More of American Housing Foundation’s public moneyBy Eric Dexheimer Thursday, May 28, 2009
This weekend I wrote about the suicide of Amarillo’s Steve Sterquell and how his now-troubled non-profit company, American Housing Foundation, built an affordable housing empire using public subsidies such as tax-exempt bonds and property tax exemptions. But I didn’t mention a third taxpayer-supported program that Sterquell has been able to use to leverage his projects.
About one-sixth of the foundation’s 14,000 units across the country were built or renovated using money from the federal Low-Income Housing Tax Credit Program. Taken together, over the years that public subsidy has come to just under $53 million.
The 23-year-old program was designed as a way to convince private companies to invest in affordable housing. Every year the federal government gives state housing agencies tax credits to promote affordable housing. The amount of the credits is based on the state’s population. To those who have them, the credits offer a dollar for dollar reduction of their tax bill: A person who owes $1,000 in income tax and possesses $1,000 in tax credits has a net bill of $0.
In Texas, the Texas Department of Housing and Community Affairs divvies up the tax credits based (in theory) on the merits of competing projects — the type of affordable housing offered, location, cost and so on. (For a brief history of how other factors may have influenced the allocation of the credits in the past, check out this fine 2007 report from Texans for Public Justice.) Each award generally is good for 10 years of credits.
Once the affordable housing developer receives tax credits through TDHCA, it sells them on the open market, usually to large corporations seeking to defray their tax bills. The first company that purchased American Housing’s tax credits was Chevron, the giant oil company. (It has continued to partner with the Amarillo developer on several projects.) The developer then uses the proceeds from that sale to pay for housing construction or rehabilitation. By law, it is also allowed to take 15 percent off the top for “developer’s fees.”
How much money the developers raise depends on what the corporations will pay for the credits. Generally, the better the economy and the more profitable corporations are, the more they are willing to pay for credits to offset their large income tax bills. In times of plenty, affordable housing developers have been able to sell a dollar’s-worth of credits for upwards of 95 cents. Conversely, a lousy economy — such as today’s — means less profit, with tax credits fetching closer to 70 cents on the dollar.
According to figures put together for me by TDHCA, American Housing received publicly subsidized tax-credit financing on 16 different projects in seven Texas cities between 1996 and 2006. Amarillo, it’s home base, had the most, with eight separate affordable housing developments containing a combined apartment 980 units.
The total value of the tax credits for the Amarillo-based developments was $2.84 million. But remember: each award is good for 10 years. So the total value of tax credits for the Amarillo projects is really $28.4 million.
Austin has two of American Housing Foundation’s tax-credit financed affordable housing projects — Fairway Village, near Montopolis Drive, and Santa Maria Village, off North Lamar Boulevard — paying a total of $3.8 million over the 10-year life of the credits.