Do Houston affordable housing NIMBYs in Tanglewood have a point? (Editorial)

The Deerwood apartment complex at 5800 Woodway Dr. on Saturday, Feb. 4, 2023 in Houston. After a ritzy neighborhood learned the Houston Housing Authority had plans to add affordable units to a luxury apartment near them, they began sending emails. They reached out to the apartment complex, their city council person and Mayor Turner who later said he would pause such affordable housing deals until further review.
The Deerwood apartment complex at 5800 Woodway Dr. on Saturday, Feb. 4, 2023 in Houston. After a ritzy neighborhood learned the Houston Housing Authority had plans to add affordable units to a luxury apartment near them, they began sending emails. They reached out to the apartment complex, their city council person and Mayor Turner who later said he would pause such affordable housing deals until further review. Karen Warren/Staff photographer

Tanglewood homeowners are at it again. Trekking a few blocks from their Galleria-area enclave, where houses sell for millions, to the Houston Housing Authority (HHA), they are demanding an end to a program that has expanded affordable housing options across the city, including their leafy boulevards.

It’s a travesty, they say, that Deerwood Apartments — a four-story luxury complex on Woodway Drive with a poolside courtyard — made a deal in December with the HHA to make half their units affordable.

In 2016, thousands of these “Not-In-My-Backyard” activists filled an auditorium to denounce the HHA’s proposed mixed-income housing on Fountain View Drive. Mayor Sylvester Turner, then at the start of his first term, withdrew support for the 9 percent tax credit application for the project saying it was too expensive. This editorial board said, at the time, we didn’t buy his excuse . Neither did the federal government, which concluded Houston had violated the Civil Rights Act, leading the mayor and city council to approve a consent agreement to stop concentrating affordable housing in low-income areas.

Since then, the city's own Housing and Community Development Department has followed through by backing developers applying for a 9 percent tax credit and leveraging disaster recovery money to build mixed-income apartments across Houston. Turner and City Council have often overcome the vociferous objections from nearby residents, though not always: In February, we urged City Council to endorse the application for Felicity Oaks in the Upper Kirby district over NIMBY opposition. Though 15 other proposed developments got the nod, some in prosperous areas, Felicity Oaks did not on the grounds that the developer had not done adequate outreach to nearby residents.

But it's a separate program, run by the HHA without any require approvals from the mayor or City Council, that's drawing the ire of Tanglewood residents in the Deerwood controversy. Enabled by a 2015 state law, the program itself boasts strong results, putting thousands of apartment units on the books classified as "affordable housing" over the past five years with little fanfare or opposition.

Yet, this time, it's hard to dismiss the Tanglewood opposition as mere NIMBYism. Sure, they've used their influence once again to get their way, prompted a Legislative battle and stoked drama with the aid of flame-throwing journalist-turned-media consultant Wayne Dolcefino, who released footage of himself following the HHA chairman into a bathroom trying to ask questions about the project.

Beyond the theater, though, the Tanglewood critics are raising valid concerns about the HHA's quiet deal-making in the newish program and they're sounding the alarm about a lack of accountability and transparency that needs to be addressed.

The program uses a tool called a "public facility corporation." When one of these corporations purchases an apartment complex, it is taken off the tax rolls and then leased back to a developer or private owner in exchange for a promise that half the units will be rented at affordable prices. The deals last for 75 to 99 years. According to figures provided to the editorial board by the HHA in early March, the program has taken more than $4 billion (though some critics estimate $5 billion) of property off of the tax rolls, which comes out to roughly $80 million in annual revenue that the local entities aren't getting to use for such things as schools, roads and public safety, though the city revenue cap and the recapture of school funds by the state complicate matters.

Every complex taken off the tax rolls does shift the burden onto the rest of us. At the same time, the need for affordable housing in Houston is dire and, in the absence of more direct government support, a tax subsidy is justifiable.

“We had 39,000 families sign up for our wait list that was open for 30 days for public housing,” David Northern, the CEO of HHA, told us.

It’s not clear, though, that public facility corporation deals are truly creating more housing at a deep enough level of affordability. When we first wrote about these new affordable housing deals two years ago, we supported reforms that would bring greater accountability and deeper affordability but that would not kill off this tool. Now, the need for reform is urgent.

In February, Turner asked for a pause to the entire program "to get a much better understanding" of the deals but the housing authority’s board pushed through a whole new round of deals in March. Turner sent a stern rebuke.

By design, housing authorities are not directly answerable to the mayor, or local voters. Although board members are nominated by the mayor, the HHA is a federal agency under the U.S. Department of Housing and Urban Development. This structure allows the HHA to act independently, and to make decisions deemed good for the community, even when projects are unpopular with NIMBY protesters. That setup makes sense with federally funded projects but it presents an accountability concern in deals involving public facility corporations, which drain local tax revenues.

The mayor wants more information and so do we. Right now it's hard to tell if the results the HHA is boasting are all their cracked up to be. According to the HHA, Houston now has an additional 7,560 units guaranteed to rent at a rate affordable to people who earn 80 percent of the area median income. That sounds wonderful but practically speaking, in many cases, this works out to about the same rent that the apartments go for normally. Right now, rents are already affordable for people at that 80 percent area median income, which is about $51,000 for a single person.

For example, the HHA will take the $37 million property of Cortland Spring Cypress off the tax rolls, but as the Chronicle’s R.A. Schuetz reports, an affordable one-bedroom can rent for as much as $1,262 there — only $8 less than the market rate of $1,270. One day in the future, rents in Houston could spike while average income stays steady, as it has in other major cities, and we may look back with gratitude at the number of units locked in at affordable rates. Until then, though, there appears to be negligible advantage.

According to the HHA, an additional 5,000 units secured through these deals are reserved for those who earn 60 percent or below the area median income, promising a deeper and more convincing affordability.

Until the recent launch of the site by the HHA, though, there was no way to know where the units could be found. In early March, we asked Northern, the HHA CEO, how he knows their partners are following through on offering affordable housing and abiding by the deals.

“I called Deerwood — actually, I had one of the staff persons call Deerwood,” he told us. “I’m going to be honest with you, the person that answered the phone did not know or understand affordability, and that’s why I called the development partner and said, 'hey you must educate your people.'”

He said the HHA checks their partners' rent rolls to check if they are complying with the terms of the agreements.

After that conversation, we looked at the Deerwood website and none of the affordable rates listed on its website correspond to the deep affordability of the 60 percent rate even though, according to the HHA , it should have such 40 units.

Texas lawmakers have proposed substantial revisions to the state law enabling these deals. State Sen. Paul Bettencourt and Rep. Jacey Jetton, both Houston-area Republicans, have filed legislation that includes stronger requirements for public facility corporations including deeper affordability, compliance reports, eviction protections and approval of projects by an elected body.

The HHA says it already meets these standards with one exception — approval by elected officials. In Dallas, these deals do come before City Council and they should here as well.

Bettencourt has not only put forward the reform bill, he's also proposed a total repeal of the law enabling public facility corporations and is holding hearings in the Senate Local Government Committee on Wednesday. He says he's laying both the bills and others simultaneously because he believes the reform bill needs "enforcement provisions" so that the stricter requirements are followed.

We hope to see substantial reform that brings accountability. If that happens, Houston's mayor and city council should set clear targets for securing affordable housing in every part of town and vote on a plan, after substantial public input, that sets boundaries, requirements and clear expectations for new public facility corporation deals. And that plan should, no doubt, include more affordable apartments near Tanglewood.