More efficient use of existing funding could solve the problem of substandard housing
Last month, I was asked what I thought of substandard housing in Fort Worth. A story in the Fort Worth Star-Telegram describing 900 houses in various states of serious disrepair had run but the editorial board wanted a different perspective. These days, housing stories like this are almost stereotypical; find stories about a family or group of families facing a housing problem, put numbers under that story, point to racism as the culprit and more money as the solution. This is exactly the formula followed by the journalist and summarized in this paragraph.
“An analysis of the Fort Worth Star-Telegram shows that Brooks [a Fort Worth resident] is one of hundreds of Fort Worth residents struggling to live in substandard single-family homes — homes that can pose a threat to their health and safety. The problem is rooted in poverty and institutional racism that has affected home ownership and generational wealth, according to studies and experts. Government and community programs designed to help lack funding to deal with the scale of repairs needed in many homes.
First, poverty and racism are real in Fort Worth and across the country. But some things struck me right away. The story specifically mentions that the developers are interested in buying the property. The property highlighted in the story – and probably many of the 900 cited in the story – is worth enough to leverage home equity to borrow money for repairs. Residents likely don’t have good credit and are already struggling to pay their mortgages. But a guarantee program for these loans could be a way to capture that value to make improvements and keep those families housed where they are now.
But why not spend the money to repair the 900 houses? And the local nonprofit was quoted as saying “foundation repairs are just too expensive, sometimes costing $10,000 or more for homes with serious problems.”
Let’s go with that number, around $10,000 for each house, knowing that some might need a lot more and some less. It would cost around $9,000,000. Sounds like a lot of money doesn’t it. But let’s look at what the State of Texas Housing Finance Agency (HFA) spends in Fort Worth. The Texas Department of Housing and Community Affairs (TDHCA), as the state’s HFA, administers tax credit allocations. You can read more about the complexities of the Low Income Housing Tax Credit (LIHTC) program in an article I wrote last year on how to simplify the program.
A project in Fort Worth has a request for 9% tax credits from the TDHCA. A Florida developer called Housing Trust Group is looking to build a 90-unit apartment building called Park Tower with 78 subsidized “affordable” housing units. The project will cost in total $22 million and be completed within the next 18 months – maybe. Remember how difficult it is in the United States to complete housing projects. It’s likely that Park Tower won’t be open to residents until 2024 and with inflation and supply chain issues its price is likely to rise. But let’s go with the $22 million. I’m about to do some fancy math, so get out your slide rules.
If we divide the total project cost of $22 million by 90 units, the total development cost per unit is approximately $244,000 per unit. If we consider only the subsidized units, 78 of the 90, that represents approximately $19 million. Then let’s divide that by 900, the number of “unsanitary” houses in history. That would be about $21,000 per home, more than double our high-end number to repair and rehabilitate all homes cited in the Fort Worth Star-Telegram story.
Imagine, as I suggested in my article on simplifying the LIHTC program, we made this sort of thing easier. At present, it would not be possible to use the money that could be allocated to the Park Tower project in this way. But what if we allowed that. Instead of spending $22 million on 78 units years from now, TDHCA could start repairing 900 homes today, helping families stay in their neighborhoods. If we’re worried about displacement — something I suggested is a duck — then that would be a great solution for families of color to sell their homes to developers and move out of the neighborhood. As I have said, the fight against racism starts with building more housingor in this case spend resources more efficiently on repairing existing housing.
And speaking of new housing, if you look at a website, houses.comyou’ll find that the average price for a single-family home in Fort Worth is $243,300, just a little less than building an “affordable” unit in Park Tower.
The article in the link about the project points out that “the residences will include one-, two-, and three-bedroom floor plans and will be furnished with quartz countertops, wood floors, and washer and dryer hookups.”
So that’s the choice in Texas – or at least the choice Fort Worth should have. Fix 900 homes now, buy 78 families their own single-family homes, or maybe work with Habitat for Humanity to build twice as many single-family homes, allowing families to start paying mortgages instead of rent. But like everywhere else in the country, complaints of racism will continue and the system will pour $22 million into 78 apartments that rent between $400 and $2,000 that won’t be ready for years, and when they are, there’s will probably have a waiting list of 100 families.