Harvey Nearly Halved Houston's Affordable Housing. Here's What's Being Done.
Houston had an affordable housing crisis before Hurricane Harvey ripped away 311,000 housing units. Before the storm, Houston already had a deficit of 400,000 units. In one week, the hurricane nearly doubled the city’s need for affordable housing.
With $1.15B in federal funding heading our way this fall to begin to rebuild the affordable housing stock, public and private entities are preparing to be faster and to rebuild communities in a more holistic way.
A Greater Need
Homelessness declined 61% in Houston from 2011 to 2017, dropping every year in that time frame. But this year it reversed course, largely because of Hurricane Harvey. The Houston Coalition for the Homeless counted 1,614 unsheltered people in January, a 500-person, 15% leap from January 2017. Eighteen percent of those said they were homeless because of the storm. The coalition counted 4,143 homeless people total, including those in shelters and transitional housing.
“Hurricane Harvey affected housing in the Houston area tremendously,” the coalition’s May report said.
Before the storm, Houston was short 180,000 units at 30% area median income (with only 18 available affordable housing units for every 100 people at that income level), and 195,000 units (50 available for every 100 people) at 50% AMI, according to the National Low Income Housing Coalition. The Houston Coalition for the Homeless estimated 122,000 homes and more than 1,000 affordable housing units were damaged in the hurricane, and nearly 1,000 homes were destroyed. Affordable housing nonprofit New Hope Housing’s numbers are even more stark: It reports 311,000 total housing units were destroyed in Harvey, and New Hope Executive Director Joy Horak-Brown said the storm will turn some longtime homeowners into renters because they will not be able to afford to buy at current pricing.
“Homelessness, substandard housing and the lack of affordable options are all part of a national crisis, one that was tragically elevated after Hurricane Harvey,” Horak-Brown said. “Every day, more people live on the edge and solutions are often elusive.”
She said Houston has a growing challenge with homeless encampments, and the obvious way to fix that is to put those people in affordable housing.
“And the way to do that is to have a pipeline [of affordable housing development] so people aren’t stuck.”
The City’s Response
Two people have joined the City of Houston Housing and Community Development Department since Hurricane Harvey to increase affordable housing activity.
Ray Miller, who joined the department in September, just weeks after Harvey blew though, is working on the commercial real estate side as executive staff analyst of the Commercial and Public Facilities Division. Laurie Vignaud joined the department in March as the assistant director of the single-family/economic development division. Their partnership underscores a systemic shift since Harvey in how the city tackles affordable housing — a more holistic view of neighborhoods and a heavier emphasis on single-family housing.
Building up capacity is mission one.
“Houston has always been thought of as the affordable epicenter in the country, but over the last 10 years with rising costs, the stock hasn’t increased for affordable housing. Houston is falling woefully short,” Miller said.
He has been working with HCDD Director Tom McCasland to identify ways to increase development activity, including changing underwriting on subsidy funds to administer as many dollars over as many deals as possible. He is focusing primarily on getting tax credit properties within city limits, and is building a strategy to determine more resilient areas to finance, such as promoting transit-oriented developments.
A Holistic Approach
“Post-Hurricane Harvey, we’re taking a much more strategic and deliberate look at our communities ... starting with five Complete Communities, which have been considered neglected to some degree,” Vignaud said.
The Complete Communities program was announced by Mayor Sylvester Turner in April 2017, before the hurricane hit, but it has taken on a new importance as the city looks to rebuild. As the five neighborhoods piloting the Complete Communities program, Acres Home, Second Ward, Third Ward, Gulfton and Near Northside will be prioritized as the city selects affordable housing projects over the next few years, Miller said. The Planning and Development Department presented the Complete Communities Action Plans — one for each neighborhood — to the Economic Development Council Committee on May 10.
The committee will iron out what exactly the city will do in these areas, but Miller and Vignaud said it will look not only to develop housing, but also to build quality schools and public space and to support infrastructure and small businesses. Some stated goals for the program are to decrease the percentage of residents in food deserts and the number of residents spending more than 30% of their income on housing and increase the number of residents using public transit and the percentage of residents within a 10-minute walk of a park. City departments are working together to build streets, sidewalks and beautification projects, and attract grocery stores and other services in these five neighborhoods. Public transit is an important piece of the Complete Communities program, Vignaud said, because it brings resources into communities.
All properties will be built with flood resiliency in mind, from site selection to raising them with pier-and-beam construction. These code changes will increase development costs for most projects, though it is unclear how much yet, Horak-Brown said.
HCDD completed 10 affordable multifamily projects totaling 1,666 units between 2015 and 2017, has eight projects totaling 1,681 units under construction now and is gearing up to restock the pipeline. The city just did a request for proposals to build multifamily: It received 32 applications and scored 28 of them. Miller said the city will divvy up $35M-$40M between seven to 10 of these programs and is prioritizing several transactions that meet set priorities: being in a Complete Community, reflecting high opportunity (such as being near high-performing schools in low-income areas), investment into existing property, permanent supportive housing, and being a transit-oriented development. Miller’s team is just dotting the i’s for the procurement processes on these and expects to share the results in a few weeks. None of this money is related to Harvey — this is coming from tax increment reinvestment zones, community development block grants, some old Hurricane Ike money and other funding sources.
Miller is working on action plans of how the city will spend $1.15B coming from the Department of Housing and Urban Development in Q4 for the first round of Harvey relief. Most significantly, HCDD is aiming to speed up the process by immediately starting underwriting when the funds are awarded. Gov. Greg Abbott has mandated that any projects that get a 9% tax credit in the July allocation must close the transaction by the end of October. Miller doesn’t expect any change in the approval process with City Council, but said departments are getting their ducks in a row to be ready when the funds are available.
But New Hope Housing, one of Houston’s most prolific affordable housing developers, sees this as pressure and an opportunity to accelerate its output in a big way.
“Our business model hasn’t changed post-Harvey, but our timeline has,” Horak-Brown said.
She said typically projects don’t break ground until six or nine months after the federal tax credits are approved, but it will be much faster this year. Though there is no deadline to break ground — recipients just need to get contracts and all financing locked down by Oct. 31 — she said anyone receiving a 9% credit will likely break ground in Q4. There is additional risk and expenses from handling predevelopment sooner in the process, and it won’t pencil if they wait more than a few months to begin construction. But even with this pressure for speed, most of these projects will not complete until 2020, leaving little relief in sight for 2019.
NHH has typically worked on one deal a year, but it intends to produce two a year starting with the 2018 allocations “and would be honored to do more than that,” Horak-Brown said. The limitation would be financing; there is a finite number of tax credits to go around, and she wonders if philanthropists in Houston may be a bit tapped out after Hurricane Harvey. The recent tax bill did increase the tax credit allocation 12.5%, which, dovetailing with the Harvey relief funds — “an infusion of capital that we hope is a once-in-a-lifetime experience” — could help get more affordable housing on the ground each year, Horak-Brown said.
NHH primarily serves people at 30% AMI ($10K annual income) or below. Most have been homeless at some point because their budgets allow no wiggle room for emergencies or mistakes. The nonprofit builds solely multifamily, with properties alternating between single-room occupancy and family housing. It operated a temporary shelter immediately after Harvey for six months that housed 295 people, and Horak-Brown saw how many of those people didn’t have a home to go back to when the waters receded. NHH Harrisburg, an SRO property that opened in April, leased 20% of its units to people displaced by Harvey. Horak-Brown is anticipating a high number of displaced families for its next property as FEMA vouchers expire; there are still families living in shelters, she said.
Prior to the hurricane, the city didn’t put much attention on single-family affordable development. Now “it’s an all-hands-on-deck push in order for us to address affordable housing from a single-family standpoint to help our community and our families,” Vignaud said.
Homeownership is important to building communities, Vignaud said — it is tied to schools thriving and students being more likely to go to college. The city is launching a “very aggressive strategy” to put new single-family homes back in the market. Her department will soon launch the New Home Development Program, which will partner with the Houston Land Bank to put sites up for sale for affordable development. That program has $26M of funding from TIRZes and CDBG, and is proposing to build 82 homes. There is also a Community Housing Development Organizations program with $3.9M of HOME funding from HUD, which is earmarked for 20 houses, and $719M in the Neighborhood Stabilization Program pool for four homes.
The city has identified 12 developers to help build single-family affordable homes. Vignaud said there have been nonprofits and for-profits working hard to build workforce housing, but the city wants to increase the opportunities for this to happen more quickly, particularly because Houston has a backlog of people qualified for the down payment and closing cost assistance programs but who cannot find homes to buy.
“This is a very growth-oriented city and a lot of people are doing very well but the cost to purchase a home now is pushing $200K and the income has not kept pace,” Vignaud said. “We want to build beautiful homes, hurricane-resistant homes, energy-efficient homes.”
The city will allow people to do swaps — homeowners can move into a new property built by the city and give the city their former home to sell to another family.
Vignaud said funding is available now for home repair and new home development; her team is just pending budget approval, and then groundbreakings can begin almost immediately because the city has been powering through pre-construction work like site acquisition, surveying and environmental work.
Everyone Bisnow spoke to saw this point in history as one not just to rebuild what was lost in the storm but to set a new standard for affordable housing and build momentum that lasts beyond the next few years. As HCDD Director Tom McCasland put it, “going forward we have an opportunity to create affordable homes and complete communities that thrive and are sustainable; supportive services and transit-oriented development provides access to opportunities that ultimately benefit working professionals, families and the city economy as a whole.”