good for them!
But this week a number of developers and their lobbyists appeared before the TDHCA board and asked that the state award them additional tax credits across the board on their proposals that were funded this year and last. The developers argued that it would be too hard for the state housing agency to figure out who among them really merited funds due to legitimate market changes. It appears that these otherwise fiscally conservative private developers become quite free spending when they stand to pocket a windfall of public funds.
After 4 hours of hearings and deliberations the TDHCA board of directors, led by it’s chairman Kent Conine, said not so fast to the developers. First off the board said no to requests for more money to developers who got funding in last month’s 2008 tax credit award round since these deals were underwritten by the department based on the current market conditions.
As for those developers who received their credits in 2007 and now want more, the board recognized the equity issue posed by the fact that some developers cut their developer fees and have already begun their projects. The board told the 2007 developers who have not started their construction to come back to the staff and prove up their need on a case-by-case basis in order to get additional public subsidy in the form of tax credits.
Now all of this might just sound like good common sense, and it is. But my point is that there have been times in the past, when the media and public were not watching, when decisions like this went the other way without anybody (except those benefiting financially) knowing. That has not happened under recent TDHCA board and staff leadership however.
This is solid evidence of how much improved the Texas Department of Housing and Community Affairs is these days.