Naked City

A funny thing happened at last Friday's board meeting over at the Texas Dept. of Housing and Community Affairs: Board members questioned TDHCA staff proposals for conducting the agency's largest housing program and even tried to write some rules themselves. The awakened interest provided a glimmer of hope for housing advocates who have criticized the TDHCA board for passively looking on while agency staff employ an arcane and at times questionable selection process to determine the winners in the department's Low Income Housing Tax Credit (LIHTC) program, which provides the state's juiciest carrot for affordable apartment builders.

In November, state Urban Affairs Committee chair Bill Carter (R-Fort Worth) and committee member Harryette Ehrhardt (D-Dallas) proposed substantive changes to LIHTC program rules that would have curtailed the staff's discretion in choosing which of the projects competing for the program's annual $200 million in tax credit prize money get recommended. The staff who administer the LIHTC program ignored Carter and Ehrhardt's proposals and submitted their own, much more limited, changes, which the TDHCA board took up Friday. But even though the legislators' reforms have been shunted aside, it appears that not all criticism of the board's management has fallen on deaf ears.

Board members Kent Conine and Michael E. Jones made it clear they want to at least partially address one of the most controversial omissions in the LIHTC program's guidelines: a clear definition of what constitutes "material" grounds for disqualifying tax-credit applicants. Currently, housing agency staff are at liberty to allow, or disallow, applications which contain inaccurate accounting, inappropriate site plans, or other shortcomings to be corrected and resubmitted to the agency. Staff used that broad discretion during the 1999 tax credit allocation round to award credits to some developers who had outstanding compliance violations on their existing projects. When Rep. Ehrhardt's office discovered that fact late last year, the state Bond Review Board asked the housing agency to explain its actions, to which staff responded that they had not judged the unresolved compliance issues serious enough to warrant denying the developers new tax credits.

On Friday, Conine and Jones pushed to set a standard for compliance that developers would have to meet in order to be considered for tax-credit allocations. "I think we should certainly be able to strengthen the kick-out clause in the [rules] from what it is today," said Conine. "If [applicants] are still maintaining compliance issue problems and not resolving them, then it's incumbent on me to think, you know, enough's enough." He did propose giving developers 90 days to rectify violations.

But tax-credit program director Cherno Njie argued against automatically dismissing applicants for any violation other than breaking health or safety codes, a rare occurrence for tax-credit housing complexes. The decision to disqualify applicants for other, more common, infractions -- such as overcharging on rents, reserving too few units for low-income renters, or failing to file paperwork -- is best left to his staff, Njie said, owing to the varying degrees of severity.

Jones pushed on, however, nudging aside assertions by agency staff that the more rigorous compliance standard would disqualify most of the developers who currently own tax-credit housing. In response to Njie's appeal not to punish applicants for minor violations, Jones asserted that 90 days ought to be plenty of time for developers to take care of those.

Then he got help from TDHCA compliance director Suzanne Phillips, who said, standing shoulder to shoulder with Njie at the podium, that she didn't believe tighter compliance enforcement would cause many reputable developers to lose out on future tax credits. Jones drafted language to make any violation of LIHTC program rules a "material" issue, but the board tired out before it reached a vote and adjourned. A specially called meeting has been tentatively set for 10am Friday to pick the item up again.

Rep. Ehrhardt stalked the boardroom during the debate, fuming that the board wasn't addressing one of the most gaping flaws in the selection process, which is that staff doesn't declare developers ineligible for tax credits if they fail to submit their compliance records with their applications. "If you lie to a government agency, then you should be out," Ehrhardt said. Her recommendations, drafted by a work group of housing industry professionals, would automatically terminate all applications which fail a range of threshold requirements, already on the books but applied subjectively by staff.

Asked why TDHCA staff did not propose any of Ehrhardt's recommended changes, Stiner said in a prepared statement that she's confident the board will reach a decision on program rules that is satisfactory to those on all sides of the issue. "The entire overview process cannot produce a win-win situation for everyone on every issue," Stiner said. "No one group or individual will walk away from this week's meeting with 100% of their requests granted; but through an exercise in compromise and Board direction, I feel confident that we will come out of the process with a [tax credit allocation process] that is beneficial for Texas."

After the meeting, Ehrhardt said that she was "delighted" the board had agreed to spend a week discussing the program rules and meet on the issue again.