On July 14th, TAAHP’s new Board President, Jean Latsha and Executive Director, Roger Arriaga provided public testimony at the Urban Affairs Committee hearing in Houston, Texas. TAAHP would like to thank Chairman Cortez and all the Urban Affairs Committee members for inviting TAAHP to speak on their interim charge related to workforce housing. We are grateful for their consideration.

Charge #2:

Evaluate the availability of workforce housing to support the dynamic economic growth of the state. Study the use of public-private partnerships and other tools to incentivize the development of housing that meets Texas’ expanding workforce demands. Develop and include measures to ensure accountability and transparency associated with these tools.

Roger Arriaga’s Testimony – Urban Affairs Committee 7/14/2022

Chairman Cortez and Members of the Committee on Urban Affairs. Thank you for inviting our testimony today. The Texas Affiliation of Affordable Housing Providers, or TAAHP, is the largest statewide affordable housing trade organization representing the owners, builders, funders, developers and others who work to bring capital and expertise to increase the supply of critically needed affordable housing. We pay particular attention to programs involving tax credits, bond financing, and other sources intended to supplement the development of safe, quality, affordable housing for the working families of Texas.

We truly appreciate this committee’s interest and focus on the challenges facing workforce housing. There are a number of financial issues impacting working families today. Healthcare, education, rising food prices, childcare, and housing costs. It has become increasingly difficult for middle-income workers to find housing in the areas in which they work, whether it is to buy or rent.

Some might be attributable to wages not keeping up with increasing costs of living but is also due to the limited supply of housing that is priced at levels that these workers can afford. What we can tell you for sure is that, regardless of the financial circumstances of these families, they will go to any length to make sure their families are fed and that there is a roof over their heads. What this means is that the disposable income available to them is nonexistent. When they are spending most of their income on housing and food, there is little to nothing left for healthcare, transportation, or childcare expenses. And these are working families simply trying to make ends meet. For many of these families, homeownership remains well out of reach. As a result, the demand for high-quality affordable rental properties is significantly increased.

The pandemic and subsequent economic challenges have made these issues more acute. And while Texas has one the strongest economies in the country, there is a limit to its success. That constraint is ultimately related to housing affordability and opportunity for the workforce, which keeps it moving.
Housing affordability is a very complex issue that is made more difficult to address because of the current lack of supply across all housing types and at all price ranges. But the impacts are felt hardest on low and moderate-income families. Those needing workforce housing.

For a long time now, the housing supply has simply not kept up with the demands of our growing population. The result is skyrocketing rents and housing costs ultimately because of an insufficient housing supply. Over the last year, the average rent in Texas has increased by 22% while the rest of the country experienced a 15% increase, according to a Redfin analysis. The highest increases in the state are happening in Austin, where the average rents increased by 46% in just the last year. As these families grapple with the inflationary costs of all goods and services increasing, housing represents the lion’s share of that burden.

Housing cost burden is defined by the US Department of Housing and Urban Development as those families who spend more than 30% of their income on housing and utility costs. What we’re seeing a lot of in Texas is described more accurately as Extremely Cost Burdened, where families are spending upwards of 50% or more on housing costs.

Even renters who earn higher incomes and would otherwise move into homeownership are having a harder time. In the Houston metro area, the 2022 median home price is over $282,000, which is more affordable than other parts of the state. According to a national database developed by the Center for Housing Policy, the annual income needed to afford a median-priced home in this metro area is about $80,000/year.

The problem is that entry-level professionals, such as teachers, police officers, and nurses here all earn $15,000 to $25,000 below this mark. And other workers, like retail clerks, custodians, or your Starbucks baristas earn over $55,000 less annually than they would need to earn to be able to purchase a median-priced home in this area. This is even more pronounced across Texas, where the median sale price for a home rose by over 19%, from $328,000 in May 2021 to just under $400,000 in May 2022. So, the dream of homeownership is much harder to reach, which means that many must remain renters. And it is our responsibility to try to meet this need for them and for the Texas economy.

Lower-income families are left with few options for dealing with these extreme cost increases, whether they rent or own their own homes. The most common response has been that these families most move further away from job centers to locations where they can better manage these costs. Of course, this compounds issues of longer commutes and higher traffic congestion. Ultimately, we see this as a housing supply issue. Simply put, if there were more housing options and availability, we would eventually see pricing moderate. Right now, we’re in the worst possible situation, where not only is there an insufficient supply, but the costs for providing more are in unprecedented territory because of supply chain issues, inflation, and now increasing interest rates.

As housing costs have continued to increase as a percentage of family budgets, other necessities such as health care, child care, transportation, and education become secondary priorities.
Affordable housing sits at the nexus of economic development, workforce development, and educational achievement. Without a sufficient supply of it, each of these critical factors to economic strength becomes deficient. There is no question that safe, affordable, quality housing stabilizes families. But even when the economy is strong, many families are left behind in their search for affordability because of rising housing costs. The need remains unmet, and this ultimately limits our State’s economic strength.

Which brings us to this committee’s interim charge. How do we deal with this housing crisis, which is really an economic crisis. There are definitely actions to consider that could work to alleviate what we’re experiencing in Texas. In general, solutions include retaining and expanding the affordable housing funding toolbox with concepts that have been proven in other states. Like a State of Texas tax credit program to overlay the current federal tax credit program.

While our organization is concerned with issues that affect the availability of all affordable housing, the federal tax credit program has been successfully administered and is a primary tool used by the State of Texas for over 30 years and administered through TDHCA. Tax credits serve as an incentive for private affordable housing development and must meet extremely rigorous standards and monitoring requirements for 15-30 years; and they compare with market-rate housing in every other aspect except for the lower rental rates and supportive services geared toward self-sufficiency for residents.

Key facts:

  • Housing developed under this program is not public housing or government-owned. Residents may receive rental assistance, but these are generally privately owned properties.
  • Tax credit developments pay property taxes and contribute to the state and local economies. In Texas, over $12.3 B since 1986.
  • One of the reasons these are successful developments is that investors in these developments, just like investors in any business venture, are just as strongly interested in well run compliant investments.
  • TAAHP members want the Texas economy to thrive. Even with a lacking supply of affordable housing, the economic impact of tax credits in Texas is immense. In the more than 30 years of the program’s existence, nearly 300,000 homes have been preserved or built in Texas, serving nearly 700,000 families over this period.

Further, there are a number of regulatory streamlining solutions that could alleviate costs for requirements that are duplicative or have alternative means of compliance. Our president-elect will provide some of these concepts in more detail. We will provide more information about the program for the committee to consider in its research and reporting. We look forward to serving as a resource for you as you consider the various policies and legislation surrounding this important issue for Texas.
Thank you.