Affordable Housing In Houston Is Growing, But Developers And City Officials Still Face Challenges

Houston's stock of affordable housing is growing, thanks to the $350M in federal funds provided after Hurricane Harvey. The city of Houston and private developers have partnered on more than 30 new developments over the past three years, which will deliver thousands of units in the near future.

But it isn't enough.

The need for affordable housing in Houston has only grown since the onset of the coronavirus pandemic and developers and city officials say finding the financial and community support to build affordable housing remains extremely difficult.

Even before the pandemic and subsequent economic downturn, Houston had an affordable housing crisis. The city ranks fifth in the nation and first in Texas for having the most severe shortage. There are only 19 affordable housing units for every 100 households in need, or about an 80% deficit, according to the National Low Income Housing Coalition. There were 92,643 active applications for the Houston Housing Authority's Public Housing Waiting List as of August.

Rice University’s Kinder Institute found that 57% of the people who live in the city of Houston in 2020 are renters, and renters make up 45% of all households in Harris County. At the county level, nearly half of those renter households are cost-burdened, paying more than 30% of their income on rent. As unemployment has spiked since the onset of the pandemic, more of those renters are likely going to be unable to pay rent and may need to seek affordable housing.

“That's our economic driver, that is our workforce,” City of Houston Director, Housing and Community Development Tom McCasland said during Bisnow’s BMAC South summit Sept. 15. “And so those are the realities that we deal with, in terms of thinking about sufficient affordable homes for our workforce.”

The destruction caused by Hurricane Harvey in 2017 helped to put a spotlight on the lack of affordable housing in Houston. The city of Houston received $350M in federal recovery funding for its Harvey Multifamily Fund and has partnered with private developers to build more than 3,500 units over a total of 31 developments, totaling more than $1B in development cost, according to McCasland.

“When you have the right facts about who you’re serving, when you have the political willpower to move this forward, and when the funding is there to do it in a way that’s responsible without spillover effects in the community, we can get it done,” McCasland said.

The “not in my backyard” mindset, known as NIMBY-ism, typically reflects fears of affordable housing attracting crime or destructive elements that might damage nearby property values, or degrade a community in some way. The disconnect between that stereotype and the reality frequently ends up blocking developments from going forward.

“The public is stuck in the concept of affordable housing as housing for poor, lazy people. And it's that distinction that has not sunk through,” McCasland said. “We are building the homes that the workforce that drives our economic engine in this region is needing. And so I think it's that shift we need, both in the development community but in the larger business community, in order to address the supply.”

Affordable housing is a challenging asset type for developers to build. A combination of slim margins, pushback from the local community and inconsistent political support means developers and city officials in Houston often face a steep uphill battle in getting them built.

“Down in the trenches as a developer, I think the biggest issue I face when I go out and get these sites, you know, to plan new sites and get these developed, is a lack of understanding of the whole program,” OM Housing President and CEO Deepak Sulakhe said.

Sulakhe said he spends a significant amount of time and effort educating local officials and the community about his company, track record and what affordable housing actually is. He also uses data to counter arguments that affordable housing developments raise crime, overburden local schools and bring down local property values.

McCasland said that over the past 30 to 40 years, housing authorities have moved away from the older public housing model, which places only very low-income people in a development. Instead, the preference is to have mixed-income housing, integrating the lower and higher ends of the spectrum in the same environment.

“If we can’t be convinced that that’s what our money is going into, we won’t fund it,” McCasland said.

The difficulty of getting affordable housing built in Houston could be substantially eased if more members of the business community, as well as supportive locals, came to public meetings and voiced their support to city council members and other political figures.

“I’m tired of going to public meetings where it’s just me, and it’s just the developer. And it’s everyone else out there who’s angry, who’s a resident and wants to shut us down,” McCasland said. “I’ve told the business community, if you want housing for your employees, you’ve got to show up. You’ve got to make the calls, and you’ve got to talk to the elected officials.”

Issues from the pandemic in existing housing may also make some developers pause before building more. 

The Centers for Disease Control and Prevention announced a national residential eviction moratorium earlier this month, which will remain in effect until Dec. 31. The announcement caught both tenants and landlords by surprise, interrupting a prior debate about a local eviction grace period in Houston.

Tenant advocates have welcomed the measure, which is intended to keep vulnerable people housed during a massive public health crisis. But landlords and city officials have expressed concern about the financial ramifications of such a move, where tenants face a massive balloon payment at the end of the moratorium, and landlords remain severely out of pocket.

“The thing that stumps me about it is, [it's] truly an unfunded mandate from federal government,” New Hope Housing President and CEO Joy Horak-Brown said. “The government appears to be looking to private landlords to solve what is a broad societal problem.”

A new federal aid package, including proposed rental assistance funds, was initially expected to pass Congress in late July or early August. Lawmakers have yet to reach a consensus, leaving landlords and tenants reliant on local assistance programs.

“This is a crisis for both tenants and landlords. I applaud the CDC moratorium in its attempt to keep people housed during the middle of a pandemic. But that is not enough,” McCasland said.

Developers have previously voiced fears that such a moratorium could deter future investment in affordable housing. Others say that despite current economic challenges and the impact of the initial federal eviction moratorium enabled through the Coronavirus Aid, Relief and Economic Security Act, interest in affordable housing is not going away.

“I think, if you look at it in the short-term, [it] might be somewhat of a deterrent for some. But if you think about it, this event we’re going through is a generational, one-time event, hopefully,” TruAmerica Senior Director of Acquisitions Ammanuel Metta said. 

“If you look at the need for affordable housing that’s going to continue, I don’t see it as a longtime deterrent, because that’s not going to solve itself.”