Effect of Elected Official Letters on the 2011 LIHTC Round

Abstract:  Letters written by Texas State Representatives and Senators regarding the development of low income housing in the state had the effect of moving development to lower income, higher poverty areas of the state.

As we’ve recently discussed here at Texas Housers, Governor Perry vetoed the 2011 Sunset bill for the Texas Department of Housing and Community Affairs (TDHCA), a bill which contained reforms of the Low Income Housing Tax Credit (LIHTC) program.

The LIHTC program provides tax credits for the production of affordable housing.  In Texas, these credits are awarded through a competitive process called the Qualified Allocation Plan (QAP).

Under the current statute and rules, applicants to the LIHTC program receive points in the competitive process for letters of support from the state representative and state senator representing the area of the proposed development.  Applicants lose points for letters of opposition from those elected officials.  The originally filed Sunset bill removed the storing of the “elected official” letters.  In the house hearing on this bill, Rep. Callegari asked that legislative letters be kept in the statute, and in the final bill as passed by the legislature, senate bills were removed and house letters were retained.  After Gov. Perry vetoed the bill, the legislature passed a two year “stop-gap” sunset bill that maintained the status-quo for LIHTC application scoring.

We recently requested, through a public information request, the letters of opposition from state officials received by TDHCA regarding applicants to the 2011 LIHTC round.  Elected State Officials wrote 14 letters regarding 9 applications in the 2011 credit round.  Those letters are summarized below and embedded in entirety at the end of this post.

Interestingly enough, in 2011, every state elected official letter received regarding a proposed development was about a development in the greater Houston Region (TDHCA Region VI).  Rep. Riddle and Sen. Hegar both wrote four letters of opposition, with Rep. Zerwas writing three and Rep. Gallegos, Rep. Farrar, and Sen. Patrick each submitting just one.

The Letters

Most of the letters gave no policy justification for the written opposition to the development other than constituent opposition. Four letters from Rep. Riddle were identical, and cited traffic issues, “strain placed on emergency personal” [SIC], and “protecting the property values that usually decline as a result of these types of projects.”  The letters from Rep. Farrar and Sen. Gallegos focused on the existing concentration of LIHTC properties in the proposed neighborhood of the development, with Sen. Gallegos stating “Time and time again, my district is treated as a dumping ground for SROs, homeless shelters, and halfway houses.”

What we did

We looked at the impact of these letters on the characteristics of the affordable housing built in the state.  There is a 28 point spread between applications that get a support letter (+14) and applications that don’t (-14).   This spread is big enough to be an effective veto regarding almost any application.  In the Houston region in 2010, 16 points separated the highest scoring development and the high scoring development not awarded funds.  Only 4 points separated the lowest-scoring development awarded funds and the highest-scoring development not awarded funds..

To estimate the impact of the letters on the opportunities provided the residents LIHTC properties, we compare the characteristics of the opposed-developments with the characteristics of the next application in TDHCA’s pre-application log.  This log is ranked by score and then, for tied applications, alphabetically by application name.  The next application in the pre-application log competitively benefits from the point reduction in the opposed development because the point reduction either removes the application scored above it, or removes an application tied with it at that stage in the process.

What we found:

Twelve of the fourteen opposition letters had the effect of encouraging Texas to build affordable housing in lower- income areas of the state.  The proposed developments receiving opposition letters were in neighborhoods with a $15,000 higher average family income than the neighborhoods of the next development on the pre-application list.  The two letters citing over-concentration by Sen. Gallegos and Rep. Farrar were the only letters with the result of encouraging construction in higher-income areas of the state.

The average area poverty rate for proposed developments receiving opposition was 2% higher than the area poverty rate for the next development on the pre-application list.

Conclusion

The letters written by Texas State Representatives and Senators in 2011 regarding the development of Low Income Housing Tax Credit Housing in the state had the effect of moving development to lower income, higher poverty areas of the state.