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ISSUE 1, September 2016
Federal Reserve
Bank of Dallas
Community Development
Community
The Scarcity of Texas
Outlook
Series
Affordable Housing
Community Outlook Series
Emily Ryder Perlmeter
Federal Reserve Bank of Dallas
Community
Outlook Series
Launched in 2016, the Community Outlook Series features analysis
on a rotating set of community development topics. The series uses
survey data and qualitative interviews to assess the needs, successes
and challenges of low- and moderate-income families across Texas as
well as the organizations that serve them. The topic of this inaugural
report is affordable housing.
Federal Reserve Bank of Dallas
The State of Affordable Housing
2
Introduction 2
The Poll: Development Trends, Obstacles
2
Financing and Production 3
Organizational Performance and Capacity
4
Types of Developments 4
Barriers 4
Regulatory and Policy Barrier Specifics
6
Key Findings 8
Profiles of the Five Texas Regions 9
North Texas 9
Gulf Coast 10
Central Texas 12
West Texas 13
South Texas 15
The State of Affordable Housing
In 2016, the Dallas Fed launched a poll of developers to assess the state of affordable housing
in Texas. Responses were analyzed, and existing secondary data were added for context. This
report summarizes those results.
Introduction
The Poll: Development Trends, Obstacles
Texas has long boasted a strong economy, favorable
business conditions and a relatively low cost of living that
includes affordable home prices. These claims have made
it attractive to residents of other states and countries. “If
you want to own a cheap home,” a 2015 CBS News article
declared, “you may want to head to Texas.”1
As costs continue to rise and real incomes remain stagnant,
much of the responsibility for preserving affordable
options for working families falls to the diverse group
of affordable-housing developers in the state. These
developers work to repair, preserve and build units that are
within reach of low- and moderate-income (LMI) residents,
and they often do so with severely limited resources.
Despite the state’s sunny reputation, the reality is far more
complex. Most Texans do not enjoy the same level of
affordability available to them in prior decades.
According to the Texas A&M Real Estate Center, the
median sales price of a house has increased 75 percent
since 2000, far outpacing inflation.2 Median household
incomes have increased just 31 percent in that time span,
with their real values mostly stagnant.3 Today, more than
43 percent of Texans can’t afford a house over $150,000—
yet the median sales price is $196,000.4
Unsurprisingly, a third of all Texas households and nearly
half of renters in the state are cost burdened—meaning
that more than 30 percent of their income goes to housing
costs.5 Housing prices and incomes vary greatly by region.
The cost–burden rate exceeds 50 percent for renters
in some metro areas and counties. The rate is lower for
homeowners across the state, but at close to 30 percent,
it’s still a sizable and growing concern.
To understand and analyze the trends, challenges and
emerging issues in Texas affordable-housing development,
the Federal Reserve Bank of Dallas launched a poll of
developers in March 2016 and conducted in-depth interviews with eight of them. This report is a discussion of the
findings in aggregate, followed by a qualitative exploration
of critical affordable-housing issues in five Texas regions.
Responses came from 52 affordable-housing developers
that have headquarters in more than two dozen Texas
counties and provide services to rural, suburban and
urban communities.6 The sample is comprehensive and
representative. Eighty percent of respondents are private
sector developers—65 percent nonprofit and 15 percent
for-profit. The remaining 20 percent are public sector
developers. Respondents were evenly split between urban
(47 percent) and suburban/rural (53 percent). Chart 1
shows the distribution of developers in the sample by type,
based on where their work is concentrated.
Chart 1:
For-Profit
Developers
More Active
in Rural
Areas
More
For Profit
Providers
in Rural
Development
Private for-profit
Private nonprofit
Public sector
Percent
100
17
17
20
67
53
80
60
75
40
20
0
8
17
Urban
Suburban
Federal Reserve Bank of Dallas
Community Development
27
Rural
2
Those targeting urban areas were more likely to be
nonprofit organizations than those targeting rural communities. In the sample, private for-profits were 3.4 times
more likely to operate in rural versus urban communities.
The majority of organizations focus on single-family
owner-occupied units, with 54 percent of respondents
indicating they produce these units “often” or
“exclusively.” This was followed by multifamily rental units
at 29 percent. Only one respondent produced multifamily
owner-occupied housing “often” or “exclusively.” Those
who marked “other” indicated they were involved with
rehab or critical repair.
Table 1: Developments by Funding Source
(Percent of responses)
At least 1
percent of
funding
At least 50
percent of
funding
Federal programs
46
27
Internal fundraising
43
12
Local programs
37
6
Foundations/grants
35
4
State programs
29
2
Private lending
28
10
Housing tax credits
26
14
Source
Financing and Production
To understand how developers acquire financing, the
Dallas Fed asked them to estimate the percentage of
funding obtained from each source for their most recent
project. Federal programs such as Housing Choice
Voucher (Section 8) and HOME were typically the largest
sources of funding.7 Twenty-seven percent of respondents
indicated that federal programs financed at least half of
their most recent development (Table 1).
Breaking these down by developer type, those developing single units—either owner occupied or rental—were
more likely to rely on internal fundraising to finance large
portions of their recent development than those focused
on multifamily properties. Additionally, multifamily developers relied more heavily on Low Income Housing Tax Credits
(LIHTCs) to finance at least 50 percent of their project.
Chart 2 shows that the majority of respondents used
HOME federal block grants (51 percent) offered through
the U.S Department of Housing and Urban Affairs (HUD),
closely followed by bank financing (47 percent). Those
who indicated “other” listed the Neighborhood Stabilization Program, city general obligation bonds, Colonia
Self-Help Center funds and Veterans Affairs Supportive
Housing vouchers, among others.
Urban developers were more likely to use Community
Development Block Grants, while suburban developers
indicated higher usage of private foundations or
fundraising. Developers focused on rural areas used U.S.
Department of Agriculture (USDA) funds—geared to help
with rural developments—at much higher rates than urban
or suburban organizations.
Top 10 Sources of Funding for Latest Project
Chart 2: Top 10 Sources of Funding for Latest Project
51
HOME funds
Banks
Low Income Housing Tax Credits
Community Development Block Grants
Private foundations or fundraising
U.S. Department of Agriculture
Federal Home Loan Bank Affordable Housing Program
Other
Intermediaries
Tax exempt or 501(c)3 bonds
47
37
37
30
23
21
19
16
14
0
10
20
30
40
50
60
Percent of responses
NOTE: Respondents could check more than one box.
Federal Reserve Bank of Dallas
Community Development
3
Regarding the number of units completed in 2015,
responses ranged from 0 to 3,600. For-profit developers
reported producing more units—an average of 145—than
public sector developers or private nonprofits, with the
exception of one outlier, a 3,600-unit public developer.
There was little difference between urban, suburban and
rural developers in terms of number of units produced.
Organizational Performance and Capacity
Next, we asked how the following indicators changed
for developers: funding sources, organizational capacity,
community support and the need for affordable housing
(Table 2).
A diffusion index is used to summarize all three percentages (increase/no change/decrease) into one number for
each question. If the index is greater than 50, the attitudes
of business owners are positive. If it is lower than 50, the
attitudes are negative. If it is 50, there is no change.
Overall, developers were positive about organizational
capacity and community support, with diffusion indexes of
59 and 56, respectively. Only 12 percent of respondents
saw their organization’s capacity decline in 2015, while 29
percent saw it improve.
Funding is a different story. Nearly 40 percent of respondents
noted a decline in funding in 2015, putting the diffusion
index at 39, far less than the baseline of 50. Furthermore,
when asked about the need for affordable housing,
developers were clear: With a diffusion index of 89,
the vast majority saw an increase in 2015. In fact, no
respondents reported a decrease. Despite the small
improvements developers saw in capacity and support,
the need for affordable housing in Texas communities
continued to grow.
Types of Developments
The Dallas Fed also asked respondents to indicate if they
had recently developed projects with traits targeting
special populations. Thirty-two answered positively,
with most saying they developed units that were mixed
use or mixed income or had environmentally friendly
components. Others targeted senior, veteran or disabled
households (Chart 3).
Barriers
The fact that almost a third of Texans with mortgages—
and more than 49 percent of renters—are cost burdened
suggests a significant shortage of available affordable
housing.8 The poll asked respondents about the greatest
barriers to developing affordable housing in their
communities.
As Chart 4 illustrates, the top concern was cost or funding,
garnering 26 responses, or 57 percent of total responses.
In second place was economic or market conditions.
Table 2: Affordable Housing Indicators in 2015
Percent
increase
Percent no
change
Percent
decrease
Diffusion
index*
Funding sources
17
44
39
39
Organizational capacity
29
59
12
59
Community support
22
68
10
56
Need for affordable housing
78
22
0
89
Indicator
*The diffusion index summarizes the three percentages (Increase/No change/Decrease) into one number for each question and
is calculated by adding the percentage of the “Increase” responses to half of the percentage of the “No change” responses and
then multiplying that total by 100. If the index is greater than 50, the attitudes of the service providers are positive. If it is lower
than 50, the attitudes of the service providers are negative. If it is 50, there is no overall change in attitudes.
NOTE: Percentages may not add to 100 due to rounding.
Federal Reserve Bank of Dallas
Community Development
4
When asked to expound upon their selections, respondents discussed the rising price of land most frequently.
Rising costs coupled with limited funding—lack of grants,
public funding or private support—can make new builds
prohibitively expensive. Indeed, the data bear this out:
The average price per acre for small land sales across
Texas has been on the rise.9 These land concerns seem to
be particularly strong for responding developers in rural
counties. Economic conditions are closely tied to these
problems. As one developer laments, “Construction and
land costs are simply outpacing funding.”
Qualified Allocation Plans (QAPs)—rules through which
states evaluate and score proposed developments to
allocate project tax credits—were seen as “unpredictable”
and were an oft-cited source of consternation for
developers over the past year. Commenters had much to
say about this topic. Below are some responses, edited
for publication:
“Area median-income restrictions are too inflexible
for rural and the hardest-hit neighborhoods. Identifying income-eligible buyers who can meet current
underwriting requirements is a huge challenge.”
Across all geographies, another top barrier was regulations,
coming in third. Multifamily developers represented a slight
majority of respondents for this category (53 percent),
although those developing single-family owner-occupied
units accounted for 47 percent. No single-family rental
developer selected this as an issue.
“Tax-credit regulations through QAPs seem to be
discouraging urban affordable housing.”
“Buyers can meet the income requirements and
qualify for an FHA (Federal Housing Administration) loan but still not pass the Neighborhood
Chart
3: Environmental
Features Top
Top Specialized
Developments
Environmental
Features
Specialized
Developments
12
Environmentally friendly
Mixed-use or mixed-income
Senior
Supportive
Transit-oriented
9
5
4
2
0
2
4
6
8
10
12
14
Number of responses
NOTE: Respondents could check more than one box.
Financial Concerns Largest Barriers for Developers
Chart 4: Financial Concerns Rank High as Barriers to Development
26
Cost or funding issues
Economic or market conditions
14
Regulations
13
Community opposition
11
Organizational capacity
7
Lack of demand/lack of qualified residents
7
Other
6
0
5
10
15
20
25
30
Number of responses
NOTE: Respondents were asked to list their top two concerns.
Federal Reserve Bank of Dallas
Community Development
5
Stabilization Program requirements that are passed
down from HUD/Texas to local communities. This is
a major barrier for us.”
The majority of respondents said property taxes were at
least somewhat of a barrier to their latest project. Certain
projects may be granted a tax exemption through such
programs as Community Housing Development Organization set-asides. However, not every project or entity is
eligible; the formal application process is open only to
nonprofit organizations with particular board structures.
Although the community-opposition concern drew fewer
responses, Not In My Backyard (NIMBY) attitudes and lack
of local support still plague developers. These concerns
are more concentrated in certain areas, such as Dallas and
Houston. As one developer in Dallas noted, “Housing
tax credits require resolutions of support. These are very
difficult to obtain.”
“Housing tax credits
require resolutions of
support. These are very
difficult to obtain.”
Regulatory and Policy Barrier Specifics
Because the inability to complete projects is such a large
issue, developers were also asked what specific regulations
or policies affected the feasibility of their projects. These
were separated into federal, state and local categories.
Under the federal category, the majority of respondents
indicated that environmental regulations, building codes
and public notices/hearings were not barriers to their
developments. However, most noted that location and site
standards were, with 45 percent saying these factors were
“somewhat a barrier” and another 15 percent saying they
were a “substantial barrier” to their latest development.
Local regulation and policy barriers are found in Chart 5.
Dallas developer
According to a 2015 Texas State Affordable Housing
Corporation report, the state’s property taxes were the
second highest in the country in 2014.10 Turning to this
survey’s county breakdowns, respondents in Brazos,
El Paso, Harris, Hidalgo and Midland counties were the
most likely to report property taxes as a substantial barrier.
Median property taxes by county do seem to correspond
with feedback from surveyed developers: Brazos, El
Chart 5: TaxesTaxes
and Zoning
BiggestBiggest
Local Barriers
andAre
Zoning
Local Barriers
Not a barrier
Somewhat a barrier
13
24
Subdivision deed restrictions
0
20
4
12
23
Impact fees
4
14
21
Building codes
5
11
23
Land use/density laws
5
16
19
Zoning
8
17
16
Property taxes
Substantial barrier
40
60
80
2
100
Percent of respondents
NOTE: Respondents could check more than one box.
Federal Reserve Bank of Dallas
Community Development
6
Paso, Harris, Hidalgo and Midland counties all report
median real estate taxes of $1,500 or more (Chart 6). The
Dallas–Fort Worth and Austin–Round Rock metropolitan
statistical areas (MSAs) also have high median taxes, but
developers in those areas were not as likely to point to
property taxes as a substantial barrier. However, housing
prices in those cities are higher on average; the effective
property tax rate—defined as the property tax paid
divided by the value of the home, which is not reported
here—is potentially lower.
Finally, the Dallas Fed asked about the seriousness
of barriers outside of regulations or policies. Chart 7
shows that while financing and community opposition
concerned developers, costs were the greatest barrier.
Nineteen respondents (48 percent) indicated that the
cost of land was a substantial barrier. Development costs
in general were another substantial barrier, garnering 16
responses, with an additional 18 describing the issue as
somewhat a barrier.
Chart 6: Estimated Typical (Median) Annual Real Estate Taxes Paid, 2014
Median Real Estate Taxes
Year: 2014
Shaded by: County, 2010
Insufficient data
$650 or less
$651 – $999
$1,000 – $1,499
$1,499 – $1,999
$2,000 – or more
Source: Census
GULF OF MEXICO
Costs are Greatest Barrier to Project Completion
Chart 7: Costs Seen as Substantial Barriers to Most Recent Project
Not a barrier
Somewhat a barrier
Cost of land
Development costs
Lack of available land
Grant or subsidy availability
Available financing
Community opposition
Organizational capacity
7
9
12
12
12
15
18
22
20
16
Application/predevelopment costs
Other
0
Substantial barrier
20
19
12
15
8
40
14
8
15
18
60
16
15
14
10
10
2
80
7
6
1
100
Percent of respondents
Federal Reserve Bank of Dallas
Community Development
7
Key Findings
Based on survey responses, it’s clear that growing costs
and insufficient funding are among the issues bedeviling
developers who are trying to increase the supply of
affordable housing in Texas. The short supply makes it
difficult not only for low-income residents—but also those
with median incomes—to find decent housing in Texas.
A third of all Texas households direct a disproportionately
large chunk of their income toward housing costs. And an
even larger proportion of households can’t afford an average-priced home in the state. These issues are pushing
Federal Reserve Bank of Dallas
some workers farther away from their jobs, others into
inadequate housing and likely others into homelessness.
While little can be done about escalating housing and
land prices in Texas, respondents point to greater public
support of affordable-housing initiatives and regulatory
modifications as possible immediate remedies to the
problem of too little affordable housing.
Community Development
8
Profiles of the Five Texas Regions
The Dallas Fed took a deeper look at individual regions of the state to get a clearer
understanding of how these findings vary geographically and to broaden knowledge about
affordable-housing development in local communities.
North Texas
Top funding sources: Bank financing, LIHTC, HOME and CDBG
Top barriers: Community opposition and costs
Dallas
The Dallas–Fort Worth–Arlington MSA is home to 7.1
million people, making it the largest MSA in Texas and
the fourth largest in the United States. Major industries
include business and finance, defense, IT and education.11
The poverty rate is 14.8 percent, a few percentage points
below the state average of 17.7 percent. Fair-market
rents for a two-bedroom unit are around $986 a month,
higher than in surrounding, more rural regions.12 Almost
4 percent of Dallas County households live in units subsidized by HUD, although the percentage is substantially
lower in Collin, Denton, Ellis, Rockwall and Tarrant.
Within the sample, top barriers to development in this
region were community opposition and costs. Jean
Brown, executive director of Green Extreme Homes,
works primarily in Dallas, Collin and Denton counties
and sees community opposition issues firsthand. Her
organization, a community development corporation
(CDC), has produced four tax-credit developments in
Plano and one in Frisco.
“It takes an incredible
amount of community
engagement to educate
and change attitudes.”
Jean Brown, Green Extreme Homes CDC
Says Brown, “Collin County residents view tax-credit
developments very negatively. They think property
values will go down, crime will increase and they’ll be
surrounded by people without jobs. It takes an incredible
amount of community engagement to educate and
change attitudes.”
Federal Reserve Bank of Dallas
To be eligible to apply for a 9 percent tax credit,
developers must obtain a letter of support from state
representatives, which can only be accomplished with
backing from homeowners associations (HOAs) in the
district, she notes.
“We meet with every single HOA group in the city to
explain what we are trying to accomplish,” Brown says.
She then describes a near-Sisyphean struggle to break
these false perceptions. After working to dispel the
notions about tax-credit housing, she finds awareness
doesn’t seem to stick from one project to another. “It’s
like pushing a boulder up a mountain and then standing
on the top watching it teeter. You would think we would
not have to go through this process each and every time,
but we get so many letters of opposition with each new
project, we have to start all over.”
Costs are a concern for Mike Meyer, president of Brooke
Community Development, a for-profit DFW developer.
“Access to capital is a serious problem,” he says.
“Sometimes we end up having to use hard-money lenders
[typically private parties issuing asset-based loans], at high
interest rates. With low-margin developments, lower-cost
capital is a necessity.”
Community Development
9
He also believes that regulations are a significant barrier.
“The basic rules should be transformed into guidelines
as opposed to inflexible rules that cannot be appealed
or subject to exceptions,” he says. He explains that the
single-family development set-aside rules specify that all
units must be sold to households at or below 80 percent
of area median income (AMI): “It’s hard to get builders
or lenders to engage unless it’s a clearly economically
feasible deal. If you have to hold every single unit for an
80 percent AMI buyer, a lot of times they end up vacant
for six months or a year.”
He says he has tried to get regulators to be a bit more
flexible. “With one development, I wanted to advocate
for a small portion of units to be available to higher-income buyers—so that there would be less initial risk. The
majority would have gone to LMI families; those units take
longer to fill. But unfortunately, the rules are inflexible. So
zero affordable units have been built. Economically, it was
too big a risk.”
Courtesy of Texas State Affordable Housing Corporation
Gulf Coast
Top funding sources: HOME and LIHTC
Top barriers: Community opposition and lack of
qualified residents
The second-largest metro area in Texas is the Houston
MSA. Consisting of nine counties, the region abuts the
Gulf of Mexico and is home to important international
seaports and shipping hubs as well as a leading energy
industry and strong business sector. Despite the vibrant
economy, 24 percent of children live in poverty.13 The
Greater Houston area also has one of the highest
homeowner cost-burden rates in the state; in fact, more
than 10 percent of Harris County homeowners direct over
50 percent of their income toward housing costs.
Federal Reserve Bank of Dallas
Community Development
Houston
10
Chart 8: Percent Change in Median Sales Price of Residential Home, 2014
Percent Change in Median
Sales Price
Year: 2014 (from 2009)
Shaded by: County, 2010
Insufficient data
-10.00% or less
-9.99% – 0.00%
0.01% – 14.00%
14.01% – 32.99%
33.00% – or more
Source: Boxwood Means
Within Houston, development is not occurring evenly
across the city. According to Rice University’s Kinder
Institute, gentrification is focused in certain regions, while
it poses only a moderate threat to affordable housing in
others.14 Some ZIP codes saw housing prices rise more
than 33 percent from 2009 to 2014, while others increased
only a fraction of that and still others decreased (Chart 8).
Mary Lawler, executive director of Houston-based
affordable-housing nonprofit Avenue CDC, is mindful of
the redevelopment of certain Houston regions and the
impact on those communities.
“There are certain neighborhoods that are being overrun
and erased,” she says. “Avenue CDC actually got started
after residents of the old Sixth Ward [an area with a
high concentration of Victorian-era homes] organized to
prevent that from happening.”
This grassroots legacy has mitigated some NIMBY
barriers. Lawler explains, “We have a history of working
very closely with residents in certain defined communities.
People know us and the quality of our work, and we have
not had opposition to proposed developments there.”
She adds, “I will say that during the expansion of our
organization into other areas of Houston, we did indeed
hit a NIMBY wall.”
Federal Reserve Bank of Dallas
Lawler also describes the necessity of finding a balance
between developing affordable units in high-opportunity
areas—such as those in low-poverty census tracks and
high-performing school districts—and the need to
continue to invest in LMI neighborhoods, particularly
those poised for redevelopment. “The time to develop
affordable housing in a gentrifying neighborhood is
before it gentrifies,” she explains. “I understand the
state’s response to the Fair Housing [Act] lawsuit, but it is
missing nuance. Had these rules been in effect earlier, we
would not have been able to preserve affordable units in
areas that have since gentrified.”15
Further, she says, “We understand the research that shows
kids do better in higher-income areas. Of course, some
resources should go to these high-opportunity areas,
but I’d argue that it’s unfair to deny these scarce and
wonderful resources to low-income and minority-concentrated areas. We’ve started to refer to it as the modern-day
redlining—distressed areas aren’t eligible for reinvestment
at all. We’re just arguing for a balanced approach.”
Community Development
11
Central Texas
Top funding sources: Bank financing and CDBG
Top barriers: Regulations and costs
Texas’ capital city of Austin, located in Travis County, is
home to over 900,000 people. By some measures, it is the
fastest-growing city in the country.16 Austin is surrounded
by the counties of Bastrop, Caldwell, Hays and Williamson.
The Greater Austin MSA just passed the 2 million-population mark—a 17 percent increase from just five years
ago—ranking it fourth in Texas and 35th in the country.
Rental price increases have matched population growth as
demand for housing has outpaced supply.
Median rent rose 18 percent from 2009 to 2014, while the
median housing sales price soared almost 43 percent.17
Austin now ranks as one of the state’s least-affordable
cities, according to the Texas A&M Real Estate Center’s
Housing Affordability Index. On top of these affordability
issues are the well-publicized bureaucratic problems with
the city’s planning and zoning functions. A 2015 independent report found hundreds of problems within the
then-combined Planning and Development Department,
including excessive permit wait times, project delays,
cumbersome zoning requirements and complex land
development codes.18
Austin
fast-growing city that saw its African-American population
decrease; the majority of those who relocated pointed
to affordability issues as the reason.19 While some households are moving just beyond the city, others are moving
to the surrounding rural counties. Complicating matters is
the fact that the rural communities experiencing the influx
have too few housing units to accommodate demand.
“We are seeing the
suburbanization of
poverty.”
It comes as no surprise that the top-reported barriers in
the sample were regulations and costs. “We are seeing
the suburbanization of poverty,” says Mandy De Mayo,
executive director of HousingWorks Austin.
“For low-income people, the farther out they go, the
less-connected they are to jobs and other opportunities.
Our infrastructure is being taxed. We are pushing people
out because of lack of affordability—and then wondering
why our roads are so clogged.”
This out-migration has not been proportionate: A
study recently showed that Austin was the only major
Federal Reserve Bank of Dallas
Mandy De Mayo, HousingWorks Austin
Mark Mayfield is president and CEO of the Burnet
County-based Texas Housing Foundation. He says he’s
seen this “massive migration” firsthand: “Many low- and
moderate-income people have had to flee the urban
Community Development
12
areas simply because they cannot afford to live there.
So they come out to our area, Marble Falls, and others.
But we are at capacity—so how are we going to be able
to absorb these folks?” He describes the difficulties in
putting together deals for affordable-housing development in rural areas, noting that most new units are priced
at market rates. “Affordable developments are just not
economically feasible without tax credits or grants,” he
says. “And those funding sources are few and far between
for rural communities.”
Mayfield also says he believes misperceptions have
played a part in limiting the development of affordable
units. “Many people, including our lawmakers, believe
that affordable means only subsidized, or only for people
without jobs who can’t make it on their own,” he says.
“And that’s simply not the case. It comes down to simple
economics: Someone who makes $30,000 a year can’t
afford most of the stock. These are people with necessary
jobs, like service or retail—they’re hardworking folks.”
HousingWorks’ De Mayo is a bit more positive, noting
that in 2013, Austin voters approved $65 million in affordable-housing bonds: “I think this speaks strongly about
citizens caring about affordability.” Still, she says of Central
Texas: “The affordable-housing crisis is a multibillion-dollar
crisis. We know we can’t come up with that locally. So our
strategy has to be focused on programs and policies in
concert with increased financial investment.”
Courtesy of Texas State Affordable Housing Corporation
West Texas
Top funding sources: CDBG and private/internal fundraising
Top barriers: Costs and economic or market conditions
The western region of Texas is home to metro areas such
as El Paso, Lubbock, Amarillo, Midland–Odessa and San
Angelo. These MSAs are diverse, but a few industries
dominate, including agriculture, energy and, due to the
presence of Fort Bliss in El Paso, defense.
El Paso
Midland
Odessa
San Angelo
El Paso’s proximity to the border makes it uniquely positioned for trade, tourism and cross-border retail and manufacturing. Unfortunately, many of El Paso’s top sectors
are relatively low paying.20 The majority of residents
are Hispanic of Mexican descent, and a quarter live in
poverty. So while the cost of living might be lower than in
other metro areas, residents still struggle to find housing.
“Even though prices are low by national standards, home
affordability is low due to low family incomes,” says Larry
Federal Reserve Bank of Dallas
Community Development
13
Garcia, board member of the National Association for
Latino Community Asset Builders. “This is especially
true for first-time homebuyers.” This crisis of affordable
housing has contributed to the proliferation of colonias,
unincorporated residential areas that may lack basic
necessities such as potable water, electricity and paved
roads.21 An estimated 90,500 people live in substandard
or unsafe conditions in the El Paso County colonias.
In an example of a creative financing structure, the
Housing Authority of the City of El Paso (HACEP) has
embarked on a five-year initiative called the Rental Assistance Demonstration (RAD) with the goal of rehabilitating
most of the city’s nearly 5,000 units. By opening up access
to 9 percent and 4 percent federal housing tax credits
and private capital such as tax-credit equity and debt,
HUD is allowing HACEP to redevelop these properties
to preserve and create public housing units and other
affordable apartments. Once complete, the project will be
a $1.2 billion investment in public housing for El Paso. The
challenge has been to move current residents into other
public housing units while the rehabilitation takes place.
San Angelo lies just to the east of El Paso and the
Permian Basin cities of Midland and Odessa and just
south of the Texas Panhandle, in the Concho Valley.
Although San Angelo isn’t typically considered the heart
of the Permian Basin, the oil industry remains important
there and employs a sizable percentage of the population, as do agriculture and telecommunications. While
Midland–Odessa’s housing prices have soared in recent
years, making the area less and less affordable, San
Angelo’s changes have been more modest. Its median
home sales price is $161,500, compared with Midland’s
nearly $240,000.22 And although average incomes are
higher in Midland, housing affordability has historically
been about 25 percent greater in San Angelo, according
to the Texas A&M Real Estate Center.
“In our community, median household income is decreasing. Income is not keeping up with the cost of living.”
Indeed, annual median household incomes dipped from
2013 to 2014 and poverty levels have risen.23
“Recently, we have been experiencing an increase in
rental housing availability, partly due to these factors,”
she says. But this increase may also be due to the
aftermath of the oil boom: “We had a lot of apartments
and motels that were targeted for weekly stays, but when
the oil industry dipped, we had a lot of vacancies and
underutilized stock. Unfortunately, much of this is not
housing we think leads to homeownership, or housing
that builds stability or independence.”
“We could double our
production without
changing how we run—if
we could just find the
money to do it.”
Judy Sikes, Habitat for Humanity
of San Angelo
As a Habitat affiliate, the organization seeks funding mostly
through fundraising and grants within its community—to
avoid taking from another affiliate’s pot, Sikes says.
“We are in a really giving community,” she says of San
Angelo. “But it’s still a challenge to raise enough of the
necessary funds or to find the right sources that match
our needs. For Habitat, the structure is there. We could
double our production without changing how we run—if
we could just find the money to do it.”
This might be changing, according to Judy Sikes,
executive director of Habitat for Humanity of San Angelo.
Federal Reserve Bank of Dallas
Community Development
14
South Texas
Top funding sources: USDA, HOME and intermediaries
Top barriers: Costs and regulations
The Rio Grande Valley is home to the cities of Brownsville
and Harlingen as well as McAllen, part of the McAllen–
Edinburg–Mission MSA. Although the cost of living in
South Texas is one of the lowest in the state, the region’s
cities are among America’s poorest.24 The McAllen MSA
has one of the largest shares of households living under
the poverty line in the state and nation, at 35 percent.
McAllen
While its cost of living is lower, the MSA is one of the top
five least-affordable Texas metros, according to the Texas
A&M Real Estate Center.25 Despite this, the homeownership rate of 68 percent is higher than in most other MSAs.
South Texas is also home to a large percentage of Texas’
migrant and seasonal farmworkers. These agriculture
workers are responsible for a substantial portion of the
state’s economy, with one out of every seven Texans
working an agriculture job in a $100 billion industry.26
Kathy Tyler is housing services director for Motivation
Education and Training Inc., an organization that
rehabilitates homes in each of the Rio Grande Valley
counties. Much of the work is done in the colonias. “Many
of the farmworkers we serve have built their own housing
from found materials but unfortunately find themselves in
a tenuous legal ownership status,” she says, referencing
the thousands of unrecorded contracts for deed plaguing
colonia residents.27 As in El Paso, colonias sprung up in the
area as a consequence of the lack of affordable options.
Alternatives to these informal homes are the USDA’s
Section 514/516 and 515 programs. Section 514/516
refers to financing for units specifically for farmworkers
and their families, while Section 515 provides mortgages
and rental assistance for low-income families, including
the elderly. Though vital for low-income rural residents
and farmworkers, Section 514/516 and 515 supplies have
been dwindling over the years.
“We’ve lost more than half the inventory we had,” Tyler
says, referring to units that lost program support and,
thus, affordability. These losses will intensify because
Texas stands to lose 28 properties—or almost 600
units—through 2019 when the mortgages mature out of
Federal Reserve Bank of Dallas
these programs. Exacerbating this problem is the fact that
low-income residents will no longer receive the critical
rental assistance they are accustomed to under these
USDA programs, leaving them without alternative housing.
“We’ve lost more
than half the
inventory we had.”
Kathy Tyler, Motivation Education
and Training Inc.
Although the maturing-mortgage problem is national,
Texas is overrepresented, with 10 percent of the maturing
stock. The good news, Tyler says, is that “USDA has not
made it difficult to stay in the program. What you have to
do is defer your mortgage or apply for an additional loan.”
She argues that state initiatives such as education, funding
and training should be in place to help combat the loss of
these resources. “It’s truly a shame when units go out of
service,” she says. “It means no one is paying attention.”
Community Development
15
Community
Outlook Series
Federal Reserve Bank of Dallas
Community
Outlook Series
Contact the Dallas Fed’s Community Development Department to find out how to get involved in initiatives
across the state to increase the availability of safe, affordable housing. For more information about this report,
email Emily Ryder Perlmeter at Emily.perlmeter@dal.frb.org.
Notes
Federal Reserve Bank of Dallas
1
“If You Want an Affordable Home, Move to These States,” by
Michael Casey, CBS News, Jan. 13, 2015. www.cbsnews.com/news/
if-you-want-an-affordable-home-head-to-texas-or-pennsylvania.
award criteria for tax credits were altered in aftermath of this ruling,
with more emphasis given to projects in lower-poverty census tracts
and proximities to high-performing public schools.
2
16
Housing Activity for Texas, Texas A&M Real Estate Center data,
www.recenter.tamu.edu/data/housing-activity#!/activity/State/Texas.
3
See 2010 and 2014 American Community Survey 1-Year Estimates,
Census Bureau.
4
“Texas Housing Market 2016,” by James P. Gaines, Texas A&M
Real Estate Center, presentation to the Federal Reserve Bank
of Dallas, Feb. 12, 2016, http://www.dallasfed.org/research/
events/2016/16shelter.cfm.
5
See 2014 American Community Survey 5-Year Estimates, Census
Bureau.
6
Not every respondent entered a headquarters county.
7
Most subsidy programs have income restrictions for residents, not
to exceed 80 percent of area median income. Some are restricted
further, to 50 percent or 30 percent.
8
See note 5.
See “America’s Fastest-Growing Cities 2016,” by Erin Carlyle,
Forbes, March 8, 2016, www.forbes.com/sites/erincarlyle/2016/03/08/
americas-fastest-growing-cities-2016/#53b4ae197056.
17
Taken from Median Sales Price of a Residential Home in 2014,
Boxwood Means Inc. data, courtesy PolicyMap.com.
18
“City Shares Complete Zucker Report,” city of Austin press release,
May 11, 2015, www.austintexas.gov/news/city-shares-completezucker-report.
19
“Those Who Left: Austin’s Declining African American Population,”
by Eric Tang and Bisola Falola, Institute for Urban Policy Research
and Analysis, University of Texas at Austin, May 20, 2016, http://
liberalarts.utexas.edu/iupra/news/10650.
20
21
See “Las Colonias in the 21st Century,” Federal Reserve Bank
of Dallas microsite, http://dallasfed.org/microsites/cd/colonias/
background.html.
9
Texas Small Land Sales Report, 2015 edition, www.texasrealestate.
com/uploads/files/general-files/LandReport.pdf.
22
10
23
“Property Tax Exemptions Available for Texas Homeowners,” by
Katie Caflin, Texas State Affordable Housing Corporation, April 10,
2015, www.tsahc.org/blog/post/property-tax-exemptions-available-for-texas-homeowners.
11
“At the Heart of Texas: Cities’ Industry Clusters Drive Growth,”
Federal Reserve Bank of Dallas Special Report, February 2016, www.
dallasfed.org/research/heart/index.cfm.
12
Taken from Fair Market Rent for a Two-Bedroom Unit, Department
of Housing and Urban Development data, courtesy PolicyMap.com.
13
14
See The UrbanEdge blog, http://urbanedge.blogs.rice.
edu/2015/11/05/here-are-four-myths-about-houstons-growth/#.
V5FL1SUUXL9.
15
In 2015, the U.S. Supreme Court ruled that the Low-Income
Housing Tax Credit program administered by the state of Texas
reinforced segregation in Dallas by awarding credits disproportionately to projects in low-income, minority neighborhoods. The effect
of this, the ruling argued, was to essentially concentrate minorities
and segregate them from more affluent, white neighborhoods. The
Federal Reserve Bank of Dallas
See the Texas A&M Real Estate Center’s Texas Housing Affordability
Index, www.recenter.tamu.edu/data/housing-activity/#/thai.
See “Estimate of Median Household Income for Tom Green
County, Texas,” Census Bureau, https://fred.stlouisfed.org/series/
MHITX48451A052NCEN, and “Estimate of People of All Ages in
Poverty for Tom Green County, Texas,” Census Bureau, https://fred.
stlouisfed.org/series/PEAATX48451A647NCEN, both retrieved from
the FRED database, Federal Reserve Bank of St. Louis, June 2016.
24
“Rio Grande Valley Tops List of ‘America’s Poorest Cities,’” by
Jason Cohen, Texas Monthly, Jan. 21, 2013, www.texasmonthly.
com/articles/rio-grande-valley-tops-list-of-americas-poorest-cities.
25
See note 5.
See note 11.
See note 22.
26
See the Texas Department of Agriculture website,
https://texasagriculture.gov/About/TexasAgStats.aspx.
27
See “Las Colonias in the 21st Century: Progress Along the
Texas–Mexico Border,” by Jordana Barton, Emily Ryder Perlmeter,
Elizabeth Sobel Blum and Raquel R. Marquez, Federal Reserve Bank
of Dallas Special Report, April 2015, http://dallasfed.org/assets/
documents/cd/pubs/lascolonias.pdf.
Community Development
16
@FedFRASER