Improving Housing for Working Class Residents: Houston 2025 Workforce Housing Plan

The City of Houston, fourth most populous city in America, and soon to be number three based on its current growth rate. This welcome growth has brought a number of challenges, particularly in areas of transportation infrastructure and housing affordability. If Houston is to continue to thrive and prosper, city leaders must work vigorously to help retain its two main selling characteristics: economic opportunity and affordable cost of living. The City plays a role in maintaining a business friendly regulatory environment that helps attract new employers and retain existing businesses within the city, however, the City plays a very limited role in job creation. In housing, contrastingly, the City can play a more significant role in delivery of moderately priced housing, and in implementation of policies to preserve the City’s housing affordability.

In a research paper published in September 2015, it was calculated that approximately 70,000 rent-restricted housing units were available within Houston, and several thousand private-owned voucher based multifamily units. The household and population analysis revealed that approximately 345,000 households earning below $35,000 annually need below market rate housing; an estimated 30,000 of those households were homeowners in 2012. The difference between the household count and the number of restricted affordable units reveals a gap of approximately 220,000 units, leaving those families having to rely on ‘market’ supply. This fact is not lost on employers, and there is a growing concern that housing within the Urban Core is becoming out of reach for middle income families as the city undergoes re-urbanization.

The Houston 2025 Workforce Housing Plan proposes specific action and policy directives the City should implement to preserve Houston’s affordable housing base for working class families in order to meet the City’s growing housing needs long-term. The housing plan focuses on addressing single and multifamily housing needs in the homeownership and rental categories. The plan further articulates a comprehensive strategy that emphasizes mixed-housing development, where different housing types and housing at various price levels are integrated within the same development, particularly in “opportunity zones”, areas within higher income census tracts in proximity of employment centers. Execution of a strategic short and long-term housing plan will help the city avoid the trap that has taken great cities like Austin, San Francisco and Seattle on an unsustainable path, and would help Houston maintain its viability as a city of opportunity poised to sustain long-term economic and population growth.

GOALS

The Houston 2025 Workforce Housing Plan would be implemented in two phases: a five year short-term plan, and a 10 year long-term sustainable affordability plan. The first phase would span the years 2016 through 2020, while the latter phase continues from year 2021 through 2025. The housing units constructed under this plan would target working families with household earnings ranging from 30% to 120% of area median income (“AMI”). The plan will target development of the below specified number of units by housing category:

MULTIFAMILY

The multifamily plan calls for development of 30,000 multifamily units from 2016 through 2020 and an additional 70,000 units from 2021 through 2025, for a total of up to 100,000 units over ten years. Development of these housing units will be accomplished through both new construction and rehabilitation of existing multifamily developments, and financed by leveraging a number of incentives (tax abatements, land grants), housing tax credits, and implementing policies to accelerate housing development.

SINGLE FAMILY

The single-family plan calls for construction of up to 50,000 owner-occupied homes, and 15,000 rental and rent-to-own housing units.

Owner-Occupied
The plan proposes construction of 20,000 single family homes within Houston’s Urban Core (Beltway 8) from 2016 to 2020, and an additional 30,000 homes within the city limits from 2021 through 2025, for a total of 50,000 housing units. The homes would be sold under affordability guidelines that expands on the current HUD minimum affordability period requirements and includes a 20-year buyback right of first refusal reserved to the City or its designee, where publically owned land is involved as “donated” land.

Single Family Rent-to-OwnThe plan proposes construction and rehabilitation of 15,000 single family homes as rental housing for working class families. Households would qualify for rentals based on affordability guidelines tied to household earnings; a key objective would be converting renters to homeowners over the long term, through 5 to 10 year lease-to-own options subject to specific stringent criteria.

The Single-family housing plans will be accomplished through a concerted effort that relies on leveraging federal housing dollars, providing property tax incentives, loosening income eligibility guidelines, improving city development policies, and rebranding of the Homebuyer Assistance Program (“HAP”) with a focus on a public service worker program. The public service worker program would focus on employees of the City of Houston, METRO, and Independent School District’s within the City limits. 

*HAP provides a $15,000 to $40,000 downpayment assistance grant for families who meet certain income criteria and purchase a home in Houston city limits that meet certain eligibility requirements.

PLAN IMPEMENTATION

The city of Houston 2025 Workforce Housing Plan would be implemented through a strategy that connects various tools and resources into a turnkey model that achieves the stated quantifiable objectives. Furthermore, the plan recognizes that those key components required to execute a successful housing and urban revitalization plan include elements of Housing, Infrastructure, Transportation, Public Amenities, Economic Development, Healthy Living, and Education. The plan anticipates incorporating aspects of these core components at various stages; infrastructure and transportation part of pre-development planning, and economic development and education in the long-term. This will help the City achieve comprehensive revitalization of neighborhoods, creating a modernized livable city platform.

MULTIFAMILY HOUSING

Development of multifamily housing has the dual benefit of achieving density, and incorporating commonly beneficial amenities within or external to a development. The goal of constructing up to 100,000 units within the next ten years is reasonable and attainable by establishing a set of guiding policies that provide City staff, housing organizations, non-profits, and private developers with a clear set of objectives and development targets. Those targets should include proposed housing units to be built within geographic boundaries, de-concentration of housing units, access to lifestyle amenities, and connectivity to transportation. This provides a platform through which the private sector can better align their long-term plans with the City’s stated goals and funding priorities. The guidelines further provide predictability, and helps the City and the development community plan ahead towards fulfilling these long-term goals.

The basic criteria for workforce multifamily housing would require that developments reserve at least 49% of their units for households earning at or below 80% AMI to qualify for treatment as an affordable multifamily development. Developments that meet this basic requirement would be eligible for property tax abatement, fast-track permitting, and flexible unit sizes; high density developments could further benefit from minimum amenity requirements, reduced parking requirements, relaxed setback rules, and possibly modified detention requirements.

The Housing and Community Development Department (“HCDD”) will issue an annual Request for Qualification (“RFQ”) to prequalify apartment developers who would be eligible to propose developments requiring City funding for the fiscal year. Prequalified developers then have the opportunity to propose qualified multifamily developments over the course of the fiscal year that meets the City’s criteria for funding and or incentives. Developers not included in the annual pre-qualification will have an opportunity to submit proposals for any subsequent solicitations from the HCDD for available funding. Developers prequalified during the prior year can simply submit an annual update to their prior year RFQ response, provided they have had no violations with HCDD or the Texas Department of Housing and Community Affairs in the preceding two years.

Once a developer has secured a site and completed preliminary plans, they would have an opportunity to submit an electronic application to the City for the incentive categories they are requesting, including fast-track permitting, tax abatement, and Chapter 380 economic development agreement. The fast-track permitting application would be the avenue to request variances for parking, setback, and detention requirements, though granting of the fast-track permit would confer no guarantee that the subsequent variance requests would be granted once full plans are developed. The application for tax abatements should include a specific dollar request on a per unit basis. After review the City may agree to or modify the tax abatement request based on cost certifications of the development. Development of multifamily would target certain Housing Opportunity Zones defined as areas within Economic Opportunity Zones, Concentrated Revitalization Areas, and High Opportunity Areas with Quality Schools (the City’s Director of Education will coordinate with local school districts on issue of school capacity). Tenant eligibility will range on a sliding scale of household incomes 30% to 120% AMI, and developments funded by TIRZ housing funds would be eligible for modified guidelines based on average market rents within the zip code.

*Note: The fast-track permitting process would be guided by the fast-track permitting proposal attached as an exhibit to this plan.

SINGLE FAMILY HOUSING

Delivery of 50,000 owner-occupied single family housing units would require construction or rehabilitation of on average 5,000 homes annually over the next decade. The strategy proposes maximizing conversion of existing property, belonging to the City and its affiliated entities, to construction of new and improved housing units. Affiliated entities include but are not limited to the City of Houston, Land Assemblage Redevelopment Authority (“LARA”), Tax-Increment-Reinvestment-Zones (“TIRZ”), Houston Housing Authority (“HHA”), and METRO. The plan would prioritize renovation or reconstruction of deteriorating housing stock, within targeted non historic preservation designated neighborhoods, in combination with construction of new housing within areas of heavy concentration of public-owned land; properties owned by LARA and tax-delinquent properties should be the highest priority for conversion.

As the Plan unfolds, the City should seek out opportunities to pursue additional land acquisition in Housing Opportunity Zones, and areas poised for concentrated revitalization. The City-controlled land can then be sold to private developers at a de minimis amount, or can be structured under control of a land trust to take advantage of potential tax benefits. Development of workforce housing should also leverage private land, owned or controlled by the builder applicants, who develop plans that conform to City guidelines for affordable or mixed-income single-family home construction. Eligible projects would qualify for fast-track permitting, and other applicable development incentives. Construction plans where feasible should incorporate sustainable environmental design and construction principles. Developments should include low and high density single family homes, zero lot patio homes, single-car garage requirements, relaxed setback rules, and reduced on-site detention requirements.

The single-family program would allow HCDD to prequalify eligible builders through an annual application process, with builders prequalified in the immediately preceding year simply submitting an annual update to their company profile, provided they have had no violations with HCDD in the preceding year. Builders not prequalified can still participate in the program through private land they control or by submitting a comprehensive application to acquire land from the pool of available land in target areas in a given year.

A builder who has secured site control and completed preliminary plans would have an opportunity to submit an application to the City for the incentive categories including fast-track permitting or property tax abatement. The fast-track permitting application would be the avenue to request variances for parking, setback, and detention requirements, though granting of the fast-track permit would confer no guarantee that the additional variance requests would be granted once full plans are developed. Application for tax abatements would be limited to land owned by affiliated city entities or developments where the land will be held in a trust. Eligible applicants for the tax abatement would be the homeowner or the land trust with the aim of maintaining long-term affordability, and tax abatements would be transferable to new owners meeting the affordability income guidelines.

Development of single family housing would target specific neighborhoods in defined Economic Opportunity Zones and Concentrated Revitalization Areas. Tenant eligibility will range on a sliding scale of household incomes from 50% to 120% of AMI, depending on the zip code. The City currently caps the purchase price for purchasers eligible for homebuyer assistance at a value of 95% of the median purchase price for the Houston area or approximately $160,000 (2015). The City’s HAP home price guidelines need to be modified to a sliding scale model with limits ranging from the 95% to 133% of the median purchase price within the city of Houston, with a provision allowing for further adjustments in neighborhoods and zip codes where the median price is significantly higher. This will expand the pool of affordable housing, and will enable more families to become eligible for moderately priced housing within the Urban Core.

INCENTIVES

Fast-Track Permitting

Eligible developments submit an application for fast-track permitting once preliminary substantive construction plans are complete for a development. The fast-track permit will reduce approval time for various phases of a construction process, mitigate inspection requirements, and shorten the development timeline, thereby providing cost savings on developments that ultimately get passed on to homeowners and renters.

Tax Abatement

The City should implement a standard incentive that provides a baseline tax abatement for construction of workforce housing, based on the category of housing and cost certification criteria; for example an eligible development within a TIRZ could be eligible for a rebate of up to 75% of the increment in taxes. For developments to qualify for the abatement, developers have to prove that the development would be cost prohibitive but for the tax abatement.

The City should expand the Downtown Living Initiative model to high opportunity areas, where City property taxes would be capped at present value, and up to 75% of the tax increment would be retained by the development for a fixed period or approximately 15 years. The program should leverage TIRZ incremental tax rebates in areas such as Galleria, Midtown, Montrose, Energy Corridor, and Medical Center. The City should also dedicate federal funds for projects that eliminate blight by tearing down existing substandard housing and condemned structures.

For developments involving City-owned property or a commitment of City funds, a developer should be required to deliver one affordable unit per $100,000 in financial incentive provided by the City. For developments involving publically-owned land acquired at a nominal amount, one single-family housing unit must be delivered per 5,000 sf of land, and 10 units per acre for multifamily or 15% of total development unit count, whichever is greater. 

Parking/setback/detention requirements

High density developments (40+ units per acre) should have reduced parking ratios, setback, and detention requirements, particularly for developments along a major transit axis with easy access to multi-modal alternative forms of transportation. These developments should also incorporate micro units in order to reduce costs, and maximize site layout; efficiency units should require no more than a 0.75 parking space per unit requirement.

Infrastructure and Economic Multiplier

The City should invest in infrastructural improvements in targeted revitalization areas, where significant private development and public investment is being made. Where feasible, workforce housing development should be targeted to areas with existing enhanced infrastructure or areas undergoing significant infrastructural improvements. The improvements to infrastructure should focus on expanded water and sewer capacity, sidewalks, security apparatus/lighting, parks, bike paths, and public amenities. Coordination of such investment efforts would accelerate the pace of community revitalization within the Urban Core, and will help the city achieve maximum impact.

The next step in community revitalization is economic development, which occurs when an area attracts private investment via incentives, available skilled workforce, or the potential return on investment. Achieving the economic multiplier imperatives requires the City gathering localized data to make the case for retail investment, and to help attract credit tenants for commercial space. The City should also emphasize providing economic and tax incentives for developers willing to invest in retail, and businesses willing to make investments within the targeted areas.

AFFORDABILITY GUIDELINES

Multifamily

Current guidelines for 4% and 9% LIHTC provides affordable units for households earning 30% to 60% of AMI. Affordability housing targets should be stratified on a sliding scale for households at 30 – 80% AMI (standard), and 50 – 120% of AMI for “high cost” developments.

Single family

The affordability cap for the City’s Homebuyer Assistance Program for single family dwelling units should be modified upward on a sliding scale from the current $160,000 to $230,000 for units within the inner-loop and higher income census tracts. Furthermore, the City should consider indexing the affordability cap going forward to the median home values within the City’s Urban Core and the Greater Houston MSA respectively.

LAND/PROPERTY

Develop a comprehensive database of property tracts owned by the City of Houston and its affiliated public entities (LARA, TIRZ, and HHA), classifying sites by size, zip code, and location characteristics. These sites should be pooled by the City through interlocal agreements with the various entities, and offer the property for sale or auction at a “de minimis” amount for construction of workforce housing. For larger scale (20 units or more) single-family owner-occupied developments, the possibility of establishing a land trust should be explored for the dual purposes of instituting restrictive covenants and securing tax relief benefits for the development.

COMMUNITY ENGAGEMENT

HCDD in conjunction with TIRZs, housing advocates, community groups, housing developers, business organizations, and the City need to develop a long-term education and awareness campaign to promote the comprehensive workforce housing plan. The campaign should focus on the importance of promoting housing and community revitalization efforts that maintain Houston’s affordable cost of living, and to encourage redevelopment of Houston’s neighborhoods in order to expand the tax base. The engagement efforts should also promote homeownership, and inform the general public of various tools and resources the City, its affiliated public entities, and community organizations have available to assist those seeking housing opportunities.

SUMMARY

The city of Houston has long been known as a city of opportunity for working families due to economic opportunity and housing affordability. The downturn in the energy industry, and rapidly escalated housing costs, require the City take decisive steps to avert a housing crisis. Implementation of a workforce housing plan for Houston will help the City retain its affordable housing stock, and expand the property tax base, further enabling the City to maintain its standing as the leading metropolitan city where working class families can work and raise their families.

The City housing department should conduct a Comprehensive Housing Market Analysis to determine the current housing stock by category, home values, and rental costs. This analysis will provide factual data on current housing inventory, the age of the housing stock, and condition of dwelling units in order to identify areas where the housing gaps exist. This data would then be applied and used to improve the Houston 2025 Workforce Housing Plan. 

Glossary of Terms

380 Agreement - An economic development incentive that provides reimbursement through tax abatement to developers for investment in public infrastructure.

CHMA – Comprehensive Housing Market Analysis: A study conducted of a defined market area to capture quantitative housing data on housing including unit count, type, age, condition, and values.

CRA – Concentrated Revitalization Area: A set geographic area targeted for focused comprehensive revitalization in areas of housing, infrastructure, and economic enhancement.

Developers – Includes private developers, non-profit organizations, Community Development Corporations

DLI – Downtown Living Initiative: An initiative by the City of Houston that offered a tax incentive of $15,000 per door for developers who build new multifamily apartments on the eastern part of Downtown Houston.

EOZ – Economic Opportunity Zones: An area of town characterized by employment opportunity, available skilled workforce, and significant private investment.

HOA – High Opportunity Area: An area or census tract where residents earn in the top 1^st or 2^nd quartile of income that features good schools and public amenities.

HAP - Homebuyer Assistance Program: Program of the City of Houston Community Development Department that provides financial grants for downpayment assistance to home purchasers who meet income eligibility criteria, and purchase homes priced at or below 95% of the area median home purchase price.

HCDD – Housing and Community Development Department: The City of Houston department responsible for administering various housing programs, and distribution of federal and local housing funds.

HHA – Houston Housing Authority: An independent agency responsible for administering the HUD housing voucher program, and who develops and manages project-based housing voucher developments.

LARA – Land Assemblage Redevelopment Authority: A City of Houston entity responsible for acquisition and assemblage of land in targeted neighborhoods.

LT – Land Trust: An arrangement whereby a private entity (the “trustee”) agrees to hold title to property for the benefit of another party or parties (the “beneficiary(s)”).

TIRZ – Tax Increment Reinvestment Zone: A public entity created by the City of Houston that operates within a specific geographic boundary where taxable values are “frozen” at the time of creation, and any increase in taxable values and subsequently taxes paid is captured for reinvestment within the defined boundary.

Urban Core – Area within the 610 loop, and certain fully developed corridors within Beltway 8.

IMPLEMENT FAST TRACK PERMITTING TO AUGMENT HOUSTON’S GROWTH AND AFFORDABILITY
by: Laolu Davies-Yemitan (September 2015)

Houston’s real estate market has been on an accelerated growth path over the last three years, however, a leveling off of prices is the optimistic outlook in the shadow of $50 per barrel oil. While consumers stand to benefit at the pump, households will continue to feel the pinch of rising unaffordability, tight supply, and fewer new projects to close the housing gap. The City has few options it can exercise to keep up its momentum, and one of those would be to implement a Fast-Track Permitting Program to make the development process more streamlined and predictable. This would also help facilitate the construction of more affordable housing options as the efficiency achieved would help alleviate ambiguities in the permitting process, limit construction delays, and drive down construction costs for the end users, Houston residents.

The City’s implementation of a fast track permit process for construction plan approval would share similarities with what has been done in cities like Austin and San Antonio. In Austin, the fast track permit process allows site development to begin while a site plan application is undergoing review by the City. The process authorizes the director of development to grant approval of a fast track permit, if in the director’s opinion, the developer meets certain requirements, including but not limited to: undergoing training for fast track certification, agreeing to a pre-construction conference, posting a cash fiscal surety for erosion and sedimentation control, and authorizing the City to draw on the cash fiscal surety.

In San Antonio, the Development Services Department has instituted fast track permits for various aspects of commercial construction including plumbing, electrical, and mechanical. To be eligible, a development needs to first obtain a fast-track permit for its interior finish structural construction. Contractors submit an application, pay a non-refundable building permit fee based on the estimated cost of construction, and submit the full design package for the interior finish. Obtainment of this preliminary permit renders the project eligible for fast-track permits for plumbing, electrical, and mechanical, provided applications are completed for each, and similar stipulations are complied with.

The City of Houston should develop its own fast track permit process for commercial and residential construction by applying elements from the aforementioned cities. Fast-Track permitting should be applicable for various construction categories including site work, water & sewer utilities, fire, mechanical, plumbing, electrical, and fire. The City should begin by establishing a Fast-Track Certification program for contractors who meet certain minimum standards, complete the requisite training, fill-out an application, and submit the required fee. The City would then establish an ad-hoc Fast-Track Committee consisting of officials from the various permitting departments that would meet weekly, where contractors can present to them during a pre-construction conference.

For projects to be eligible for fast track permitting, the general contractor must first obtain Fast-Track Certification. Next the contractor needs to sign-up for a pre-construction conference, where the City’s Fast-Track Committee will meet on a weekly basis to review the entire construction plans for each fast-track permit being requested. The construction plans need not be final, but would meet a minimum completion threshold to be eligible for preliminary review by the Fast-Track committee. If the pre-construction conference yields a preliminary approval from the committee, the project is ruled eligible for fast track permitting for each step of the permit approval process, provided the project complies with the City’s requirement for each fast-track permitting category.

Instituting the above proposed fast track permitting process will confer significant benefit to the City of Houston, and to developers, owners, and end-users. The City should begin by running a pilot Fast-Track Permitting program on qualified projects that promote Affordable Housing, Community Revitalization, and Public/Private Partnerships. Once the pilot yields measurable results, then the program can be expanded for other project types that meet the stipulated requirements. Successful implementation of the program will make the process of completing projects more efficient, cost effective, and would not abridge the rights of residents and neighborhoods to weigh in on certain projects.