If Not In Your Backyard, Then Where?

The Low Income Housing Tax Credit Program (LIHTC) is a federal program that supports the production of affordable multifamily housing.  Most of these tax credits are awarded through a competitive allocation process administered by the Texas Department of Housing and Community Affairs (TDHCA).   Developers apply for credits for a specific proposed development, TDHCA scores the applications, then awards the credits to the highest scoring proposals in each region according to a regional allocation formula.

The Texas Legislature mandates in statute that the scoring process must give “written statements from any neighborhood organizations on record with the state or county in which the development is to be located and whose boundaries contain the proposed development site” more points than the income levels of tenants of the development, the cost of the development, the services provided to the tenants, or the ability of the proposed development to affirmatively further fair housing.  As a result, these written statements by the future neighbors (called “Quantifiable Community Participation,” or QCP, in the statute), can make or break a deal.

Unfortunately, TDHCA has extensive notification and signage requirements for the sites of proposed developments that implicitly endorses the viewpoint that developments funded through the LIHTC program are a public hazard.  These can act as “warning labels” that encourage NIMBY opposition to development placement.

TDHCA recently released a list of the letters they have received from neighborhood organizations regarding applications to the 2010 LIHTC program.  Of the 196 proposed developments, 67 received letters of support and seven received letters in opposition.  Of the seven developments receiving opposition letters, six have since withdrawn their applications.

The current scoring algorithm gives significantly fewer points to developments which fail to receive support letters as well as those receiving explicit opposition.  This is an opportunity for silent NIMBYism.  Fifty-four percent of the applications which failed to receive a support letter dropped out of the application process, a dropout rate five times that of developments receiving support letters.  While many factors may contribute to the withdrawal of an application, the lack of points for community support makes those applications less competitive and is likely a contributing factor.

An preliminary analysis by TxLIHIS of 30 randomly selected pre-applications shows that developments that failed to receive community letters were located in more affluent census tracts than developments that did receive support letters: There was almost a ten percent lower percentage of population at Low to Moderate Income (LMI) in the census tracts of developments where neighborhood groups provided no written commentary on the application compared to developments in census tracts where neighborhood groups supported the application (40.0% LMI vs 49.4% LMI).

The statutory importance placed on these letters (and lack of letters) is a potential barrier to fair housing.   The penalty for “lack of support” allows affluent communities to quietly discourage the construction of affordable housing, and opportunity for low-income Texans, in their neighborhoods.

Our review of opposition letters raised specific concerns regarding the South Houston Concerned Citizens Coalitions’s letter in opposition to application #10052.  Under “Statements and Documents supporting the Community’s opposition to these Orem Ranch, ltd. TDHCA #100052 Rental Homes” the letter states: “Housing, banks, credit card applications all indicate an increase in minority population growth.  In fact, grocery stores have now opened Hispanic stores and advertise in Spanish.”  While it appears that the neighborhood is making an argument against over-concentration of poverty, this statement could also be interpreted as an attempt to block the access of Hispanics to that neighborhood.    This raises serious Fair Housing Issues regarding the power of community letters based on such an argument to result in the withdrawal of an application.

It is commonly perceived that “Elderly” developments are less susceptible to NIMBY opposition.   As a result, the mix of funded developments has steadily shifted away from those targeting the “General” population to developments targeting the “Elderly” population. In 2000, 22% of funded LIHTC developments were targeted at the Elderly.  By 2009, that number had risen to 41%.   This is not a sustainable trend.

The79th Legislature examined the issue of the scoring and NIMBYISM and released an interim report that stated: (at page 49)  “The notification, signage, political support scoring and neighborhood organization scoring provisions should be eliminated. These provisions facilitate NIMBY attitudes of suburban homeowners and officials and as such they have no place in funding decisions for affordable housing.”

We concur.  Scoring NIMBYism higher than fair housing IS an impediment to fair housing and needs to be addressed.

We recommend four changes:

1) The Texas Legislature should change the statutory priority of scoring to prioritize affirmatively furthering fair housing above NIMBY opposition.

2) Any public notice provisions not required by state law should be struck from TDHCA’S regulations. The signage requirements in the TDHCA’s regulations do not appear to be statutorily required and adversely affect the state’s progress towards affirmatively addressing fair housing.  Developments receiving LIHTC funding should be held to the same notification standards as other residential developments, not more.

3) TDHCA should only accept and score letters that address how the acceptance or denial of the referenced application would affirmatively further fair housing in the state. The basis for the support or opposition should be based in factual statements and not merely a desire to impede the furthering of affordable housing opportunity in that location.

4) Many QCP letters we reviewed contain arguments against the structure of the LIHTC program in general rather than the placement of a specific development in a specific location.  Arguments against the structure of the LIHTC program in general should not be counted against an application, but should be summarized and presented to the board prior to their acceptance of the regulations governing next year’s the Tax Credit Program.