Five takeaways: City Council offers critiques, suggestions for $34.4M affordable housing plan

by Ben OlivoAugust 18, 2019
The Soap Factory apartments rest on the banks of San Pedro Creek Culture Park. Photo by Jullien Uriegas | Heron
The Soap Factory apartments rest on the banks of San Pedro Creek Culture Park. Photo by Jullien Uriegas | Heron

Covering the cost of a lawyer for someone going through eviction court. Spending tax increment revenue on streets and sidewalks instead of affordable housing. Defining "affordable housing" in a way that's more San Antonio.

This was some of the feedback City Council members gave during a discussion on the proposed $34.4 million affordable housing plan last week.

The plan is as complex as any one policy or department the council must consider while fine tuning the overall $2.9 billion budget this month and next. It's really a series of policies that combine to make one big housing strategy a la the giant robot from the Mighty Morphin Power Rangers. Or the Transformers version, if you were one of the cool kids.

The big picture plan is based on the recommendations the Mayor's Housing Policy Task Force made in its framework report issued last August. Its goal of inducing 18,681 units—either new construction or the rehab of existing housing—in the next 10 years won't solve San Antonio's affordable housing woes, but it will help to stabilize them, some members of the task force say.

[ Read a summary of the plan: Here's how San Antonio plans to tackle affordable housing ]

Here's what the City Council had to say. Some of this stuff is highly technical. Let's walk through it together:

...

1. AMI continued

The debate over the area median income (AMI), which is $71,000 for a family of four in the greater San Antonio area according to the U.S. Department of Housing and Urban Development, resurfaced during the council discussion on Wednesday.

Mayor Ron Nirenberg pressed Assistant City Manager Lori Houston about the city's efforts to target and produce apartments for people making 50 percent of the AMI or below.

Quickly, here's what they're talking about when they talk about AMI:

The area median income (AMI) for a family of four in the greater San Antonio area (Bandera, Bexar, Comal, Guadalupe and Wilson counties) is $71,000, according to the U.S. Department of Housing and Urban Development.
The area median income (AMI) for a family of four in the greater San Antonio area (Bandera, Bexar, Comal, Guadalupe and Wilson counties) is $71,000, according to the U.S. Department of Housing and Urban Development. This graphic, prepared by the city of San Antonio, shows income levels for other household sizes.

According to Houston, San Antonio is on pace to meet the task force's goals for apartment production in all income levels except for households making 50 percent AMI or less, which was Nirenberg's concern.

This fiscal year, which began Oct. 1, 2018, the city is on track to produce 316 apartments for people making 30-50 percent AMI, and 87 apartments for people making 30 percent AMI or less. If this pace keeps up, the city will fall short of the 10-year targets outlined in the task force report, which are 6,344 units in the 30-50 percent AMI range and 1,701 units for 30 percent AMI or less.

Conversely, San Antonio is vastly ahead of schedule in the production of apartments for people making 50-60 percent AMI. See the graphic below. The percentages in yellow indicate where the city is behind schedule.

This graphic shows the city's goals for rental units in terms of new construction and rehab. <em>Courtesy City of San Antonio</em>
This graphic shows the city's goals for rental units in terms of new construction and rehab. Courtesy City of San Antonio

Also note that the task force included 30 to 60 percent AMI as one category. See the "10 Year Target" column. The city broke into two categories, 30-50 percent AMI and 50-60 percent AMI, see column "Adjusted Target," because 50 percent and below is where the greatest need is, Houston said.

Houston's confident the city will get back on track in those lower rent levels because of a new concept called income averaging. Here's roughly how it works: It used to be affordable projects that rely on federal 4 percent low-income housing tax credits were required to fix all apartment rents at 60 percent AMI. With income averaging, a recent change in the federal tax credit rule for housing, the development's apartment rents can average 60 percent AMI, allowing for a certain percentage to be priced in the range lower than 60 percent. Logic says it would also have to include higher-priced units, above 60 percent, to make the rents "average."

Another strategy is land banking, Houston said.

The city has four properties which it believes will yield 450 combined units after it sells them to affordable housing developers. The properties are the former marina on Nueva Street at the river; the former Continental Hotel building on West Commerce Street; property on South Cherry Street; and land on Zarzamora Street. It will want to purchase more.

District 7 Councilwoman Ana Sandoval brought up the fact that the task force uses the U.S. Census Bureau’s American Community Survey 1-year median income estimate for San Antonio of $49,268 from 2016. (The American Community Survey only provides one median income figure; it does not break it up by household size.) HUD's AMI includes Bexar County, and the counties that surround it.

Sandoval wanted to know how the city's projections, which use HUD's AMI, synch up with what the task force recommended?

"Are we meeting the spirit or the letter of the goals set by the frame work if they were actually set at different income levels?," Sandoval asked.

District 9 Councilman John Courage has been beating the AMI drum since he was sworn into office two years ago. He said by the time some of the developments in the pipeline are built, say, in two years, the AMI will be considerable higher.

[ Editor's note: Sandoval and Courage's questions bring up a matrix of additional questions, which, if addressed, will only derail this piece. Rest assured, we'll tackle those in a future post. ]

"It’s going up, and so when we’re forecasting today X amount of dollars to move into this apartment, that's going to be built two years from now, we know those apartments are really going to cost more than that two years from now," Courage said.

This year's AMI rose 6.287 percent to $71,000 from last year's figure. Assuming the growth will be the same, San Antonio's area AMI will be north of $80,000 in two years.

[ Related: The San Antonio area median wage rises to $71,000 ]

Then, Courage cranked his argument up a notch, and talked about the profit developers make from deals that receive a public subsidy. He said the city could achieve more affordable units by simply demanding them from developers.

"We're kind of taking out of hand what the building and development community is telling us they can do," Courage said. "Well what they are doing is based on them making a certain profit."

...

The Baldwin near St. Paul Square is an example of a public facility corporation—in this case, the San Antonio Housing Trust's PFC—in action. Because of its partnership with the PFC, developer NRP Group pays no property taxes on this development.

Clarifying subsidies

One statistic the city has been throwing around lately is the $1.09 billion in incentives given to 92 affordable housing projects scheduled for completion this year and beyond. Meanwhile the city estimates it alone has provided $84 million in incentives toward its downtown housing incentive policy for 56 projects that have signed agreements. This is sort of an apples and oranges comparison, because the city is comparing housing in the future, with housing that's already been built for the most part.

CITY OF SAN ANTONIO

Nirenberg wanted to make clear that the $1.09 billion in affordable housing incentives is mostly coming from the state and federal levels. He wanted to make sure people understood that the gap between incentives the city offers to affordable housing developments, and those it offers to predominately market-rate developments downtown isn't so wide.

"A lot of people will look at the $1.09 billion and think that it is all coming from city incentives and it’s not," he said.

Houston said the majority of the $1.07 billion in affordable housing incentives come from low-income housing tax credits ($373 million), the savings from tax exemptions made possible to developers by nonprofit public facility corporations ($299 million), and tax-exempt bonds issued by the same nonprofits (286 million). The city's tax increment reinvestment zones chip in $93.2 million. The other sources come in the form of federal housing grants; San Antonio Water System and city fee waivers; voter-approved bond dollars; rebates on city property taxes; and the city's general fund.

...

Two towers one by SAHA and JMJ, and the other by just JMJ. Renderings going to SAHA board meeting Aug. 1, 2019. SAN ANTONIO HOUSING AUTHORITY
Two apartment towers—one by SAHA, the other by JMJ Development of Dallas—are planned for Villita Street. San Antonio Housing Authority

SAHA's role questioned

More and more elected and appointed officials are beginning to question the role of the San Antonio Housing Authority in the overall affordable housing strategy.

Lately, SAHA has partnered with for-profit developers to build market-rate and affordable housing in the 80 percent AMI range. Not exactly the 50 percent AMI and below Nirenberg was talking about.

"Is this the space where SAHA should be working the most?" District 3 Councilwoman Rebecca Viagran asked.

Houston said the city will assist SAHA's desire to redevelop the Alazan Courts, as well as those at Apache, Cassiano and Lincoln, by offering capital support services-type development through future bond programs, such as youth centers, daycares, senior centers, or libraries. It's a symbiotic role the city will play while SAHA builds the actual housing.

[ninja_form id=3]

Houston also mentioned SAHA's recently-adopted strategy to build affordable housing in the 80 percent AMI range, as well as market-rate housing, as a way of building up its cash reserve so it can spend those dollars subsidizing future developments at those lower-echelon rents.

The strategy has Sandoval concerned.

"I was really concerned about that," she said. "Clearly the need is in another area."

[ Read about one of those new SAHA developments: "SAHA board gives nod to build St. Mary’s Tower with Dallas developer JMJ" ]

...

Right to council

Last week, District 1 Councilman Roberto Treviño brought up an issue not seen yet in San Antonio when it comes to affordable housing. He suggested the city use part of its risk mitigation fund, which helps keep residents in place by paying bills and other expenses, or with moving costs in the case they are evicted or displaced.

Treviño wants a portion of this $1 million allocation to be set aside for right-to-council, where the city would pay the lawyers fees for a household that's getting evicted.

Treviño said, according to his figures, the city is spending roughly $5,000 per case to help someone relocate under the risk mitigation fund. He said with right-to-council, it would cost $550 per household to give them representation in eviction court.

"Having a lawyer does not change the merits of your cases, just your ability to defend your rights in a very complicated and unfamiliar legal setting," Treviño said.

Veronica Soto, director of the Neighborhood and Housing Services Department, which manages the risk mitigation fund, said her department would look into squeezing right-to-council into the program.

...

What to do with tax increment?

District 10 Councilman Clayton Perry said he disagreed with the plan to spend $6.2 million of tax increment reinvestment zone (TIRZ) revenue on affordable housing. Typically, in a TIRZ, tax revenue gained from the rise in property values is gathered and redistributed into the same area.

In San Antonio, those dollars have traditionally been spent on infrastructure needs, such as new streets and sidewalks, or facade upgrades for historic buildings.

According to City Manager Andy Segovia, TIRZ dollars can also be spent on affordable housing anywhere in the city, not just within the zone.

Perry's afraid the $6.2 million would deplete the TIRZ coffers, but Houston tried to assure the councilman that the $6.2 million in TIRZ grants wouldn't do such a thing.

Perry asked for balance sheets on all the TIRZs involve, which are Inner City, Mission Drive In, Houston Street, Midtown and West Side. Hemisfair and what's called the Northeast Corridor also have TIRZs, but those are not involved in this affordable housing effort, Houston said. Here's a complete list of all the city-created TIRZs.

Perry's concern is that affordable housing will be siphoning funds that are supposed to be allocated for these areas, and that they will help fund affordable projects that won't feed the TIRZ because they might be placed outside the zone, or may not contribute to the TIRZ because the are either fully or partial tax exempt because of the affordability status.

"To me, we're not really gaining anything out of this," Perry said.

Houston said having more affordable families will have an indirect effect in these zones, because they will be spending money in them.

"The goal is to make that affordable housing project work so we can have housing for families and those wrap around services that will contribute to the overall vitality to that area," she said.

"But it might not be within those TIRZs?" Perry asked.

"Correct," Houston said. "It might be within a 1-mile buffer in that area. Sometimes property values may have gotten too high in that area, and you want to spend that money in an area that maybe is more along a bus line or something that has more workforce opportunity around it. That's why the statute reads the way it is: to be able to use the money inside or outside (the zone)."

Then, City Manager Erik Walsh chimed in.

"We saw it as an equitable way to be able to utilize those funds for a very high council priority," Walsh said.

Contact Ben Olivo: 210-421-3932 | ben@saheron.com | @rbolivo on Twitter

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