A focus on community revitalization at first 2016 state housing tax credit plan roundtable

Community revitalization, as a concept, is fairly straightforward. But how does it actually happen, and how can its progress be measured?

This is an essential question for the ongoing series of Qualified Allocation Plan (QAP) Roundtables hosted by the Texas Department of Housing and Community Affairs (TDHCA). The first discussion last week brought TDHCA staff, developers, local governments and advocates together to consider how best to address issues with the state guidelines for awarding Low Income Housing Tax Credits (LIHTCs) in the next year’s revision of the QAP rules.

The meeting’s topic was the Community Revitalization Plan (CRP) provision in the state’s QAP, which is required by federal statute for any development built in a Qualified Census Tract (QCT). Developers who propose a project in a QCT must submit a CRP that, at a minimum, has been adopted by a local government and can be reasonably expected to address at least one of a number of issues ranging from inadequate infrastructure to low-performing schools in a specific area around the development.

These tracts, as defined by the agency that distributes tax credits to the states, the U.S. Department of the Treasury, have high numbers of low income residents (at least 50 percent of residents earning less than 60 percent of the area’s median family income) and/or a poverty rate of more than 25 percent. The state’s rules requiring a CRP are slightly different but no less stringent.

Many developers argued last week that “CRP deals” are no longer worth the trouble, and several said that they hadn’t submitted any CRP applications for the 2016 tax credit cycle. This is a stark contrast from just a few years ago, when, according to a new report by University of Texas graduate student Megan Randall, developers submitted 101 applications claiming CRP points in 2012, more than half of which were awarded CRP points toward their application and a third of which ultimately received an award of tax credits. In 2015, only 25 applicants across the state claimed CRP points and just 15 were ultimately awarded tax credits. However, TDHCA has made significant changes to the CRP provision for the 2016 QAP.

Though several developers expressed a desire for the state to allow for more CRP deals, or even create a set-aside for tax credits specific to CRP deals, I believe the current outcome is best, as it is unreasonable to expect 50-some-odd Texas cities to successfully execute a CRP — it’s simply not an easy thing to do.

The group at the meeting was collectively asked if the current CRP rules are having their intended effect.  But we won’t know until we see the projects that are produced from the 2016 QAP, as the rulemaking process is an iterative one. This is one of the challenges before the TDHCA staff – we can’t see if the rules work until after a cycle has passed, after which we reevaluate how the rules worked and revise them again to correct for undesired effects.

What “undesired” means depends on whom you ask, however.

One of the most contentious issues to arise was the overlap of high-performing schools and areas in need of community revitalization. Many developers said that it is very difficult to find a site that is both in a CRP area and is located in the attendance zone of a school which qualifies for the critical “Educational Excellence” points in the CRP scoring system. It was during this discussion that one developer asked a truly forehead-smack-inducing question: “If I’m a low income person, do I really care about the quality of schools?” Shirley Johnson, a resident of an LIHTC development in Austin who was in attendance, answered this question with a clear “Yes.”

Obviously, it is important to low income families and advocates, and rightly so, that the siting of affordable housing be highly contingent on the availability of good schools, as a child’s quality of education is inextricably tied to their outcomes as an adult. Additionally, we do recognize that finding the right target area for revitalization, matched with quality schools, is difficult.

There is an argument for supporting CRP deals in areas that have empirically demonstrated signs of revitalization or gentrification, with a lesser emphasis on schools. The fundamental reason to limit CRP deals is to end the historical pattern of segregating LIHTC developments into low income areas that have pie-in-the-sky plans, but fail to see the expected level of revitalization.

Despite this intention, the Texas Senate passed a bill last year (HB 3535) which allows for this kind of prioritization of CRP projects in the three regions which contain the four most populous Texas counties (those around Dallas-Fort Worth, Houston and San Antonio). Specifically, the highest-scoring project to be awarded CRP points in each of these three regions is guaranteed an award of tax credits. This year’s cycle will be the first to feel the effects of this new statute.

We look forward to continuing the important conversation about how LIHTC developments can be a part of community revitalization, and will continue to assert that placing low income housing in distressed areas without an quality plan will not revitalize a neighborhood.