The Texas legislature passed a bill in the early 1980's to accommodate such financing. Since passage of the legislation, 70 towns and/or counties in Texas have created their own HFC. In fact, in nearby Waxahachie, Lancaster, Duncanville, Desoto, and Cedar Hill, all have HFC's. In addition, an HFC exists for each of Rockwall, Hunt, and Ellis Counties. And, even the City of Dallas has one. There appears to be nothing new and exotic about HFC's.
Essentially, a Housing Finance Corporation exists for nothing more than a financing vehicle for residential real estate development, funding everything between developing apartments, or helping a family purchase a house. There are some different rules that I am just now learning, but in the final analysis, its simply a way to finance residential real estate transactions.
I'm only experienced in private non-government development financing. Therefore, I have a substantial learning curve to climb. I am still mired down in many of the syrupy details, but I've formed a couple of opinions. I'd like to share some.
An apartment project was recently denied by City Council. The motion was denied for lack of a second. Of course, each City Councilperson had their own ideas about why the proposal failed, but I have my reasons.......and maybe they meshed.
According to the developer, in order to make the numbers work, the Dallas Housing Authority had to be invited into the deal. They would have to bring their check book. In return for their cash investment, they would get absolute authority to select tenants for 60 of the 223 units. In addition, although the DHA did not technically manage the project, they had their list of rules on how to manage the project. In short, if you accepted their financial support, you accepted their rules. This almost assured the use of Walker Vouchers, the descendant of the Section 8 program, and the tenants could come from all over Dallas County. Standing alone, I have nothing against Walker Vouchers if they are used sparingly over a large geographic area. By doing so, any project or neighborhood avoids being "tagged" as a low income area. That is good for everybody. However, I only wanted to fill needs of Rowlett residents, not all of Dallas County. I wanted more control to be administered by Rowlett than shared, and maybe junior to, another jurisdiction. If someone wanted to move to Rowlett because it's nice, that's fine. However, I didn't want them sent here by someone we didn't even know.
Another issue was the tax issue. Since a tax exempt entity does not pay taxes, the above developer proposed a "payment" each year to the city in lieu of taxes. That would be fine, but it was only $55K a year. That is hardly enough to pay for all the police and fire protection, and infrastructure maintenance. It was only about 1/3rd of the normal tax load. That means that all costs over $55K per year had to be paid by Rowlett taxpayers. Folks, that's a subsidy.......and maybe a subsidy to residents that were imported into Rowlett from other places.
Atho all the facts (and risks) aren't in, yet, I feel an HFC can mitigate the above risks. First, all the funding needed for any project would come from Bond sales, and on some loan structures, maybe contain Federal Tax Credits benefits. I still have to learn the details. Those features should negate the need for DHA. That eliminates any tenants or homeowners that were not vetted by appropriate Rowlett officials.
Secondly, on an apartment deal, I think (altho still unproven) that an HFC can contract independently with the City to provide services to the city, including sharing part of the developer's fee. I think the city could receive maybe 75%-80% of the revenue that would have been received if there was no tax exemption. The taxpayers would not be subsidizing the projects.
Folks, I think this is worth looking into. I have received email from Rowlett's City Manager in which he states that he has talked to staff about this proposal. I am also receiving phone calls from very knowledgeable experts in the business of setting up and administering to HFCs. All are Austin based. I will report progress as I learn of it.
I'm excited about the prospects. We need very good housing for Seniors and workforce families. So far, I see nothing on the horizon that would prevent us from adding an HFC to Rowlett's tool box. The more tools we have, the better we can build a Rowlett.