"Who profited as Texas quasi-government agencies exploited an affordable housing loophole"

INVESTIGATIVE CATEGORY — SHOWCASE CERTIFICATE OF MERIT

Houston Chronicle
Contributors: Eric Dexheimer, Yilun Cheng, Matt Zdun, Robert Eckhart, Yaffa Fredrick
11/11/2024

As part of a multi-year effort, the Houston Chronicle’s investigative team uncovered fresh details on how a small group of quasi-governments have exploited loopholes in Texas' affordable housing tax break laws, profiting at the expense of local governments, taxpayers and low-income residents across the state.

In 2024, investigative reporter Eric Dexheimer, investigative reporter Yilun Cheng and data reporter Matt Zdun teamed up to investigate further.

The first story in the 2024 series focused on a small public agency Texas lawmakers formed at the request of a handful of landowners claiming they wanted to develop their land near the Austin airport. Instead, they quietly used their new government status to rake in tens of millions of dollars helping private developers across the state obtain tax breaks for "affordable housing" that offered little in the way of rent discounts – and with little input from local governments.

The agency then lavished the money on itself, renting office space in a posh downtown tower, showering its lawyer with nearly $15 million, hiring a world-class architect to create fantastical plans with no chance of being built and making the director of the five-employee agency into one of the highest paid public administrators in the state.

The second series of articles revealed how, thwarted by the new laws limiting public facility corporations, developers had quietly turned to another obscure public entity, the housing finance corporation (HFC), to arrange valuable property tax breaks. A handful of newly created HFCs in small, out-of-the-way Texas towns were using their public status to earn millions more arranging the tax deals. Often, the "affordable housing" they created was as expensive as market-rate apartments.

Another set of articles exposed the scheme’s impact on the Houston region, revealing how nearly 30 local taxing entities unknowingly lost millions in revenue. Using financial statements obtained through public records requests, reporters traced the developers behind the deals, including one that pulled in $100 million in a single year. They also requested rent rolls for these apartment complexes and found most projects added little to no affordable housing in the Houston region. The stories combined in-depth reports with compelling data visualizations, breaking down how these secret tax deals drained funding from essential public services, while failing to deliver meaningful housing relief.

The series has already made an impact in the short amount of time since its publication. State Sen. Paul Bettencourt and state Rep. Gary Gates have filed a new bill to further rein in the use of these programs. In the Houston region, several local officials have vowed to get involved in response to the Chronicle's findings, and Harris County Attorney Christian Menefee said he would pursue legal action if necessary.

MAIN LINK to content online

Additional links to supporting content online:
Nov. 11: $1M for lobbyists, $17M for lawyers: Who profited as a Texas agency used an affordable housing loophole
Dec. 12: Looking for a $1 million tax break? For a fee, these tiny Texas agencies are willing to help
Dec. 12: Some Texas local governments profit by driving up property taxes outside their bounds. Here’s how
Dec. 17: Secret tax cuts for landlords strip $600M from Harris County tax rolls in a ‘get-rich-quick scheme’
Dec. 17: These four charts show how Harris County loses while landlords cash in on a legal loophole
Dec. 17: A tax loophole for landlords costs Harris County millions and is sparking lawsuits. Who can stop it?

Submitted by Yaffa Fredrick.