It’s no secret that Denton needs affordable housing for the nearly half of Denton households that are low-income, according to a presentation from city staff last week.
The city’s affordable housing needs were previously identified in a January 2021 affordable housing study. At the time, it reported that rent had increased 23% in the past five years, outpacing the median housing income growth of 17% and illustrating a growing need for affordable housing.
That study found that renters who earn less than 50% of the area median income (AMI), which was $43,110, and a portion of owners (particularly first-time buyers) who earn less than 80% of the AMI ($68,976) found it difficult to afford most housing in Denton without assistance.
Service industry workers and other low-wage workers earning close to minimum wage have the greatest need, the study reported.
To address the need for affordable housing units in 2021, the study found that Denton needed 1,695 units at 50% AMI and 5,730 units at 30% AMI.
Units at 50%, 30% or 80% AMI refers to apartments that are priced so that households earning half, 30% or 80% of the area’s median income can afford them.
But only 380 units at 50% AMI and 60 units at 30% AMI have been built since 2021, Jesse Kent, the city’s director of community services, told the City Council on Tuesday. Kent’s presentation supported updating Denton’s housing tax credit policy in hopes of addressing this need.
However, developers did build 2,865 units at an 80% AMI rate — which Kent said may not actually be affordable enough for Denton. Federal housing programs include Denton in the Dallas region, which has a higher AMI rate at $110,300, instead of Denton’s lower one at $80,900, as of 2024.
Now, city staff members are projecting that 2,068 units at 50% AMI and 6,743 units at 30% AMI are needed within the next five years, and the council directed the staff on Tuesday to update the policy.
None, staff said, are needed at the 80% AMI rate.
Council member Joe Holland asked Kent why so many 80% AMI units have been developed instead of the deeply affordable ones.
“If the market is there, why aren’t developers trying to fill that void?” Holland asked.
Kent explained that it was more cost-effective for developers to build the 80% AMI rate units because they can get market rate for them here.
“It might be the case that the margin they get is not going to be large enough to justify their time. … Then the policy kind of lends to, ‘Well, that’s the way it is,’” Kent said. “But if you want hundreds of thousands of dollars in tax exemption but no rent reduction, we’re suggesting that not a good enough reason.”
On Thursday, Carrie Baugus, executive director of the Denton Affordable Housing Corporation, said that once the federal government offers a tax credit, the developer has to turn around and sell it to an investor, and that money is then used for capital.
“If an investor sees that you have these 30% and 50% units, they’ll ask you if you have a voucher tied to them; and if you don’t, you can’t get an investor.”
For example, Baugus said that DAHC is having a hard time finding an investor for the McAdams Haven supportive multifamily housing project because it is primarily 30% and 50% AMI units.
Denton currently has 29,000 multifamily units — of which, Kent said, 4,800 units are income-restricted and only 500 of those are offered at the deeply affordable rates.
Affordable means that a household wouldn’t spend more than 30% of their income on housing, Kent told council members. Those who do are considered “cost-burdened” and “extremely cost-burdened” if they spend more than 50% of their income on housing.
Denton has several affordable multifamily housing projects currently in development, according to staff:
- Under construction: Four multifamily projects that will offer 474 units at 80% AMI, 78 units at 50% AMI and 18 at 30% AMI.
- In development: Three multifamily properties that will offer 422 units at 80% AMI, 81 at 50% AMI and 32 units at 30% AMI.
- Pending: Four multifamily projects that will offer 617 units at 80% AMI, 153 units at 50% AMI but no units at 30% AMI.
To help address the current need for the deeper affordable rates, city staff proposed and received council direction to begin updating the housing tax credit policy, which allows developers to offer affordable rates at 30%, 50% and 80% AMI.
Housing entities such as the Denton Housing Authority and DAHC and developers seek resolutions of support or no objection from the council to help receive the housing tax credit administered by the Texas Department of Housing & Community Affairs.
TDHCA offers two types of housing tax credits: the 9% housing tax credit program, which is competitive, and the 4% HTC, which is available statewide and throughout the year and awarded to developments that use tax-exempt bonds as a financing component.
The 9% HTC is only available in each region and determined via a regional allocation formula. At least 10% of the allocation must be used for qualified nonprofits, and applications are scored and ranked, according to the TDHCA.
That’s why receiving a resolution of support or no objection from the council is important because it offers a higher score for 9% HTC applicants.
Staff recommended updates to the Denton housing tax credit policy that include:
- Preapplication meeting that would make sure the development would be successful going through the development process in Denton.
- Neighborhood meeting with notice to neighbors.
- Tax reductions that must be partnered with a local entity such as a community housing development organization, public facility corporation, housing finance corporation or public housing authority.
- Scoring matrix with a threshold to be presented to the City Council.
- Annual work session to update the council and receive direction.
But Baugus worried that requiring people to do meetings in the fall when they’re working on their applications for 9% housing tax credit would be difficult since the timeline for it is so short and they often live outside of Denton.
Sometimes, they don’t have a contract for the land until shortly before it’s time to submit the application to the state, as was the case for Baugus on the McAdams Haven project.
“Some of those things are going to create barriers for developers,” Baugus said. “We already have a difficult system [in Denton]. It takes a lot of time to get through permitting and three times the cost [compared to other cities].”
To help incentivize the right kind of development, Kent and his team created a 100-point scoring matrix:
- Affordability: Scaling points for 30% and 50% AMI (60 points maximum)
- Opportunity: Scoring opportunity index points on TDHCA application (10 points maximum)
- Supportive or senior housing (10 points maximum)
- Rehabilitation: Renovating existing housing (5 points) or renovating nonresidential into housing or extending affordability (10 points)
- Program participation: Reduces income requirements for housing choice voucher holders (5 points) and/or prioritizes 10% of units to households exiting homelessness (5 points)
Kent said developers would need to score additional points to receive a 50% property tax exemption and high score if they want the 100% property tax exemption.0
“Most of that is going to come from affordability and the production of those units that are affordable for Denton,” Kent told council members Tuesday.
The scoring matrix would be flexible from year to year for council members to update it as needs change. Staff plans to provide a report to the council about projects that don’t meet the criteria.
“For a lot of tax exemptions, this is actually the only opportunity council has to say whether they want it in their community or not,” Kent told council. “For many property tax developments that the housing authority produces, council never has an opportunity to say we believe this is a good use of public funding, the tax exemption, or not.
“And so we want to make sure that council has the opportunity to weigh in on those projects and to help kind of lend their voice if it is a good use of taxpayer funding.”
Part of the reason why the policy focuses on affordable unit production is to account for multifamily housing landlords’ requirement for applicants to earn three times the rent, Kent said in an email Wednesday to the Denton Record-Chronicle.
“It is easier for low-income households to meet the income requirements of affordable for Denton units,” Kent wrote. “Additionally, council provided direction to incentivize developments that decrease the income requirements for Housing Choice Voucher recipients.”
Baugus pointed out that multifamily housing complexes that receive housing tax credits will waive the requirement for applicants to earn three times the rent, but will then charge a higher deposit.
Baugus’ son recently moved into a DHA property, and she said he didn’t have any credit and was working a blue-collar job, and for him to get into the property, he had to pay a $3,500 deposit.
“Luckily, he had family to help cover it, but for the average person, that is the frustration with LIHTC [Low-Income Housing Tax Credit] properties,” Baugus said. “[They will] bring in corporate property managers who are not local people and have all these barriers, and people can’t access it.”