Two ways to improve Texas’ housing tax credit allocation plan

We recently filed comments (jointly with Texas Appleseed) on the Texas Department of Housing and Community Affairs‘ (TDCHA) “Qualified Allocation Plan,” the document that determines how the state scores applications for the Low Income Housing Tax Credit program. Our full comments are here, but today we’re going to recap two points made in our formal filing:
– The proposed Concerted Revitalization Plan (CRP) language is overly subjective, and
– The existing scoring of legislative support letters is in conflict with statutory language.

Concerted Revitalization Plan

There is a long-running debate in economic development circles about how affordable housing fits into a revitalization plan for a blighted neighborhood. One (over-simplified) argument is that building new, shiny, affordable housing units improves the character of a neighborhood, and jobs and educational opportunity follow as the neighborhood becomes an attractive place to live.

A counter (over-simplified) argument is that building jobs and educational opportunity will make a neighborhood an attractive place to live, after which affordable housing is then appropriate to maintain a place for low income residents to access the growing opportunity of the changing neighborhood.

TDHCA has adopted the second side of the debate, stating (to paraphrase public comments) that they want housing on the back end of CRP plans, i.e. placing units on the ground after a neighborhood is on the upswing.

We agree with this sentiment, but believe the proposed language isn’t going to get the department where it wants to be. Basically, the current language awards points for a CRP if it plans to be getting better by the time the development open. What’s that quote? The best laid plans of mice and men, oft go awry. The state shouldn’t be allocating millions of dollars of tax credits for revitalization plans. It should be allocating millions of dollars of tax credits for revitalization results.

To this end, we ask the department to outline explicit benchmarks in the rules to identify when a CRP plan has reached the stage suitable for the placement of housing.

We suggest the department look at three metrics over three years:
– Census tract poverty rate, based on U.S. Census data
– Census tract income level, based on U.S. Census data
– neighborhood land values relative to place, based on local appraisal district data

CRP points should be awarded only to applications that show a statistically significant improvement on two of these three metrics over a three-year period since the date of the adoption of the CRP. While this timeline is longer than that allowed by the previous language, it recognizes that true revitalization takes an extended commitment in local and private resources.

Legislative support letters

If you’ve got a few hours on your hands, I encourage you to read the last 10 years of posts on this blog about the sordid history of legislative letters (or at least fair housing planner Charlie Duncan’s recent recap of the negative effect of legislator influence on the 2015 tax credit awards round). But the most relevant point is that in 2013, the Legislature, in response to sunset committee recommendations about the problems with legislative letters, changed the relevant statute, removing the letters from senators and lowering the importance of the representative letter in the statutory ranking of prioritization.

However, when TDHCA went through rulemaking following the statutory change, they adopted language creating a greater (16 point) spread between positive and negative legislative letters than the (nine point) spread between positive and negative letters from neighborhood organizations, even though the latter have a higher priority in the statutory ranking. We believe this rule is in conflict with the statute and should be revised.

Additionally, we support the idea, proposed by other commentators, of conditioning the award of legislative letter points based on whether or not the state representative provided the developer with a statement of reasons for any opposition and provided the developer with an opportunity to respond to the opposition. If the executive branch is going to make a decision regarding tax credit allocation based on the advice of a legislator, they should know the basis for that advice.