By DIANE XAVIER
The Dallas Examiner
Dallas is one of the fastest growing cities as more and more people move to the city. One of the goals of the city is to create more affordable housing such as affordable rental and home ownership housing. One of the ways the city does that is through the Notice of Funding Availability program which promotes the development of affordable multi-family and single-family housing.
The Housing Policy Task Force hosted an online meeting Feb. 11 to discuss proposed changes to the mixed-income housing development bonus and also discussed proposed changes to Chapter 20A-4.1 of the Fair Housing ordinance.
The purpose of the meeting was to review the mixed income housing development bonus and a proposed One Dallas program to be developed that allows for on-site development or a fee in lieu of development in exchange for development bonuses.
Also, it looked to amend chapter 20a provisions that require developments that receive financial incentives to reserve 10% of their units solely for voucher holders.
Amendments to the new construction/substantial rehabilitation section of the Comprehensive Housing Policy equity audit were also discussed.
City of Dallas Housing Strategy Manager Pam Thompson opened with the presentation.
“Staff is beginning to develop options for developers who want to take advantage of the mixed-income housing development bonus which allows additional development rights in exchange for providing affordable units,” Thompson said. “The proposed changes would allow a developer to build the units off-site, donate land in lieu of development, partner with a nonprofit to develop the units, or pay a fee into the housing trust fund to allow the money to be used for gap financing of other mixed-income developments.
“Regulatory incentives are incentives that arise from modified city regulations like zoning or rules about financial incentive to encourage development of it. It is important to note that a regulation can either incentivize or stymie development and it can either advance or worse equity issues in the city.”
Thompson said rigorous negotiated studying requirements can improve the quality of a development, but they can also add to the developments cost. Also, that economic development must outweigh the cost of the incentives.
“Otherwise, they don’t work, and housing development incentives must make financial sense,” she said. “And of course, our housing comprehensive policy should insure equity.”
To get a little background, Thompson noted that land use regulations and economic development policies help to direct, incentivize or even hinder development. She said that
rigorous zoning requirements can improve the quality of a development but also add to a development’s cost.
“Economic development incentives must outweigh the cost of complying with the requirements of the incentives,” Thompson said. “Housing development incentives must make financial sense. Comprehensive Housing Policy should ensure equity.”
In 2014, the city signed a volunteer compliance agreement with the United States Department of Housing and Urban Development that required a planning effort that encouraged both the development of affordable housing throughout the city and greater economic opportunities in areas of concentrated poverty.
“This charge underlies the philosophy of the mixing component to add affordable housing and areas of strength where it might not otherwise be financially feasible and encourage market rate and mixed income development in areas that have been overlooked,” she said. “We started work on the mixing components in 2016 council direction. So with that context in mind, let’s look at the mixing combined. The purpose of the program is to create mixed income development all across the city by providing zoning bonuses from multi-family developers in exchange for onsite affordable housing.”
She said on-site provision is far more financially viable in low- and mid-rise buildings with lower construction costs and lower market rents.
“As you’re aware, the development process is slow,” Thompson said. “Properties were approved in 2017 and 2018 are still under construction. We have six more developments that are under construction and the six development’s currently under construction are all low and mid rise developments together. They are producing about 100 reserved units at 1600 total units. The Mixed Income Housing Development Bonus works best with stick built apartments that offer moderately priced market rents. High rise developments on expensive land are financially harder to accomplish but these developments offer great opportunities for eligible households.”
Thompson said mixed income can create mixed income development, but on site provision can be expensive. So the organization wants to touch on this new proposed program called One Dallas that would allow for onsite development of affordable units. Off site development dedication or a fee in lieu of development in exchange for development bonuses. This flexibility would be to improve usage of the mixed income program and potentially for new developments.
“The proposed changes would allow a developer to build the units off-site, donate land in lieu of development, partner with a nonprofit to develop the units, or pay a fee into the housing trust fund to allow the money to be used for gap financing of other mixed-income developments,” Thompson said. “For example, setting aside 10 units in an expensive high rise in Uptown could cost $5 million dollars. And instead of producing those 10 units, the developer would pay a fee into the housing trust fund, which would then be used to provide gap financing for hundreds of units. Or mortgage assistance for dozens of homes. The thing that we are kind of looking for feedback on is the guardrails for how that money gets used and how we make sure that this is equitable.”
BAE economics is developing the Nexus Study which will propose a fee in lieu of on-site provision.
“Staff is working with a consultant to develop the OneDallas program, collect stakeholder feedback, refine the program and present it to the Dallas City Council late spring or early summer,” she said. “Several recent studies have indicated a deep need for additional housing at all price points, but particularly for families under the median income and these initiatives complement our federal programs by creating mixed income communities and high opportunity areas and by creating local funding streams that can be used to provide gap financing for developers.”
Next, Thompson discussed the proposed changes to Chapter 20A-4.1 of the fair housing ordinance.
“This portion of our fair housing ordinance was amended in 2016 to require multifamily developers who receive funding from the City to set aside 10% of their units and lease them only to voucher holders,” she said. “Since this change, zero developers have used tax increment financing funding, which means that we are missing out on hundreds of mixed-income units. Staff proposes to change this ordinance to require developers not to discriminate against voucher holders. The idea here is to allow financial subsidies to go forward and to ensure that folks are not allowed to discriminate against voucher holders without making a 10% solely to voucher holders or else you have to hold the unit vacant. We are hoping that this change will actually increase production of developments that are available.”
Afterward, Area Redevelopment Manager T. Dan Kalubi, gave the presentation on the equity audit of the comprehensive housing policy.
Housing and Homeless Solutions Committee Chair Casey Thomas had asked the department to conduct an Equity Audit of the Comprehensive Housing Policy.
“Between August and December of 2020, staff received five NOFA applications for multifamily developments and applications were underwritten by a third-party underwriter,” Kalubi said.
At present the CHP limits the city of Dallas participation in projects by 9% of HUDS 234 condominium housing units funding limits.
“And in 2018, and the reason that we say 2018 is because that’s the year that the housing policy is written. In 2018, those limits are as follows: we can subsidize an efficiency unit for $58,000, a one bedroom for $67,000, a two bedroom for $81,000, a three bedroom for $106,000 and a four bedroom for $116,000,” he said. “In our comprehensive housing policy, the 9% rule essentially says that if the city of Dallas is going to participate in a project, it can only allocate up to 9% of the HUD and two, three or four limits to a project. The city of Dallas could, if they are sensible, if you know the need was there, subsidize the construction of an efficiency unit to the tune of $58,000. What the comprehensive housing policy states is that we can only subsidize $5,290 dollars per unit and this all doesn’t just include federal funds. This includes all funds.”
He said the housing policy does not just extend to travel funds but is the housing policy for the entire city.
“So whatever funds we have, they are all subject to whatever the rules are in the end and right now the CHP does not make a distinction between federal funding and nonfederal funding. So even if we had nonfederal funds that we wanted to put into a project, we would be limited to this 9% rule,” Kalubi said. “This is a rule that constrains the amount of subsidy that we can participate in as a city for projects. And as we get aggressive about affordable housing, we need to look at the entire CHP and recognize that some of the clauses in there may need clarity but what we are hoping to convey here is that at present a limited way we can participate, and our recommendations is that we get rid of the 9% rule.”
Kalubi said the other issue they are recommending for change is a permanent support of housing carve out rule. So at present, this does not differentiate between permanent supportive housing developments and non PSH developments. Subsidies are structured in the same manner for all projects, regardless of requirements and financing.
“The characteristics of a permanent supportive housing project that differentiates it from a non-supportive housing project is that those units require extensive case management and supportive services,” he said. “And residents are often individuals that are experiencing homelessness. At the end of the day that equates to higher operating costs which then yields lower net operating income. So we could potentially be adding extra stress financially to these projects by not taking into account the reality of the residents that we are trying to serve. So our recommendations based on the conversation that we have just had is to remove the 9% rule in the comprehensive housing policy to remain consistent with HUD rules.”
Kalubi said the second recommendation is the flexibility to structure subsidy as forgivable loans for projects including PSH units.