In any event, the issue of apartments was the fuse that ignited the turmoil. The marching song and drumbeat was simple....."All apartments are bad." Discussions never got more sophisticated than that. The demonstrations worked without ever being fully vented by Council. We had approximately 75 citizens that thought they knew absolutely everything there is to know about apartments. But remember, all things are known by people who have no idea what they're talking about. These few people represented themselves as "all of Rowlett" and Council bought into it. They weren't even close.
Let's go to school. I want to point out some things that most people don't know, or think, about apartments.
First, the word "apartments" does not define all attached "for rent" housing facilities. "Apartments" can usually serve five different markets They would be 1) upscale, or luxury. 2) market rate, or normal unsubsidized projects, 3) workforce housing, usually subsidized by tax credits or tax free bonds, 4) Seniors, financed by tax credits and tax free bonds, and 5) FHA type apartments, insuring lenders against default, or insured by FHA. These FHA apartments are often used by users of Section 8 or Walker vouchers, but these projects are not limited to subsidized tenants. Section 8, or Walker Vouchers can be used anywhere. They are used in places that would not normally be th0ught of as subsidized properties........even nice homes. These are very low income tenants, some identified as the the "working poor." Most are honorable people and trying to provide for their families, but their skill level is such that they don't command higher salaries. There can still be a lot of very good people in the "working poor."
All the above are apartments, but each has vastly different uses and missions, altho there can be some overlap. All five classes of apartments can easily influence other "outside" people's opinions and reputations of communities.
For example, Rowlett is just beginning to experience luxury, or upscale apartments. The new apartments on Scenic Drive will have some pretty pricey rents. A two bedroom with two baths will rent for $1,725.00 per month. That is probably more than most of the house payments on very pricey houses surrounding the apartments. Furthermore, the "big stuff" is coming. That would be apartments in Bayside. Bayside rents will probably make Scenic Drive look like a low rent district. Also, some other apartments are being planed near the base of the new bridge on the Tollway. These projects will serve to identify Rowlett as a truly upscale community. Combined with Bayside development, Lake Ray Hubbard, I-30, the Tollway, and some of the best medical facilities around (more important after the closing of Baylor-Garland) a casual observer should view Rowlett, particularly the peninsula because of medical facilities, as a truly upscale place to live. These "apartments" would contribute to that upscale image, and preserve, or at least partially protect, Rowlett from most other downward pressures on real estate values. These apartments hardly cause a lowering of real estate values, which is the most often quoted argument against apartments. In fact, they can help values.
Another example: Have you been on Elm Street lately, just east of downtown Dallas and North Central Expressway? This used to be a very depressed area. If you get a chance, visit the area, now. The new apartments and condos will equal apartments in the Gold Coast in Chicago, South Shore Miami, and San Diego. They hardly reduced real estate values. In fact, they pushed up values considerably.
The market rate apartments are the ones that most people mean when they talk about "apartments." Many are usually financed by FHA insured loans of conventionally funded projects. They serve the largest market needs, therefore these are the ones you see the most. These apartments are the ones that could most easily become overbuilt. Overbuilding of these types of apartments can hurt a real estate market. Lowering of rents and empty units are not good. However, the same economic forces that are effecting these apartments are also effecting the houses around them. If people are leaving the apartments, there is a better than average chance they are leaving the houses around them, also. If the whole area is declining, the apartments may be getting a bum rap. Declining real estate values may not have anything to do with nearby apartments. They could easily be the real estate market in general. Real estate lenders have learned a lot of things over the past 20 years, or so. They watch this particular apartment market very, very closely. They don't want over building, like the early 80's, any more than anyone else. Some fact you may not be aware of: Dallas and Houston both are 40% occupied by renters. That's a big deal. It's a huge market. Usually the big developers and big lenders know where it's best to build apartments. That's their business. Machinists, plumbers, and electricians usually do not. Big lenders can't plumb a house, either. An important note: Did you ever see a rundown apartment project surrounded by a neatly kept and maintained subdivision? I never have. There is too much public pressure to clean up the errant apartments. City officials would never allow it. Have you ever seen a rundown apartment project? I have. In every case, the rundown apartments are surrounded by rundown houses. There is no, or little, evidence of maintenance or pride of ownership displayed on most of the surrounding houses. The economic conditions that created the rundown apartments also created the rundown houses. There will be another facet of this depressed economic condition mentioned below........"slum lording."
Senior and workforce housing are usually financed by the same financing vehicle. That would be tax credits and tax free bonds. Essentially, proceeds from the sale of these products go toward the development costs of the apartment projects. Excellent projects can be built with the infusion of these funds. This lowers costs, and as expected, lowers rents. At this point, the two types of projects diverge. One set of rules apply to Seniors and the other to workforce populations. Rowlett just approved it's first Seniors housing apartments to be owned by Rowlett's new Housing Finance Corporation on December 19. The project will be partially financed by bonds. The vote was six in favor and one denying approval. The one declining vote came from Martha Brown, who felt the Seniors market was not strong enough to fill the complex, and there were no tax revenues generated by the project. Actually, both positions were wrong. The Seniors market is one of the strongest markets in Rowlett, and there had just been an extensive conversation about the project's PILOT program. PILOT means "payment in lieu of taxes." It is a payment made to Rowlett, instead of ad valorem taxes. The payment is based on an "income approach" method of appraisal. In addition to the PILOT payments, the Rowlett HFC will receive hundreds of thousands of dollars in fee income, over the mortgage payments. Maybe Martha had excused herself during the PILOT and income discussions.
Now, some things you need to know. A tax credit program requires NO checks from the federal government. Tax payers ought to be happy with that. Funds contributed to the development costs of either the "workforce" or Seniors projects come from the sale of tax credits or tax exempt bonds. The addition of these proceeds from bond sales will lower the development costs to the developer, which in turn, lowers the rent. Not as much rent is required to retire the project's obligated mortgage when tax credits don't have to be repaid at all, and tax exempt bonds will be repaid at a much reduced rate. Therefore, renters have to pay less rent. There are income rules that any proposed tenant must follow, but it all works.
Now the above are some of the "mechanics" of how it works, but there's even more to consider about "apartments" than you ever hear from the NIMBYs, (not in my backyard).
Now, there is another story to tell about tax bond funded projects. An unexpected benefit came from the passage of the laws creating the Housing Finance Corporations. The HFC program became a tool to use against "slum lording."
I shall address "slum lording" in the next episode of this article in a couple of days.