Dallas Has Until June to Fix a Huge Housing Problem for Poor People. Should Be a Snap.

So, last week the city of Dallas reached an agreement in its battle with HMK, a company the city accuses of operating as a slumlord. Families that faced imminent eviction in West and South Dallas now need not worry being put out onto the street.

They don't, at least, until June, when school is out. That's as far as the reprieve reached in the agreement extends. In the meantime, hundreds of families will be allowed to stay in homes the city has described as decrepit, and in some cases a threat to safety.


That's the problem with reprieves. They only postpone the inevitable, leaving the victim sitting in a cell and wondering: What happens next?

HMK's owners Khraish Khraish and his father, Hanna Khraish, are fed up with being called slumlords by the city and propose turning some of their properties over to Habitat for Humanity. In any case, they insist they will pull more than 300 rental properties off the market and leave the business. For his part, Mayor Mike Rawlings has said he'd like to see fewer renters and more home ownership — of better quality homes — in rapidly gentrifying West Dallas.

Barring an unlikely string of winning lottery tickets finding their way into West Dallas, it's hard to see people paying between $300 and $600 monthly rent qualifying for the loans they'd need to buy and rehab the homes they're renting. But everybody needs to live somewhere, so the question remains: What can Dallas do to provide affordable, decent housing for poor people — not only come June but in the years ahead? How does Dallas promote development in gentrifying neighborhoods without squeezing out the non-gentry?

The Observer put that question and others to John McNellis, a governor and member of the Urban Land Institute, which does research and education on issues of development and sustainability. A Californian, McNellis is a co-founder of McNellis Partners and author of the recently published Making It in Real Estate: Starting Out as a Developer. He was in town late last month for the ULI's fall meeting.

We asked him for his advice, which he gave after offering one important proviso: "I don't think Texans want to hear a Californian tell them how to develop."

Fair enough, but even California has the occasional good idea. Naturally, his was sort of crunchy and vegan, in a manner of speaking. "I think the best approach, and this works better in a red state than a blue, is the carrot approach," McNellis said.

The stick, McNellis said, is to simply require developers to include a number of affordable or moderately priced housing units in their projects in order to get permits to build. That sort of approach has been adopted in Massachusetts, McNellis said, but "Texas doesn't strike me as the type of place that would do that."

No. It does not. Not while red blood flows in our veins.

The carrot approach offers developers incentives to include lower-cost housing. Say, for example, that local codes allow for 20 apartments per acre. The city allows the developer to add 10 more at market rates as long as they agree to add another 10 affordable units, letting the extra higher-priced homes more than cover the cost of the lower.

If that sounds familiar, that's generally the idea offered by Dallas plan commissioner Paul Ridley last year when Trammell Crow Co. was seeking to increase density on a project it's building near Klyde Warren Park.

The city suggested 10 affordable units. Trammell Crow balked. The City Council blinked and ended up with four units and Trammell Crow agreeing to pay for a study outlining ideas about how the city could increase affordable housing. That study was done by the ULI and released earlier this year.

One of the ULI's recommendations was that the city look at creating "in lieu fees," which, to beat the metaphor to death, is sort of like letting developers pay someone else to eat their carrots. McNellis, who has developed projects that included a mix of market-rate and affordable units, is not a fan.

With in lieu fees, developers faced with affordable housing requirements can instead pay money into a fund that can be used to build affordable housing elsewhere — namely, not in their own projects.

"The developers, they're pretty clever," he said. "They're rich for a reason."

The problem, McNellis said, is that developers line up to pay the fees and cities end up with big pots of affordable housing money and bigger NIMBY problems as they try to find places to spend it, leading to concentrations of affordable housing in neighborhoods least able to push back, places like Dallas' southern council districts, where high numbers of low-income apartments have stirred up bitter feelings for years.

"I think those little houses that are in the path to growth will come down. It's just, 'What is Dallas going to do to protect those people?'"

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"They all say, 'I'm for low-income housing, but my district has enough,'" McNellis said.

Creating a regional authority to make decisions about where to place affordable housing could overcome some of the NIMBY issue, but that's not politically tenable in Texas. But in his own developments, McNellis said, he's found that blending in affordable units with market-rate homes allows the lower-priced units to effectively disappear into the mix, another advantage of the carrot approach.

Of course, this discussion of incentives and density and projects assumes we're talking about apartments or condominiums. What's on the line in West Dallas are detached, single family homes, the gold standard in renter-averse Texas. Even in Dallas' priciest neighborhoods, in Preston Hollow and near Highland Park, recent plans for high-end apartments were met with stiff resistance from neighborhoods.

How realistic is it to think that the tiny, wood-frame homes sitting in the path of encroaching condominium buildings on the west side of the Margaret Hunt Hill Bridge will be able to withstand the onslaught of developers?

Not very, McNellis said.

"It's like that old, old expression, everybody wants to go to heaven, but nobody wants to die," he said. "Everybody wants the benefits of density, but nobody wants to pay the costs."

The benefits of denser urban growth are "all the things that lead to vibrant city life," the cool coffee shops, theaters, walkable neighborhoods. And for those who aren't latte drinkers or don't care for theater, there are the downsides to consider in living in a sea of single-family homes. Transportation slows down, infrastructure costs go up, jobs growth is harder to maintain. Life becomes much less affordable.

"In an urban setting ... a 1,000-foot house on a 5,000-foot lot is just tremendously inefficient, and those will get bought up by the sharpies," McNellis said. "I don't think you can stop progress. I think those little houses that are in the path to growth will come down. It's just, 'What is Dallas going to do to protect those people?'"

In the HMK case, we have about seven months to find out.
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Patrick Williams is editor-in-chief of the Dallas Observer.
Contact: Patrick Williams

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