Affordable Housing is Good Business & the Economy Depends On It

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.

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 affordable 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-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.

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

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.”

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

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.

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.

Case Study

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.

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.