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Bob Voelker: Density and Affordable Housing in Dallas—Some Questions to Ask

A proposal being discussed at Dallas City Hall would require multifamily developers requesting up-zoning (higher density, more apartments per acre) to include affordable housing in the project.
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Bob Voelker
Bob Voelker

In the real world, solutions to complex problems can rarely be solved with simple ideas, or by executive fiat.

A proposal being discussed at Dallas City Hall would require multifamily developers requesting up-zoning (higher density, more apartments per acre) to include affordable housing in the project. Having spent 11 years in my legal/real estate career developing affordable housing, and more than 20 years involved in Fair Housing litigation, it is incredibly refreshing to see this type of focus and thought process in Dallas. We have spent literally decades creating concentrations of affordable housing in Dallas, and creating mixed-income (and in a perfect world, mixed-use) communities addresses a host of concerns—economic and racial segregation; cross-migration and traffic congestion; health benefits of walkability; etc.

If we could just wave a wand and make this happen, right the wrongs of the past, create utopia, all would be good.

In my affordable housing development days, we built a 200 unit mixed-income townhome-style rental project in North Fort Worth, previously homeless families (many at 30 percent of median area income) living with those at 50 percent and 60 percent of median income and market rate units. And it worked economically. But … for that project we bought land for 25 cents a square foot, instead of $300 per square foot in Uptown. And we received a lot of low income housing tax credits from the State of Texas (very hard to do on a project that only has 20 percent affordable units). And the nonprofit we worked with contributed $2.5 million to the project.

Proponents of the density-for-affordable-housing proposal point to other places in the country and places like Vancouver where this has worked. But they need to look further behind the magical Oz veil at the entire economics of those projects. Some questions to ask:

• What are the median area income levels in those cities (this determines the rent for the affordable units)?

• What subsidies did the local, state or federal government or non-profits or foundations provide tax abatements, grants, tax credits, tax-exempt bond financing, etc., to make the project economically viable? How are those subsidies structured to encourage mixed-income housing?

• What are the rents for market rate units in those areas? Dallas is just now seeing top-end $3 per square foot rents. Some of these other cities have significantly higher rents, in which case some of the market rent “premium” rents (or in some cases condo sale prices) can help support the affordable housing.

• Are apartment residents, lenders, and equity partners for Dallas projects accepting of the concept of mixed-income high rise projects? What rent reduction will be required on the market-rate units due to the perceived issues (please note I said “perceived”) of having affordable housing as part of the development?

The answer to the density-for-affordable-housing concept is a function of grasping the economic issues outlined above—really understanding the depths of real estate proformas and market rate and affordable housing finance and Fair Housing requirements.

One of the affordable housing developers I worked for years ago used to say, “If it was easy, it would already have been done and everyone would be doing it.” Statements like “doubling the developer’s density doubles their profits, so they can afford to put in affordable housing” are not correct—only the land cost is nonrecurring with more units—and ignores the fact that capped affordable housing rents won’t pay for the incremental cost of building affordable units in a high-rise expensive structure, including added costs and complexities of affordable housing financing and the cost of structured parking.

This question of integrating affordable housing with market rate units in a high rise environment is not easy, and the answers will be even more complex. And we won’t solve it just at the Dallas level; changes in state (and maybe even federal) policies need to be part of the equation.

I hope that the Dallas City Council takes its time to deliberately study what other cities have done, and how it worked, and brings in some experts to explain these intricacies before it acts. Again, the goal is laudable, and the mere fact that Dallas is having this discussion (like the discussion of not building or tearing down highways) says a lot about the boldness of our leaders. It is increasingly becoming clear that we are living in “A New Dallas” in many ways.

Bob Voelker is senior vice president and general counsel for StreetLights Residential. Contact him at [email protected].

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