TAAHP Testifies at the Texas House of Representatives Urban Affairs Hearing

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

Load #2:

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

Testimony of Roger Arriaga – Urban Affairs Committee 14/07/2022

President Cortez and members of the Urban Affairs Committee. 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 homeowners, builders, lenders, developers and others who work to bring capital and l expertise to increase the supply of much-needed affordable housing. We pay particular attention to programs involving tax credits, bond financing, and other sources intended to complement the development of safe, quality, and affordable housing for working families in Texas.

We really appreciate this committee’s interest and attention to the challenges facing workforce housing. There are a number of financial issues affecting working families today. Health care, education, rising food prices, child care and housing costs. It has become increasingly difficult for middle-income workers to find housing in the areas where they work, either to buy or to rent.

Some could be due to the fact that wages do not keep up with the increase in the cost of living, but also to the limited supply of affordable housing for these workers. What we can tell you with certainty is that no matter the financial situation of these families, they will do anything to ensure that their family is fed and that there is a roof over their heads. . This means that the disposable income they have is non-existent. When they spend most of their income on housing and food, there is almost nothing left for health, transport or childcare costs. And these are working families just trying to make ends meet. For many of these families, home ownership remains out of reach. As a result, the demand for affordable, high quality rental properties is greatly increased.

The pandemic and subsequent economic challenges have made these issues more acute. And although Texas has one of the strongest economies in the country, there is a limit to its success. This constraint is ultimately tied to housing affordability and labor opportunities, which keeps it moving.
Housing affordability is a very complex issue that is made more difficult to solve due to the current lack of supply in all types of housing and at all price ranges. But the impacts are felt hardest on low- and middle-income families. Those who need housing for the workforce.

For a long time, housing supply has simply not kept up with the demands of our growing population. The result is soaring rents and housing costs due to insufficient housing supply. Over the past year, the average rent in Texas has risen 22% while the rest of the country has seen a 15% increase, according to a Redfin analysis. The state’s largest increases are occurring in Austin, where average rents have risen 46% in the past year alone. As these families grapple with rising inflationary costs for all goods and services, housing accounts for the lion’s share of that burden.

Housing cost burden is defined by the US Department of Housing and Urban Development as families who spend more than 30% of their income on housing and utility costs. What we see a lot in Texas is more accurately described as extremely expensive, where families spend over 50% or more on housing costs.

Even renters who earn higher incomes and who would otherwise access homeownership have a harder time. In the Houston metro area, the median home price in 2022 is over $282,000, which is more affordable than in 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 metropolitan area is about $80,000/year.

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

Low-income families have few options to deal with these extreme cost increases, whether they rent or own their own homes. The most common response was that these families move furthest away from employment centers to places where they can better manage these costs. Of course, this compounds the problems of longer trips and bigger traffic jams. Ultimately, we see this as a housing supply problem. Simply put, if there were more accommodation options and availability, we would end up seeing moderate prices. Right now we’re in the worst possible situation where not only is supply insufficient, but the costs to supply more are in unprecedented territory due to supply chain issues, inflation and the current rise in interest rates.

As housing costs have continued to rise as a percentage of the family budget, other necessities such as health care, child care, transportation and education are becoming secondary priorities.
Affordable housing is at the crossroads of economic development, workforce development and educational success. Without sufficient supply, each of these factors essential to economic strength becomes deficient. There is no doubt that safe, affordable and quality housing stabilizes families. But even when the economy is strong, many families are left behind in their search for affordability due to rising housing costs. The need remains unsatisfied, which ultimately limits the economic power of our State.

Which brings us to the interim charge of this committee. How to deal with this housing crisis, which is actually an economic crisis. There are certainly actions to consider that could help alleviate what we are experiencing in Texas. In general, the solutions include maintaining and expanding the affordable housing finance toolkit with concepts that have been proven in other states. As a Texas state tax credit program to overlay the current federal tax credit program.

Although 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 by TDHCA. Tax credits serve as an incentive for the construction of private affordable housing and must meet extremely rigorous standards and monitoring requirements for 15 to 30 years; and they compare to market-priced housing in every other aspect except lower rental rates and support services focused on resident self-sufficiency.

Highlights:

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

Additionally, there are a number of regulatory streamlining solutions that could reduce the costs of requirements that overlap 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 their research and reporting. We look forward to serving as a resource for you as you review the various policies and legislation surrounding this important issue for Texas.
Thanks.

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