This April, Austin-based multifamily developer Saigebrook Development LLC had an application approved that changed zoning on a vacant wooded lot in Travis Heights to Multifamily Residence — giving the company the green light for an affordable housing project.
The zoning change was necessary to proceed with a tax credit-financed project. It got through the Planning Commission “on consent,” meaning without public discussion. Once a developer has all their ducks in a row, it’s not unusual for their request to pass through on consent. However, it should not go unnoticed that this project, Aria Grand, is unique considering its location, the terms for eligible tenants, and the history of litigation that brought Texas to this point.
Saigebrook and every other developer that utilizes the 9 percent Housing Tax Credit program are beneficiaries of Texas Department of Housing & Community Affairs v. The Inclusive Communities Project Inc., a 2015 U.S. Supreme Court ruling that upheld the theory that a disparate impact claim could be brought to court without proof of intentional discrimination.
Mandy DeMayo, executive director of policy research and affordable housing advocacy non-profit HousingWorks Austin, explains that the Dallas-based Inclusive Communities Project (ICP) filed a housing discrimination lawsuit in federal court in 2008. The plaintiff claimed that the applicant rules and scoring used by TDHCA—the state’s administrative agency for this federal resource tax credit—historically had the effect of packing those projects into low-income neighborhoods with scarce social and institutional resources, along with higher crime rates.
ICP prevailed on a series of court orders in 2010 and 2012 in the U.S. District Court of Northern Texas. As a result, DeMayo says the TDHCA, which annually reviews and revises its guidelines, began implementing changes that encourage these projects to build in more affluent neighborhoods, where residents in the HTC-financed projects would have better access to essentials of urban life — good schools, healthcare, public transit, and so on.
Bearing in mind that the ICP lawsuit began at the start of the Great Recession, there was hardly any affordable multifamily housing development to speak of in the early years of the case. But real change arrived alongside the recovery of the market, and projects in recent years have appeared in higher-income neighborhoods in Dallas, San Antonio, and Houston.
In Austin, with few exceptions, 9 percent HTC projects have generally remained distant from downtown. While some have shown up in nicer neighborhoods, an average of 2 ½ projects have been approved since 2013 — not very many, considering the need.
Each project is scored based on a multitude of criteria; the Aria Grand application to TDHCA is 420 pages. These criteria include everything from community and political endorsements of the project, the developer’s record, other project financing, development team profiles and certifications, site and building schematics, listings of on-site amenities for residents, the ratios of tenant income levels, and the project site’s proximity to commercial and public services.
These projects are also scored according to distance from a competing project — they can’t be too close together — and the length of time that’s passed since the target neighborhood had another such project. In this regard, Saigebrook’s application notes that it qualifies for 3 points because it’s inside a “Census tract within the boundaries of an incorporated area that has not received a competitive tax credit allocation or a 4 percent non-competitive tax credit allocation for a development within the past 15 years, and continues to appear on the Department’s inventory.”
It’s safe to say that Travis Heights residents have no direct experience with 9 percent HTC projects. The only comparable development nearby is Bluebonnet Studios, which Foundation Communities built at 2301 South Lamar Boulevard in 2015.
Most so-called affordable projects are financed via non-competitive four percent tax credits, and claim affordability based on a percentage of the units being reserved for renters earning 80 percent of the area median family income (AMFI). Housing advocates are often underwhelmed by these projects, since 80 percent of AMFI in a city like Austin is still far above what many families earn.
The lower the income level of prospective tenants served, the higher the TDHCA score. In the case of tiebreakers between applicants in the five largest cities, applicants can score 16 points (that’s a lot) if at least 40 percent of units go to families earning 50 percent or less of the Area Median Gross Income.
Aria Grand covers that goal with almost 43 percent of units at 50 percent or less.
Austin could be in for a banner year for 9 percent HTC projects. Seven of the 10 Travis County applications to be decided this summer by the TDHCA are within the city limits, and three of them — Aria Grand included — are in neighborhoods on the periphery of downtown.
It’s undeniable that over the last five years, the TDHCA has made substantive advances and worked in good faith with affordable housing advocates — but there are some flies in the ointment. While TDHCA was cooperating with the early federal court orders, then-Attorney General Gregg Abbott was fighting against the disparate-impact theory.
While the U.S. Supreme Court eventually upheld the theory, the court also set strict standards on what burden of proof had to be met to prevail on a disparate-impact claim in order to weed out frivolous lawsuits. The case was remanded to Texas and ICP ultimately lost.
Meanwhile, the Legislature is up to mischief in the current session. As reported by Texas Housers — another affordable housing advocacy organization — several bills have been introduced making it more difficult to build HTC-financed projects in affluent neighborhoods.
About Saigebrook Development and Aria Grand
Aria Grand is a 70-unit development on a 1.42-acre asymmetrical lot, located at the southwest corner of the intersection of Woodland Avenue and the southbound frontage road of Interstate 35. Designed by Miller Slayton Architects of Gainesville, Florida, it will consist of two buildings, one six stories and the other five stories. Both buildings are podium-style, as opposed to slab-on-grade foundations, and will have parking located below the apartments, with 91 parking spaces. The five-story building will include a clubhouse, leasing office and other common amenities.
Wells Fargo and Mason Joseph Company Inc. will provide the lion’s share of financing. The estimated construction cost is $9,985,085, and the total development costs (total loan package) is $16,852,904. The developer is represented by Megan Lasch, the managing member of O-SDA Industries LLC, which holds a 90 percent interest in Aria Grand LLC. The other 10 percent interest is held by Saigebrook.
Lasch, has head of O-SDA Industries and Lisa Stephens at Saigebrook Development are partners. This team successfully got one project through the 2014 round of 9 percent HTC awards, producing Art at Bratton’s Edge, 15405 Long Vista Drive. They had another win in the 2015 round with LaMadrid Apartments, which is now under construction at 11320 Manchaca Road.
*Editor’s Note: This article was revised May 6 to correct and clarify the identities of the developers.