One week away from a much-anticipated first look at a revamped Comprehensive Housing Policy, the Dallas City Council teed up two new developments during a Wednesday meeting.
One will be financed under the Dallas Housing Finance Corporation and the other is a Public Facility Corporation project. Both financial structures have been scrutinized by critics due to foregone tax revenue; proponents say they offer much-needed affordable housing that wouldn’t otherwise be built.
The two financing structures are not the same. Housing Finance Corporation projects provide tax-exempt mortgage revenue bonds and other support for the acquisition, construction, or substantial rehabilitation of multi-family housing.
Public Facility Corporation projects come with a 75-year lease, during which time the developer gets a 100 percent break on property taxes. The city, in return, gets affordable housing units and the developer can still make a profit. The lease can be renegotiated over time, and the city generates income through annual lease payments.
Both corporations are governed by council-appointed boards.
On Wednesday, the Dallas City Council:
- Authorized the Dallas Housing Finance Corp. to acquire and own Muse at Midtown, a multi-family development at 13675 Noel Road. The estimated revenue foregone is $12.2 million (15 years of estimated taxes). District 12 Councilwoman Cara Mendelsohn voted against the project.
- Authorized the Dallas Public Facility Corp. to acquire, develop, and own Bluffview Highline, a mixed-income, multi-family development at 3802 West Northwest Highway, and enter into a 75-year lease agreement with Urban Genesis LLC or its affiliate for the development of the project. The estimated revenue foregone is $582,585 (15 years of estimated taxes). While Mendelson has typically voted against past PFC projects, she did not pull this item from Wednesday’s consent agenda. (We reached out to ask Mendelsohn if she wished to comment on her vote and did not get an immediate response.)
Dallas Assistant Director of Housing and Neighborhood Revitalization Kyle Hines explained the difference between the two financing structures to daltxrealestate.com, so we’ll use his own words to break it down.
Dallas Housing Finance Corp.
Here’s what Hines had to say when we asked about the Dallas Housing Finance Corp., specifically referencing some common misconceptions:
“The Dallas Housing Finance Corporation is not solely working on essential-use bond acquisitions. We are still actively involved in partnering and issuing private activity bonds for the development of 4 percent housing tax credit developments.
In September and October of 2022, the DHFC provided a preliminary inducement for seven mixed-income housing developments in the aggregate amount of $335 million to potentially be awarded through the Texas Bond Review Board’s bond lottery. We are confident that at least four of these developments will receive bond allocations through the lottery to move forward. These developments will include units restricted for 30 percent [Area Median Income], 50 percent AMI, 60 percent AMI, and market rate.
The DHFC also has 10 multifamily properties totaling over 2,400 units under construction through partnerships with private affordable housing developers. These include units reserved for 30 percent AMI, 50 percent AMI, 60 percent AMI, 80 percent AMI, and market rate.
The DHFC currently owns seven properties in partnership with private developers totaling over 1,500 units.
The DHFC issued $25 million in bonds last year to fund below-market single-family mortgages with down payment assistance in the City through TDHCA’s Texas Homebuyer Program.”
Dallas Public Facility Corp.
Hines breaks down the PFC financing structure, referencing the wording in a graphic circulated by a local pro-housing group:
“For the PFC, it would be nice to state that the collected rents “repay the convention debt and equity used to fund the property” and not “goes to the developer” since that sounds like such a negative connotation, but it’s not necessarily inaccurate since the developer manages the repayment of the debt for the property.
The PFC transactions need to have at least 50 percent of the units at 80 percent AMI, but providing deeper affordability at any AMI level is allowed – it just doesn’t typically pencil. If other soft funds or gap financing was included, deeper affordability could be incorporated into a standard PFC transaction.
The PFC actually has the ability to acquire existing properties using the same essential-use bonds and structure as the DHFC; however, we’ve only used the HFC for this structure at present since it’s a fairly new structure.
For non-essential bond acquisitions, the DHFC actually receives considerable fees and cash flow payments for the projects it develops. In 2022, the DHFC received a net operating income of about $2.4 million. These funds will be used to fund and provide assistance to the development of for-sale housing to continue creating opportunities for generational wealth in the City.
These are state-authorized corporations.”
