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Success of Mueller limits affordable housing funding options

Friday, September 7, 2012 by Kimberly Reeves

The ironic consequence of the Mueller community is that success is making it tougher to create the mixed income neighborhood that was Mueller’s initial goal.

 

At the most recent Mueller Municipal Airport Advisory Commission meeting, officials with Catellus Development, the master builder of Mueller, and Foundation Communities, a nonprofit that specializes in providing affordable housing, explained that the best tax credits for construction probably were no longer available for Mueller.

 

One of the largest sources for funding for affordable housing is the Low-Income Housing Tax Credit, created in the Tax Reform Act of 1986, which generally comes in two varieties – the 4 percent and the 9 percent credit, referring to how much the investors can claim on their federal tax returns.

 

“The state housing agency has put out a draft of the 2013 scoring criteria for the 9 percent tax credit program,” said Jennifer Hicks, in charge of housing finance at Foundation Communities. “To get the most funding for Mueller, it’s very close on the income level of the surrounding community, but it doesn’t meet it, though.”

 

The Texas Department of Housing and Community Affairs won’t approve the final draft of the criteria until next month, Hicks said. For now, though, the Mueller development falls outside of the most desirable range for the 9 percent credit, which is a limited pool of funding that is meted out to states on a per capita basis.

 

The tax credit is a huge selling point for getting additional financing, Hicks said. For example, on a project like Foundation Communities’ M Station Apartments at 2906 East Martin Luther King Blvd., the credit saved the nonprofit developer between $2 million and $2.5 million.

 

The news was probably not what the advisory board wanted to hear, although Hicks pointed out that a project in Mueller could garner 4 percent tax credits, which were not competitive and which had a pool of funding that was not limited.

 

“The goal was to have 25 percent affordable multi-family units without overburdening the developer,” advisory commission Chair Jim Walker said. “Five or six years ago, we qualified for tax-credit projects, but the rules change and the timing has changed on the (Mueller) school site. Things change.”

 

Walker suggested market-driven projects might be able to capture affordable units. No developer likes jumping hoops, just to find out a project lost out by a point or two on an application form. But Hicks expressed doubts, saying it would be difficult to maintain a high level of long-term affordability without some tax credits.

 

Officials developing the 700-acre Mueller site, the former home of Austin’s airport, have set aside a number of locations for multi-family projects, including in the planned Mueller Tower District, the Town Center North and near the proposed elementary school site. Hicks estimated the total project cost on a 150-unit apartment complex at about $23.5 million.

 

Dee Desjardin of Catellus said no specific project is on the table for an apartment complex at Mueller. Financing profiles change. Mueller already is home to DMA Development’s Wildflower Terrace, a 200-unit senior affordable housing community with units designated from 30 percent of median family income, at $360 per month, to market rate, up to $1,600 per month.

 

“What we’re looking for is deeper affordability and longer affordability, where we can go to 30 percent of median family income and can sustain it for 99 years, which is different from other projects,” Desjardin said.

 

The city has little to no funding for an affordable apartment project in Mueller. Foundation Communities, however, is still pressing forward and would like to look at a project with at least 4 percent income tax credits, Hicks said. If the Mueller neighborhood comes on board, a resolution would go to City Council in January.

 

Already, Catellus has convened a group of stakeholders to discuss the challenges around affordable multi-family projects in Mueller and to discuss alternate funding sources. Desjardin still described the chance of affordable apartments as excellent.

 

Desjardin said multi-family housing will come to Mueller, but it will be the right place, right time and right project, and with the community input.

 

“We’re looking at it from a long-term viewpoint,” Desjardin said. “We look at these things. We look at the developer needs and the master plan layout, and we look at what the development timing is. We should be able to put together a picture of what might be appropriate at what time in what place with the stakeholders’ group.”

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