Why Aren’t There More Affordable Housing Units? This Mixed-Use Project is a Case-in-Point

If you’ve noticed all the housing projects in Dallas and the suburbs with no affordable units, it doesn’t take an expert to tell you why.

As I write this, the dust has begun to settle on the vote by Dallas City Council to approve a Kroger mixed-use project.  For those watching, the project was not an easy approval.  Instead, this was contentious and brought out the knives.  

Ultimately, this is a project about incentivizing or subsidizing housing.  A textbook case study on NIMBY.

Housing Policy Headache

Not that long ago, there was a simple process for projects with affordable housing in Dallas. If a developer comes to the city asking for financial support one question is asked — will there be housing? 

Not to get lost in the weeds, but the U.S. Department of Housing and Urban Developement has pushed for affordable housing requirements on cities. For Dallas, the common number was 20 percent of the units at 80 percent Average Median Income (AMI).  This is the definition many use to define the term “low income.”  These rates are calculated by HUD and reflect the city in which they are located.  

(There are also other tools to address affordable housing, including the use of low-income housing tax credits, but the Kroger project wasn’t addressing that type of affordable housing so that discussion is for another day.) 

The affordable housing situation started several years ago right around the time City Manager T.C. Broadnax was hired at Dallas City Hall.

Making The Math Work With Vouchers

At the time, Dallas City Council members felt that it wasn’t enough to require developers to add at least 20 percent of the units at 80 percent AMI if they got incentives or support from the Economic Development Department.  So, they passed an additional caveat — 10 percent of the 20 percent for affordable would require housing vouchers (formerly known as Section 8).  

For Dallas, housing vouchers come through Dallas Housing Authority (which regulates the funds from HUD) and whose rules are complicated.  Amounts are not the same across the city.  Instead, it’s based on ZIP code and the number of bedrooms.  For example, if you live in 75001 with a two-bedroom home, your voucher per month is $1,730.  If you live in 75042, that number is $1130.  

The impact of this decision is huge.  I know this because I worked at Dallas City Hall at the time.  The decision to insert vouchers along with the housing policy developed by the new city manager’s staff basically killed all new housing projects coming into the city.  

With incentives, developers were able to make their project financially successful by increasing their rents on the remaining units to 120 percent and 140 percent of the AMI.  But if you, as a developer, were offering $1,500 units, 80 percent of that cost would be $1,200.  Now, imagine instead that of a 150-unit development, you have 30 units at the 80 percent AMI, you now suddenly have only 15 units at $1,200 – the remaining 15 can’t be over the voucher amount.  It’s fine if you are in an area with high-amount vouchers, but not so much if the amount is lower.  

Now you have to consider the rest of the units at 140 and 160 percent, which is difficult for most projects — even harder when you have to sell to prospective renters that their neighbors use vouchers — it’s a NIMBY for many.  

Little Choice For Apartment Developers

For a system forced on developers, few apartment developers want to offer vouchers. If we required apartment owners to use vouchers, perhaps a change could happen.  But we don’t.  So, the estimated 20,000 units needed to fix Dallas’ affordable housing problem (a number used when selling the housing policy to council), is still an extreme challenge with no immediate solution to fix.

Ultimately, the council is in the middle.  

Did the old system of 20 percent work perfectly? No.  Does the new 10-10 system work? Definitely not.

The new process and the housing policy were approved with little or no input from stakeholders who actually build apartments.  Everyone should come to the table to find solutions, not start as adversaries.  No solution will fix all of Dallas’ affordable housing problems.  But common-ground solutions work better than the City of Dallas saying take it or leave it.