There’s a lot of buzz in Texas about Public Facility Corporation projects, and it’s made its way to the state Capitol.
Controversy surrounding the PFC financing structure, which incentivizes developers for providing affordable housing, has been praised as the only way to attain much-needed “missing middle” housing and simultaneously criticized for taking property off the tax rolls for 75 years.
State Sen. Paul Bettencourt (R-Houston) shed light on another facet of the complicated financial structure, attacking the lack of accountability and abuse of the guidelines. In particular, some housing authorities aren’t providing the affordable units they’ve agreed to, Bettencourt said.
The senator filed SB 805 in February to “end practices of out-of-control housing authorities” and reform 2021 legislation to include oversight.
The bill aims to repeal the ability of housing authorities and other taxing entities that are using PFCs to take billions of dollars off the tax rolls by approving leasehold deals, Bettencourt said.
“In the most recent egregious example, the Houston Housing Authority didn’t even hold public meetings, granted 75– to 99-year tax exemptions, and some only had 10 percent of their units set aside for low-income residents,” Bettencourt said in a press release.
Dallas Public Facility Corporation Projects
Developers who seek the PFC model in Dallas take their projects before a council-appointed board. Meetings are open to the public and the projects don’t even make it to Dallas City Council unless the board approves them.
More than a dozen local projects have been approved by the Dallas City Council, each of which offers about 50 percent of its units at an affordable rate.
While there has been criticism of the projects — District 12 Councilwoman Cara Mendelsohn routinely votes against them — they’ve been, for the most part, embraced by local officials and city staff as a tool for providing affordable housing.
However, there are some aspects of the structure that are troubling, according to University of Texas researcher Heather Way, who authored a 68-page study on PFCs published in 2020.
“There are some structural flaws,” Way told daltxrealestate.com in December. “It’s a big, huge tax break. That results in shifting the property tax burden to other taxpayers. There are no reporting requirements and no accountability. In the case of the City of Dallas, they’re also giving up county and school taxes. That’s really problematic.”
There also is a rogue PFC entity, Texas Essential Housing PFC, that is developing tax-free properties across the state independent of a particular municipality or housing authority, Way added.
Bettencourt’s Senate Bill 805
We reached Sen. Bettencourt on Friday and asked him about his bill and what, if any, concerns he has about the PFC projects underway in Dallas.
“Dallas is kind of late to the party on this,” he said. “With all things, there are scenarios where it’s good. Dallas has a few projects, but the proliferation, and the abuse, have occurred in San Antonio and Houston. The City of Houston put out a horrid suite of these, including one project that had 66 percent market rates, not reduced rates, and one at 10 percent [Area Median Income]. That’s pathetic. They’re being used as property tax shelters.”
Houston’s Lakeside Place PFC, which only offers 34 percent affordable units, received a tax exemption valued at $48 million, Bettencourt said.
Housing authorities have abused the statutory authority and created PFCs in a “totally nontransparent manner,” the senator told daltxrealestate.com.
Bettencourt added that there is strong support for his bill in the House and the Senate.
“There’s been no oversight,” he said. “The original laws were weak. It’s been a huge drain off the property tax rolls. There has to be compliance and oversight because that’s been missing completely.”
