Low-Income Housing Program Compels Building in Poor Areas

Plans to build a low-income apartment complex for seniors in one of San Antonio’s most fashionable neighborhoods had been posted for barely a week in January when the fury began.

Residents feared that the 68 rental apartments, which were competing for federal tax credit subsidies, would spoil the affluent Stone Oak neighborhood. In a storm of emails, calls and letters to local and state officials, they predicted unpleasant results: lower property values, more traffic and an increase in crime.

“It just didn’t fit with us,” said Francisco Martinez, president of the Mount Arrowhead Homeowners Association, one of about a dozen groups that opposed the apartments. “These are single-family homes. Anything that takes away from that takes away from why we bought into it.”

By March, the neighbors had prevailed. The project and any chance of public subsidies this year were dead.

Federal housing programs are designed to break up concentrations of poverty and discourage segregation. To lift low-income residents out of poverty, policy makers increasingly focus on the links between neighborhoods and access to jobs, good schools, transportation and safe streets.

But in Texas — which gives neighbors a significant say in where subsidized housing can be built — those policy objectives are largely being foiled, as the dynamics in Stone Oak illustrate. Subsidized apartments are being built disproportionately in impoverished neighborhoods with high concentrations of minority residents, according to an analysis by The San Antonio Express-News and The Texas Tribune.

The examination of data from the Texas Department of Housing and Community Affairs, which administers the biggest federal housing subsidy program in the state, found that of $9.7 billion in tax credits awarded from 1990 to 2011, more than three-quarters subsidized the construction of apartments in neighborhoods mostly made up of poor blacks and Hispanics. Few units built with support from the Low-Income Housing Tax Credit program, which gives federal incentives to private developers to build or rehabilitate low-cost apartments, were in areas that are predominantly white.

The examination found that:

• Of the 193,000 tax-credit units subsidized statewide, 78 percent are in census tracts where more than half of all residents are minorities. By comparison, only 59 percent of all rented apartments are in the same areas, according to census data.
• Roughly 31 percent of the units across the state are in neighborhoods with high concentrations of minority residents — 90 percent or more — which is about twice the rate for all rental housing.
• Eighty percent of the low-income apartments, but only 64 percent of all rented units, are in poor census tracts where residents earned less than the state median household income, $49,646.

“Those figures are startling,” said John Henneberger, co-director of the Texas Low Income Housing Information Service in Austin. “These funds are supposed to be used to overcome patterns of economic and racial segregation. It appears that they’re doing exactly the opposite.”

In many cases, tax-credit financing has clustered apartments in areas suffering from the kind of blight the program is supposed to correct.

The problem is more prevalent in Texas. A study by the federal Department of Housing and Urban Development in 2009 ranked Texas fourth in the nation for placing tax-credit apartments in areas where more than half of the residents were minorities.

How the state housing agency dispenses the credits — worth about $450 million this year — has come under increasing public scrutiny. In March, a federal judge in Dallas ruled that the program violates the Fair Housing Act. Though the lawsuit focused on a concentration of tax credit-financed apartments in minority areas of Dallas, Chief Judge Sidney A. Fitzwater of the Federal District Court in Dallas ordered a statewide remedy.

The nonprofit group Inclusive Communities Project said in the suit against the state that the department deliberately steered projects into minority neighborhoods. But Fitzwater sided with the state, which argued that it has no control over the location of apartments and that the approval of subsidies is based on a strict point system that is blind to race. The agency also pointed out that developers pick the sites and draw up proposals before the state awards money to high-scoring projects.

The housing department and Inclusive Communities Project declined to comment while the state works on a corrective plan, which is due in May.

 High land costs in affluent areas and federal incentives for building in the poorest neighborhoods also aggravate the racial and economic imbalance.

The angry reaction of the Stone Oak neighborhood to the proposed senior apartments, however, epitomized what many view as the biggest cause by far — state rules that allow such groups to block low-income housing based on not-in-my-backyard fears.

In the scoring system, community support is the second-biggest point-getter — the first is the financial feasibility of a project. The deals can be lucrative, and the competition is fierce. A single point can separate winning and losing proposals. And with application costs that run up to $100,000, many developers avoid the risks of pitching projects in affluent neighborhoods.

“Usually your more organized neighborhoods and communities are ones that have more resources, and those are the ones that are going to get organized more quickly if they don’t want you there,” said Jennifer Gonzalez, executive director of the Alamo Area Mutual Housing Association, a nonprofit San Antonio developer. “We just don’t even go there.”

Unless low-cost apartments coincide with other public subsidies, they do not typically improve neighborhoods, said Jill Khadduri, the former director of policy development at HUD. By competing with other low-rent apartments already in those neighborhoods, the subsidized units can even add to blight, she said.

“The net effect is not really to improve the neighborhood because it’s just moving tenants from one building to the other,” she said.

The pushback from middle-class neighborhoods has also fostered concentrations of low-income apartments in areas that already accepted tax-credit deals.

In the neighborhood surrounding Mission Del Rio apartments on San Antonio’s south side, one of every two rental units was built or refurbished with tax credits. The median household income there is $14,352 a year, and 9 percent of the population is white.

The well-kept complex stands out from a dreary landscape of warehouses, railroad tracks and ramshackle apartments with boarded windows.

Genia Machado and her husband, Elijah, said they were drawn to the complex three years ago because it looked nice and accepted Section 8 housing vouchers. But two weeks after moving in, the Machados were robbed at gunpoint on their way home from the bus stop. Since then, thieves have broken down their door twice, and they no longer go outside at night.

Living in the neighborhood also requires Machado to commute 35 minutes to his construction job on the north side. Mrs. Machado is looking for work, but is finding that her options in the neighborhood are limited.

“Usually all the jobs are farther away, on the north side,” she said. “They want to pay me minimum wage, and I can’t be wasting that kind of gas to get up there. Gas is expensive.”