Northern Dallas affordable housing project closer to being built — but it still faces hurdles
A northern Dallas affordable housing project moved one step closer to being built after being on hold for nearly two years.
But the future of the proposed apartment complex is still uncertain, facing procedural and legal hurdles that could still stymie the project.
The Dallas Public Facility Corporation voted Tuesday in favor of a proposal to acquire land near the intersection of Highway 75 and Forest Lane, and lease it to developer Sycamore Strategies LLC to build and operate a nearly 200-unit apartment complex that includes both market-rate and subsidized apartments.
The DPFC is a city-owned nonprofit created to “to develop and preserve mixed-income workforce housing communities,” that include both market rate and subsidized units, according to city documents. Projects developed through the agency are exempt from local property taxes for 75 years.
But the 8-to-3 vote approved the arrangement only conditionally. If the Dallas City Council approves the acquisition of the property and development of the apartments, the issue will come back to the public facility corporation, which will evaluate legal concerns regarding the project.
If the DPFC board greenlights the acquire-and-leaseback deal at that point, construction could finally start on the apartment complex – called Cypress Creek at Forest Lane. But a court challenge may well follow, and depending on who you ask, that court challenge may test the boundaries of Texas law.
‘Get around the deed restrictions’
In 2021, Sycamore Strategies won competitive Low-Income Housing Tax Credits to build Cypress Creek at Forest Lane. The project was scored highly because of its location in a census tract considered “high opportunity” due to abundant jobs, nearby public transit, low poverty and other neighborhood characteristics.
The project also had the backing of the Dallas City Council, which helped it win the coveted tax credits despite a campaign of opposition from people living more than a quarter-mile from the project as well as the local council member, Adam McGough, and state representative.
But the project ground to a halt before any shovel could hit the ground. The proposed site for the development is bound by a decades-old restrictive covenant barring multifamily housing. Zachary Krochtengel of Sycamore Strategies told the board that it was discovered after the tax credits had been approved.
“After we made a few attempts to negotiate with [adjacent property owners] to get through the deed restrictions and make an arrangement to do this project, they declined to do so,” Krochtengel told the board. “So we had the advice of counsel that the way to get around the deed restrictions to build affordable housing was to partner with a public entity.”
That deed restriction is why the project is in front of the Dallas Public Facility Corporation, and led to a long discussion about potential legal challenges if the project moves forward.
It applies to eight acres that includes the potential apartment site, and allows only the development of offices and other commercial uses on the land. If Sycamore Strategies were to begin construction on the land as a private company, neighboring landowners in the deed-restricted area could — and probably would — take him to court and stop the development.
But if the PFC, as an extension of the city, acquires the land and leases it back to Sycamore Strategies to begin building the project, the deed restriction becomes unenforceable, because a deed restriction cannot be enforced against a city or other government with sovereign immunity.
At least, that’s the working theory behind the push to have the city partner on the project.
Contested legal ground
Owners of an office building next door to the project pushed back on that idea at the Tuesday PFC meeting. Carl Weisbrod, an attorney who specializes in disability law, told the board that Krochtengel, the developer, “failed to do his due diligence” so he was trying to “use government authority to improperly permit him to avoid the deed restrictions.”
He and his co-owner, William Roth, framed the issue as a matter fo property rights, and called negating their property rights “a taking” that they’d likely challenge in court. Their legal team, Weisbroad said, told them “the city and the PFC will not be protected by sovereign immunity because this is being used to favor a private entity.”
An attorney advising the PFC, Jim Plummer, said the Dallas city attorney’s office believes that the law is on the city’s side, because it is acquiring the land for a public purpose: Building affordable housing.
But, Plummer told the board, he wasn’t sure the PFC would be shielded from a lawsuit by the city’s sovereign immunity.
The developer, Sycamore Strategy, had agreed to pay for the PFC’s legal defense in the case of a lawsuit, Plummer said. The city attorney’s office, though, has been unwilling to make a similar commitment to protect the PFC, even though the PFC would be entering an agreement with Sycamore Strategies on the city’s behalf and at the direction of the city council.
“The ability of the PFC to be shielded by the city’s sovereign immunity may be a test case,” Plummer said.
Mary Poss, a board member and former council member, said Plummer’s assessment “scared me to death” and called for the project to be tabled until they could have lawyers determine just how legally risky the project might be. Poss had previously opposed the Cypress Creek project.
Alan Tallis, a board member from District 11 in North Dallas, said the project was in line with the mission of the public finance corporation, and has been supportive of partnering with Sycamore Strategies to build Cypress Creek because it’d add high quality affordable housing in northern Dallas.
He proposed the board conditionally sign off on the arrangement with Sycamore Strategies, and send it to the city council. If the council also approves of the arrangement, then the PFC would have a chance to do its legal due diligence before giving a final approval.
That’s what the board approved.
Tallis said he’d also want to know that the city will defend the PFC in court, should it come to that.
“I think we need to go back to the city attorney’s office and say, 'Guys, if you want us to fulfill our obligations under the charter of the PFC, and you want us to do this deal…we need to know that you have our back,'” Tallis said.
Philip Kingston, an attorney for Sycamore Strategies and a former city council member, downplayed the legal concerns after the meeting.
Kingston said Weisbrod and Roth are “absolutely bluffing” about their chances of prevailing in court, should the project be approved. Even if they did win, he said they still couldn’t stop the project. They’d only be entitled to money, and only if they could prove that their office building lost value because apartments were built next door.
In February, the board asked for Krochtengel to do more community engagement with homeowners in neighborhoods close to the project after opponents testified about an array of concerns if the project were approved. That community engagement delivered a showdown in a public library that didn’t appear to change anybody’s mind.
At the Tuesday meeting of the PFC, nine people who owned businesses or homes nearby voiced the same concerns, though the board seemed less receptive.
Mike Nelson from the Northwood Estates Neighborhood Association said he felt the area already has too many subsidized housing options within a couple miles.
Those include a mixed-income luxury apartment complex where subsidized rents start around $1,400 a month, housing for low-income seniors and apartments for formerly homeless individuals with high needs. Two projects proposed nearby include a stretch of 29 new single-family homes to be sold to middle-income families, and converting a crime-ridden extended stay hotel into long-term housing for people leaving homelessness.
“Our community is being barraged with programs and projects,” he said. “It’s as if our community is being systematically targeted.”
Director Ronald Stinson said he’d previously been sympathetic to homeowners worried about Cypress Creek’s impact on their neighborhood. He said he changed his mind after visiting the area and realizing it wouldn’t actually be in a residential neighborhood. The closest houses, none of which are visible from the property, are a quarter of a mile away.
Oak Cliff, where Stinson lives, has significantly more subsidized projects, which are usually much larger than the Cypress Creek project, and are often built much closer to people’s homes, he said.
“I have vehemently protested multifamily coming into our neighborhoods [before] because of the impacts they’d have on our homes, because they’re sitting down the street or next door,” Stinson said. “But here…they’re not next door to any homes….so where is the impact?”
It’s unclear when the city council will take up the Cypress Creek project. What is clear is that opposition to the development is unlikely to dissipate.
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