Legislation filed by state Sen. Paul Bettencourt (R-Houston) and Rep. Jacey Jetton (R-Richmond) Tuesday would add more stringent requirements to the approval of tax breaks through Public Facility Corporations (PFC) in exchange for affordable housing for low-income households.
Under current law, local government authorities may create a PFC to purchase or build a multifamily property, which is then leased back to a private developer or owner. The property is exempted from both property and sales taxes if some rental units are set aside for “affordable housing.”
According to the statute, developers must designate half of the units for persons who earn less than 80 percent of the local area median income (AMI). Those residents are then charged 80 percent of the local average rent, but in some Houston agreements, only 10 percent of the units are set aside for low-income households earning less than 60 percent of AMI.
Last month, Houston Mayor Sylvester Turner called for a pause on the city’s approval of new PFCs after a resident pointed out that the Houston Housing Authority (HHA) had approved new mixed-income apartment properties for 100 percent tax exemptions for periods of 75 to 99 years.
Critics such as Houston developer Alan Atkinson note that HHA has removed approximately $5.1 billion of local property tax valuation through PFC approvals, impacting multiple tax districts, including 12 area public school districts.
Turner appoints all seven HHA board members, who then approve Houston PFCs independently and without input from the city council. In Dallas, the city council appoints members of the Dallas Public Facility Corporation and votes to approve PFCs.
Houston Region Business Coalition chair Alan Hassenflu has criticized Houston’s handling of PFCs but praised the proposed reforms, saying, “We believe this is a valuable tool that has been abused by our local housing authority and in other areas of the state.”
“Senator Bettencourt and Representative Jetton have crafted a very strong bill which will stop the current abuses, add desperately needed guidelines, and bring real transparency and accountability to Houston and across the state,” added Hassenflu.
Jetton and Bettencourt’s proposed reforms would require notification to the mayor and city council, commissioners court, and local school board 60 days prior to the approval of a PFC in their jurisdictions; create a state registration database; and mandate compliance reviews and annual audits for all existing and future PFCs.
Additionally, PFCs would either have to set aside half of the units for households earning less than 60 percent of AMI or expend at least 15 percent of the property purchase price to rehabilitate an existing property.
Atkinson, who has sued HHA over violations of the Texas Open Meetings Act, told The Texan that he would like to see changes to the reform proposal since some of the approved PFC properties are 20 years old and were already leasing at reduced rates.
“The 15 percent rehabilitation reinvestment requirement won’t do much to increase available affordable housing,” said Atkinson. “In fact, it may even work backwards since the owner would be able to lease half of the renovated units at a much higher rate after renovations.”
Atkinson has been tracking Houston’s PFCs for several years and says that although HHA staff evaluate potential properties, some properties have been approved for the tax exemption with scores of less than 55 out of a possible 100 points.
During a Houston city council meeting last week, council member Mary Nan Huffman queried HHA Chair LaRence Snowden and learned that the city has approved 76 PFCs and has another 51 properties currently in partnership negotiations. Snowden told Huffman each property removes approximately $1 million in tax revenue annually from local government authorities.
Huffman told The Texan that she had been trying to get lists of available low-income units from HHA since last July, and that while she supported the creation of affordable housing, she was concerned about the lack of community engagement and transparency.
“The Texas Department of Housing and Community Affairs tax credit program uses a much more arduous process and only about 5 percent of applicants make it through,” said Huffman. “They check to make sure the affordable housing is near transportation and food supply among other concerns.”
“On the other hand, the PFCs never come before council and there’s no accountability or audit, and we don’t even know if the 76 existing PFCs are providing what they’ve promised.”
Last month, Bettencourt filed legislation that would repeal the PFC program. The reform legislation filed this week was co-authored by Reps. Mano DeAyala (R-Houston), Cody Harris (R-Palestine), and Charles Cunningham (R-Humble).
Rep. Jon Rosenthal (D-Houston) has also filed reform legislation imposing more stringent requirements, reports, and audits of PFCs.
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Holly Hansen is a regional reporter for The Texan living in Harris County. Her former column, “All In Perspective” ran in The Georgetown Advocate, Jarrell Star Ledger, and The Hill Country News, and she has contributed to a variety of Texas digital media outlets. She graduated summa cum laude from the University of Central Florida with a degree in History, and in addition to writing about politics and policy, also writes about faith and culture.