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Texas’ affordable housing dilemma is only expected to get worse in 2017. Demand will continue to skyrocket as new inventory is threatened by a perfect storm of rising costs, bureaucratic hurdles and political uncertainty.

“Most of the quality affordable housing you see in any Texas city is built by developers willing to stick their necks out and take a capital risk,” said Frank Jackson, executive director of the Texas Affiliation of Affordable Housing Providers. “That’s become increasingly difficult.”

Rising land and construction costs in 2016 pinched low-income housing developers like they did everyone else.

But builders of affordable housing face additional hurdles. And take additional risks.

For example, a developer building affordable apartment homes through the housing tax credit program must purchase an option on property before they even know if their proposed development will be approved for tax credits by the state.

“A developer could easily lose tens of thousands of dollars if they bet wrong,” Jackson said. Even if they won approval, developers are now also struggling to close on tens of millions of dollars worth of deals put on hold by expectations of a substantial federal corporate tax rate cut.

The private investors who purchase the tax credits that make most affordable housing in Texas possible are backing away from the closing table amid speculation they might not need the tax credits if their corporate tax rates are lowered.

“Right now, good projects are on hold all across the state,” Jackson said. “A pause in building affordable housing doesn’t just hurt Texas seniors or working families,” he added. “It hurts the local economy when developments don’t pan out.”

“There are 122 jobs created with every 100 apartments built through the Low-Income Housing Tax Credit program,” Jackson said. “Building affordable housing provides jobs and helps lift local tax bases.” The Texas affordable housing crisis drew the attention of the Dallas Federal Reserve last year, which did a report on the hurdles developers face. The top-reported barriers to building new affordable housing were regulations and costs.

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