San Antonio City Council on Thursday unanimously approved changes to how the city evaluates projects seeking affordable housing tax credits.
The new policy will give a slightly greater advantage to private or nonprofit developers who plan to build housing units for the city’s poorest residents.
“This is a small but important step to get the deeper affordability that the city of San Antonio needs,” said Councilwoman Teri Castillo (D5), who pushed to further incentivize developers to include cheaper rents in their projects.
She pointed out that a majority of the affordable housing units San Antonio needs to have built, according to the city’s 10-year housing plan draft, are for people who earn 30% of the area median income (AMI) — that’s $20,010 for a family of three — or less.
When developers submit applications for competitive federal tax credits to the Texas Department of Housing and Community Affairs, a supportive letter from the city or county where the project will be located can mean the difference between receiving a Low Income Housing Tax Credit, looking elsewhere for funding or even abandoning a project.
The 9% competitive tax credit can cover almost three-quarters of development costs, while the non-competitive 4% tax credit covers about a third of those costs, according to city estimates. Those credits enabled more than 2,000 units to be built in San Antonio last year, said Veronica Soto, director of the Neighborhood and Housing Services Department — units that, without those credits, would likely not have been built, she added.
Local resolutions of support are worth 17 points out of the 183 points that the state uses to evaluate competitive projects.
“Since it is a competitive process, it is not unusual to see that these resolutions can be a determining factor,” said Elizabeth Mercado, a public relations manager for the Neighborhood and Housing Services Department.
The city has its own 100-point scoring system, which includes points for projects in targeted areas, have affordability components, resident amenities, and for developers to engage the surrounding neighborhood.
Once projects are locally scored, the city council votes on whether to issue a resolution of support or of no objection. It has typically supported projects that earn 75 points or more.
The new scale takes some points away from general development experience and project readiness to start awarding points for projects that would be located close to public transportation options (10 points) and those that plan to use local contractors (2 points).
The city does not award any funding through the local point process, Soto said.
“The state, which actually awards the credits, does spend a lot of time making sure that the owner-developers have the experience, have a good track record, and can deliver,” she said.
Originally, staff did not recommend changes to affordability scoring, which offers 10-20 points on a graduated scale for units that affordable to a household that earns 50% AMI — $33,350 for a family of three — or less.
Castillo initially proposed only awarding the full 20 points to projects that propose building at least 20% of their units for people who earn 30% AMI, and 15 points for projects with 15% of units at 30% AMI.
Very few projects would likely meet that criteria so early in the process, Assistant City Manager Lori Houston told the committee.
“It could really kill any project’s ability to get the tax credits, or even be able to get financing,” Houston said. “This initial barrier [as proposed by Castillo] is going to hurt our ability to get more affordability.”
If a project gets the tax credits, typically the developer comes back to the city to apply for other incentives or partnerships that require deeper affordability such as 30% or 50% AMI units, she said.
“That’s the time for us to buy down or get more affordability,” Houston said, as most projects eventually get partially funded through the San Antonio Housing Trust.
Planning and Development Committee members including Mario Bravo (D1), Adriana Rocha Garcia (D4), and John Courage (D10) were generally supportive of finding some way to further incentivize units that meet the 30% AMI threshold, so city staff came back to the committee this week with a compromise.
Now, the only way to receive the full 20 points under the new scale will be to offer 20% of the project’s units for households who earn 30% AMI. The points graduate down for less affordability.
Rocha Garcia, who chairs that committee, praised city staff for finding a “happy medium.”
No one voted against the changes, but Councilman Manny Pelaez (D8) was not present for the vote.
The scale as approved is far from perfect, said Bravo, noting that the two-point difference may not be enough to incentivize more 30% AMI units.
He said the next round of changes to the policy, which will occur in two years, should encourage more environmentally sustainable projects and those that involve nonprofit partners.