A new report by the U.S. Government Accountability Office (GAO) identifies fair housing concerns with the way the State of Texas distributes Low Income Housing Tax Credits. As we have previously written, the ability of Texas state representatives and local officials to impact the scoring of tax credit applications creates what the report calls a “discriminatory influence…on where affordable housing is built.”
When developers apply for tax credits to build subsidized housing in Texas, they are scored via a complex system that, among other criteria, considers the input of local governments, neighborhood organizations and the state representative from the area where the development would be built. Only state representatives have the power to deduct points from an application, submitting a letter that awards a proposed development with anywhere from eight to negative-eight points. In practice, any score of less than eight points – that is, if the representative disapproves or remains neutral on a proposed development – makes it very unlikely that the project will score well enough to be awarded tax credits. Similarly, not procuring either a resolution of support or no objection from the local governing body almost guarantees that a project will not receive an award. In this manner, Texas state representatives, city councils and county commissions exercise effective veto power over affordable housing in their districts and jurisdictions.
A Texas Observer cover story on state representatives blocking tax credit developments noted that “NIMBYism has rarely had such a powerful cudgel.” And indeed, the representative and local government points have essentially built local prejudice against the tenants of affordable housing into the state’s official system. As we’ve seen in Dallas, Frisco, Houston, Tomball and again and again around the state, vocal groups of neighbors opposed to subsidized housing developers often pressure politicians to advocate for exclusion. While these neighborhood organizations are given their own point category in the tax credit scoring system, they are often the force driving the more consequential opposition from representatives and local governments, as well.
This bias is why the GAO report, issued to members of the U.S. Senate Judiciary Committee, recognized that “scoring criteria (like letters of local support) can influence project location and HUD officials have expressed fair housing concerns about these letters…These HUD officials suggested that eliminating local approval or support requirements or preferences from [state tax credit allocation plans] should be top priorities.“
The GAO informed senators that “in Texas, concerns also have been raised about the [local support] requirement, but its allocating agency continues to require letters of support. Specifically, in 2013, the state’s Sunset Advisory Commission recommended eliminating letters of support from state senators and representatives because the commission believed the letters gave too much power to officials far removed from the process.”
Texas used to require letters from state senators to be included in tax credit scoring as well, but after the Sunset commission found that “letters are not always representative of the community as a whole, and are regularly contested,” the Texas Senate voted to remove themselves from the process. But House members from the suburban Houston area covered in the Observer story fought to keep their scores intact, even advocating for more points to be awarded or taken away by representatives.
The GAO report brings renewed attention to this important fair housing conflict, which came to the attention of members of the Texas House Urban Affairs Committee at their recent interim session hearings on housing issues. You can read the full public report (a more detailed version with confidential tax information was provided to the U.S. Senate) below: