This week Texas Housers will release the 2015 Texas Housing Tax Credit report, an analysis of the state’s competitive process to award subsidies for low income housing developments. Before the report’s release, a series of posts will explain some of our key findings how parts of the process hurt the cause of fair housing in Texas – and what can be done about it. This is part two in the series. Read part one here.
In yesterday’s blog post we examined the outsized influence that state representatives have in determining where housing tax credit developments are built. Today, let’s look at the real-world implications of that influence, and how some of our legislators use their power keep low income families out of high opportunity neighborhoods in their districts.
We can start by comparing the poverty rates for the locations of developments that community or neighborhood organizations supported but state representatives did not in this year’s tax credit application cycle, and vice versa. It suggests a dissonance between the perspectives of local community groups and their representatives. (Agency definitions of these organizations can be found here.)
A representative’s neutral response to an application nets that project zero points while their opposition deducts eight points from the application, effectively killing the project (a full explanation of the scoring system is in part one of this series). There were 24 applications throughout the state that received community organization support but received neutrality or opposition from a representative. Their average tract poverty rate is 9.6 percent, significantly less than the 15 percent average tract poverty of all 173 original projects as a whole. The average tract poverty rate of developments that received a representative’s letter of opposition was only 6.4 percent.
Now let’s reverse this selection and look at projects that did not receive community organization support but did receive representative support, as happened 17 times this year. The 17 projects are located in Census tracts with an average poverty rate of 19.3 percent, more than double that of the projects community organizations supported and representatives did not.
Practically speaking, if a state representative does not support a tax credit development in their district, that development is very unlikely to be built. Of the 32 projects that received opposition or neutrality from a representative this year, only one project, in a rural region with little competition, narrowly won an allocation of tax credits. The other 31 projects either didn’t score well enough due to a representative’s negative or neutral score, or withdrew from the competition altogether before awards were announced, knowing that their chances of winning were slim to none.
This year 13 state House members had the opportunity to submit a letter on more than one project seeking an award within their district. Their individual actions are a microcosm for the program-wide effect of state representative letters. Five of the 13 representatives chose to not submit a letter on multiple or all projects in their district; the 11 projects that fell victim to this inaction have an average tract poverty rate of just 7 percent. Four other representatives chose to support family or elderly developments in high poverty areas while simultaneously opposing family developments in low poverty areas — exactly the opposite of what we would expect from a state that claims to be “affirmatively furthering fair housing.”
The effect of support points is striking. This year, projects located in Census tracts where the median household income (MHI) is in the bottom quarter of the county or metro area made up only 27 percent of the original pool of applicants. Yet they make up 33 percent of the awardees after support points were factored in. Conversely, projects in highest quarter of MHI tracts made up 49 percent of the original pool of applicants, but only 39 percent of awardees.
Additionally, elderly-only projects fare differently than general population projects where families can live. Elderly developments are often (though not always) more politically palatable for representatives to support, as neighbors are often less opposed to housing for elderly people being built in their neighborhood. The average tract poverty rate for the 17 elderly developments (removing one outlier at 57 percent) is only 12 percent, while the same for the 45 family development awardees this year (removing one outlier at 50 percent) is 17 percent. Nearly half of elderly awardees are located in tracts where the poverty rate is less than 10 percent, yet less than a quarter of projects for families received an award in these same high opportunity areas, despite the fact the 40 percent of the original pool of family applicants were located in such areas.
Take the Dallas-Fort Worth area, which has been at the center of a fair housing controversy over the use of tax credits that reached the U.S. Supreme Court earlier this year. Eight tax credit developments in DFW received an award this year. Before support points were added, the eight highest-scoring developments had:
- 709 low income family units in seven developments
- 123 elderly units in one development
After support points were added, however, the top eight developments had only:
- 337 family units in three developments
- 601 elderly units in five developments
All but one of the original top eight received a neutral or opposing response from a state representative, and four received all other types of support points. While the pre-support applications had an average tract poverty rate of 8.7 percent, the post-support awardees have a rate of 15.9 percent, with two of the three family developments in tracts where poverty rates exceed 35 percent.
The housing tax credit award system should fund housing for families with children in high quality neighborhoods. But as long as state representatives have executive power to approve or veto tax credit housing in their districts, housing will be disproportionately located in low opportunity areas and disproportionately skewed toward more politically palatable elderly-only developments.