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The Intergovernmental Relations Committee met to examine issues that impact housing affordability, evaluate purchasing a single-family residence in different parts of the state, and ways to increase transparency

 

This report is intended to give you an overview and highlight of the discussions on the various topics the committee took up. This report is not a verbatim transcript of the hearing; it is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.

 

Opening Comments

  • Chair Lucio- Today in committee we are going over the interim charges Lieutenant Governor Dan Patrick asked us to look at. One aspect of local affordability is local property taxes.
  • Each member introduces him/herself and stresses the need for affordable housing

 

Ambrosio Hernandez, Mayor of Pharr

  • Gives background demographics of Pharr: 80,000 population, 21,000 households with 4 people per house; median household income is $36,000 dollars, and rate of owner occupied housing is 60%
  • ¼ renter households have income at or below 30 percent and cannot afford rent
  • Pharr has used initiative programs and grants to remedy the crisis some of which are being used in San Francisco and Austin
  • Ensure there is adequate variety of housing types within the city
  • Pharr family housing foundation gifted 18 families affordable homes;
  • Low rate financing that meet requirements
  • Pharr used a grant for down payments
  • Pharr housing for hero’s program assists new homeowners with a $5,000 grant if they were part of police, a veteran, medical, etc.
  • Support efforts of local banks and non-profits
  • Support ways to fund state’s housing home fund

 

Jim Darling, Mayor of McAllen

  • McAllen started affordable housing program that is one of the most successful programs in the country; Integrated process of housing
  • When you write zoning ordinances, they are addressed to the lowest common denominator not to the responsible builders
  • Do not punish the city for a couple of wrongdoers, example of Houston annexing the woodlands
  • Reasonable regulations are important
  • Forcing local cities to adopt statewide building codes is wrong and adds cost to affordable housing in our areas
  • The tax credit process does not help with affordable housing and 35% of the tax credit goes to the developer

 

Chris Boswell, Mayor of Harlingen

  • Past year Harlingen increased building permits 30 percent
  • Gives a background of city of Harlingen’s taxes and they are experiencing good growth
  • Private developers can build in our local communities
  • We have a private/public partnership with MRE Capital and invested funding for housing credit to restore the Baxter Building to create into affordable housing
  • Partnered with Habitat for Humanity; The city clears the run-down lots, and give them to Habitat for Humanity

 

Open Questions

  • Menendez opening remarks to the panel
    • Zoning is very important. The point is that you pass rules to protect the quality of life and counties do not have codes in place to fix streets which adds a cost to the city.
    • You mentioned the Tax Credit Program is too political. Every session the IRS allocates per capita and Texas gets the 2nd largest appropriation.
    • Some cities are starting public finance housing corporations. You could go into a private developer to maintain your partnership to have a say in affordability.
    • The state may need to get out of your way sometimes, so you can create affordable housing
  • Huffines- Dr. Hernandez, how do you find your affordable housing program?
    • We use grants and tax base if need be we supplement
    • Partner with non-profits and use some properties we acquire over time
  • Huffines- Did you use building fees? Do any other cities use building fees?
    • Hernandez- Will come into one pot then allocate as needed
  • Huffines- If you increase building fees now you have made it unaffordable for rest of the community. When you implement a new building code, do you look at cost benefit analysis?
    • Darling- we have sure building inspection department lists each change because we need to make sure it is effective
    • Boswell- We are on the front line with the developers
    • Hernandez- We bring in 3rd parties to guide us
    • Darling- One cost we could avoid from the state is the TEXDOT policy
    • It costs the developers money and set backs are based on right away; go back and look what state mandates cost developers
  • Huffines- How much have your housing stock increased in last 7 years?
    • Darling- Increase in tax base has been on new construction; 75% on new construction
  • Huffines- The city’s revenue has gone up from property taxes. It is a huge burden to everyone.
    • Darling- Residential usage of police, fireman, etc.; service on residential increase costs
  • Huffines- You are not raising taxes, but not keeping at effective rate. So that is raising your taxes.
    • Hernandez- We cannot control borders, school district, or county but we have returned the tax dollars back to the residents for the past 2 years
    • Hernandez – Recommend you override appraisal district and fund the school districts better so the tax rates would not be so high
  • Huffines- Political sub-divisions are making large amounts of money and it does not look like it is going back to the residents.
    • Boswell- We spend 2/3rds of our budget on public safety
  • Huffines-How you spend your money is your choice and most political sub-divisions do not say no enough.
    • Boswell-What you are seeing is new growth in the cities
    • Boswell – Think about bracketing and out situation is different than metro-cities
  • Huffines- Most cities do not get a formal study done and a real study is very beneficial.

 

Gary Maler, Director of Real Estate Center at Texas A&M University

  • Demand is strong for housing, but the supply side is constrained
  • Growth is a great thing, but means we are bringing in competition for our residents
  • Building industry is still re-grouping from the recession; shortages of electricians, plumbers, and do not have the people we need on the ground
  • Cost factors- regulations at the municipal level, talk of tariffs on international products, lost a lot of skilled labor due to Harvey,
  • We have a skewed view of what affordable housing is; people are trying to build affordable housing on million dollar lots in Tarrytown
  • Wages are being outstripped by the cost of housing and skill sets do not match the job
  • Support trade and technical school development recognize approaches like higher density, and encourage state and subsidy programs

 

Scott Norman, Executive Director of Texas Association of Builders 

  • Texas cities are all improving, and housing market is doing well
  • The housing market is driven by jobs and population growth
  • Regulatory costs and taxes are what drive up the price of housing and caused by the Government
  • As you go down the price points, those people are most sensitive to the increases
  • Cities and counties show where the greatest need is in low-cost housing
  • Difficult for young starting families to try and live in the cities where they work because they cannot find a house below $200,000
  • Homebuilder Incentive Program where they wave fees
  • There was a major job shortage before Harvey and it is worse now
  • Bettencourt- There has been a 30% increase in housing cost in 6 years and there are areas of the state growing at 10 percent a year. What do you recommend we do to keep the growth curve here?
    • Many of the factors are not determined by Government
    • As lots go up the investment cost must go up accordingly
    • Cost and carrying costs are property taxes
    • When local government wants to get involved, incentives work better than mandates
    • Waving inspection fees, lowering impact fees these are ways for local government to affect the market
  • Garcia- In terms of data we know how many people come to Texas each year. Do we know how many end up in a home or apartment?
    • Not sure
  • Garcia- Do you give guidance to local government about what affordability is in their area?
    • Cities working with demographers can determine what the demand and price point is
    • What would make the greatest impact would be to use the 10,000 plus vacant lots in Houston and have them transferred over the market would respond
  • Garcia- You as industry to assist the local government to give an actual number
    • Maler- We are starting to do that
    • Maler – Looked at income cohorts and what is available then apply fees then see how many people in that income cohort can afford
    • Maler – More affordable that we thought
  • Garcia- There is a shortage in the Houston region, people confuse affordable housing with public housing.
    • Norman-Should be Market based
    • Norman – What is affordable is a very personal thing
    • Norman – Directly related to what your income is and what savings you have
  • Garcia- Do you have any recommendations for the permitting process?
    • Norman-Time is money and some cities do a good job and some do not of trying to process jobs quickly
    • Norman – If a city demonstrates they have our developers are willing to pay fees if there is an insurance that money is going to be used to hire new staff and expedite it
    • Norman – The building/permitting department can be seen as a revenue generator and that is something we think is wrong; fees should be covering the cost of service
  • Huffines- Complement Texas A&M on the work you do. What would you think would be the most important thing the legislature should look at in regards to affordable housing?
    • Maler- Need more people working trades
    • Maler – There are kids getting degrees and not getting a job for student loans; should get them into skilled trades to pay off those debts
  • Huffines- Every regulation/rule has a cost. Can we balance the rules and regulations to only get the minimum necessary?
    • Norman- Building codes are necessary, but have seen them evolve to make the homes more energy efficient
    • Norman – Also, manufacturers have gotten involved in amending the codes
  • Mendez- Can you give us a breakdown of all the materials, labor, permitting etc.? Then cities could look and compare with what they are doing.

 

Brian Matthew, Policy Analyst at the Texas Public Policy Foundation

  • Housing affordability refers to the proportion of households that can obtain households at certain price points
  • Price of housing product is the most important figure to focus on for state lawmakers
  • The state should not micromanage local land use right regulations, but the state should focus on policies to protect local land rights
  • We recommend you beat back regulatory delay, prohibit local governments from imposing new regulations after the property owners have obtained required permits to begin projects, suggest the committee explore targeted areas where broad based preemption may make sense- look at prohibiting lot sizes or mandatory parking
  • Suggest end of exemption to Texas cities from Private Rio Property Protection Act of 1995
  • Bettencourt- I agree with the statement on lot sizes. When someone is foreclosed on them they have a right of redemption, so is that was you are talking about?
    • No, it is the Texas Private Protection Act of 1995

 

 Roger Arriaga, Texas Affiliation of Affordable Housing Providers

  • Reiterates the demand for affordable housing
  • The need remains unmet and affects Texas’ economy
  • 36% of low-income tax families are rent burdened
  • 20% of low-income tax families spend 50% or more of their resources on rent
  • Variety and increasing cost to development
  • Ask you provide guidance to agencies about the Low-Income Tax Credit Program
  • Construction cost allowances increase in a booming economy
  • QAP process is very complex as it seeks to balance policy objectives
  • Historical success many find areas where additional housing may be funded
  • Property appraisal varies across the state and urge legislators to bring back proposed legislatures that make the property appraisal to be consistent throughout the state

 

Scott Houston, Texas Municipal League

  • TML worked closely with association of builders at the state and our cities worked with them at the regional level
  • Balance of regulations and fees that are imposed
  • The notion that city fees that comprise 25% of cost of a new home is not true in Texas
  • Data shows the fees imposed by city constitute 2-3% of new home
  • Taxes are a large component of what somehow pays for their house
  • Affordability goes hand in hand with sustainability
  • School taxes drives affordability
  • Supportive of Commission on Public Finance
  • Neighborhood Empowerment zone, city to designate a part of the city for low income house and lower or wave other fees
  • Bettencourt- The example of the 322 unit apartment complex in Austin has a million-dollar development fee, but in Dallas $120,000-dollar developmental fee. What is Dallas doing right that Austin is not?
    • Disparity between what different cities around the state do; more inspections at more stages or the citizens demand for
    • I do not know the answer
    • City officials that dealt with it say there is an underlying reason that we do not know
  • Bettencourt-Could you go back and find the underlying reasons?
    • Would be thrilled to
  • Bettencourt-If we took the $100 transfer plan, could you see TML supporting that?
    • Not sure what plan you are talking about
  • Bettencourt-In San Antonio, small parcels are being transferred to waive developmental fees.
    • Can be different for different areas of the state
    • The question about compiling empty lots is something that cities are doing now
    • Land banking
  • Bettencourt-Development is better when it is lease intrusive to the market, if they can get it transferred and off the tax roll and back into circulation there is authority there.
    • Yes, we would support that authority for cities
  • Lucio- In Minnesota- They are buying hold homes and tearing them down to make duplexes to address affordable housing shortage. Is anything like that being done in Texas?
    • Yes, I think maybe some of the affordable housing folks will be better at explaining what is going on in those lots

 

Jim Allison, County Judges and Commissioners Association of Texas

  • They work with county and local governments
  • Counties provide property tax reductions for up to 20% of the home the min is $5000
  • Residential homesteads occupied by 65 or over and disabled also get exemptions; provide incentives for residential home ownership
  • Average increase of appraisal values has exceeded the average increase of appraisal of other properties for several years
  • 10 years ago, residential properties were 40% of tax roll and now they are over half
  • The legislature could address the appraisal imbalance
  • Resisted trying to dictate the method of evaluation
  • Counties support residential homeownerships by building road system; 88,000 miles of county roads
  • Need additional support is needed to fund the transportation systems, so homeowners have a safe way to travel
  • Affordable housing is essential to economic well-being of our residents and should not be related to inadequate standards of construction
  • To prevent fraud and reputable contracts being subject to competition we need to strengthen the provisions
  • Counties do not have the authority to sell the properties except by bid or auction
  • Bettencourt- Passed some bills to improve the auction speed and process and has made a huge difference in properties flowing through the foreclosures. If you have ideas on how that would help, that would be a good bill.

 

Pablo Javier Almaguer, Texas RioGrande Legal Aid

  • Regulations offer safety and removing those regulations set the bars low
  • Colonias, patchwork of homes where houses who have regulations are better, but there are builders who become competitive and do not follow regulations
  • Demand is great for low-income
  • You should look at the less reputable builders who want to take advantage of having less regulations
  • 1989 Model Subdivision Models
  • Residential housing allows the owners to see more benefits
  • Need a home that has all the regulations
  • Menendez- You need to build a coalition and look to TML and reach out the builders to work together to build an affordable plan.
    • Patchwork of better Colonias with better institutions it is because of the coalitions you mentioned
  • Once they buy the home they can keep it with the mortgage

 

Tim Urvan, Texas Department of Housing and Human Affairs

  • Quarter of a million in portfolio and 1.2 million rent-burdened we are meeting 20 percent of the need
  • $9 million dollars dealing with low housing the percentage is must lower
  • 9 percent tax credit program 6500 units a year
  • Private activity bond program is producing more
  • Tax Credit program leverages the private sector
  • The bond cost must be drawn down on the front end
  • Local gov permitting costs pale in comparison to building costs
  • Examine the structure of bond deals could provide flexibility
  • 7,800 Texan households in their own homes this year 1.2 billion in financing leveraging down payment assistants
  • Performance of our portfolios are fantastic
  • Avg loan 160,000 interest is $940 dollars a month= classic definition of affordable
  • We provide mortgage credit certificates and can increase household income
  • Menendez- How we can put more units on the ground? If you get someone from your team to contact us and let me know how we can fix it so we can start working on legislation. Maybe bonds should work like a line of credit.

 

Homer Cabello, Office of Colonia Initiatives for the Texas Department of Housing and Community Affairs

  • Texas Bootstrap Loan Program created in S.B.1287
  • After 20 years, 2,000 homes and the repayments that are coming in will help self-fund the project
  • The program has flexible underwriting standards
  • Minimal foreclosures
  • Bettencourt-How minimal?
    • Out of 1800 we have foreclosed on 28
  • Where we are in terms of need.
  • 6% on a high-risk population is an impressive number. When will you will be self-sustaining?
    • $40 million dollars in mortgage notes that are being paid every month
    • Funded at 3 million dollars a year
    • We use general revenue funds

 

David Long, Texas State Affordable Housing Association

  • Home Sweet Texas Home Loan Program; requires the applicant completes a homeowner program which is a huge benefit for success
  • In 2017, these programs helped finance 5700 homes and to date served 20,000 households
  • Housing impact fund and Affordable Communities of Texas Programs foster long term partnerships and attracts private investment
  • Jacone development in Austin features 28 single family homes; 21 are for $68,800 dollars made per year
  • Partnership with CDD Brownsville with $1 million-dollar commitments through Mi Casita housing programs

 

Diane Rath, AACOG

  • The network consists of 70,000 providers in 15 areas
  • In 10 months, we received 625 requests
  • In San Antonio, the average rent is $1,113- 14% increase from 2016; The price of a home in SA rose 24.4 % since November of 2015
  • Housing for military housing only increased 1%
  • Joint based program occupancy rates are 97%
  • In my area, 749 vouchers, avg age is 55, majority disabled, 1/3 have children, 648 veterans on public housing waiting lists
  • Rural populations have fewer options available
  • Traditional method of obtaining first loan was using the VA loan program, now 1 percent population that option is not available
  • Menendez- If you could work with the apartment association and show us where your vets are looking to purchase.
  • Lucio- Interest rate is where people are paying so much interest and little of the payment goes towards the principle, have you looked at that?
    • People not being aware of the options available
    • People forget about using VA loan option
  • Menendez- Mortgage brokers do not like to use the VA loan, so it is going to require agencies like yours to reach out
    • Texas Serves promotes the use of the VA loan
  • Bettencourt- The increase in prices of housing has a huge property tax component.

 

Zoraima Diaz, Community Development Corporation of Brownsville

  • Often trapped in a cycle of chronic instability
  • Disproportional impact specifically in rural areas makes it impossible for them to be put into low-income housing
  • Serving low-income working families, disproportionally impact by property taxes couple with insurance makes it unaffordable
  • Helping Individuals earning less than $25,000

 

Nick Roads, Esperanza Homes

  • This year will make 220 homes in Hidalgo and Cameron counties
  • Usually cost between $120,000-400,000 dollars
  • $60-100-dollar utility bills
  • Land development and lot costs are now $40,000 dollars which leads to home prices around $200,000 dollars
  • Supply issue is building up the problem
  • Effects of the federal policies that have not been enacted yet are causing the cost of materials to increase
  • If there is a way to enact incentives for customers buying the green homes
  • Partnered with CDCB to build homes with parks, trails, and roads that cost $120,000 dollars
  • Bettencourt- Can you go over the margin markup cost again?
    • Lumber is usually 15% now up 25%, steel is up 30%, the tariff on boxwood from china adds another thousand dollars
    • Builders will eat the cost in the short term but long-term goes to the buyer
    • Passed on to buyers at a margin of $9,000-10,000 dollars

 

Nick Mitchell Bennett, Community Development Corporation of Brownsville

  • The rising cost of housing is hurting local economies, health outcomes, educational outcomes, basically all aspects of life
  • People who want to eliminate building codes to solve the affordability affecting the state, I disagree
  • Since 1991, we utilized over $50,000,000 million dollars in state and federal funds to fix the mistakes in the housing
  • If we would have already built strong homes, we could have used the $50,000,000 million dollars to improve education or other programs
  • Mi Casita model is based of rapid reconstruction model
  • Core unit can serve as phase 1 of housing then can be expanded
  • Core units will be made from 4-6 weeks; 600-650 square feet
  • Lucio- What specific reforms could we pass to better help you address the housing needs you are confronted with?
    • Fund housing and financial coaching for low-income families
    • Encourage local governments to demand high performance and adopt processes and systems that speed up development
    • Ask the Federal government to back away from higher tariffs and fees
    • Loan and grant programs
  • Lucio- How can we maximize resources and encourage collaborations with the private sector?
    • Need relationships with banks
    • Private partnerships like the CDCB need to be done everywhere
    • Ask the state to put down $300 dollars a buyer for counselling, fund the Housing Trust Fund, and fund down payment assistance programs
    • Texas funds housing with $6,000,000 million dollars every 2 years whereas LA uses $100,000,000 million per year

 

David Salen, JP Morgan Chase

  • Nexus of economic development across the country
  • JP Morgan funded a study that focused on affordability issues in Miami, Austin, and Denver
  • Essentially, one issue that affects state of Texas does not allow inclusionary zoning to mandate affordable housing
  • Rising housing costs are due to construction costs
  • Developers are put through additional challenges and getting fancy for those projects
  • Affordable housing cannot keep up with the pace of growth in Texas
  • Affordability needs to have a common definition
  • Texas is the only state that requires the full amount of the tax-exempt bond
  • Menendez- I have noticed that the TDHCA has stricter underwriting standards than the private market sector. If the commercial partners are willing to be apart of that loan the state shouldn’t be putting more money into it.

 

Robert Franco, Texas Capital Bank

  • It is important to be able to afford a home close to your job
  • Only bank invited by the housing department for the Grassroots Campaign
  • We developed a home investment partnership program and gave homeowner recovery grants to families who were affected by Harvey
  • Offer free financial literacy programs
  • Support community enriched private/public partnership
  • Menendez- We have a need in San Antonio, I would love to work with you to fulfill that need.

 

Kyle Jackson, Texas Apartment Association

  • Upticks in city fees and ordinances across the state especially in areas of permits and services; they are difficult for the tax payer to find
  • Bedford increased apartment inspection years to $120 dollars per year, but dropped $33 dollars after we negotiated with the city
  • Gives the panel the Dallas affiliates 2018 fee survey
  • More upfront notification of the increases would increase the transparency of the city budgeting process
  • The fees should be included on budget’s cover page and there should be email notifications sent out
  • Cost of development has increased greatly; a higher cost of development means a higher cost in living

 

Amelia Adams and Josué Ramíerz, Texas Housers

  • Recently completed a report on the
  • Lack of affordable housing has produced large amounts of colonias
  • Sub-division developers failed to provide proper infrastructure, water, and roads
  • Repeated floods occur in the colonias and there are no proper storm cautions
  • Residents at colonias have spoken about the need for safer places to live
  • Environmental issues like cancer causing chemicals and sewage lagoon stations are present in the regions
  • Support Lucio’s legislation for pre-storm prevention plans
  • Can take a proactive approach and plan for development
  • De-regulation is not the solution
  • The county of Hidalgo has come up with regulations that make the county safer and protect the living conditions
  • De-regulation is important in terms of where housing is found because of environmental concerns
  • Support the increase of funds for financial literacy

 

Ann Williams Cass, Proyecto Azteca

  • Increase in 300% in home insurance
  • Eagle Voice housing working group was able to develop Hope Insurance
  • Have a problem with water supply company charge up to $3,000 dollars for water meters
  • Increase the minimum wage and invest in rural transportation
  • Economic development corporations need to invest in transportation
  • Looking at putting a small manufacturing company close to colonias that will pay $13 dollars an hour
  • Lucio- How many homes in the colonias system are being supplied with water from the water supply corporations?
    • Their source of water is from water supply corporations
  • Lucio- There is not a central place?
    • Councils of Government does have that information

 

Public Testimony

Andrea Landerez and Laura Guera

  • Benefited from Proyecto Azteca
  • Here to ask for your support for non-profit organizations can continue giving a better quality of life to people
  • Lack of regulations is not the answer to affordable housing because it makes the families more vulnerable
  • Families do not feel safe without street lights and have their kids wait for the bus in the dark