How Do the Dallas HFC and PFC Work?
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On Tuesday, the Dallas Housing Finance Corporation will consider entering into a two-year agreement with a local economist to study the impact of housing finance corporation and public facility corporation projects on communities.
The initiative comes as officials grapple with devising new policy statements for the Dallas HFC and PFC. Board members from the two entities and city staff are at odds about some of the specifics, which will ultimately have implications for where and what kind of projects get prioritized.
Council members are expected to make a decision in May, so it’s as good a time as any to get familiar with what HFCs and PFCs do.
Similar to local government corporations, HFCs and PFCs can be created by cities and counties to facilitate a public interest. That public interest is to finance or incentivize development — often housing — but they work in slightly different ways and come with different policy implications. Dallas has had an HFC for more than three decades now, while its PFC is a much more recent endeavor.
Here are the basics:
Dallas Housing Finance Corporation
Texas law describes an HFC as “a means to finance the cost of residential ownership and development that will provide decent, safe, and sanitary housing at affordable prices for residents of local governments.”
Established in 1984, the Dallas HFC is a nonprofit with the power to issue tax-exempt bonds to support housing projects that might not otherwise be feasible. It partners with private developers, using bond money to provide them with lower-cost financing in exchange for affordable units with below-market rents. Those units are typically tied to area median income (AMI), 60% or below. This kind of structure lets the city leverage private development activity while still securing some affordability without having to directly build the housing itself.
By lowering financing costs, the corporation can encourage mixed-income developments across the city. At the same time, its effectiveness depends heavily on how affordability requirements are structured — such as how many units are set aside, how deep the affordability goes, and how long those restrictions remain in place.
Dallas HFC support can go toward new construction, conversion projects, rehabilitation, and refinancing to build or preserve housing stock. It can also purchase, lease, own, hold title to, or acquire interest in a residential property with the authorization of the city council.
Priority multifamily projects include:
- Demolition and reconstruction of existing substandard stock
- Rehabilitation/adaptive reuse of existing developments
- New construction of housing for special needs populations (seniors, people with disabilities)
- Youth projects, including housing for the homeless
- Low-Income Housing Tax Credit financed projects, with priority given to master-planned, transit-oriented development
Dallas Public Facility Corporation
The Dallas PFC is a relatively young organization, having only been established in 2020. Like the HFC, it’s meant to support the creation of affordable housing, but it does so by leveraging its tax-exempt status.
Rather than focusing on financing, a PFC’s primary function is to take legal ownership of a property. In a typical PFC deal, a private developer transfers ownership of its project to the corporation. The PFC then leases the property back to the developer with a lengthy tax abatement to support any construction and rental operations (such leases are going for 75 years).
Because the property is technically publicly owned, it is removed from the local property tax rolls. In exchange, the developer must agree to reserve a portion of units for renters earning at or below 80% AMI.
This kind of ownership structure has made PFCs an increasingly popular tool in fast-growing markets like Dallas, where high property taxes can be a significant barrier to development. By eliminating that tax burden, the PFC can improve a project’s financial feasibility, allowing developers to move forward with deals that might otherwise stall.
As previously reported by CandysDirt.com, this model has drawn scrutiny from some officials for taking properties off the tax rolls while the city is grappling with tough budget decisions amid uncertain sales and property tax revenues. Supporters of PFC-backed development, on the other hand, counter that the tool helps bolster housing production without direct taxpayer subsidies.
Read more about the arguments for and against PFCs here.
