Credit Risks

As we explained earlier this year, the FBI investigation into bribery at City Hall and beyond had everything to do with how affordable housing developers needed to garner political support at all levels before they could receive millions of dollars in tax credits from the state. With elected officials able to put the kibosh on a lucrative development with a single letter, a developer like Brian Potashnik practically made it part of his business plan to forge close ties to Mayor Laura Miller, city council members Don Hill and Leo Chaney and, of course, state Representative Terri Hodge, whose support was rewarded with rent subsidies that added up to $32,000 over four years. Anyhow, I think the investigation will almost certainly produce indictments and make the careers of several local defense attorneys, but in the short term, it already seems to be having an effect on the local affordable housing market.

The Texas Department of Housing and Community Affairs, the state agency that awards the lucrative tax credits, has already received proposals from developers across the state to build affordable apartments. And guess what? Exactly two are proposed to be built in Dallas, compared to seven in Houston. And one of the Dallas proposals submitted this year is a renovation of the abandoned Fairway Crossing, so that doesn't exactly count as a new development. Other interesting facts: Neither Brian Potashnik nor his nemesis Bill Fischer have submitted any proposals; the Fairway Crossing project, which was submitted last year by Potashnik, now has a different owner.

With Dallas Mayor Laura Miller already on record saying that TDHCA shouldn't award tax credits until the FBI investigation concludes, it's no surprise that few developers wanted to spend hundreds of thousands of dollars on preparation costs for a proposal and then try to convince the state to defy the mayor's wishes. Or, alternately, like a playboy without his Bentleys, a developer who can't bribe his council member has no game. --Matt Pulle

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