Stacked Deck

Giving penny-ante politicians a say over lucrative affordable-housing developments seemed like a good idea--until the FBI came calling

Developers like to say that the state scores their tax-credit applications like a beauty contest: The standards may be the same for everyone, but there is still a lot of subjectivity in deciding who walks away a winner. The state, however, maintains that it evaluates tax-credit applications as objectively as possible. TDHCA staff score each application for 24 different categories that include how many residences are provided to various income levels, the level of debt the developer accrues, the size and quality of the homes, and the types of social services--such as job counseling and daycare--provided to the residents. The state also awards points for various amenities, including fitness centers, fencing, covered patios and self-cleaning ovens. For senior housing complexes, developers are even rewarded for building lawn bowling courses, horseshoe courts and television sets showing Matlock reruns. (OK, one of those is false.)

"The better developers are building B-plus apartments," says John Henneberger, co-director of the Texas Low Income Housing Information Service, an Austin-based advocacy group. "These are nice, suburban, mainstream apartments with computer rooms, swimming pools, clubhouse and covered carports."

Of course, your development could rival a Turtle Creek high-rise, but you won't win a dime of tax credits without letters of political support. Thanks in part to a 2003 law, enacted after Potashnik had a run-in with a poor San Antonio neighborhood that objected to one of his projects, prospective developers are virtually required to shout out their plans from every rooftop in town. The list of people they are mandated by law to notify include state and local elected officials, school superintendents, school board trustees and area homeowners. In addition, the state is required to score applications on whether developers received written statements from the board of trustees at the local school district as well as input from state and municipal officials. In cities like Dallas, which has a high concentration of tax-credit properties, developers must first receive approval from the city council and state senators and representatives. Sometimes an application may also need to go through the Plan Commission, and in other cases, the Dallas Housing Finance Corp., a council-appointed board. The TDHCA board will also take into account letters of support or opposition from local elected officials, school system officials and any other individuals who want to provide comment. If Dallas elected dogcatchers, their blessing would likely be courted as well. "Everybody is going to have a voice in this," says Gordon Anderson, the spokesman for TDHCA. "We're obligated to do that as a part of our legislation, but even still, we want to make it as easy as possible for people to have a say."

When developers are done winning over a sprawling cast of public officials, they'll need to turn their attention to the local neighborhood association. If a qualified neighborhood group backs your proposal, you may win 24 points. In a process where developers can miss out on a fortune in tax credits based on a few points, losing a neighborhood's approval could cost a developer millions in future revenue as well as the thousands of dollars already spent on submitting the application.

Despite the wealth and power of tax-credit developers, the way the program is structured, a neighborhood association can kill a proposal by taking a quick vote in a member's basement during half-time of a football game. Most neighborhood associations don't like affordable housing, wrongly linking its current incarnation with old-style public housing projects. So, developers often go to absurd lengths to placate community groups and their elected representatives, often appeasing the neighbors' prejudices against the working poor.

In Fort Worth, several neighborhood associations signed memorandums of understanding with tax-credit developers that required all prospective tenants to undergo a credit check and provide a two-year job history, a litmus test that the associations couldn't possibly force upon any of their middle-class neighbors. That same agreement required the developer to "set the rental rate at the highest level" allowed by the program in order to "enhance the quality" of the surrounding neighborhood. It also mandated that the complex employ private security patrols.

Oddly, due to a quirk in the program, if an affordable-housing complex is planned in an area without a neighborhood association, the developer can only win 12 out of 24 points in the community support category. So last year, the attorney for the Odessa Housing Authority incorporated a local neighborhood association that, in turn, "supported" the agency's plan to develop an affordable-housing complex, earning the agency 24 points on its application. The state later rescinded the points.

For developers, winning the support of neighborhood associations adds up to a series of procedural headaches that can thwart even well-intentioned proposals.

"If I go to a zoned piece of multi-family property and I want to build a high-end apartment building, there is not a single public hearing I have to go to," says Brent Stewart with Trammell Crow Residential. "But if I want to build an affordable development, I have to get letters of political support and the support of the local neighborhood association. If you really think about it, you're not going to get their support most of the time. I've spent a lot of time with neighborhood and community groups and neighborhood leaders, and I've lost a lot of money on deals that were killed for the wrong reasons."

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