2024 Texas Affordable Housing Magazine by Texas Affiliation of Affordable Housing Providers

AFFORDABLE TEXAS MAGAZINE HOUSING

Legal Counsel for the Development of Aﬀordable Housing

THE COATS ROSE AFFORDABLE HOUSING AND COMMUNIT Y DEVELOPMENT GROUP

We have extensive experience in affordable housing development. We represent for-profit developers, non-profit developers and public housing authorities utilizing a variety of financing techniques, including low income housing tax credits, CDBG Disaster Recover y Funding, private activity bonds, historic tax credits, HUD programs (including RAD and CNI), investment syndications and conventional financing.

Our attorneys routinely structure complex transactions providing comprehensive solutions that utilize all aspects of ﬁnancing in the aﬀordable housing arena.

We are focused on the development of aﬀordable housing and inner city revitalization.

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With more than 30 years of experience in community lending, we understand the unique needs and challenges of affordable housing--and we know it’s worth it. Together, let’s achieve one common goal: making our community a better place.

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LOCKE AND KEY. Unlocking Potential.

The lawyers of Locke Lord have been at the forefront of growth and innovation in the affordable housing industry over four decades. Today, communities are focusing on the need for affordable housing more intently than ever before. Quality legal services provided by Locke Lord are key for our clients who build, preserve, finance and operate affordable housing from coast to coast. Let us help you unlock the potential of each and every opportunity.

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We are dedicated to elevating the living standards in a ordable housing communities.

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FINANCING SOLUTIONS FOR AFFORDABLE HOUSING

R4 Capital provides capital solutions to grow affordable housing nationwide. With integrated equity and debt financing, structuring flexibility, and competitive pricing, we have more than a decade of proven, reliable performance to meet our clients’ objectives.

For 13 years, together with our developer and investor partners, we have provided $9.8 billion in LIHTC equity and tax-exempt mortgage capital to create and preserve more than 63,500 units of affordable housing across 49 states and territories.

Contact R4 to find out what all the buzz is about.

Marc D. Schnitzer, President, CEO

Paul Connolly, Managing Director

Jay Segel, Managing Director

Cory Bannister, Managing Director

James Spound, President, R4 Capital Funding

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WWW.R4CAP.COM

The Park at North Vista (Houston, TX)

Hudson Housing Capital has delivered consistent results for tax credit investors and affordable housing developers since 1998. But it’s also the simple things that set us apart: Care in working with our partners, private ownership with a view toward the long term, thorough underwriting and meticulous asset management. Those who have worked with us know the difference.

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“Outside of taxes, water and sewer are the highest and most controllable expenses we have. Anytime we have a big expense like this and can reduce it, it gives us breathing room to do more. ION helped us to really dive in and monetize their platform which has been extremely valuable for our properties.”

Robyn Eaton, Senior VP, Portfolio Management & Analysis, Kittle Property Group

Affordable Housing is Good Business & The Economy Depends on It

ELAINE ACKER, FOR TAAHP

Layers of Regulation Mounting Pressure on Tax Credit Developers: The Growing Costs to Provide Affordable Housing

ELAINE ACKER, FOR TAAHP

TAAHP Legislative Priorities: Setting the Stage for the 89th Legislative Session

WHITNEY PARRA-GUTI É RREZ, TAAHP POLICY & REGULATORY MANAGER

Texas' New Housing State Tax Credit Program: A Good Start, But Needs Meaningful Investment

WHITNEY PARRA-GUTI É RREZ, TAAHP POLICY & REGULATORY MANAGER & KATHRYN SAAR, TAAHP QAP COMMITTEE CO-CHAIR

24 16 38 20 52 21 48 64 71 114 120

President's Message

VALERIE WILLIAMS, TAAHP PRESIDENT

Contributors

ARTICLES & ADS

A Message from TAAHP

ROGER ARRIAGA, EXECUTIVE DIRECTOR

TAAHP Leadership

BOARD OF DIRECTORS

A Message from Leadership

NATHAN KELLEY, TAAHP GOVERNMENT AFFAIRS

COMMITTEE CHAIR / TAAHP PRESIDENT-ELECT

JOHN GONZALEZ, ITEX GROUP 24 64 120 71

Affordable Housing Success Stories SPOTLIGHT ON NEW DEVELOPMENT

Year-15 & the Aggregator Problem Hits Texas Courts

JUSTIN H. JENKINS & SAMUEL T. JOHNSON, BC DAVENPORT, LLC

Integrating AI in Affordable Housing

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Working in the affordable housing industry provides a great sense of accomplishment. We have all experienced the deep satisfaction in our careers when we see and hear the appreciation of a family or formerly homeless individual when they obtain safe, quality, and affordable housing. While I have been in this industry for more than 25 years, it is wonderful to see the next generation of housing providers stepping forward with a passion to continue the work of providing affordable housing in Texas.

The Texas Affiliation of Affordable Housing Providers (TAAHP) remains at the forefront of affordable housing in Texas as well and across the country. We have a membership of over 700 members from every facet of the industry, all focused on bringing affordable housing to the under housed.

Valerie Williams

TAAHP 2023-2024 President

TAAHP has accomplished quite a lot over the past year, but I want to highlight just a few of them:

• TAAHP recruited the greatest number of individual members in a single year in its history. With this we implemented a Member Orientation in 2023 for the first time. During the orientation new members received information regarding the mission and goals of TAAHP. They were also made aware of how they can add value to the organization.

• The TAAHP Scholarship has been instrumental in helping those that reside in affordable housing get a chance to accomplish their educational goals. These scholarships are for those who are seeking two or four-year degrees or vocational/skilled labor training. In 2023 the TAAHP Foundation awarded $57,000 in scholarships and received donations of nearly $150,000. Every donation, small or large makes a difference.

• For the first time in the history of TAAHP, three of TAAHP’s priority bills were signed into law by the governor. This was no small task, with many of our members talking to various state legislators, these bills were passed and signed.

• There are 21 TAAHP Committees with 109 members actively participating to make a difference. Each member takes time out of their busy schedules to review proposed policies, regulations, and laws to make sure they will support the efforts of TAAHP Members to provide affordable housing.

• In an effort to ensure the financial capacity of TAAHP,

the staff developed an Investment Policy that will govern their efforts to ensure responsible growth of TAAHP funds. While the policy was developed by the staff, it has been reviewed and evaluated by the Board to ensure that it was in line with the mission and goals of the organization.

There are many more accomplishments which you can hear about during the annual TAAHP Member Awards and Installation event during the conference. Everyone attending the Conference is invited to attend. We’ll recognize many of our members with awards and install our new Board of Directors and Officers. Please stop in and say hi. TAAHP Board directors and staff members would love to visit with you.

We are very grateful to every member of TAAHP, because of you, we are a premier housing organization. Part of our success can also be attributed to the TAAHP Staff. The day-to-day operations of TAAHP are led by TAAHP’s Executive Director, Roger Arriaga. The team is rounded out by newly appointed Deputy Executive Director, Naomi Bludworth, who is focused on overall operations and communications, Policy Manager Whitney Parra and Operations Manager Amanda Doyle–Nicholls. Please join me in thanking the staff for their tireless efforts to help propel the organization to new heights.

I also want thank our outgoing board members: Eleanor Fanning with Portfolio Resident Services, Steve LeClere with Monarch Private Capital, Janine Sisak with DMA Companies and Lora Myrick with BETCO Consulting. They have each made significant contributions to the TAAHP board and their service is appreciated.

My sincere gratitude also goes to the 2024 Texas Housing Conference Committee. They have worked very hard to make sure the conference experience provides opportunities for both educational and networking opportunities. Working alongside the committee, Kristi Sutterfield and her team continue to be a driving force in the success of the conference.

I am excited to pass the torch of President to Nathan Kelly of Blazer Building for the 2024-2025 board year. Nathan, we are ready to provide support as we approach yet another legislative session in 2025. We are confident you’ll help us navigate the waters to another successful outcome.

Start the conversation Valerie Williams, valerie.a.williams@bofa.com business.bofa.com

Make an impact

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“Bank of America” and “BofA Securities” are the marketing names used by the Global Banking and Global Markets divisions of Bank of America Corporation. Lending, derivatives, other commercial banking activities, and trading in certain financial instruments are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Trading in securities and financial instruments, and strategic advisory, and other investment banking activities, are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, BofA Securities, Inc., which is a registered broker-dealer and Member of SIPC , and, in other jurisdictions, by locally registered entities. BofA Securities, Inc. is a registered futures commission merchant with the CFTC and a member of the NFA.

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Charlie Fenton (214) 965-3618

charlie.fenton@chase.com

For more than 40 years, we’ve worked toward one mission: to make home and community places of pride, power and belonging. Enterprise and BWE are proud to sponsor the Texas

Reagan Maechling Vice President, Acquisitions

Enterprise Housing Credit Investments rmaechling@enterprisecommunity.com 213.787.8238

Philip Porter

Senior Vice President and Head of Acquisitions Enterprise Housing Credit Investments pporter@enterprisecommunity.com 410.772.2594

Ben Nichols Director of Affordable Operations BWE ben.nichols@bwe.com 216.505.6014

Kevin Bowen Executive Vice President BWE kevin.bowen@bwe.com 469.729.7681 BWE.com

Jon Killough Executive Vice President BWE jon.killough@bwe.com 205.588.6053

Bob Morton Director of RHS Programs BWE bob.morton@bwe.com 219.380.5956

Cindy Hannon Senior Vice President BWE cindy.hannon@bwe.com 678.892.3178

enterprisecommunity.org | bwe.com

Jim Gillespie Executive Vice President BWE jim.gillespie@bwe.com 646.829.1157

Michael Furrow Senior Vice President, Affordable Housing BWE michael.furrow@bwe.com 979.330.5944

Colleen Basil Associate Vice President BWE colleen.basil@bwe.com 469.729.7682

Elaine Acker

AFFORDABLE HOUSING IS GOOD BUSINESS

LAYERS OF REGULATION MOUNTING PRESSURE ON TAX CREDIT DEVELOPERS

Whitney Parra-Gutiérrez, TAAHP

LEGISLATIVE PRIORITIES: SETTING THE STAGE TEXAS' NEW STATE TAX CREDIT PROGRAM

Justin H. Jenkins & Samuel T. Johnson

YEAR 15 & THE AGGREGATOR PROBLEM

John Gonzalez

INTEGRATING AI IN AFFORDABLE HOUSING

AMTEX, Foundation Communities, NRP Group, Palladium USA, Saigebrook / O-SDA, The Michaels Org, Volunteers of America

SPOTLIGHT: AFFORDABLE HOUSING COMMUNITY SUCCESS STORIES

SPECIAL THANKS TO

Bobby Bowling, Aaron Eaquinto, Quinn Gormely, Nathan Kelley, Megan Lasch, Jean Latsha, Karsten Lowe, Erika Rich, Kathryn Saar

Published By

TEXAS AFFILIATION OF AFFORDABLE HOUSING PROVIDERS

2401 E 6th Street, Ste 3037, PMB 153 Austin, TX 78702 (512) 476-9901; www.taahp.org

Advertising, Sponsorship Sales

KRISTI SUTTERFIELD, CONFERENCE DIRECTOR kristi@taahp.org

Contributing Editor

WHITNEY PARRA-GUTIERREZ, POLICY & REGULATORY MANAGER whitney@taahp.org

Publisher ROGER ARRIAGA, EXECUTIVE DIRECTOR roger@taahp.org

Art Director / Design / Editor

NAOMI BLUDWORTH, DEPUTY EXECUTIVE DIRECTOR naomi@taahp.org

Contributing Editor

AMANDA DOYLE-NICHOLLS, OPERATIONS MANAGER amandadn@taahp.org

On the Cover: The Oaks — Photo Credit: John Sutton, Sutton Pictures, LLC

Although every attempt is made to be as comprehensive and accurate as possible, the Texas Affiliation of Affordable Housing Providers (TAAHP) and its affiliates are not responsible for any misprints, errors, omissions, deletions, or the accuracy of the information in the publication. TAAHP and its affiliates do not accept responsibility for any loss, injury or inconvenience sustained by anyone using this publication. Information may have changed since print date.

Copyright© 2024 by the Texas Affiliation of Affordable Housing Providers. All rights reserved. No part of this publication may be reproduced or transmitted in any form, by any means, electronic, mechanical, photocopying or otherwise without the written permission of the Publisher. The Texas Housing Conference™ is a protected trademark.

RBC COMMUNITY INVESTMENTS is a leading syndicator of Low Income Housing Tax Credits, Workforce Housing Investments, Renewable Energy Tax Credits, Historic Tax Credits, and State Tax Credits. By creating well-structured investments, our team of experienced professionals craft equity solutions that help drive the successful development of affordable multifamily communities and renewable energy projects nationwide.

Investment Services: Advisory

■ Affordable Housing

■ Renewable Energy Asset Management

■ Direct

■ Workforce Housing

■ State HFA Portfolios

Syndications:

■ Low Income Housing Tax Credits

■ Renewable Energy Tax Credits

■ State Tax Credits

■ Historic Tax Credits

■ New Markets Tax Credits

NATIONAL FOOTPRINT

$18.1B Equity Raised Nationally $1.5B in Texas

100,039 Affordable Homes Nationally

18,210 in Texas

Proud to Support TAAHP

RBC Community Investments raised more than $18.1 billion in tax credit equity across the nation since inception. RBC Municipal Finance team senior managed over $6.3 billion in single family and multifamily housing bonds in 2023.1 As one of the nation’s largest syndicators and bond underwriters, we are proud to support TAAHP and are grateful for their partnership in advocating for affordable housing throughout the State of Texas.

49 States, Washington D.C. & Puerto Rico

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Dan Kierce

Managing Director

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Helen Feinberg

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Greg Goldberg Director

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Boost Your Profitability

Your

•Work

•Netted

TAAHP is your home for industry effectiveness and the venue for your business growth. Your membership, participation, and engagement with TAAHP are moving the needle on responsive affordable housing regulation and legislation at all levels of government, providing the latest in education and awareness, and creating new opportunities to connect and do business.

Stating Our Case

Roger Arriaga

Over the last six years, we have more than doubled our membership and conference participation! Why is this important? Because with your engagement, these numbers translate into influence and capability to make positive change where it is needed. For the first time, TAAHP promoted three bills that were signed into law. As a key industry stakeholder, our QAP Committee successfully defended against potentially harmful rules being seriously considered and our Compliance Committee provided well-received input to mitigate costly new regulations. With TAAHP, you are making a difference!

TAAHP Goes to Washington

TAAHP Executive Director

All Housing is Local

New this year, TAAHP launched its Local and Municipal Affairs or LAMA initiative! Regardless of where your development funding or incentives come from, all housing is ultimately built within local jurisdictions across Texas. LAMA is TAAHP’s latest member-driven effort to advocate for affordable housing at the local level of government. Still in its infancy, LAMA is expected to bring TAAHP’s influence into the cities and counties where it all happens. Our LAMA groups are led in the major metropolitan areas of Houston, Austin, Dallas/Ft. Worth, and San Antonio. The groups will be monitoring local government laws, regulations, strategic plans, zoning changes and the like for opportunities to become valuable resources in support of sound affordable housing policy. Oh, and there may also be property tours and happy hours held to bring our members together.

At the national level, TAAHP has been steadily increasing its profile in the U.S. Congress by partnering with advocacy groups like the Affordable Housing Tax Credit Coalition (AHTCC) to expand awareness of the need for affordable housing in Texas and advocating for important legislation like the Affordable Housing Credit Improvement Act (AHCIA). Congressional affordable housing champions, including Senator Maria Cantwell from Washington State and Senate Finance Committee Chairman Ron Wyden from Oregon have visited us recently in Texas and are hearing our concerns about the critical need for funding and regulatory relief in our state.

TAAHP Into Education

We work hard every day to ensure that we return a high level of value for your membership. Aside from our legislative and regulatory work, we administer over 20 committees which touch just about every corner of our industry. Monthly webinars and newsletters keep your team well informed. And to bring it full circle, scholarships awarded from the TAAHP Foundation are giving new opportunities to students living in your developments. This program has experienced tremendous success and has produced graduates ranging from trade schools to PhDs.

We appreciate our members for allowing us to reach new heights and work on your behalf. If you haven’t yet joined, now is the time and we hope you’ll be a part of our growing success!

Over the last two years, TAAHP has worked to provide the most relevant and timely education to help your business stay afloat of market disruptions while continuing to perform effectively. From an Overview of Affordable Housing Programs in Texas to the ABCs of PFCs, TAAHP provided valuable industry expertise that:

+ Brings you the latest information you need in challenging times

+ Changes the perspective of decision makers

+ Gives creative alternatives for today’s environment

+ Matters to you and your organization

Board of Directors

Top Row, Left to Right:

Second Row, Left to Right:

Bottom,

Valerie Williams, President; Jean Latsha, Immediate Past President; Nathan Kelley, President-Elect

Eleanor Fanning, First VP; Darren Smith, Second VP; Meghan Cano, Secretary; Hector Zuniga, Treasurer

Left to Right:

Chris Akbari, Janine Sisak, Tracey Fine, Gilbert Gerst, Quinn Gormley, Darrell Jack, Steve LeClere, Ryan Lunderby, Lora Myrick, Stephanie Naquin, Kathryn Saar, Nick Wash

Gene Levental, Managing Director Gene Levental@svn com

David Shlahtechman, Senior Advisor David.Shlahtechman@svn.com

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Whether

Partner

Investing in Affordable Housing for Texas Senior Residents

As demographic trends continue to evolve in the US, Statista estimates that more than a fifth of the US population will be 65+ years old by 2050 This shift is taking place against the backdrop of a nationwide affordable housing shortage in which more than 11 million senior households were cost burdened in 2021, according to the Joint Center for Housing Studies Cost-burdened households spend 30% or more of their income on housing.

Over the course of the two decades between 2010 and 2030, the Texas Demographic Center anticipates the 65+ demographic in Texas will more than double

“With the senior population increasing amidst a statewide–and nationwide–affordable housing shortage, there’s a clear need to create and preserve stable affordable housing that centers around senior residents’ needs,” said Desiree Francis, head of Community Finance at Capital One

Capital One recently financed two seniors affordable housing properties in Houston Campanile on Minimax will provide 93 units for residents making 30%, 50% and 60% of the area median income Deeply affordable units will be available and marketed to households with special housing needs, for

example, formerly unhoused individuals or families, veterans, individuals with different mobility capabilities, and individuals with different hearing or vision needs

New Hope Housing Ennis will provide 102 units of affordable seniors housing in downtown Houston Eleven units of deeply affordable housing will be reserved for households making below 30% of AMI with the remainder of the units available for those with household incomes below 50% and 60% of AMI.

Capital One originated a construction loan and low-income housing tax credit (LIHTC) equity investment in support of New Hope Housing Ennis and originated a LIHTC equity investment and HUD 221(d)4 loan for the construction and permanent financing of Campanile on Minimax

Between 2018 and 2022, Capital One has supported the development of over 30,000 affordable housing units in Texas Capital One provides financing for affordable housing properties in Texas primarily through LIHTC equity investments, construction loans, tax exempt bonds, and Fannie Mae, Freddie Mac and FHA lending programs

AFFORDABLE HOUSING IS

GOOD BUSINESS

& THE ECONOMY DEPENDS ON IT

By Elaine Acker for the Texas Affiliation of Affordable Housing Providers

For 20 years running, Texas has been named the Best State for Business. It’s home to 3.1 million small businesses and more than 15 million people work hard to keep the economy strong. The diverse workforce spans all pay scales and includes a wide range of talents and skills necessary for growth and innovation.

But not everyone can afford to live near their jobs, which makes it harder for businesses to attract and retain loyal employees. It also means lost opportunities for local economies. And that’s the biggest reason why affordable housing is a smart business strategy. It pays dividends in terms of a stable, reliable workforce.

Myth vs. Reality

The term “affordable housing” itself has a public relations problem. “If you get 100 people in a room, and ask them what affordable housing means to them, they’ll each have a different definition,” says TAAHP Executive Director Roger Arriaga.” When communities reject plans for new affordable housing projects, it’s often because residents and decision-makers envision older, dilapidated, crime-ridden apartments filled with unemployed tenants.

But that is far from the truth, and TAAHP members are committed to educating the public and policymakers about what “affordable housing” really means and how the tenants being served are an essential component of the Texas economy. The face of affordable housing is the daycare worker who keeps children safe while parents earn the money that puts food on the table and sends them to college. It’s the emergency medical technician who responds on what may be the worst day of someone’s life. It’s senior citizens, who have lived in their community their entire life, but whose retirement pay hasn’t kept pace with increased housing costs. It’s baristas at the coffee shop, servers at a favorite restaurant, bus drivers who take students to school every day, and honored veterans.

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Housing Costs are Suffocating the Workforce & Its Ability to Drive Our Consumer-Driven Economy.

Perhaps “affordable housing” would be best described as “workforce-friendly living spaces,” or even, “business-friendly living spaces.” These phrases offer a better perspective and set a different tone for conversations. TAAHP members most often serve individuals who earn between 30 percent and 80 percent of the community’s area median income (AMI). Here’s what this looks like in communities across Texas. Even at 80 percent AMI, it is clear that the working class would be hard pressed to afford market rate housing.

It Just Doesn't Add Up

According to the U.S. Housing & Urban Development (HUD), any family’s housing and utility costs should be no more than 30 percent of their gross income. With that in mind, it’s clear in the following table that individuals in these professions - the people who have a direct impact on the quality of life enjoyed in any community, won’t be able to afford to buy a home. They may be able to afford an apartment, but only if the market rental rates do not increase exponentially. And their own quality of life in their apartment home should reflect the contributions they make to the community.

Would many of these people love to buy or rent a home in the community in which they work? Yes. Can they afford it on their salary with all other cost of living requirements like healthcare, student loans, and car payments? No.

"Urban Doom Loop" & How to Avoid It

Have you heard the term, “Urban Doom Loop?” It’s set in motion when housing prices escalate, outpacing the income growth of many residents, particularly those in essential service roles. These are the individuals who form the backbone of any community, ensuring safety, health, and well-being. Yet, as housing becomes less affordable, these crucial workers find themselves priced out of the communities they serve, especially in metropolitan and surrounding urban areas.

Consider the paradox: a community flourishes and attracts higher-income residents. As demand for housing increases, so do prices. However, without a corresponding increase in diverse housing options that are accessible to all income levels, those who support the community’s infrastructure may no longer afford to live within it. The result? Longer commutes, increased traffic congestion, and a decline in local workforce availability, which can strain even the most well-planned public services. These added logistical costs of retaining the workforce also increase what communities must pay to keep these services.

The consequences extend beyond inconvenience. When essential workers can’t afford to live near their jobs, it affects their quality of life and job performance, which in turn impacts everyone in the community. Moreover, the lack of affordable housing reduces diversity and social mobility, leading to segregated communities where only the affluent can afford to live. “We try to demonstrate,” says

Arriaga, “that the quality of life in your community is dependent on the quality of life for the working class. The community fabric is incomplete without a diversity of people in it.”

Avoiding the doom loop requires innovative thinking and coordinated action. Communities must prioritize the development of diverse housing options that are affordable for all income levels. This includes not only single-family housing but also a variety of housing types such as townhouses, multifamily developments, and co-housing spaces that can accommodate different income groups.

Aaron Eaquinto has extensive experience in real estate and is general manager of the Dallas Housing Finance Corporation. For him, affordable housing is a mission-driven opportunity that offers a distinct public benefit. “We’re working to provide people with the best housing they can attain,” he says. “We can’t give them a bigger salary, but we can give them a safe, high-quality place to live until their economic situation changes. We can’t tell sellers to offer cheap land prices in downtown Dallas, but we can offer a tax exemption. It’s not a gift to developers. It’s a gift to citizens who qualify to live in those homes. Yes, the developers make money because that’s how capitalism works. And the affordable housing programs enhance our ability to serve a population that needs it.”

Governments, developers, and community planners have an opportunity to collaborate to build afford-

Governments, developers, and community planners have an opportunity to collaborate to build affordable housing and to remove bureaucratic hurdles that often stall such developments.

able housing and to remove bureaucratic hurdles that often stall such developments.

Public-private partnerships can be particularly effective in achieving these goals, leveraging the strengths of both sectors to foster communities that are truly inclusive.

Very few developers can be considered affordable housing experts in the state of Texas. Each developer willingly assumes risks that far exceed private development, and they work alongside people like Eaquinto to offer high quality options for those in income brackets that dip below the AMI. Without these partnerships, market forces would take effect, meaning that many respected, essential workers would become tenants of properties with values that have deteriorated due to

lack of maintenance over time. Instead, with subsidized, affordable housing partnerships, there are pathways to housing options that better reflect community values.

“I invite any lawmaker, any citizen, who wants to better understand what we’re doing and the mechanisms through which it happens, to come and talk to me,” says Eaquinto.

“I’m open to a face-to-face conversation that will help you better understand tax credits and sustainable affordable housing.”

Quinn Gormley, president of the Economic Development Board for the City of Bee Cave, shared his perspective from Central Texas. “I have found that a vibrant community needs three elements,” he says, “just like a three-

continued on next page...

In Bee Cave Texas, chain retailers' employees are often “on loan” from stores outside the area.

legged stool. First, it needs economic sectors that are stable or growing: the trade industries that provide employment, and multiplying effects that support the local economy. Second, those economic sectors need a workforce, or human capital.” In turn, those in the workforce spread wealth and create and support additional jobs through the buying of goods and services within those communities.

But Bee Cave tells the story of a community facing significant challenges. It is part of the Austin metro area, where retail workers earn an average of $8.25 per hour (versus the Texas average of $17). “If I get down in the weeds and say that a mid-level retail employee, working full time, is earning around $20 per hour, that’s less than $42,000 in annual pay,” says Gormley. “And that means that at today’s interest rates, with a mortgage payment, taxes, and insurance, they can only afford a $140,000 home.

Bee Cave is nowhere in that ballpark.” Business owners tell Gormley that in the case of larger, chain retailers, employees are often “on loan” from stores outside the area. And small businesses are trying to compete for staff despite lengthy commutes from the outer edges of the metro area.

The third and most intangible part of Gormley’s analogy is "community and connectivity." It includes the services and amenities that make up the quality of life within the neighborhoods: housing, infrastructure, arts and culture, healthcare, childcare, and access to modern technology. “These are the assets that support the workforce and the community,” Gormley continues. “We need a thoughtful, educated, and focused approach to all three elements. Just like a three legged stool, if you take one of these elements away - or if they are not secure - the stool can't stand.”

Photo by Steve -

Urban Doom Loop in Motion: Lakeway,

Texas

Lakeway, Texas, is an affluent area west of Austin where the cost of housing is high. Their city council made headlines in 2021 when they voted down a proposal for workforce housing. Here’s a look at what happened in 2021 and what has taken place over the past four years when the urban doom loop was set in motion.

November 2021: The Lakeway City Council rejected a proposal for a workforce housing planned unit development. According to the Austin-American Statesman, the project was first rejected because of the higher density housing per acre. And when the planned density was reduced, the council still said no because the site could one day be a good location for business development that would increase the city’s tax revenue. The proposal included 248 units on 3.8 acres of land, and would have served teachers, bus drivers, firefighters, and service workers. Local employees and families making between $40,000 and $60,000 a year would have had the option to live in Lakeway.

Council member Laurie Higgenbotham, who voted in favor of the development, said, “A gated city for millionaires is not sustainable without a diversity of housing. ... We need to get the concept of workforce housing in place sooner rather than later.”

August 2022: Just a few days prior to the first day of school, Lake Travis ISD (LTISD), the school district serving Lakeway, eliminated bus service for students living within two miles of their campus. And, those living beyond that boundary were allowed to take the bus only every other week. Assistant Superintendent of Operations Brad Bailey was quoted in the Austin-American Statesman, saying, “The district has less than half the bus drivers as it did before the pandemic. He also cited the high cost of living in the Lake Travis area as one of the reasons for the district's struggle to find employees, including bus drivers.

Metropolitan areas across Texas are especially vulnerable, so acknowledging and addressing the doom loop helps ensure that communities remain vibrant and sustainable. It’s prioritizing a future where everyone has a place to live close to where they work, creating a thriving, integrated community where every member can contribute to its success.

A Formula for Success

Every Texas community is different, and it is worth taking a closer look at what is happening in El Paso where affordable housing has become a bridge to home ownership.

Bobby Bowling, who owns Tropicana Homes with his brother, Randy, is a third-generation developer who is an enthusiastic supporter of affordable housing. They submitted their first tax credit application in 1999, and since then have built 40 apartment complexes serving residents in El Paso County. “I’m a conservative businessman,” says Bowling. “And this is a fantastic program, because I’m able to grow my company and support a lot of families.”

He is also realistic when it comes to the challenges. “There is a lot of regulation,” he says. “There are politics involved, and you have to think like an accountant, a lawyer, and a politician. The U.S. Treasury is involved, along with HUD, the IRS, the State of Texas, local governments, school districts, water districts, electric companies, and more.”

El Paso is situated on the Texas border in the middle of the desert. It is 300 miles in any direction to get to Lubbock, Albuquerque, Tucson, or Chihuahua City, Mexico. It is ranked as one of the poorest big cities in America. But in many ways, the poverty has made the city more open-minded about affordable housing opportunities, and people like Bowling have created a pathway to home ownership.

“We have almost 4,000 families in El Paso County living in our housing tax credit developments,” says Bowling, “and we have qualified over 200 of them for homes.” The bridge from poverty to home ownership has come through their social services. “We started

continued on next page...

Lakeway: A Cautionary Tale

The district asked office staff and mechanics to step into the role of drivers, and despite a robust recruiting effort and pay raises (experienced drivers can now make up to $33 per hour), the district fell short. From the bus drivers’ point of view, they simply can’t justify commuting more than an hour each way twice a day to drive students to school. Parents described the traffic during pick up as a “living nightmare” and accused the district of acting “too little, too late.”

May 2024: The LTISD board of trustees recently voted to establish a public facility corporation (PFC), enabling the district to own and lease property to a developer with the expertise to provide affordable housing for teachers and staff. The PFC will provide developers with a 100 percent property and sales tax exemption under the condition that over 60 percent of units are affordable, or reserved for those making less than 80 percent of the area median income.

During the trustees’ initial discussions about creating a PFC, LTISD General Counsel Allyson Collins acknowledged that Lake Travis is an expensive place to live, and that staff commute times are having a direct impact on staff recruitment and retention.

After surveying nearly 450 staff members, the district found that 81 percent of staff live outside the district, and 56 percent expressed an interest in the new workforce housing. According to the district, a certain number of units could be reserved for staff members while some could go to other residents in the area, including first responders.

As Lakeway has discovered (along with similar communities statewide – this is not an isolated incident), having affordable housing isn’t optional. It’s essential. Lakeway illustrates what can happen once the doom loop is set in motion. Too often, community leaders fail to recognize the ripple effects of unaffordable housing until they are faced with teacher shortages, angry parents, and long hold times for urgent 9-1-1 calls.

Banking on “someday,” as Lakeway did in 2021 when it refused to authorize affordable housing in favor of a hypothetical new business that could eventually build and contribute to the tax base, was a bad investment. Meanwhile, there was, and is, a tax-paying workforce waiting for their own opportunity to support the local economy.

That tract of land still sits empty.

with daycare but found that it wasn’t the motivator we thought it would be. So now, we focus on credit counseling, English as a second language, home-buyer counseling, and a rent-to-own program.”

Their programs are similar to business incubator programs, and their focus is on bringing low-income families to the point where their credit is strong enough to purchase a home. Bowling also notes that one of the most valuable aspects of the affordable housing program is that residents are never disqualified for succeeding. “Other federal assistance programs, like welfare and WIC, have an income cutoff and at that point, you’re no longer eligible,” says Bowling. “But in the tax credit program, once you’ve moved into a unit, you can never make too much money. This is still your home.”

That stability is key because Tropicana Homes’ typical family is a single mom with two children. “That’s our typical tenant profile here in El Paso,” says Bowling. “But with the stability comes opportunity. We have a tenant who went to community college and became a registered nurse. We were selling homes just across the street from her apartment. And she thought, ‘I can’t afford that.’ I told her, ‘yes, you can,’ and showed her how.” Most tax credit developers are multi-family developers, but Tropicana Homes also offers single family homes in beautifully designed subdivisions. About 10 - 12 families every year make the move from apartment living into their own home.

Bowling has demonstrated that the term “affordable housing” means quality of life, with safe, clean, pretty places to call home. But he admits that every year, the building and development codes become more complex and when well-intentioned people add layers of processes, requirements, checks, and balances, doing business become more difficult. continued on page 34...

Community leaders fail to recognize the ripple effects of unaffordable housing until they are faced with teacher shortages, angry parents, and long hold times for urgent 9-1-1 calls.

The mounting mandates, soaring interest rates, and the cost of materials and labor are just a few reasons that for the first time since 1999, Bowling chose not to submit a tax credit application for 2024. “Interest rates are too high,” he says. “And I can’t accrue enough return on my investment to compensate for the risk and amount of work that’s involved in doing a tax credit deal right now. If you look at the list posted by the TDHCA, you’ll see there are regions of the state that didn’t have even one application this year.”

Despite the pause, Bowling remains one of affordable housing’s most enthusiastic supporters and advocates. “There’s an unaffordable housing crisis happening in parts of Texas,” he says. “And there are rays of hope as permitting authorities begin to understand the impacts of the ever-increasing layers of regulations.” El Paso is an example of what is possible when the tax credits turn into new opportunities for residents.

Taking Action

There are no simple answers to the complexities of affordable housing. However, here are three action steps that can influence the business of affordable housing in Texas.

1. Streamline the process for creating affordable housing (see the article, Layers of Regulation, on page 38). There is a significant gap between the processes for private and affordable housing developments, yet, when

compared side by side, they are indistinguishable. Oversight is critical. But so is the mission to provide high-quality housing for Texas’ working-class residents.

2. Always educate. If you’re an advocate of affordable housing, you have an opportunity to help break the stereotypes and introduce policymakers at all levels to the real definition of “affordable housing.” When you work in the industry, it’s easy to forget that not many people understand the problems and solutions in the same way our members do. You have an opportunity to use your personal networks to spread the word and change the narrative.

3. Make it personal. What if every member set up a call, a coffee, or better yet, a site visit, with the decision-makers who resist affordable housing developments? Face-to-face conversations, and the resulting personal relationship and even friendships, can pave the way for real change in the policies and regulations, and lead to working relationships that benefit those who need affordable housing the most.

A Commitment to Business

Texas values its commitment to business, but true commitment means ensuring that everyone who contributes to the economy can afford to live near where they work. Affordable housing is the cornerstone of this vision, making it not just good policy, but good business.

$13,518.393

Layers of Regulation

Mounting Pressure on Tax Credit Developers

The Growing Regulatory Costs to Provide Affordable Housing

By Elaine Acker for the Texas Affiliation of Affordable Housing Providers

Navigating the labyrinth of modern government regulations can be daunting, and the regulations impact many aspects of our daily lives, often in ways that were never intended.

Consider healthcare: Over the past five years, visiting a healthcare professional has become an exercise in paperwork and red tape. Patients now sign electronic acknowledgments for documents they rarely read, all in the name of protection. Yet, these regulations often create more hurdles for doctors and their patients, complicating the path to wellness.

Consider technology: The devices we rely on daily—our smartphones, smart TVs, and computers—are laden with features and applications so numerous that it's nearly impossible to fully utilize them. The complexity intended to enhance our lives frequently overwhelms us instead.

Affordable housing is no different. The Texas Qualified Allocation Plan (QAP) looks very different today than it did in the 1980s. It has ballooned from 120 to over 200 pages, layered with requirements from federal, state, and local authorities. These regulations, while initially designed to protect residents and ensure that public funds are appropriately applied, have created a tangled web that even seasoned developers struggle to navigate. Often, these mandates address problems that no longer exist, yet the barriers they create persist, hindering the development of much-needed housing.

These examples underscore a broader issue: government regulations, though crafted with the best intentions, often lead to unintended consequences. Instead of simplifying and safeguarding, they frequently complicate and obstruct, creating challenges that impact industry professionals and the public alike.

The Cost of Doing Business

Meeting the growing need for housing is becoming ever more challenging for both private, market rate developers, and affordable housing, tax-credit developers

thanks to factors like soaring insurance expenses, high interest rates, the cost of materials, and the increased costs associated with fee structures in local municipalities. According to the National Association of Home Builders (NAHB), the costs of regulations now exceed 40 percent of multifamily development costs. Read that again: 40 percent.

That means that as Texas’s affordable housing developers and builders face additional layers of requirements for every new community developed, the cost of doing business will ultimately become unsustainable. Every Texas business owner is in business to earn money. It’s fair to expect a return on their investment. But with every new regulation, the equation becomes less cost effective, which ultimately hurts Texas residents with fewer properties being developed or with properties having fewer available housing units.

The Dallas Morning News reported in March of this year that some permit fees would double, or in some cases, even triple. The new fee schedule took effect on May 1, 2024 and permit fees jumped from $225 to $552 per unit for multifamily developments. While the City of Dallas development department argued that the rate hikes were long overdue, the substantial, immediate increases are likely to hit affordable housing developers especially hard, adding tens of thousands of dollars to every development that cannot be passed along to tenants.

Also in March, the San Antonio Business Journal reported that the San Antonio Water System voted to increase impact fees on new builds. Fees are used to pay for capital improvements to service new developments. Under the new fee structure, developers’ costs increased by an average of 23 percent. When the city council expressed concerns about how the fees would affect residents moving into affordable housing builds, the city’s chief financial officer noted that affordable housing developers can apply for partial or full impact fee waivers – something that is helpful, but not readily available in all local jurisdictions.

New Study:

Average Cost of Layers of Regulation Across All Levels of Government

Market Rate

Multifamily Housing

Tax Credit

Multifamily Housing

40.6% 47.0%

Other state & local fees

Additional legal fees

Cost of zoning approval application

Costs when site work begins (fees required, studies, etc.)

Development costs beyond the ordinary (layout, mats, etc.)

Exploring the Double Standard

If you’ve wondered exactly what requirements factor into the equation, consider the chart below. You’ll see a quick comparison between the requirements for private developers versus tax credit developers.

Zoning

Financing (debt & equity)

With all city approvals and permits, can close a deal in as little as 60 days

Raise rental rates (as the market will bear) to offset increased costs

Publicly disclose development plans to competitors

Provide social services for tenants, which can include daycare, bus services for the elderly, credit counseling, and more.

Requirement to close deal within 180 days of issue of private activity bonds (4% Tax Credit Deals)

Letter of support by elected state representative

Approval of local jurisdiction

Certify that tenants meet income eligibility requirements

Required to maintain properties to rigorous standards over 15 – 30 years

Market rate developers clearly have fewer hurdles and access to more creative ways to move a deal forward.

Market rate developers have fewer hurdles and access to more creative ways to move a deal forward. With all documentation in place, they can close a deal in as little as 60 days. On the other side, affordable housing developers have multiple ways their plans can be derailed, and because rigorous protocols are required by the Texas QAP and statutory requirements, these deals take longer to place into service. It’s not unheard of for tax credit developments to take a year or more to close.

“There are different levers market rate developers have versus tax credit developers,” says Karsten Lowe,

Texas features a wide range of geographical regions and significant economic diversity. There’s high tech in Austin and agriculture in the Valley. There are piney woods in the northeast and deserts in the west. It only makes sense that no two housing markets are the same, yet broad regulations remain in place, whether you are building in Plano or Laredo.

Acknowledging the regional differences can be a first step in reducing state and federal mandates and instead, tailoring regulations to fit local communities and lessening the burden of expensive universal mandates.

...it is important to consider the cost-benefit equation in a way that recognizes the impact on property owners, and ultimately, the effect on Texas’s most vulnerable renters.

affordable housing development manager at JPI. “Underlying market conditions can allow market rate developments to charge higher rents which can help absorb the growing costs. Affordable developments are required to charge rents based on the county AMI, which has a defined ceiling. This can directly impact something as simple as how much you can pay for the dirt you are trying to develop. In counties with lower AMI’s it is becoming increasingly challenging to make the numbers work.”

Reminder: No Two Markets Are Alike

How did we get here? Federal and state regulations were initially intended to address health and safety. This meant universal requirements about certain building materials such as insulation. But over time, well-intended, one-size-fits-all regulations have morphed into expensive mandates that aren’t applicable for every municipality.

Mandates and Policies in the News

The most recent example of this one-size-fits-all approach is the requirement that new multifamily developments financed by HUD or USDA be built to meet the International Energy Conservation Code (IECC). In an April 2024 article, the NAHB said that the mandate does little to curb overall energy use but will make the housing affordability crisis worse, deterring developers at a time when more affordable housing options are needed. Further, the article notes that property owners will not see a payback for more than 90 years and they "will make older, less efficient homes more attractive." All multifamily properties will have to comply with the new building codes by May 2025.

While there’s no question that measures are needed to address climate change, it is important to consider the cost-benefit equation in a way that recognizes the

continued on page 44...

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$1.6 Billion Tax Credit Equity Raised

Total Since 2021

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impact on property owners, and ultimately, the effect on Texas’s most vulnerable renters. If the payback on the added cost is 90 years away, the property owner will not see a benefit in their lifetime, yet they would be required to shoulder those costs on top of everything else.

In other news, the City of Austin’s latest eviction policies have created a backlash for residents.

Megan Lasch, owner and president of Austin’s O-SDA Industries, explained the ripple effect of a well-intended policy: a 30-day notice period prior to providing notices of eviction. When the City of Austin extended the time for eviction notices it inadvertently made it difficult for those being evicted to find alternate housing. Why? Some tenants accrue thousands of dollars of past-due debt because of the extended process. Residents end up with 90-120 days of past due balances instead of 30-60 days, or even a zero past due balance if they were able to work out a payment plan sooner rather than later. “When tenants stop paying, over time, it creates an economic problem with the property,” says Lasch, “and the

property has to spend money reletting the unit. The goal is always to keep people housed but for the system to work, there has to be accountability on all sides of the equation.”

Meanwhile, the developer is still responsible for meeting their own debt obligations to lenders and paying for social services. The bottom line: affordable housing has to be sustainable for developers, too, because you’re counting on them, along with their investors, to build housing for a diverse workforce.

“If we really want to create and maintain long term affordable housing, it is incredibly vital that lawmakers listen to all sides of the process as they consider new policies,” says Lasch. “Taking time to understand how policy changes affect the day-to-day operations of the community will, in the long run, create more sustainable affordable housing. Because these communities operate under very tight margins, even one bad policy can have a huge impact to the overall health of the property.”

If we really want to create and maintain long-term affordable housing, it is incredibly vital that lawmakers listen to all sides of the process as they consider new policies.

Megan Lasch, President, O-SDA Industries

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Benefits of Choosing Stellar Construction Company:

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Quality of Life

When you reduce the regulatory costs associated with development, housing becomes instantly more affordable for those who need it most and immediately improves their quality of life."

One of the objectives of safe, high quality, affordable housing is that you can put a market rate development right next to it and not be able to tell them apart. Tenants needing affordable housing don't deserve any less of a standard of living, says TAAHP Executive Director Roger Arriaga.

The differences in costs are happening behind the scenes. The chart below highlights some of

the design features and on-site benefits that can affect the business model for affordable housing developers.

“We know we have a housing crisis here in Texas,” says Lowe. “And people struggle to quantify what that means. But I can tell you, as it relates to the low-income housing tax credit program, that affordable housing has been one of the most successful public-private partnerships in all of U.S. history.”

“The goal should be to address affordability,” Lowe continues. “But to address that need of affordability, the finances have to make sense.”

Multifamily Development Design Features, Amenities, and Requirements

Pool

Clubhouse

Fitness center

Granite countertops

Ability to raise rental rates (as market conditions permit) to offset increased cost of materials and labor

Social services

Cost of implementing Federal and State affordable housing regulations

Retain ownership of the property for 15 to 30 years

A Sustainable Future for Affordable Housing

For that partnership to remain robust well into the future, consider this:

1. What if every regulation started with an affordability impact analysis?

2. What if policymakers streamlined the tax credit regulations to remove duplications?

3. What if the state removed requirements for state representative approvals and allowed community leaders to decide what is best for their home community?

4. What if the broad federal and state regulations were set aside in favor of requirements tailored to Texas’ diverse regions?

5. What if local jurisdictions helped facilitate the approval processes for developers and builders, removing burdens and barriers, and focusing on the mission of affordable housing.

6. What if everyone believed that neighborhoods are made of a strong community fabric which includes diverse housing options for those who seek it?

7. What if municipalities leveled the playing field, applying affordable housing’s rigorous standards to market-rate developers?

8. What if municipalities waived fees and expedited applications, zoning, and inspections for housing developments that meet their criteria for quality built, safe, and affordable housing?

Meaningful change and sustainable affordable housing programs can start with a single conversation.

ARE YOU INTERESTED IN AFFORDABLE HOUSING POLICY ISSUES?

The goal should be to address affordability, but to address that need of affordability, the finances have to make sense.

Karsten Lowe, JPI

TAAHP offers several ways to stay informed and get involved. TAAHP sends e-mail newsletters monthly to members. Members who want to take a more hands-on approach can get involved in TAAHP committees. For more information, visit www.taahp.org

A MESSAGE FROM TAAHP’S

GOVERNMENT AFFAIRS COMMITTEE CHAIRMAN

Housing affordability has been a focal point of Texas’ legislative body over the last year. This has been driven, in part, to the continual stream of people looking to call Texas home. TAAHP’s position, as the Voice of Affordable Housing in Texas, has our organization well positioned to influence the policy and regulation that allows our members to continue to produce safe, high-quality, affordable housing to serve Texans. Through its Government Affairs/Legislative Advisory (GALA) committee, TAAHP continues to strengthen and solidify our relationships with Texas’ elected officials. These connections allow us to directly impact how housing policy and regulation affect our members’ ability to renovate and produce affordable housing for Texans. GALA has, and will continue to host, property tours, and receptions for key community stakeholders and elected officials so that they can witness firsthand what affordable housing means for Texas.

Nathan Kelley Government Affairs Committee Chair

With all the macro-environmental challenges that have slowed the production of new housing units, in recent years, TAAHP’s legislative priorities going into the 89th legislative session will focus on removing red tape and barriers to new production. GALA’s subcommittees have worked feverishly to analyze and develop ideas focused on that effort. Special thanks to Jean Latsha, Nick Walsh, Avis Chaisson, Emily Abeln and Quinn Gormley for leading our subcommittees. These subcommittees are charged with developing strategies, drafting legislation, and identifying champions to sponsor TAAHP’s priorities. While specific legislative priorities are still in development, the subcommittees are evaluating potential changes to the statutes governing the Housing Tax Credit program, Private Activity Bonds,

Tax Exemptions, Real Estate Tax Appraisals, Insurance, among others.

These priorities will continue to be refined over the next several months, and then, with the help of our lobby team, GALA will begin hosting workshops for legislators and their staff. These pre-session interactions are paramount to TAAHP’s legislative successes in the 89th session as it allows us to dive into the details of our industry, the issues at hand and how proposed changes will impact the creation and preservation of affordable housing in Texas.

For those that have participated in TAAHP’s Rally Day, or the legislative process in general, you know it takes a team effort to deliver results. TAAHP is thankful to have partners like the Texas Apartment Association (TAA), the Texas Association of Builders (TAB), Rural Rental Housing (RRH), Texas Association of Local Housing Finance Agencies (TALHFA) and the Texas Chapter of the National Association of Housing and Redevelopment Officials (TXNAHRO). TAAHP’s team maintains an open dialogue with these partners so that we can align ourselves on various priorities and leverage relationships across each of our organizations. We’re thankful to call these groups friends of affordable housing and look forward to the great work we can do together in the 89th legislative session.

Lastly, TAAHP and the GALA committee appreciate all the support provided by TAAHP staff; Roger, Naomi, and Whitney; as well as our lobby team, Andrade-Van De Putte and Associates. These folks commit a tremendous amount of resources to developing the framework that allows TAAHP’s committees to be productive. We couldn’t do what we do as an organization without you.

Thank You to the GALA Committee Members

Emily Abeln, Brinshore Development, LLC

Christopher Akbari, ITEX

Dan Allgeier, Lakewood Property Management

Terri Anderson, Anderson Development & Construction, LLC

Bobby Bowling, Tropicana Building Corp.

Zachary Cavender, Pennrose, LLC

Avis Chaisson, AFC Real Estate Development Services

Khayree Duckett, Dominium

Eleanor Fanning, Portfolio Resident Services

Alyssa Flores, Madhouse Development

Quinn Gormley, Fishpond Development

Debra Guerrero, The NRP Group

Nathan Kelley, Blazer

Tim Lang, Tejas Housing Group

Jean Latsha, Pedcor Investments, a Limited Liability Co

Steven LeClere, Monarch Private Capital

Diana McIver, DMA Development Co., LLC

Kim Parker, Palladium USA International, Inc.

Joel Pollack, Streamline Advisory Partners

Janine Sisak, DMA Development Co., LLC

Darren Smith, Pivotal

Nick Walsh, The NRP Group

Valerie Williams, Bank of America

At Blazer Building, we are unwavering in our commitment to providing top notch quality in a cost effective way. We firmly believe that our company’s success is rooted in our relentless pursuit of excellence. With nearly 40,000 units built, our 45 years of experience, team and attention to exceptional quality allows us to deliver superior service.

SETTING THE STAGE

FOR THE 89 th TEXAS LEGISLATIVE SESSION

By Whitney Parra-Gutiérrez, TAAHP Policy & Regulatory Manager

On the heels of a successful effort in the 88th Texas Legislative Session in 2023, TAAHP immediately turned its focus to preparing for the 89th Legislature beginning January 2025. There is much more work to be done and expectations are high. TAAHP has been working diligently to address housing affordability challenges statewide, focusing on building relationships, and crafting a legislative agenda that will advance vital policy solutions to some of the greatest issues facing the affordable housing industry. Given the current political environment, any legislative success will require the support of the entire industry and links with partners who understand that affordable housing is a common thread for economic success.

Internal divisions within the Texas GOP and changes in House and Senate committee assignments present new challenges, and possible opportunities, for TAAHP to reshape perceptions of affordable housing. Both the Lt. Governor and the House Speaker have released interim study charges which acknowledge both the need to increase housing supply and the risks that issues like insurance costs are posing to the industry. TAAHP will soon launch several advocacy initiatives and education campaigns aimed at communicating these legislative priorities to every legislator as part of a solution to address the critical shortage of housing. Through these efforts, TAAHP will maintain its role as a pivotal resource for affordable housing and solidify its position as the primary voice for housing affordability matters in Texas.

88th Legislative Session Recap

During the 88th Texas Legislative Session in 2023, TAAHP embarked on a mission to tackle housing affordability challenges across the state. With a strategic focus on fostering relationships, advocating for legislative priorities, and actively opposing detrimental bills, TAAHP members

FEBRUARY

Make plans to join us for an exciting day at the Texas state capitol where we'll meet with legislators and their staff to advocate for affordable housing. Registration for this important event will open soon. Sponsorships will be available to help underwrite this valuable effort that allows our industry to come together with One Voice

DETAILS COMING SOON

TAAHP MEMBERS MAKE SURE LEGISLATORS ARE

INFORMED OF INDUSTRY ISSUES

worked tirelessly throughout the 140-day session to champion policies conducive to affordable housing.

One significant component of TAAHP’s legislative efforts was the biennial TAAHP Rally Day, where over 80 TAAHP members met with all 181 Texas legislators to deliver TAAHP's message and legislative priorities. These efforts bore fruit as the Texas Legislature approved bills crucial to the industry, including the establishment of a new state housing tax credit program, reforms for public facility corporations which kept the program from being eliminated, and efficiencies in the private activity bond program. Despite not achieving all legislative priorities, TAAHP's concerted efforts during the session represented significant progress in making affordable housing a key priority for the Texas Legislature.

New Challenges for the 89th Legislative Session

Internal dynamics within Texas politics have intensified as leaders aim to recalibrate their party’s legislative priorities for 2025 following a contentious primary election. This past spring, primary challengers unseated 15 Republican incumbents from the State House of Representatives- nine in the March primaries and six more in the May runoffs.

As Texas prepares for the legislative session starting in January 2025, this evolving landscape presents new

challenges and opportunities. For instance, early in 2024, multiple House and Senate Committees received housing-related interim charges—directives to study special policy issues and provide recommendations for future legislation. Notably, the House Urban Affairs Committee, historically responsible for most affordable housing legislation, did not receive any interim charges. The housing-related interim charges were instead assigned to other House committees, some of which haven't typically been responsible for housing-related legislation. This presents TAAHP with a strategic opportunity to cultivate new relationships with influential committees and legislators beyond their traditional areas of focus.

Process for Setting Legislative Priorities

A multitude of stakeholders participate in vetting TAAHP’s legislative priorities. TAAHP’s Government Affairs and Legislative Affairs Committee (GALA) is dedicated to making a substantial impact on the 89th Legislative session. Comprised of more than 40 members, GALA and its five legislative subcommittees are currently engaged in drafting proposed legislation and identifying housing champions to advocate the necessary messages to the Texas Legislature. These legislative subcommittees serve as the platforms where TAAHP priorities are established, drawing on the diverse backgrounds of members to craft initiatives beneficial to the entire industry. Following deliberations continued on next page...

and voting within these subcommittees, proposed legislative priorities undergo evaluation by the Government Affairs Committee, ensuring thorough vetting by many TAAHP members and different TAAHP committees before formal adoption into the official legislative agenda for the 89th Legislative Session. Five overall legislative priorities have been formed, including modernizing Section 2306, streamlining Private Activity Bonds, providing insurance relief to affordable housing developers, protection of existing tax exemption programs, and ensuring that property appraisals are conducted in an equitable manner.

TAAHP's Legislative Priorities

SECTION 2306: Modifying the Requirement for a Resolution of No Objection (RONO) for 4% Housing Tax Credits One of TAAHP’s most consistent policy priorities has been to remove or limit the requirements for obtaining a Resolution of No Objection (RONO) for 4% Tax Credit developments. As introduced in the last three sessions, TAAHP plans to advocate for legislation that would restrict the requirement of RONOs to only the largest metropolitan governments. Currently, applicants seeking to utilize the non-competitive 4% Housing Tax Credits (HTC) are required to provide notice of their proposed developments to each governing body. The governing body must also hold a hearing and affirmatively pass a Resolution of No Objection, or RONO. Failure to do so renders the proposed housing development ineligible for credits with no opportunity to appeal. But the statutorily required RONO process is not practiced in a consistent manner across all jurisdictions. While most major metropolitan governments have established protocols for evaluating and recommending

support or denial of these developments, their policies still differ among themselves. Meanwhile, many smaller suburban and mid-sized local jurisdictions lack any guidelines for evaluating them at all

The TAAHP bill proposes that only major metropolitan cities and counties retain the requirement to hold a hearing and adopt a RONO within 90 days of receipt of notification for developments proposing the use of 4% HTCs. If the municipality or county fails to meet that 90-day deadline, TDHCA shall deem the application as satisfying the “no objection” requirement and the development will be able to move forward. This rule would only apply to counties with a population more than 1.2M and municipalities with a population more than 600,000. This bill would help combat “NIMBYism” (Not In My Back Yard) that is still a strong factor in some jurisdictions, as there are some council members and/or commissioners who will simply not vote for any affordable or workforce housing in their districts. With lengthy development timelines and stringent investment requirements, it is essential that municipal approval be received in an efficient and time-sensitive manner in the affordable housing development process.

SECTION 2306: Modernizing the Two Mile Rule

Currently, statute prohibits more than one housing tax credit applicant from being awarded credits within two linear miles of each other. This rule was originally enacted more than 20 years ago to avoid the over-concentration of affordable housing in high poverty areas. However, in dense urban areas in Texas’s largest cities, this rule drastically limits the development of affordable housing near dense job centers, neighborhood empowerment

zones, and transit-oriented development areas. A two-mile radius within an urban city could exclude entire neighborhoods, including those with a high demand for housing. A more precise approach would better address the specific needs of each city’s local landscape.

TAAHP’s anticipated bill would reduce the two mile requirement to one mile, subject to approval of the municipality or county in which the application is located. This bill will focus on counties with a population of one million or more and municipalities with populations over 750,000. Growing cities know their local landscape best and should be empowered to waive this rule if it is in the best interest of the city.

SECTION 2306: Ensuring Consistency with Neutral State Rep Letters for 9% Housing Tax Credits The current requirement for state representative letters discourages high-quality housing tax credit developments in communities where they are needed. This scoring category alone has significant influence on the award process because a state representative’s negative or neutral letter can singlehandedly derail a development, even if local officials and community advocates have endorsed it. TAAHP proposes a modification to this requirement as a way to meet local housing demand across Texas.

A TAAHP supported bill signed by the governor in the 86th Session changed statute by stating that if no written statement is received from a state representative, the corresponding points would then be attributed in the direction of the locality’s support or opposition. In awarding points under the bill's provisions, TDHCA must award positive points for positive resolutions adopted, negative points for negative resolutions adopted, and zero points for neutral resolutions adopted, but only when no written statement is received from a state representative. If a neutral statement is received from a state representative, no points are awarded even if the locality supports the development.

TAAHP MEMBERS WORK HARD TO BE A VALUABLE RESOURCE FOR TEXAS LEGISLATORS

TAAHP seeks consistency in the statute so that a letter of neutrality is treated the same as no written statement, whereby the locality determines the direction of those respective points. This reallocation of available points to local governments where the state representative chooses to not provide a statement or provide a neutral statement provides for a consistent outcome in cases where the state representative does not either support or object to a certain development.

SECTION 2306: Addressing Educational Quality Requirements in Housing Tax Credit Applications

In Texas, the housing tax credit program heavily relies on educational quality as a determinant for evaluating applications, effectively excluding many urban areas in dire need of affordable rental housing. This stringent requirement exacerbates housing shortages in neighborhoods that could benefit most from increased housing availability. TAAHP's proposed bill would aim to address this issue by advocating for the removal of educational quality as a threshold criterion in the application process for low-income housing tax credits. By eliminating this barrier, the bill would significantly broaden the geographic areas where developers can qualify to build affordable housing developments. This strategic shift is particularly crucial for urban regions experiencing rapid population growth and increasing demand for affordable housing options. By allowing development in areas previously deemed ineligible due to school performance metrics, the bill ensures that housing initiatives are better aligned with community needs and socioeconomic realities.

Private Activity Bonds

The Private Activity Bond (PAB) program, governed by Chapter 1372 of the Texas Government Code and administered by the Texas Bond Review Board (“BRB”), plays a vital role in financing the needs of the state, including the development of affordable and workforce housing. The previous 88th Legislature made progress on this front with the passage of House Bill 1766, which instituted a cap on the percentage of housing development costs that may be financed with PABs. When properly implemented, this change will result in more housing being built without additional PAB resources.

For the 89th Legislature, TAAHP will monitor and support legislation that aims to modernize the PAB program, providing more time and opportunity for additional units to be developed within the same volume cap. TAAHP supports all procedural and administrative improvements that leverage state resources to add desperately needed supply for the expanding Texas workforce.

Rising Insurance Costs

Affordable housing developers, owners, and operators are grappling with unprecedented increases in property casualty, general liability, and builders risk insurance premiums. Recent research reveals that over the past three years, these premiums have surged dramatically, with annual hikes ranging from 30 percent to 100 percent for affordable housing communities. This surge in costs is

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particularly problematic for the affordable housing industry due to capped rents, which are challenged to keep pace with all escalating expenses, especially insurance. Consequently, owners and operators are compelled to reduce resident services and delay essential repairs and upgrades to manage financial strain, posing a significant threat to the long-term financial viability of properties and even sponsors or owners in some cases.

If left unaddressed, the inflation of insurance premiums will have severe consequences, , potentially causing housing providers to find operational cost savings in ways that harm existing affordable housing communities or to ultimately opt-out of the affordable housing market altogether.

TAAHP has been monitoring the impact of higher insurance costs on affordable housing developments in Texas and is studying innovative state-level strategies that could address the issue. Some potential solutions include: 1) Expanding the Fair Access to Insurance Requirements (FAIR) Program to ensure coverage is available for multi-family affordable housing, 2) Prohibiting insurance providers from using neighborhood crime scores to determine coverage options for affordable housing developments, 3) Mandating that insurance companies offer premium discounts for policy owners who implement certain risk reduction measures and 4)

Providing grants or tax credits for improving a building’s resilience to flooding, winds, etc.

Monitoring the Preservation of Tax Exemption Programs

The 88th Legislature nearly eliminated the Public Facility Corporation (PFC) tax exemption program due to concerns about loopholes that undermined the program's original goal of promoting the development of workforce housing units. Lawmakers specifically cited the ability of corporations to extend tax breaks beyond their initial locations and a lack of transparency in the program. TAAHP successfully worked to save the PFC program, securing a major victory for workforce housing. Now, in the upcoming 89th Legislature, similar concerns are surfacing regarding other tax exemption programs that support affordable housing, such as those offered by Housing Finance Corporations (HFCs). While TAAHP doesn't plan to sponsor a bill directly related to these programs, its staff and GALA subcommittees will closely monitor relevant legislation and actively advocate for the preservation of all programs that benefit affordable housing.

Special Issues – Improving Appraisals and Limiting Development Fees

During any given legislative session, topics and bills arise which require special attention and expertise to

We help our clients with the processes of developing, constructing, rehabilitating, and operating properties for affordable, workforce, and market rate housing. We facilitate buying, selling, and investing in single affordable and workforce housing assets or portfolios of affordable and workforce housing. At every step of the way, our dedicated team is ready to support you in achieving your objectives.

1,000+

address. The newly established Special Issues Subcommittee is charged with leveraging the subject matter expertise of TAAHP members to assist in establishing position statements and sponsoring bills which would benefit the industry. For the upcoming 89th Legislature, this committee will be focused on addressing the inconsistency of tax appraisals for tax credit properties. Each year, developers spend millions to protest inequitable appraisals for affordable housing properties because of inconsistent methodologies used across the various appraisal districts in Texas. A TAAHP supported bill would seek to provide standards for achieving equitable consistency for the evaluation of all tax credit properties in the same manner. This alone would save the industry millions in protests which could otherwise be spent on adding housing supply. This subcommittee will also be considering legislation to address the negative impacts of local development fees, which are reaching a level that is impeding the development of safe, high quality affordable housing.

How to Get Involved

Advocating for such a robust agenda requires significant legwork and support from TAAHP’s GALA committee, legislative subcommittees, lobby team, staff and the entire membership. TAAHP’s goal is to connect with as many legislators as possible before the session begins and will

provide one-on-one presentations to elected officials, specifically those in priority committees such as the Senate Committee on Local Government and the House Committee on Urban Affairs. Other initiatives include hosting housing workshops for freshman legislators, publishing legislative white-papers, testifying before House and Senate committee, and ensuring that TAAHP is at the table during the bill-making process.

Members are encouraged to utilize TAAHP's Advocacy Center, which facilitates coordinated communications and grassroots advocacy campaigns. The Advocacy Center will also provide ready to use collateral for all TAAHP members who may seek on their own to meet with elected officials at all levels of government. Through email, e-newsletters, and alert messages, members can actively participate in the legislative process. Additionally, TAAHP will host Rally Day on February 18, 2025, bringing together legislators, housing advocates, and stakeholders to discuss legislative issues affecting affordable housing in Texas. The intention of these advocacy initiatives is to foster a coalition of advocates dedicated to developing high-quality affordable housing for low- to moderate-income individuals and families in the state, solidifying TAAHP's position as the primary voice for housing affordability matters in Texas.

Our heart is in your community

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TEXAS' NEW

STATE

A GOOD START, BUT NEEDS MEANINGFUL INVESTMENT

By Whitney Parra-Gutiérrez, TAAHP Policy & Regulatory Manager & Kathryn Saar, TAAHP QAP Committee Co-Chair

The housing affordability crisis gripping Texas has reached a tipping point propelled partly by the lack of sufficient funding for affordable housing development. Until recently, Texas had yet to significantly allocate its own funds towards affordable, multifamily housing development, leaving the sector heavily reliant on federal programs. This historical underfunding, paired with unanticipated economic challenges of increases in materials, interest rates, and insurance premiums, created a dire situation where developers are now facing immense challenges in making developments financially viable. The shortfall not only stifles new construction but also affects the maintenance and preservation of existing affordable housing stock, exacerbating the crisis. However, in the last legislative session, Texas took a significant step toward addressing this missing component by creating a state tax credit program structure.

As states nationwide confront soaring demand for housing, relying solely on federal resources has become insufficient. In this environment, state housing tax credit programs have emerged as a crucial tool for increasing housing stock. With over 30 states implementing their own programs and several more considering similar legislation, these programs represent a billion-dollar-plus market for affordable housing development. Against a backdrop of mounting costs and budgetary constraints, the pivotal role of state tax credits in facilitating affordable housing development is more pronounced than ever.

Texas 88th Legislative Session

Texas made a historic investment to tackle the State’s housing shortage with the passage of HB 1058, authored by Representative Craig Goldman, which established the Texas State Housing Tax Credit Program. After several previous

attempts failed over multiple sessions, TAAHP adopted the effort and successfully promoted it in the 88th Legislature. Due to the hard work and perseverance of Representative Craig Goldman and Senator Charles Perry, Texas housing developers now have access to this newly created funding source.

Funding Structure

HB 1058 amended the Tax and Insurance Code to permit a taxable entity with an interest in a qualified development to receive a credit against its franchise tax or its state insurance premium tax liability. The credit is claimed in equal installments over the ten-year credit period. HB 1058 caps the total amount of credits that may be awarded each year at $25 million beginning January 1, 2024 through December 31, 2029.

Opportunities for Growth

State housing tax credits represent a substantial commitment from the Texas Legislature, offering long-term economic benefits which far outweighing initial costs. To unlock the full potential of this program, Texas must ensure its efficient implementation and scalability in two ways: first, by increasing the state's allocation authority, and second, by removing administrative barriers that dilute the value of the credit.

Increasing Annual Funding Gap

Currently, the $25 million cap on the State housing credit ceiling limits the impact that the program has in the second most populous State in the Union. Similar programs in other states are funded at much higher levels, especially relative to their population size. For example, Ohio has a population that is a little more than a third the size of Texas, yet their state tax credit program is four times larger.

TEXAS FALLS BEHIND OTHER REPUBLICAN STATES IN ANNUAL STATE TAX CREDIT FUNDING

Increasing state housing tax credit funding is not a risky proposition; it's a proven strategy. Recognizing the escalating demand for affordable housing, many states have bolstered their annual funding levels for existing programs. Virginia, for instance, quadrupled its annual allocation of state housing tax credits from $15 million to $60 million in August 2022, citing the substantial economic benefits of robust investment in affordable housing. Similarly, Pennsylvania's housing tax credit program demonstrates the economic advantages of increased funding. A recent study revealed that every $10 million invested annually generates nearly $20 million in total economic impact, showcasing an impressive multiplier effect. These examples highlight the immense opportunity for Texas to replicate such economic gains by enhancing funding for its own housing tax credit program.

Removing Administrative Barriers

In addition to increasing funding levels, Texas can increase the usefulness of the state housing tax credit by removing administrative barriers which dilute its value. Currently, the Texas Department of Housing and Community Affairs (TDHCA), the state agency responsible for administering the state tax credit program, places a $1 million limit on the credits that can be awarded to any single project. A one-million-dollar allocation sold at $0.85 per credit would generate

$850,000 in capital. On a $25 million dollar development, this is helpful, but would make up less than 5 percent of the total capital stack.

Further diluting the value of this capital is the administrative requirement to produce additional 30% AMI units in exchange for the state credit allocation. Units limited at 30% AMI have a net negative effect on the operating budget for a tax credit development – these units cost more to operate than they generate in income. Consequently, the capital generated by the state credit will function to cover lost revenue instead of creating an additional source of funding. This is a lost opportunity.

Economic Development Opportunity

Ultimately, expanding the funding for the Texas State Housing Tax Credit program represents a strategic investment in the state's future. Every dollar invested in affordable housing development will circulate within the state economy, driving business activity and job creation across various sectors. Embracing this approach demonstrates a commitment to addressing housing affordability as an important foundation for economic development in Texas, diversifying resources and expanding its toolbox to effectively tackle affordable housing challenges and unlock opportunities for sustainable growth and prosperity.

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VillageCommunitiesofTexarkanaTexas(VCTT)isaPublicHousingAgency locatedinTexarkana,Texas.VCTThastheproventoolstodevelopandacquire properties;administerprograms;andprovideservicesandsolutionsvia partnershipswithbusinessindustryentitiesservingcommunitiesthroughoutthe stateofTexas.VCTThasparticipatedindevelopmentincludingpartnershipswith privatedevelopersforover1,250apartmentsthroughoutthestateofTexas.

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We’re resourceful, experienced, creative problem solvers in affordable housing and financing. With a specialty in the Housing Tax Credit program and other state and federal funding sources, we guide our clients through the process in Texas while mitigating the bureaucracy. One of our proprietary GIS “viewer” mapping system facilitates the site selection process and structure a successful real estate transaction.

FRONTERA

LSan Antonio, TX

Crossing

ocated on the rapidly growing south side of San Antonio, Frontera Crossing is a 348-unit affordable multifamily community with floor plans from 1 to 4-bedroom units reserved for residents and families earning 40 to 70% of the Area Median Income (AMI). A testament to strong public-private partnerships, the development was created in partnership with Opportunity Home and the City of San Antonio to deliver high-quality affordable housing options to meet the needs of residents.

With Bexar County’s population slated to rise at an even faster pace over the next decade, NRP, the City of San Antonio and Opportunity Home recognized the need for affordable housing options to be at the forefront of successful growth strategies. From University Health’s investment in a new hospital campus and the expansion projects at Texas A&M–San Antonio and Palo Alto College, to the growth among major employers, including Navistar and Toyota, and development of regional hubs like VIDA–South San Antonio is one of the fastest growing regions in the city.

Frontera Crossing combines top-tier amenities including a resort-inspired pool and sundeck, picnic areas with barbecue grills, a 24hour fitness center, outdoor playground and a stunning community garden with life-affirming wraparound services like financial literacy

training, health and wellness screenings, and after school and summer programming to engage and empower residents.

The commitment to creating affordable housing options near workforce centers has only become more essential as the cost of living continues to rise. Developments like Frontera Crossing achieve the housing priorities of local entities and partners by leveraging thoughtfully designed amenities in locations for residents to access opportunities for success at home and within their community.

Location: 13139 Watson Road San Antonio, TX, 78073

Photo by Mike Deering

We provide clients with top-tier services, leveraging our best people, processes and technology and strong relationships with subcontractors, tradespeople, vendors and suppliers. We are consistently ranked as a Top Builder by NMHC and NAHB and offer unmatched pricing, talent, and quality. Put NRP to work for you as we celebrate 30,000 units in Texas + our 30th Anniversary year.

SPOTLIGHT

FRONTERA

Crossing

UNITS & COMPOSITION

348 units for individuals and families earning 40% to 70% AMI

FUNDING

4% Low Income Housing Tax Credit Development

RESIDENT PROFILE

This community features mixed resident profiles ranging from working families to seniors

AMENITIES

• Resort-inspired pool and sundeck

• Picnic areas with barbecue grills

• Playground

• Community Garden

• Fitness Center

• Children’s activity center

• Conference Center with Wi-Fi

• On-Site Clothes Care Center

• Controlled access gated community

• Package concierge

SUPPORT SERVICES

• Nutritional After School Snacks and Summer Lunches

• Homework First After School Programming

• Community Garden Activities and Education

• Adult Education Programs

• ESL Assistance

• Healthcare Screenings

• Financial Literacy Programs

• Job Readiness Preparation

CREDITS

Developer: The NRP Group and Opportunity Home

Syndicator: U.S. Bank / KeyBank

Architect: Alta Architects

Built Green

so Residents Can Save Even More!

National Green Building

Standard Certification

Energy Star Appliances

LED Lighting

Low-flow Fixtures

High-efficiency HVAC

Community Garden provided by Texas Green Bee

For More Information Contact: Debra Guerrero dguerrero@nrpgroup.com

Photo by Mike Deering

San Antonio, TX

Photo by DeeDee Silver

Photo by Mike Deering

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KIVA East

Kiva East is a mixed-income, multi-family community in Old East side Dallas, providing 87 units of high-quality affordable housing available to households at various income levels. The property has units available at 30%, 50%, and 60% of area median income and market rate.

Kiva East was a 2021 LITHC 9% award, and, with support from LISC, the project also received the first loan from their new Dallas Housing Opportunity Fund, which invests in and alongside local developers to create and preserve affordable housing options in Dallas. Kiva East also secured critical financing from the City of Dallas’ Department of Housing and Neighborhood Revitalization to execute the development, including $2.48 million in HOME Investment Partnerships Funds. The HOME funds were awarded through the City of Dallas’ standing Notice of Funding Availability (NOFA) process to support the development of mixed income throughout the city and to ensure affordability for a period of 20 years. Other partners include Hudson Housing Capital, Citibank, Legacy Bank, and the Texas State Affordable Housing Corporation.

The property has 1, 2, and 3-bedroom units, providing suitable options for families and individuals. The property has direct access to the Santa Fe Trail, a wide walk-able and bike-able concrete path that connects Deep Ellum to White Rock Lake. The northern part of the Santa Fe Trail is known for their display of public art. The neighborhood requested that the Kiva East development contribute to the community’s vision of ensuring public art along the south side of the Santa Fe Trail network as well. In partnership with local artist Gregory Beck, Kiva East created an art wall along the boundary of the development that borders the public trail in line with this vision. Additionally, Kiva East will serve as the home to Bezos Academy, a tuition-free, Montessori-inspired pre-school. The 2.5 acre site was surprisingly zoned for multifamily already; however, the opportunity to partner with Bezos Academy was too good to pass up, so the development team actually took the site through a rezoning to allow the school to be built onsite. The school will have two classrooms and follow a full-day, year-round schedule, providing 40 children with early childhood education. Bezos Academy signed a 10-year lease agreement with Kiva East.

Dallas, TX