Affordable Housing: We have to get it right.

Protecting and increasing our community’s inventory of affordable workforce housing is very important to me. During my tenure as a city council member I have had the opportunity to approve housing developments that have helped us to meaningfully tackle this issue. Projects like the Veranda where, in 2016, council partnered with the Denton Housing Authority to add 322 units of housing for low income and very low-income households. I gladly supported that meaningful and substantial project and it’s full property tax exemption. And there have been projects like the Palladium where, by working directly with the property developer, council was able to secure a development with 93 below market rate units (57 units at market rate, 45 units for households below 60% area median income, 38 units for households below 50% of area median income, and 10 units for households below 30% of area median income) with absolutely no property tax exemptions – we merely needed to endorse the project as a council so that the developer would qualify for a federal tax credit.

With both examples above, we have had the opportunity to structure and approve ordinances that effectively increase our affordable housing inventory and provide a benefit to all in our community.

Despite my record of support of affordable housing initiatives in Denton, I recently voted against a proposed affordable workforce housing development called the Enclave at Brinker. It’s not a good deal and I am very concerned that deals like it will become the new template for affordable housing development in Denton.

The Enclave will be located along Brinker Road on the land behind Walmart near Loop 288 and will provide up to 270 additional apartment units to Denton’s housing inventory. The Enclave will set aside at minimum 51% of its units (138 units) at below market rental rates in a partnership with the Denton Housing Authority. (The Denton Housing Authority is an agency that operates independent of the City of Denton with authority granted by the State of Texas, where the only influence the city of Denton has is that the Mayor appoints the governing board of directors.) In exchange for at least 138 below market value rental units, the Denton Housing Authority has granted the developer of the Enclave a 100% property tax exemption for the entirety of the development. Once the property is developed the exempted property tax is estimated to be about $1M per year. That means that the Enclave will not contribute anything to the city, the county, or the school district in terms of property taxes.

If you are an advocate for affordable housing, you may be inclined to take this deal at face value and see that it is expanding the stock of affordable housing. But are we really and to what degree?

What constitutes affordable housing?

HUD is the federal agency that sets the guidelines for subsidized housing. The minimum guidelines to qualify for subsidized housing are based on AMI (area median income) for the greater area in which a subsidized property is situated. For Denton, the AMI is currently set at $77,200 per year (note that this is not Denton’s median household income, it is the greater Denton area). Based on AMI HUD spells out the following income categories:

  • Middle Income – Households with income that is at least 80% of AMI. HUD considers middle income in the Denton area to be a household with income of at least $61,700
  • Moderate Income – Households with incomes between 65% and 80% of AMI. HUD considers households with incomes between $50,180 and $61,700 to be moderate income.
  • Low Income – Households with incomes between 50% and 65% of AMI. HUD considers households with incomes between $38,601 and $50,180 to be low income.
  • Very Low Income – Households with incomes between 30% and 50% of AMI. HUD considers households with incomes between $23,160 and $38,601 to be very low income.

As part of its agreement to be property tax exempt, the Enclave will provide at least 138 of its units at below market value for persons of Moderate Income or lower. Unlike previous affordable housing projects that I have supported and that council has passed, the Enclave offers no guarantees that a certain amount of housing will be set aside for Low Income or Very Low Income households. The only guarantee is that at least 138 units will be rented to households making Moderate Incomes ($61,700 a year) or lower. The developer provided a draft schedule (see below) of a potential allotment of the below market value units. This schedule does not appear to be binding in the ordinance that was passed. All the Enclave is bound to do is provide at least 51% of its units at or below the Moderate Income threshold of 80% AMI. The schedule is telling in how the “affordable” housing units may be allocated at the Enclave. It would suggest that in a “best case scenario” we may (but no guarantee) see this development provide 28 units for Low Income or Very Low Income households. And the number of bedrooms in these units does not appear to support many family households. In exchange for at least $1M per year in property tax exemptions this “affordable housing” development might (again, might, there is no guarantee in our ordinance to approve this development) help 28 Low to Very Low Income households. The value of the property tax abatement sits at nearly $36K per year per potential low-income dedicated unit in this suggested scenario.

rent schedule

But what about the other 110 units set aside for below market rents targeting moderate income households? Remember that moderate income is defined by HUD in the Denton area as any household with incomes between $50,180 and $61,700 (65% to 80% of AMI). I won’t suggest that households making a moderate income would not benefit from subsidized housing. But let’s put that moderate income range into local perspective.

According the U.S. Census 2017 American Community Survey, Denton has the following median income levels:

  • Median Household Income = $51,004
  • Median Family Household Income = $76,653
  • Median Non-Family Household Income = $28,633

Every way you slice it, the HUD standard for greater Denton AMI (area median income) is higher than the median household incomes within the City of Denton (overall, family, and non-family households). Granted, Denton is a college town with two universities. There are 8,020 students living off campus inside the city and they do impact our median income values. For that reason, we need to look at our household incomes split out by age of head of household and isolate our workforce – head of household between the ages of 25 and 65. This definition of workforce reduces the influence of college aged off-campus students and those who are more likely to be retired. Key findings on our workforce incomes are:

  • There are an estimated 32,757 workforce households in Denton. These are defined as households headed by individuals that are aged 25 up to 65 years old.
  • Over 50% (16,473) of our workforce households have incomes less than $60K per year. Over 50% of our workforce households would qualify for subsidized housing according to HUD standards based on AMI in the Denton area.
  • Over 34% (11,267) of our workforce households have incomes less than $40K per year. 34% of our workforce households are at or below Low Income according to HUD standards based on AMI in the Denton area.
  • Over 16% (5,241) of our workforce households have incomes less than $20K per year. 17% of our workforce falls BELOW Very Low Income according to HUD standards based on the AMI in the Denton area.

workforce incomes

Using this more detailed analysis of income in the City of Denton, it is clear that using the HUD guideline of moderate-income as the threshold to qualify for subsidized housing at the Enclave (80% of AMI which for the Denton area means a household income less than $61,700 per year) does not serve as the best and most impactful threshold for adding affordable or workforce housing for the citizens of our community. This affordable housing project will subsidize at least 110 households with incomes that are higher than over half of our already existing workforce households. For an estimated $1M per year property tax abatement we could have endorsed a project that would have guaranteed targeted assistance aimed at the 11,267 workforce households in Denton that are making at or below HUD’s Low Income threshold (below $50,180 income in this area). Instead the we have heavily subsidized what amounts to a standard apartment complex with the chance to perhaps set aside 28 of its 270 unites for low-income households.

The property tax abatements make this a very lucrative project for the developer. According to the memorandum of understanding for this deal, the developer stands to make over $17M once the Enclave is built. The memorandum indicates a 10-year exit plan for the developer. $10M over the 10 years coming from the exemption. Without the abatement the developer would only net just over $7.5M. The Denton Housing Authority will earn $5M. From the developer’s perspective they did a very good job structuring this deal and will profit well from it. From the standpoint of affordable housing, the bang for the buck on this project is not good and it appears that the Denton Housing Authority failed to negotiate effectively for a more impactful affordable housing development.

The project at the Enclave is a done deal. Council approved the Special Use Permit allowing the project to move forward. My hope is that future city councils faced with similar projects will get past the “affordable” housing label and dig into the numbers with their eyes wide open. When built, I am sure that the Enclave will be very nice, with great amenities, and may prove to help a small percentage of our low-income households. But we can do better. It’s not the intention that counts, it’s the results, and the results are lacking at the Enclave. If developments like this become the template for affordable housing in Denton, we will not be putting ourselves in a long-term position of strength for our citizens.