Balancing Housing Needs is Essential in Shadow of Fountainview Controversy

The affordable-workforce housing needs of Houston are further glaring in the aftermath of the “Tax-Day” flooding event in April, which affected more than 1,800 apartment residences just in the Greenspoint area. The City stepped up to house over 150 families in hotels, and worked with local agencies to provide emergency shelters throughout the city for hundreds of others impacted. A key obstacle during the event was the difficulty of locating units, that could serve as temporary or permanent housing, to transition families displace by flooding into. Four months later, a significant number of residents remain displaced, and numerous tenants have recounted stories of the additional nightmare of landlords who refused to let them out of their leases, forcing them to remain in uninhabitable units. And a significant number have had difficulty finding a housing alternative that falls within their price range, so their lives remain on hold as they hold out hope for a solution.

The Greenspoint narrative is a snapshot of the housing challenges and difficulties faced by so many, a challenge further deepened by Houston’s seeming inability to take full advantage of opportunities to capitalize on developing workforce housing leveraging federal housing tax credits. A recent decision not to authorize a resolution for 4% Housing Tax Credits, places the future of the 2640 Foutainview development, proposed by the Houston Housing Authority (HHA) in limbo. The debate on the development has often overlooked the central issue of the critical need to develop affordable workforce housing in all neighborhoods, particularly in thriving communities like the Galleria. The HHA operates under federal guidelines that require developments in census tracts with higher incomes and good school ratings, to balance out development in historically under-invested communities.

Opponents of the Fountainview development have argued that the $53 million ($240,000 per unit) price tag of the 233-unit development is too high, rather than considering the price is reflective of the cost of building a high quality development on high priced land. Factor in historically high costs of construction, and the need to keep the development unit count low due to school and housing concentration concerns, and you can see how the deal arrives at such a price tag. Development plans usually start out with a loosely constructed financial analysis, but as plans become final, adjustments are made to fit the budget, so it’s reasonable to expect that the development could end up at a lower price than initially proposed. The other factor detractors raised is the $6 million developer fee, which fits within the allowable guidelines of fees for such a development. The fee, only accessible to HHA if the development moves forward, are likely going to be channeled towards other developments they have planned, and it’s likely that HHA would have reduced their fee or deferred a significant portion of it, to help the financing for the deal make, as private developers do in similar circumstances.

Another often misstated assumption has been suggestions of alternative ways HHA could have utilized the construction funds to house more people. The development is slated to be financed with both federal and private funding sources, which come with specific requirements on how those dollars have to be spent. The portion of the financing covered by federal Community Development Block Grant (CDBG) funds, is earmarked by HUD for development of affordable rental housing. Similarly, the federal housing 4% tax credits, have to be sold to a third-party private investor, who provides the cash equity for the project, in exchange for the developer expending those funds in construction of the development. Lastly, the debt financing would require HHA collect sufficient rents in order to cover the annual mortgage payments on the loan. You can clearly see that each funding source for the development, have specific requirements of the funds being utilized to construct a housing development, so without a planned development, again there is no $53 million for HHA to spend.

From the community’s perspective, a workforce housing development is proposed in an affluent area with residents, who chose to live there in part due to the quality of the neighborhood elementary school that’s at full capacity. Developments with the ‘affordable’ or ‘low income’ tag are usually a non-starter, and in numerous instances over the past ten years, such proposals have pit neighborhoods against developers. Communities have found reasons to justify their opposition to such developments, citing factors such as impact on schools, traffic, infrastructure inadequacies, and in this case cost. Over the past few years, several market rate apartments were built tangential to Fountainview Drive, but there are no public accounts of the neighborhood rising up in protest over any of those developments. However, once the proposed plans for the apartments became public, residents found every reason to drive opposition to the development, which makes one wonder, why the sudden angst?

Local news publication have documented what has been a rising tide of workforce housing deals being shelved due to not-in-my-backyard (NIMBY) attitudes. These have included proposals by both the Houston Housing Authority, and separately the Harris County Housing Authority, that were publicly and privately opposed by elected officials who were reacting to community opposition. 

The HHA ultimately sought to move forward with this development after several other proposals for affordable housing development were rejected over the past few years.

Existing federal law, and a 2015 Supreme Court ruling on a case filed in Texas (ICP vs. TDHCA), have led to HUD emphasizing the goal of ‘Affirmatively Furthering Fair Housing’ (AFFH), and we now have codified into law that ‘disparate impact’ is a considerable factor in how federal housing dollars are spent by state and local housing agencies. Put in laymen’s terms, these two precepts means local and state housing agencies can be held accountable if their spending of federal housing dollars further concentrates affordable workforce housing in low-income and minority communities, regardless of whether they intended to or not. HHA like other housing agencies therefore now have an obligation to pursue developments in affluent areas like the Galleria, with the goal of dispersing pockets of poverty.

A separate overarching issue the City has to reckon with is the rising cost of housing for both renters and homeowners. In the period from 2009 to 2014, several submarkets in Houston experienced a 50% increase in rental and home values. While rents have receded temporarily in some of those submarkets, rental rates are still much higher than they were three years ago, and land costs remain stubbornly high, propping up home values. These facts lead any close observer of housing and demographic trends to the conclusion that Houston needs to act urgently if it hopes to preserve its existing stock of low to moderately priced housing, and must be resolute in implementing a plan to build more housing that can remain affordable long-term.

Houston needs to build workforce housing in all parts of the city, and in doing that has to be intentional in factoring how developments are situated near existing physical infrastructure and access to multimodal transportation. As families with higher incomes make decisions on where to live based on proximity to work or their children’s school, the City must be conscious, when building workforce housing, of the proximity needs of the families that are served. HHA’s data revealed 15,000 potentially eligible residents work within a one-mile radius of the site, who travel more than 10 miles to work each direction. These individuals contribute to the Galleria community, and given the opportunity should be availed a chance to take residence there. Furthermore, there exists within the Gulfton, Sharpstown, and Tanglewilde areas, a significant contingent of Hispanic and African American families who already live within close proximity of the Galleria, who are left with only aging and deteriorating apartments as their choice of housing.  It goes without saying that these hardworking Houstonians deserve to have quality housing options available, where the City is able to make it a possibility.

For the displaced residents of Greenspoint who face a tough and uncertain road ahead, many have no place to turn to find housing options affordable at their income level, placing them and their families at risk of greater long-term insecurity. People often wonder why the issue of workforce housing should be their concern, and the answer simply is, we each have a family member, friend, church member, or coworker who faces a high hurdle in meeting their housing expense obligations. So where we have the resources to mitigate the impact, even if for a small segment working families, then we should encourage promoting opportunities to help workforce housing developments become integrated into our communities. We should build replacement housing for displaced residents from Greenspoint to Meyerland, and we should invest in historically underserved communities. We must extend a ladder of opportunity to every American who will grasp on to a rung, and providing safe, quality affordable workforce housing is the first rung of the ladder of upward mobility for many in our community.

Laolu Davies-Yemitan is a real estate broker and developer who specializes in housing, multifamily development, and urban-suburban revitalization. He editorializes on issues related to real estate and public policy. LaoluD.blogspot.com; Twitter: @laoludavies

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.

Why a Houston Workforce Housing Plan is Urgently Needed!

Over the span of a few weeks in October 2015, Houstonians were horrified by news reporting of the horrendous condition of the Crestmont Village Apartments. From reports of leaking sewage, to loss of power due to non-payment by the landlord, the dire situation at that apartment complex displayed why the City of Houston needs to act urgently to begin addressing the affordable housing challenge its residents face. The apartment story is an example of well-intentioned plans gone awry. An out-of-town developer purchased an aging apartment complex during the economic downturn, with intentions of completing some minor upgrades and turning it into a cashflow positive property. The repairs never materialized, and within a short period of time, the complex spiraled into significant disrepair, leaving behind a declining property.

The proliferation of substandard apartment complexes is not an uncommon phenomenon, as various parts of Houston are littered with them. This has been brought about in part by the significant number of apartments developed during the economic boom of the 1970’s outliving their usable lives. As the economy contracted during the 1980’s, landlord’s rushed to fill their apartments with any readily available tenants, often paying less attention to management and maintenance, while surrounding neighborhoods fell into decline as homeowners fled to the suburbs.

In the case of Crestmont Village, we have a community that has undergone significant decline over the last three decades, with schools that have fallen behind, and no significant public or private investment made in over twenty years; the current reconstruction of Sterling High School being one of the few exceptions. Similar stories ring true for many communities throughout the Houston area, where places that were once vibrant have been left with boarded-up homes, overgrown lots, declining infrastructure, and substandard housing structures as their housing stock.

The City can and must act to redress this situation by developing an affordable housing plan, as part of a broader community reinvestment effort, towards creating what former St. Petersburg Mayor Rick Baker described as a seamless city. Houston City Council passed a general plan for the City in 2015. Alongside the plan should be a comprehensive reinvestment strategy, where the City utilizes public dollars to invest in workforce housing, elimination of blight, and improvements to public infrastructure and amenities i.e. parks, sidewalks, and drainage. The plan should establish a 10-year goal of developing 100,000 new affordable workforce multifamily housing, and construction of 65,000 single-family housing units for working families within the City’s urban core.

These goals can be accomplished by leveraging local and federal housing dollars, repositioning public-owned land for development, and leveraging private funds in partnership with private builders and developers to accelerate the construction of new housing units. The City can further tap into “homegrown” investment dollars by partnering with local banks in meeting their Community Reinvestment Act obligations, and by working with the City’s Police, Municipal, Fire, and METRO pension funds to encourage reinvestment in the Houston community. The City, furthermore, should offer tax abatement for workforce housing development, invest in building infrastructure in areas undergoing significant revitalization, provide incentives for tearing down dilapidated structures, and lower the barrier of entry by providing fast-track permitting for workforce housing developments. These steps taken in concert will enable the City provide quality housing for low-to-moderate income families, expand the City's property tax base, and return our neighborhoods to the vibrant livable communities they deserve to be.

Laolu Davies-Yemitan is a real estate broker/developer who specializes in housing, multifamily development, and urban-suburban revitalization. He editorializes on issues related to real estate, policy, and workforce housing. LaoluD.blogspot.com; Twitter: @laoludavies

Is Houston's Competitive Edge at Risk of Slipping Away?

I sat for breakfast with two dear friends on a Friday in mid-September, and we had the most enjoyable time catching up on tales of summer adventures, professional conquests, and future plans. As we parted ways outside the diner, one of the three in our group revealed that he and his wife were contemplating moving back to New York, where he is originally from. His remarks came as a bit of a surprise because we have all routinely expressed long-term plans tied to Houston. To my further surprise, Friend B, a transplant from the Midwest, remarked that he too was losing his zeal for Houston, and talked about how other "non-peer" cities such as Dallas were outpacing us in several areas.

My friends further elaborated that Houston seemed to be losing momentum, not just economically, but also in terms of inaction from city leadership leaving us seemingly stuck in the last decade. Friend B talked about being in Minneapolis a few weeks prior, and how simple and easy it was getting from the airport to downtown via light rail. He also talked about the ease with which he and his wife traveled around the city during their weekend stay, and how the city just left them wanting to return for a visit.

Fiend A remarked about how his wife of over a decade, who is originally from Austin, during a recent weekend in New York to his surprise expressed how she felt a certain kind of energy, so much that she conceded after 15 years of resisting that she would be open to their family with their two kids moving back to his hometown. He further expressed about how much they enjoyed hanging in the City, the vibrance of the people, and just the imprint that New York's swagger imparted on them.

Before long, I was joining in the chorus describing my recent trip to St. Louis, and how easy it was to get on the light rail from the airport to downtown for a quick lunch meeting, and then to the suburbs. I started to go into explaining how downtown St. Louis was undergoing significant revitalization of its water front along with potential plans for a new football stadium, before I finally caught myself and asked "wait, would you guys seriously consider moving out of Houston"? 

The takeaway from that morning's exchange was that Houston's competitive edge has relied, for a long time, on its strong job market and affordable real estate.  In the aftermath of the latest boom-and-bust oil cycle, Houston is forced to grapple with losing some of that competitive edge. Houston real estate is still relatively affordable compared with some of the other top 20 U.S. cities. However, inflated rents and rapid value growth within the urban core and exurban communities has made the city significantly less affordable than it was just five years ago. This coupled with the slowdown in employment growth due to the energy industry's decline, and you get a picture of a city losing the luster of it attractiveness for newer, younger residents.

The city is taking concrete steps to enhance its image and quality of life through an ambitious bayou trails project, which will connect the city's bayous via bike trails, and provide for great outdoor recreation. Buffalo Bayou, which runs from Downtown to west Houston has become a destination for outdoor lovers, who can now navigate vast portions of the sleepy flowing waters in a watercraft. The City has undergone improvements to the theater district, expanded light rail service, and new development taking place in Downtown and the Galleria area, which should all enhance Houston's livability.

For Houston to inure the full benefits of these investments in its physical landscape, the city must promote these amenities to visitors and make sure they are easily accessible to all Houstonians. The city must maintain economic competitiveness by living up to its reputation as a business friendly place, and operating a more predictable regulatory regime. To continue to entice and retain young people, the city must invest in a multi-modal transportation system, attract new industries, and make every effort to ensure housing opportunities are available for people at all income levels within the urban core. Houston's next mayor must make the foregoing a priority, and act with urgency to take essential steps towards maintaining Houston's competitive edge.

Implications of Gentrification on Houston’s Inner Core

October 2015

Houston has been on a wild tear since 2010, as rapid growth in the domestic energy sector led to exploding employment and population expansion. With that growth came significant urbanization of Houston’s inner core, as developers rushed to develop new housing supply to meet the huge demand. The shortage of new housing was further exacerbated by short supply of land and escalating land prices. This forced developers to look towards denser development within certain inner loop communities, while others branched out into older established neighborhoods to kickstart significant redevelopment of those areas. The older homes in a lot of neighborhoods underwent significant reconstruction or were torn down to make room for newer and often denser housing developments.

This trend spread rapidly to various neighborhoods including the Galleria, Medical Center, Montrose, Meyerland, Cottage Grove, and the Heights, leaving certain neighborhoods with adoption of historic preservation designation or minimum lot size restrictions as the main tool to preserve the character of their neighborhood. As revitalization spread to some of the most attractive neighborhoods, maverick developers began venturing out to previous overlooked historic African American neighborhoods of Third Ward, Fifth Ward, Independence Heights, and Latino neighborhoods such as Near Northside and the East End.

The shift towards these areas came without warning, and took hold before a lot of these neighborhoods could act to protect themselves. Residents who had rented in some of these neighborhoods for decades were suddenly been forced out, while homeowners watched their communities turnover right before their eyes. Several small rental apartment complexes were demolished to make room for larger mid-rise apartments, while single-family lots were cleared and subdivided to accommodate multiple housing units. The resulting effect is residents who helped build these community have become displaced as new owners put the land to its highest and best use.

A key contributing factor to this shift has been the fact that homeownership rates are particularly low in Houston (45%), and even more so in historic African American neighborhoods. Another factor has been existing homeowners opting to sell their homes to the highest bidder, which inevitably leads to market demand forces driving the influx of new residents. There is a golden rule in real estate, particularly in a city that has no zoning, “he who owns the land makes the rule”. The combination of low ownership rates, older residents aging out, and existing homeowners fleeing the neighborhood, is ultimately rendering a lot of our neighborhoods at risk of mass gentrification.

This trends show no signs of slowing down, even in the aftermath of a rapid decline in the energy industry. Developers seeing a slow down at the higher end of the market have turned their targets on areas with affordable land, which are primarily historic African American and Latino neighborhoods, and are moving fast to put up new housing to meet the demand. These new residents are not only altering a neighborhood’s character, the increase in value brought about by new home construction is simply pricing older resident out of their home due to escalating tax valuations; another key driver of gentrification.

Houston families who helped build our City into the amazing mecca of diversity it has become should not be driven out of their neighborhoods, but should rather be afforded opportunities to retain their residence in a new and improving Houston urban core. The City can and should act to help facilitate quicker adoption of deed restrictions to protect established neighborhoods, implement policies to help more residents become homeowners, and accelerate development of affordable owner-occupied and rental housing options to mitigate the impact of escalating housing costs in these priced neighborhoods. These steps taken in combination will go a long way towards preserving affordability, maintaining the character of our long established neighborhoods, and helping our long-term residents age in place. 

Maintaining Houston’s Affordability for Working Class Families

Maintaining Houston’s Affordability for Working Class Families
Laolu Davies-Yemitan

September 2015

INTRODUCTION

Long viewed as a hidden gem largely outside the nation’s spotlight, the city of Houston has been ranked as the best place to live in several different categories by national and international publications over the last five years. Likely due to its new found popularity, and the region’s economic prowess, the Bayou City is becoming a less affordable place to live. Houston has long been renowned for its real estate affordability and good neighborhoods making the city score high on the quality of life index. However, as the city weathered the recession and continued to create new jobs, the demand of new residents led to a real estate spike, drove up land and rent prices in good neighborhoods and within the urban core. The success of the real estate market and the lack of supply has led to a dearth of affordable real estate options in quality neighborhoods, leaving less desirable neighborhoods as the only places where working class families can find a place they can afford to live.

The growth of the Houston Metropolitan Statistical Area (“MSA”) has followed both the Sector Growth and Multiple Nuclei theories. In the “sector growth” theory of development, growth occurs along the periphery of the central business district, as seen in inner-loop Houston. While in the “multiple nuclei” theory, development growth occurs as new urban centers form within residential areas. The “multiple nuclei” theory has characterized Houston’s expansion over the last four decades, and has helped the region thrive as city dwellers were able to find new enclaves to raise their families in suburban settings. Over the last 20 years, “re-urbanization” has drawn more affluent residents back into the city’s inner core, gradually replacing the old sector growth order. This shift has been accompanied by a cross-migrational pattern where suburban, previously quality affordable neighborhoods abandoned by original occupants, are being replaced by newer low-to-moderate income families. These shifting trends have led to what is increasingly becoming a broad based urban/suburban need for quality affordable housing.

Figure 1a.                 Sector Growth Model Note: Similar to Houston’s Growth Model Figure 1b.           Multiple Nuclei Growth Model Note: For illustrative purposes only

Some of the critical factors to consider when looking at housing affordability include income, poverty, neighborhoods, housing availability, and public policy. This paper examines the current real estate market, income levels of working class families, availability of affordable housing options for those families, and suggests policy proposals to deal with the affordable housing gap in order to stem the looming affordability crisis within Houston’s urban core and its exurban neighborhoods.

INCOME AND HOUSING NUMBERS

According to U.S. Census Bureau data, Houston’s 2015 median household income is $48,258. In its June 2015 report, the Houston Association of Realtors’ numbers indicate the median home sold in the Houston MSA was priced at $223,000, a figure simply out of reach for most families.¹ With a population of 2.2 million residents, and an average household size of 2.70 persons, only 45% of Houston households live in owner-occupied dwellings.² The homeownership percentage is low in comparison to other major American cities, and is further compounded by the fact that Houston’s demand is causing housing values to grow at a much faster pace than median family income. A continuation of this trend will likely lead to further decline in homeownership rates, but more troubling is the fact that short supply and increasing demand by residents looking to live within Houston’s urban core, is driving real estate prices significantly higher.

In 2011, the US Census estimated a Houston median household income of $42,811, which means median income has risen about 12.7% over the last four years.³ Over that same period, however, median home values rose from $161,000 in the Houston MSA to $223,000, an approximate 38.5% increase ($123,000 to $187,176 in the City of Houston or a 52% increase). The homeownership rate in the MSA is down 6-8% from 2010 at the peak of the economic recession, and the cost of renting a home has grown significantly in every housing category over that time span. The outlook is even more dire for millennials and Nextgen whose median income at $35,034 qualifies them to purchase a home, though not at Houston’s median home price.⁴ There is also a rising trend within the group where those able to purchase a home are opting to rent in order to be closer to work or the inner city, a fact bolstered by a recent survey where a majority of millennials plan to put off buying a home till 2018 and beyond.⁵

The conventional measure of housing affordability stipulates that households should spend 30% or less of their income on housing expenses. In a study conducted by Rice University’s Shell Center for Sustainability, the results indicated that in five of Houston’s 11 city council districts, 31% of households spent in excess of 30% of their income on housing.⁶ The study further ranked Houston 26^th on the list of top 50 U.S. cities for affordability when transportation costs were factored in, a fact best appreciated by suburban residents most familiar with Houston’s traffic. In a separate report by the Harvard Joint Center for Housing Studies, 45.5% of renter households in the Houston MSA spent more than 30% of their income on housing.⁷

POVERTY NUMBERS

Concentration of poverty continues to be a problem throughout the United States, though there has been a marked shift in where it persists. In the aftermath of the economic downturn from the early 2000’s and the 2008 recession, poverty has become more concentrated in distressed neighborhoods, and has shifted from big cities and rural areas, into suburban and exurban areas. According to a 2014 report, analyzing the American Communities Survey (2008-2012), by the Brookings Institution, the concentration of poverty is exacerbating the challenges facing disadvantaged neighborhoods—namely escalating crime rates, failing schools, poorer health outcomes, and fewer employment opportunities—making it harder for families to break the cycle of poverty.⁸ The report further cites that the number of distressed neighborhoods, census tracts where poverty rates exceed 40 percent, rose by 75% during the 2000’s, and nearly every major metropolitan area witnessed the growth of suburban poverty during the same time period. These numbers accentuate the fact that the issue of poverty is no longer just an urban or rural issue, but rather has become a broader issue that must be addressed in all parts of the country. And the future economic success of cities such as Houston is inextricably linked to the ability to offer quality affordable housing options, a critical element of breaking the cycle of poverty.

The graphic below indicates that, following the 2008 economic downturn, the Houston region now has 44.1% of its poor suburban residents living in high poverty or distressed neighborhoods.

HOUSTON’S HOUSING SITUATION

Houston’s leaders’ primary objective going forward has to be determining how we provide quality housing options at an affordable cost for both renters and homeowners within the city limits. Data from the Texas Department of Housing and Community Affairs indicates that as of January 1, 2015, 46,261 affordable housing units (7,700 restricted for seniors 55 and above) were available in Houston from the state’s Housing Tax Credit programs.⁹ Data from the Houston Housing Authority shows that 4,825 housing units are available (not including 1,200 Housing Tax Credit units), while the agency administers about 17,000 vouchers, making a total of approximately 23,000 housing units the agency is responsible for.¹⁰ Combining data from both agencies, we can approximate that affordable/rent-restricted housing units for Houston’s low to moderate income families, earning between $15,000 and $42,800 or 30% to 60% of Area Median Income (AMI), totals out to 70,000 housing units.

Analysis of the household and population data from the American Communities Survey shows that of the slightly over 800,000 households within the city of Houston, 345,000 of them have household incomes of $35,000 or less, while another 110,000 earn between $35,000 and $50,000. The numbers further indicate that approximately 16,200 households earning below $35,000 annually live in owner-occupied housing units, and approximately 14,000 households earning between $35,000 and $50,000 own their homes, a total of just over 30,000. These numbers include senior households aged 55 years and above, where 126,225 earn below $35,000, and 37,211 earn between $35,000 and $50,000 for a total of 163,436 households. These statistics confirm that homeownership has not been a viable option for most of Houston’s working class families, leaving over 300,000 Houston households with rental housing as their primary option. Taking into account other socioeconomic factors such as credit, employment stability, and upward mobility, you find that most of those residents simply are unable to leverage homeownership as a tool to climb up the economic ladder.

This leaves approximately 270,000 households having to rely on market driven supply for affordable housing options. Those market forces do supply many of the households within that gap, though the options might be limited to substandard dwelling units. Furthermore, over 50% of those households spend above the recommended 30% of their income on housing, leaving less for other living expenses. Houston still maintains affordability in certain areas, a fortuitous benefit of its free market and sprawl growth model. There are a number of older neighborhoods that have owner-occupied and rental homes available at modest prices, and there are homes in ex-urban neighborhoods that have been developed over the last 30-40 years. The housing supply in these areas are usually an aging stock surrounded by declining neighborhoods. Based on the present development market (construction prices and land costs), it is impractical to rehabilitate some of the older housing, and developers are unable to develop new homes priced at or below the city’s median price. In August 2015, of the 5,700 homes with a ‘Houston’ address on the Houston Association of Realtors’ Multiple Listing Service, 32% were priced below $220,000, and a mere 19% were priced at or below $160,000

In the multifamily sector Class  B and C+ apartments scattered throughout Houston’s city limits, have experienced significant rental rate increases, driving a lot of residents to Class C and D complexes, the remnants of the apartment developments built from 1960s to 1980s that likely account for 60% or more of the affordable apartment inventory in the market. Listings for affordably priced rentals and apartments are primarily concentrated on the eastern half of the Inner Loop, and in areas spread out around the city’s periphery, where transportation options are limited and costs are significant. The single-family residences in those areas have become rentals due to stagnant market conditions, where rental values have risen faster than home values. This market condition has been driven, in part, by few buyers at income levels that qualify them for a mortgage. A number of these neighborhoods are ripe for redevelopment and significant infrastructural investment that, if done right, can turn those neighborhoods into thriving communities yet again.

Figure 2a.

Figure 2a. shows the number of homes for in August 2015 on the Houston MLS priced below Houston’s affordability cap of $160,00, and compares that percentage to the percent of households earning less than $50k annually.

Figure 2b.



Figure 2b. depicts the gap between the number of households needing affordable housing and the availability of housing restricted to low to moderate income households.

  

RECOMMENDATIONS: A PATHWAY FORWARD

The City’s embrace of higher density housing has been a positive step in the right direction, however, the City will need to do much more to meet the housing shortage it faces. The City needs to place emphasis on single and multi-family housing development, and must maintain a fair and balanced approach where neighborhood objection to high density multifamily housing, the proverbial Not In My Back Yard (“NIMBY”), does not become the prevailing wind that dictates housing policy decisions. To achieve its aims, the City needs to collaborate with various stakeholders including developers, non-profit organizations, real estate professionals, TIRZ’s (tax increment reinvestment zones) and neighborhood organizations to generate a workable needs and market driven plan for affordable housing.

Rental Housing

Projections from Houston’s demographic forecasters anticipate that the city’s population will continue to grow at a steady pace over the next decade. Using this data, the City can estimate a goal of affordable rental housing units to be built within the City limits over the next 10 years. Furthermore, the City should establish targets for development of housing in certain opportunistic areas with good schools that are within proximity of major employment centers including areas such as Downtown, The Texas Medical Center, Greenway Plaza, Galleria, Town & Country, Energy Corridor, The Woodlands, and NASA/Clear Lake. The City can begin by establishing the following baseline goals:

• Develop 20,000 rental units for working class families over the five year period from 2016 - 2020
• Set an average target number of affordable housing units per square mile in high opportunity areas

The City should take action to implement the following:

• Replicate the $15,000 per door incentive program used to drive development of residential units in the eastern half of Downtown, by offering abatements to developers whose projects incorporate at least 60% of the units restricted to below market rents for residents within 30–80% AMI.
• Leverage existing HOME and CDBG funds with state 4% Tax Exempt Bonds and 9% Housing Tax Credits to drive development of affordable housing in target areas.
• Utilize CIP spending to drive infrastructural improvements in target areas, and apply housing dollars from TIRZ’s, and development incentives such as tax abatements and lower permit fees to accelerate workforce housing development
• Implement a standard reimbursement for builders who tear down structures cited as dangerous buildings by the City, provided they construct affordable housing in its place within three years
• Establish a policy when City funds are expended towards a development or City-owned land is involved that requires inclusion of between 10 - 25% below market rate housing units in the project.
• Reserve portions of City-owned land in higher opportunity areas for construction of mixed income and affordable developments (an example is the pending sale of the Municipal Court Complex).
• Incorporate fast-track permitting for “affordable” housing to facilitate faster delivery of housing units.
• Fast-track the Planning Department approval process for developers with an established track record with the City.

Home Ownership

The goal of achieving development of affordable homes within the urban core must focus on overcoming the significant barriers of high cost of land, scarcity of assembled large contiguous tracts, lack of qualified buyers, tightened mortgage requirements, and the unfavorable risk/reward ratio that drives most builders to respond to the needs of the higher end of the market. The City of Houston needs to rebuild and rebrand its homeownership incentive program to make it more robust, flexible, and accommodating to the development of affordable single-family homes within the urban core. Some of the proposed goals for City’s single family program should include:

• Achieve a 40% conversion rate of Land Assemblage Redevelopment Authority (LARA) owned lots into developed single-family dwelling units from 2016–2020.
• Facilitate construction of 10,000 single family homes for working class families from 2016–2020.
• Partner with developers and offer reimbursements for infrastructural improvements (sidewalks, lighting, pocket parks) in communities needing revitalization.

The City should also take action to implement the following:

• Raise the affordability cap on home sales prices on a sliding scale up to $220,000, enabling builders to acquire land from public entities at a de minimis amount and still build a quality home.
• Expand the City’s service worker homebuyer incentive program to include policemen, firefighters, non-managerial city workers, teachers, nurses, and Metro service employees.
• Expand first time homebuyer assistance programs and partner with area banks on establishing more favorable lending requirements, downpayment assistance, and second mortgage coverage.
• Create a fast-track permitting process for builders constructing homes under the city’s affordable housing program, and lessen permit and impact fees to help achieve affordability price targets.
• Compile a singular database of city-owned land, and hasten the process of reclaiming tax delinquent properties within certain nodes targeted for housing development to facilitate land assemblage for development of single family homes.
• Establish a policy when City funds are applied towards a development or City-owned land is involved that requires development of a certain percentage of homes at or below the affordability cap.
• Establish a standard tax rebate to reimburse developers who tear down structures cited as dangerous buildings by the City, provided they build affordable housing in its place within three years.

SUMMARY CONCLUSION

The City of Houston needs to commission a Comprehensive Housing Market Analysis, which would measure income and households against housing options available that fit within the 30 percent income test. This study would help the City better understand the shortages in affordable housing, identify areas of greatest need, and offer a defined basis on which to prioritize affordable housing development. The study should quantify the percent of current dwelling units that are substandard housing, and those that need to be rebuilt or rehabilitated to extend their useful life. Quantitative data from this study should be evaluated against the aforementioned recommendations to ascertain if the suggested actions go far enough in helping the City meet its long-term affordable housing needs.

Houston’s population is projected to continue to grow at an annual rate of 1.36%, which means the city will add 181,000 residents by the end of the next Mayor’s term. Though the City will maintain population growth, its growth rate continues to lag behind the MSA, leaving it at a net population loss, relative to the region, and at further risk of erosion of its comparative tax base.¹¹ Beyond its population growth, Houston’s upward real estate trend is emblematic of trends endured by other markets, where escalating real estate values have driven working class families out of the city limits. A nearby example of such a market is Austin, TX, where rents increased 50% from 2004 to 2013, young professionals are being driven out of the City’s core, and just six neighborhoods have rental listings priced on average at or below $1,000 per month.¹²  

With comprehensive study data available, the City’s Housing and Community Development Department can work with the Planning Department and community stakeholders to apply necessary revisions to the goal of affordable housing units needed to be completed within the 5 year span from 2016 to 2020. The data can also help establish a more comprehensive decade-long forecast. This longitudinal forecast can then be incorporated into a prioritization chart, where housing development numbers are targeted by geographic area, type (family or elderly), and category (rental or owner occupied). Lastly, the action plan should be integrated within the City’s Neighborhoods and Public Works & Engineering Departments, so that they can be part of the process of improving target neighborhoods, and prioritizing capital improvement spending.

*         *        *

Laolu Davies-Yemitan is a real estate broker/consultant working with private investors and housing developers who specialize in multifamily and urban-suburban revitalization. (Twitter: @laoludavies).

REFERENCES

1. HAR (June 2015): http://www.harconnect.com/2015/06/23/may-brings-a-slowdown-in-houston-home-sales/

2.  US Census Bureau (2009 – 2013): http://quickfacts.census.gov/qfd/states/48/4835000.html

Census American Community Survey (2012) - https://www.census.gov/newsroom/releases/archives/american_community_survey_acs/cb12-r04.html

3.  Houston Association of Realtors Multiple Listing Service Report (June 2011): http://www.har.com/content/mls/?m=7&y=11

4.   Bloomberg Millennial Housing Affordability Index (2015) - http://www.bloomberg.com/graphics/2015-millennial-affordability/table.html

5. Survey: Millennials want to buy houses but most will wait (2015) - http://blog.chron.com/primeproperty/2015/07/survey-millennials-want-to-buy-houses-but-most-will-wait/

6. Rice University Shell Center for Sustainability (2013) - http://news.rice.edu/2013/09/23/affordable-housing-and-flooding-among-sustainability-issues-to-address-in-houston-2/; https://shellcenter.rice.edu/uploadedFiles/Shell_Center/Indicators/HSISocial2013sml.pdf

7.  Harvard Joint Center for Housing Studies/Washington Post | http://www.jchs.harvard.edu/sites/jchs.harvard.edu/files/jchs-sonhr-2015-ch5.pdf  -- http://www.washingtonpost.com/news/get-there/wp/2015/07/15/the-cities-where-americans-are-most-likely-to-spend-more-than-half-of-their-paycheck-on-rent/

8. The Growth and Spread of Concentrated Poverty, 2000 to 2008-2012 (2014) - http://www.brookings.edu/research/interactives/2014/concentrated-poverty#/M10420

9.  Texas Department of Housing and Community Affairs (2015) - http://www.tdhca.state.tx.us/multifamily/housing-tax-credits-9pct/index.htm

10.   Houston Housing Authority (2012) - http://www.housingforhouston.com/media/32613/hcvp%20wait%20list%20closure%20press%20release.pdf  

11.   Houston Chronicle – Houston posts strong growth but still outpaced by suburbs (2014) - http://www.houstonchronicle.com/news/houston-texas/houston/article/Houston-boasts-strong-growth-but-still-outpaced-5496639.php

12.  Affordable Austin: Building The Housing We Need At Prices We Can Afford (Jan. 2015) -http://www.reca.org/public/uploads/files/general/2015RECAAffordabilityWhitePaper.pdf