City of Lewisville defends using controversial tax exemptions to build affordable housing development
Cities across North Texas are grappling with skyrocketing home values and increases in rent, but a tool meant to spur construction of more affordable units is mired in controversy.
Our I-Team has been reporting on some of the problems for months.
- Texas lawmakers may have cost local governments 'billions and billions' by unknowingly expanding a tax break to private developers
- "Luxury" developments getting affordable housing tax breaks
- Euless loses 2 percent of revenue to controversial tax break approved in faraway county
The City of Lewisville is giving it a chance anyway, saying they've found a way to make sure the development will actually benefit those who need it the most.
"I think everyone is feeling the pinch right now with inflation and with cost of housing going through the roof," said Lewisville City Manager Claire Powell.
To address the growing problem, the city is partnering with Dallas-based developer Ojala Holdings to turn a 17-acre lot on the east side of Old Town into a massive affordable housing project.
The city believes it will save residents about $24 million in rent over the next 15 years. In return, the developers will get an even bigger tax break.
"We have one-story cottages, two-story townhomes with attached parking, and then your traditional 3-4 story units," said Jennifer Burns, vice-president of development for Ojala.
Lewisville created a Public Facility Corporation, of PFC, to bring the development to life. It's a tool meant to incentivize developers to provide affordable housing by taking the property off the tax rolls for decades.
In this case, that's an estimated tax savings of $27 million for Ojala over the next 15 years.
In Plano, the city has taken its own housing authority to court over its use of PFCS.
"Are they actually becoming affordable?" said Plano City Manager Mark Israelson.
Even lawmakers have pointed to evidence of developers misusing the tool, and some affordable housing advocates say they don't cut the cost of rent nearly enough.
However, Marichelle Samples, Lewisville's director of economic development, says this project is different.
"For the City of Lewisville, our priority is to provide deeper levels of affordability," Samples said.
"Just like any other entity or municipality, they have to provide what their priorities are and the need in their community, and that is then going to have an effect on what types of projects they're seeking. For us, we have been very strategic."
Samples said Ojala initially presented a proposal for 600 units, with just half reserved for households making 80 percent of the area median income, or AMI. In the Dallas metro area, that's $84,480 or less for a family of four.
Until recent reforms to the program, making 50% of units affordable to households making 80% AMI was the only requirement for PFCs.
"For Lewisville, we knew the need was greater," said Samples.
So they negotiated even stricter standards. This development, The Standard at Old Town, will have 17 units at 50% AMI, 42 units at 60% AMI, and 247 units at 80% AMI. The remaining 294 units will go for market rate.
Yearly compliance checks will also ensure Ojala is living up to its promises, according to Samples.
"Ojala has done this for quite some time," Burns said.
"We have other affordable housing projects. We also have a contract with the city. We're required to maintain these rents, we're required to maintain standards."
The standard for affordable units is no tenant will pay more than 30% of their income on housing costs.
Using current housing data, that means market rate for a townhome at The Standard will be $2,275 a month. A household at 50% AMI will pay less than half of that at $1,095 a month.
Rent for cottage homes and apartments will range from $988 to $2,100 a month, depending on the size of the unit and the resident's AMI.
Another part of the deal the city made was for the developer to create a street grid on that side of Old Town, with 3.6 acres of public right-of-way and more than 200 public parking spots.
So while affordable housing was the goal, Samples said the city feels like it gets multiple benefits from the arrangement. They hope the project serves as an anchor and a catalyst for the redevelopment of the entire area.
"The good thing about the PFC structure is it also creates revenue, and with that revenue, what we plan to do in Lewisville, is invest it in more affordable housing," said Samples.
So far, this is the only PFC project the City of Lewisville has done.
"My hope is that when they open, they'll be 100% occupied in no time so our residents are really getting the benefits of this structure," Samples said.
Construction crews aren't expected to break ground on The Standard till next year, which means people will be able to start renting units in phase one of the project sometime in 2026, with the entire development expected to be completed by the end of 2029.
