Without More Funds, Houston’s Housing Authorities Can’t Keep Up With Affordable Housing Demand
The Houston Housing Authority and the Harris County Housing Authority are racing to build more affordable housing in the greater Houston area, with at least 30 approved projects underway between them, the most in a number of years and a significant expansion of their portfolios.
That growing pipeline is part of a serious effort by city leaders to address the economic hardship facing many low-income renters in Houston, a situation that has only intensified since the onset of the coronavirus pandemic.
But a lack of adequate federal funds and not-in-my-backyard attitudes have made it exceedingly difficult for housing authorities to catch up with demand, calling into question whether Houston will ever be able to properly house its low-income population.
Houston’s affordable housing crisis has been bubbling for years. Even before the pandemic, the city ranked fifth in the nation and first in Texas for having the most severe shortage. There are only 19 affordable housing units for every 100 households in need, or about an 80% deficit, according to the National Low Income Housing Coalition.
The demand for public housing, affordable housing and housing vouchers is so high that waiting lists can only be opened by Houston-area housing authorities a few times a decade. As of March, there were 57,326 active applications for the Houston Housing Authority's Low-Income Public Housing waiting list, and 25,571 applications on the voucher programs waiting list.
Houston Housing Authority interim President and CEO Mark Thiele said that to “meet the moment” and combat the intense level of demand, the housing authority has become extremely aggressive about pursuing every possible method to provide affordable housing.
Right now, HHA has 22 active affordable housing projects that have been approved and are in progress, totaling about 6,500 units. The majority are mixed-income projects being developed in partnership with private developers, which will ultimately provide around 3,500 affordable units.
The Harris County Housing Authority, which oversees a smaller portfolio of affordable housing, has eight mixed-income underway, of which six have broken ground. When complete, those properties will total about 1,500 units, Harris County Housing Authority Executive Director and CEO Horace Allison told Bisnow. This will almost double HCHA’s portfolio — it oversees 10 existing properties.
The U.S. Department of Housing and Urban Development just distributed $41.7M to support affordable housing development and maintenance across Texas, 16% of its most recent national disbursement and a huge increase over the year prior.
Another mechanism to address the affordable housing shortage is to offer rental assistance through the Housing Choice Voucher Program. Recipients of those vouchers are able to choose housing in the private market and pay a certain percentage of their income toward the rent, while the housing authority pays the remaining amount.
Landlords have to be willing and accredited in order to accept tenants with housing vouchers, and renters must meet a range of eligibility criteria in order to qualify. It’s a faster solution than building new housing, but there’s a catch: The Houston Housing Authority only has about 18,000 vouchers, and the Harris County Housing Authority only has about 4,900.
In comparison, New York City’s three housing authorities have somewhere around 200,000 housing vouchers between them, while Chicago, a city comparable in size to Houston, has around 73,000, according to Thiele.
“We apply for every possible additional voucher. And we're very good at that. But there's nowhere near enough for the need in Houston,” Thiele said. By his estimate, Houston needs about 90,000 housing vouchers to be able to address the level of need across the city right now.
More vouchers could be coming next year. President Joe Biden released a preview this month of his fiscal year 2022 budget, which proposes a 15% increase in funding for HUD. That money would create an additional 200,000 housing vouchers for low-income renters across the country.
How many of those vouchers would go to Houston is unknown, but it’s unlikely to be enough to offset the affordable housing shortage, according to Thiele.
“I appreciate that the administration just proposed an additional 200,000 vouchers, a 15% increase, in the president's budget. But you know that's aspirational. And I aspire with the administration, but it's not enough,” Thiele said.
What affordable housing is getting built looks different than in past generations. Housing authorities have been moving away from the older public housing model, where only very low-income people were placed together, for the last 30 or 40 years. Now, the preference is to build mixed-income housing, integrating the lower and higher ends of the spectrum in the same environment.
In Texas, housing authorities have turned to using public facility corporations to boost their pipeline of affordable housing developments. PFCs are nonprofit subsidiaries that are used to acquire or build properties that will be dedicated to public use.
As a subsidiary of a housing authority, PFCs retain all the same rights and exemptions as their parent but are able to partner with private sector financing to acquire, renovate, repair and build affordable housing. But crucially, a property acquired by a PFC does not have to pay property tax.
That’s a powerful incentive for developers and lenders to get involved in affordable housing. Both Thiele and Allison noted that interest from private developers in partnering with the housing authorities has not waned, despite the pandemic and the economic downtown.
The Houston Housing Authority began using the PFC structure in 2018, when it acquired Milano Apartments in Westchase. Since then, HHA has used PFCs several more times to acquire mixed-income affordable housing in Houston, offering an alternative to the limitations of federal funding.
But as the pipeline of affordable housing projects created through PFCs grows, some opposition has formed. Groups like the Houston Realty Business Coalition have argued that exempting these properties from taxation is eliminating crucial tax revenue from Houston’s coffers, at a time where the city is financially strapped.
Thiele said that despite the pushback, the Houston Housing Authority has not been deterred from using the PFC mechanism to acquire and build more affordable housing.
“My opinion would be, expand the toolkit. And if there are concerns about it, then refine it, and improve upon it. But let's not talk about improving upon it, and [then] limit it to the point where it's not useful,” Thiele said.
Since the adoption of PFCs by HHA in 2018, the pipeline of new affordable housing projects has grown. Though he did not offer specific numbers, Thiele said the number of projects approved in 2020 was more than in 2019, which was in turn an increase from 2018.
However, there can be drawbacks to mixed-income housing. Middleton noted that when project financing is a blend between market-rate housing, affordable housing and public housing, the deal depends on a certain level of return. That can push rent requirements higher, from 50% area median income affordable units into the 80% or higher range. Those properties can still function as workforce housing, but they don’t cater as well to those people on lower incomes.
“You're going to have to, at some point, eat into just how deep the affordability can be for the mixed-income housing,” Middleton said.
The solution to Houston’s affordable housing woes is two-pronged: a boost in both private and federal money, as well as public support, according to Allison. Housing authorities frequently run into community and political opposition, usually stemming from misconceptions about the people who seek affordable housing.
“It's called money and the will to break the cycle of anti-affordable housing. And that's a whole long education process, because of ignorance in the community, where people don't really understand the benefits and the outcomes of really affordable housing,” Allison said.
Texas also has a state law that allows landlords to refuse housing to a prospective tenant, based on how and where they earn their money. That includes whether or not they receive funding from a federal housing assistance program.
Middleton said housing vouchers could be much more powerful in Texas if the statute was overturned, eliminating discrimination against voucher holders. But in a strange twist, the pandemic has actually boosted the popularity of vouchers with landlords.
“We've seen during the pandemic that demand for voucher holders as tenants have actually increased. Because it turns out, when no one's looking, getting a check from the federal government — it may be a couple days early, maybe a couple days late — is a good thing,” Middleton said.