Developers like Builders of Hope CEO James Armstrong are trying their best to provide affordable housing in underserved areas, particularly in southern and West Dallas.
The federal programs available for such projects — the Single Family Home Ownership Development Program and Land Transfer Program — are costly and restrictive, developers told members of the Dallas City Council’s housing committee in November.
City staff responded recently, proposing a solution by memorandum that could address the matter, but it’ll require the full council to amend program guidelines, and it’s unclear whether there’s enough support from elected officials to make the change.
A staff memorandum, issued Dec. 8 by Assistant City Manager Majed Al-Ghafry, addressed issues raised by developers and council members at a Nov. 14 meeting of the council’s Housing and Homeless Solutions Committee.
HHS members asked city staff to seek alternative funding sources “that are less restrictive than federal sources to assist in the development of single-family housing.”
“A potential resolution to this challenge as discussed during the meeting included the update to the Dallas Housing Resource Catalog changing terms for the Single-Family Homeownership Development Requirements Program to a forgivable loan rather than a repayable loan to non-profit and for-profit single-family homeownership developers with current development projects underway and future ones,” Al-Ghafry wrote in his memo. “This recommendation would require an amendment to the current program statement.”
HUD Programs For Affordable Housing
The city receives about $16 million annually from the U.S. Department of Housing and Urban Development, which is split among various programs. About $10 million is administered through the Community Development Block Grant and $6 million through the HOME Investment Partnership Program.
An example of the restrictive nature of HUD funds is that CDBG money can’t be used for new construction so it has to go toward acquisition and infrastructure.
The Single Family Home Ownership Development Requirements Program (SFHDR) provides funding to for-profit developers, nonprofit developers, and certified community housing development organizations.
Additionally, the Land Transfer Program incentivizes the development of quality sustainable housing through vacant surplus and tax-foreclosed land owned by the city.
Al-Ghafry’s memo explains that under the SFHDR, gap financing is provided to developers in the form of a repayable loan, repaid on a pro-rata amount as each home is sold from sales proceeds.
“The current challenge under the SFHDR with the repayable loan creates a financial burden on developers when providing affordable homes to households ranging from 60 to 80 percent Area Median Income,” the memo states. “Under the LTP, City-owned lots are sold at below-market prices to developers to spur additional affordable housing. LTP lots are secured by deed restrictions to ensure long-term affordability of the homes occupied by low-income to moderate-income homebuyers which conflicts with the federal deed restriction requirements once a home is subsequently sold to an income-eligible homebuyer receiving homebuyer assistance through the Dallas Homebuyer Assistance Program (DHAP).”
Federal Programs Create Challenges For Developers
After District 12 Councilwoman Cara Mendelsohn said in the Nov. 14 meeting that she wasn’t interested in hearing the developers’ woes, she pointed out that the city is providing a lot of subsidies for just a few people rather than using the funds to develop more housing for more people.
Armstrong responded by saying that the Dallas Homebuyer Assistance Program allows homeownership for individuals who have been priced out of the market.
“I won’t waste time talking about my woes, but what I will say is … the $50,000 that goes through DHAP doesn’t come to the developer,” he said. “It increases the affordability for someone who may work at a local hospital or as an administrative assistant. We are not building shoddy homes. These are homes that have to be subsidized for our current workforce. Essentially, if we don’t allow the $44,000 to sit as a subsidy on the home, what we’re saying is that homeownership for 60 to 80 percent of [area median income] is not welcome in the city of Dallas.”
Dallas Department of Housing and Neighborhood Revitalization officials are expected to bring a resolution before the council in March that would address the programs in Dallas Housing Policy 2033.
