Report Shows Reduction in Segregation in Texas’ LIHTC Developments

Texas Low Income Housing Information Service recently released a report titled “Fair Housing and Balanced Choices: Did Texas Reduce Government-Funded Segregation?” The report looked at the effect of a 2013 change in LIHTC award criteria on the location of LIHTC developments in the state’s five largest metro areas. These areas include Austin, Dallas, Fort Worth, Houston, and San Antonio. The new race-neutral criteria resulted in properties located in areas with lower concentrations of racial minorities and higher opportunity. The report finds the award-criteria changes were a success.

The change in award criteria occurred in response to the Texas Department of Housing and Community Affairs v. The Inclusive Communities Project lawsuit. In response to the lawsuit, the Texas Department of Housing and Community Affairs reformed its system for awarding housing tax credits. Prior to the changes, the state’s Qualified Allocation Plan (QAP) process for evaluating tax credit applications favored developments in areas with high concentrations of minorities and high poverty rates.

In addition to being located in areas with high minority populations, the developments given tax credits prior to the 2013 were located in low-opportunity neighborhoods with limited access to quality schools. The state designed the 2013 reforms, including points for an “Opportunity Index” and “Education Excellence” in the QAP, to reverse these trends. The report evaluated whether the reforms, which emphasized developments in low-poverty, high-opportunity neighborhoods zoned for high-performing schools, were successful in reducing the locating of tax credit developments in racially segregated communities.

The report compared the location of developments in Texas’s five largest metro areas that were awarded 9 percent tax credits between 2006 and 2012 to those awarded between 2013 and 2015, after the reforms were implemented. The study found that 68 percent of tax credits awarded between 2006 and 2012 went to developments in tracts with Hispanic or black populations above the state average. The 2013 changes to the QAP reversed this trend; between 2013 and 2015 the majority of the developments awarded tax credits were located in areas with below-average minority populations. Beyond racial demographics, 52.2 percent of non-elderly tax credit developments in the five largest metro areas were located in Census tracts with less than 15 percent poverty levels, up from 22.8 percent in the seven years prior to the reforms. Whereas 23.2 percent of units awarded tax credits between 2006 and 2012 were located in areas of extreme poverty, with poverty levels above 40 percent, only 5.5 percent of developments awarded tax credits after the reforms were located in areas of extreme poverty.

While the change reduced “government-funded segregation” through the 2013 reforms, the report noted that “low income families still have limited housing choice in low poverty, safe neighborhoods with access to high performing schools. It would take many more QAP cycles before ‘balance’ in housing choice was reached.”