After a two-year battle, Denton City Council member Chris Watts received the four votes he needed Tuesday night for Denton to create a public facility corporation — a public-private partnership designed to create the attainable housing that nearly half the households in the city need, according to United Way.
The United Way of Denton County’s most recent community needs assessment cites a shortage of affordable housing for households identified as ALICE — asset limited, income constrained, employed. That is, residents who live above the federal poverty level but don’t earn enough to keep up with the cost of living.
The PFC will allow the city to incentivize developers by taking a property off the tax rolls if it provides “workforce housing for middle-income families” who aren’t receiving housing tax credits or served by market-rate developments, according to the Texas Affiliation of Affordable Housing Providers.
In an infographic, the trade association group breaks it down as follows:
- A local government PFC takes ownership of the land and leases it back to the development.
- The developer builds housing for mixed-income residents.
- The PFC provides a property tax exemption — which could last decades — to offer below-market rent units to eligible renters.
Besides helping renters, the TAAHP says public facility corporations can also stimulate growth and revitalize targeted areas.
The vote to approve the creation of a PFC came on the eve of Watts’ final meeting as the council’s Place 6 representative. A health battle kept him from seeking reelection.
“I really appreciate this coming back before the council,” Watts said Tuesday evening. “This is something that I felt was really important for the last few years, especially now that the citizens have weighed in on the priority and the importance of this policy as far as affordable housing with the $15 million bond approval.”
In November, Denton voters approved $15 million for affordable housing as part of the nearly $300 million bond package they passed.
The PFC board will be formed after the May 4 election. The PFC will be able to issue bonds, finance public facilities or lend proceeds of the obligations to other entities.
On Tuesday, Watts offered an example of why Denton needs a PFC by touting the success of the PFC that the Lewisville City Council created in September 2022.
The Lewisville PFC has partnered with a Dallas developer, Ojala Holdings, to bring an affordable housing project to downtown that city leaders hope will save $24 million in rent over the next 15 years while developers “get an even bigger tax break,” CBS affiliate KTVT-TV reported in February.
Another reason Watts offered for creating a PFC is the price of apartments in Denton. He said one local complex, which he didn’t name, offers a two-bedroom, two-bath apartment for $2,100 monthly.
Mayor Gerard Hudspeth reiterated Watts’ claim about helping ALICE households. Hudspeth also indicated that voters seemed to want the PFC since they approved $15 million for affordable housing in the November bond package.
“Do I want to take that [$15 million] and entrust it to an organization we have no control over?” Hudspeth said rhetorically, pointing out that city leaders are not involved in those deals. “We are responsible for taxpayer money.”
The $15 million in bond money is not intended for use by the PFC, as Dani Shaw, director of community services, pointed out in March and again Tuesday night.
The organization that Hudspeth referred to is the Denton Housing Authority, which was formed in 1970 to address the housing needs of low-income families in the city. It owns and/or operates 634 affordable housing units at four locations throughout the city, according to its website.
The housing authority is the reason that council members Brian Beck, Paul Meltzer and Brandon Chase McGee opposed the creation of a PFC on Tuesday because the DHA already has infrastructure in place and uses a PFC for affordable housing.
“In my opinion, we clearly need to be collaborating more closely with the DHA, and as staff shared, there’s nothing preventing the city from entering into legally binding agreements with the DHA to ensure our policy objectives are being met,” Meltzer said Wednesday. “So that was my view when I voted. We’re going down a different road now, and I will do my level best to help make sure we deliver the affordable housing Denton needs and that Denton voters funded in the bond election.”
Meltzer said it was compelling to hear from Hudspeth’s appointee to the DHA board, Sharetta Lee, on Tuesday evening. She attended the meeting, Meltzer said, “to say this work is already being done and there’s no need to duplicate efforts.”
During the meeting, Lee said the Denton Housing Authority has approved and closed an additional 1,504 affordable units to the city between 2022 and 2024. Between 2023 and 2024, the agency has approved but not yet closed an additional 647 units.
DHA also has an additional 982 units in its pipeline.
“We are doing this work,” Lee said. “We are doing it well. We have had opportunities to advocate.”
Lee said that last week, the agency traveled to Washington, D.C., and spoke to senators and representatives about the need for more funding for affordable housing.
“While I can completely understand wanting this, I just don’t see the need to reinvent the wheel when we already have an agency that knows what they’re doing, has the infrastructure, has the staffing to man something like a PFC, because we already have a PFC,” Lee said. “I just don’t see the need for an additional one in the city of Denton. I think a collaboration would work better.”
Shaw said it’s not a duplication and the city has the staff to operate a PFC.
Watts said the lack of communication between the city and DHA is a problem since they didn’t know about the units or how many tax dollars were being taken off the property tax rolls.
“I’m angry that some of the rationale is that we don’t need it … blah, blah, blah, and to hear about 3,000 apartment units and zero knowledge about it,” Watts said.
But Watts stressed that they weren’t attacking DHA or trying to create competition, although developers could approach both the city and DHA to see what terms are being offered.
Shaw explained that the city could set the terms for the number of attainable units available for those below the area median income, which for Denton County is nearly $100,000, and for how long, such as 15-, 20- or 30-year terms. She said the city’s ability to set those terms, however, doesn’t mean developers will agree.
Last year, the Texas Legislature strengthened the rules governing public facility corporations, which are now required to offer 10% of units at 60% of area median income and 40% of units at 80% AMI. The state now also requires housing authorities that use PFCs to give a 30-day notice to all impacted taxing entities.
Watts also pointed out that the council would have more control over its PFC board than it does over the DHA board, and he said the city could use extra funds generated by the deals to fund more affordable housing projects.
It’s unclear if council members will serve on the PFC board, if they will appoint board members or if it will be a mixture of both.
Hudspeth reiterated that they were simply trying to fill in the gap left by DHA since the housing authority often helps extremely low-wage earners, a group that the city’s consultant said had the greatest need for housing in a 2021 report.
“Denton has also faced some of the challenges inherent in strong housing markets. These primarily include maintaining affordability for lower‐income residents, many of whom are essential to the city’s economic dynamism as they staff food and entertainment venues or support university operations,” according to the 2021 report.
“When the housing market caters heavily to student rental housing, there are fewer adequate options for families, who are then unable to find affordable rental units or purchase homes.”