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An investigation by the Houston Chronicle, has uncovered a startling funding scandal.  It seems there are thousands of dollars missing from the agency’s coffers that was suppose to be set aside for low income housing.  Because these funds are unaccounted for, the program is unable to meet its obligation, or mission.

Houston has collected $130 million in local taxes over the last decade to help provide affordable housing for low-income families, but has little to show for it.

For many projects, city housing officials cannot say how many families were helped or whether their homes still qualify as affordable for low-income residents.

Records are so chaotic that it took dozens of public information requests over 10 months for the Chronicle to connect spending to outcomes. The results have been underwhelming.

For example, although the city used its affordable housing fund to subsidize the construction, purchase or rental of more than 2,000 homes over the last decade, fewer than a quarter of them remain tied to city rules for housing subsidies.

Houston for years has lacked a coherent housing strategy and, in fact, does not even define affordability.

As a result, almost half of the $96 million spent since fiscal 2007 has gone toward administrative costs, federal fines or keeping projects moving after the city lost state and federal grants. For the last few years, the money even has been used to pay rent for the housing department’s offices.

The city’s efforts to track its finances have been similarly poor.

It was the Houston Chronicle’s repeated questions about financial discrepancies that led the city to discover $46 million was available for new projects, tens of millions more than officials thought.

These shortcomings, spanning three mayors and five housing directors, have played out as Houston wrestles with a growing affordable housing crisis. At the Houston Housing Authority alone, roughly 43,000 families were on a waiting list for subsidized housing as of April.

Housing Director Tom McCasland, who was appointed last year, said the city’s failures are unacceptable.

“We’ve got to change everything about the way we do business.”

SLOPPY RECORDS

The empty lot two doors down from Asia Davis’ rental home in Acres Homes is where people go to dump things — torn mattresses, used insulation, other household trash.

Other properties in the neighborhood had been left to fold in on themselves like this, shedding paint and accumulating weeds.

The lot by Davis, however, is owned by the city.

Houston’s plan was to clean up the parcel, acquired seven years ago with local affordable housing dollars, and sell it to a developer who would build the kind of house Davis hopes to buy one day.

Instead, the lot remained abandoned and overgrown, and the 23-year-old University of Houston student — priced out of her rental — was packing up to move back in with her mom and grandmother.

She was upset to hear the city had left so much housing money unspent.

“That’s, frankly, irresponsible,” Davis said. “You have a lot of people out here struggling, and it just seems like there’s no help out there.”

The newly discovered money appears to be the result of poorly kept records that employees across departments have struggled to interpret.

Asia Davis, 23, feeds her dogs in her grandmother’s garage after she moved back in because she could no longer afford her rent.

McCasland’s staff thought they had started the budget year with $7 million in unallocated local housing funds. In the city’s economic development office, which manages the housing fund’s revenue, officials thought the fund held roughly three times that much.

By late March, it became clear both were wrong. The correct figure was $46 million.

City officials attributed the errors in part to the fact that about five years ago, they lost track of nearly $17 million that was collected before fiscal 2007, when the city moved to a new accounting system. McCasland said they also failed to fully account for the taxes collected since fiscal 2012.

“Believe me, I’ve shaken my head more times than you can imagine once this got uncovered,” said Chief Development Officer Andy Icken, who oversaw the housing department from 2011 to 2016.

As for tracking expenditures, the City Controller’s office, which is auditing the fund, has found the housing department is missing paperwork to support some of its spending.

“What we’ve uncovered is sloppy,” City Auditor Courtney Smith said.

Heather Way, director of the University of Texas at Austin’s community development clinic, called the poor bookkeeping “ridiculous.”

“It’s a huge amount of money,” she said. “These are public tax dollars that are being utilized here, and we should hold them to a very high standard in terms of tracking how that money is being spent.”

Houston puts almost no general tax revenue toward affordable housing. Instead, it primarily relies on state and federal grants, most of which have strict spending rules.

The local housing fund, by contrast, is nearly restriction-free — and growing.

Houston is one of many Texas cities that use tax increment reinvestment zones for economic development. Property tax revenues are funneled back into the zone to pay for infrastructure and capital improvements in a bid to attract further private investment.

Houston is the only city, however, in which some of the zones must set aside a third of their money for “low-income housing,” under a 1989 amendment to state law. That vague description means Houston is uniquely positioned to finance innovative housing initiatives, or to patch holes exposed by crises.

The city often has chosen the latter.

For example, the local housing fund became the city’s key resource for dealing with the consequences of misusing millions in federal grant funding during the early 2000s.

Houston paid nearly $14 million in U.S. Department of Housing and Urban Development fines with local housing dollars, and another $9 million to replace frozen federal funding or reinspect and fix work it had not performed to specifications.

“We were using it to fight fires,” Icken said.

As for administrative expenses, Houston leaned heavily on its local housing fund after Hurricane Ike, when it received $290 million in federal disaster recovery grants that came with restrictions on administrative costs.

Facing those limits, the city pulled roughly $10 million from the housing fund, which carries no such restrictions.

The housing department also budgeted another $3.3 million in 2014 to administer programs, including Ike recovery, but spent more than twice that amount without itemizing the expenditures. This, in turn, makes it impossible to determine how much went to hurricane recovery initiatives.

Neal Rackleff, McCasland’s predecessor, said the city would not have been able to “effectively complete” its disaster recovery projects absent supplemental local administrative money.

However, that still leaves more than $6 million in other administrative spending that covered costs such as, in recent years, the housing department’s $800,000 annual rent.

That rental payment alone is equivalent to the cost of providing housing vouchers for more than 100 families for a year.

“Let me take a look at that,” Mayor Sylvester Turner, who took office last year, said when asked if the payment was appropriate. “We shouldn’t have to eat up the dollars administratively when those dollars could be put on the street and fixing somebody’s roof or repairing their home or, in some cases, even working to build a new one.”

Even when the city has used its local housing dollars to support signature initiatives, programs have produced relatively few affordable homes.

Houston can claim to have used its fund to reduce the construction, rental or purchase price of, at most, 2,007 homes over the last decade. The city’s own rules often were so lax, however, that just 463 of those homes still can be categorized as affordable housing.

“This has definitely been a missed opportunity,” Way said. “It’s alarming to see in light of the huge needs that exist in Houston for affordable housing.”

In one program that produced 1,122 homes, the city reimbursed developers more than $3 million — or about $2,800 per property — for the cost of installing drainage infrastructure at 21 developments, as long as the houses sold for less than the area median home price.

However, the buyers did not have to be low-income, and they later were allowed to sell their homes at market rate.

How Houston spent its housing money

Houston has spent about two-thirds of its $161 million local affordable housing fund over the last 10 years, records show. Nearly half of that $96 million was spent on administrative costs, professional services, federal fines or keeping programs running after other grants were pulled. City officials recently discovered that $46 million was available to spend as of March, tens of millions more than they thought.

Without long-term affordability requirements, once-subsidized homes quickly can become too expensive for poor families.

“We have spent a lot of money that, in essence, provides housing in that moment,” said Amanda Timm, executive director of the Local Initiatives Support Corporation of Greater Houston, a community development organization.

The initiative that received the most local housing dollars is the Land Assemblage Redevelopment Authority, created in 1999. The idea was to have the city acquire tax delinquent properties, clean them up and sell them to developers interested in building affordable housing.

The city has spent nearly $10 million through LARA over the last decade to buy and market 1,403 lots in low-income neighborhoods. Homes had been built on just 362 of those lots as of February, and 805 remained vacant.

Four of those empty properties were on Davis’ block in Acres Homes.

“It seems like everybody brings their heavy trash down here,” said Charles Smith, 65, who lives a street down from Davis, next to a vacant LARA lot he said the city has not mowed since 2013.

“I’m the one that keeps it clean,” he said, gesturing to Cinnamon, a horse he brings over when the grass gets high.

A single subdivision named Leland Woods, meanwhile, has received a series of cash infusions totaling nearly $4 million over the last decade, with just 55 homes to show for it.

The irony is that Leland Woods is a TIRZ, formed so the city could spur development in the struggling northeast by subsidizing the development of 375 homes on 80 acres.

The project kicked off with a $1.5 million grant in 2004 — also from the city’s local housing fund — but only 42 homes sold before the 2008 recession pushed the developer under.

Houston was left responsible for the debt and repeatedly has offered subsidies to prevent the land from being put up for auction.

Housing advocates were unimpressed by the city’s overall results.

“It’s a very small impact relative to what we’ve seen in other places with other resources,” Timm said.

Icken does not dispute that. “We haven’t done as much as we’d like.”

Who needed help?


250,000:

Number of low-income Harris County families spending more than 30 percent of their earnings on housing in 2000


400,000:

Average number of low-income Harris County families spending more than 30 percent of their earnings on housing from 2009-2013


43,000

Number of families on a waiting list for subsidized housing through the Houston Housing Authority as of April


4,200:

Estimated number of families the city directly helped with its local housing fund


2,007:

Number of homes the city helped make more affordable using its local fund, not counting assistance like repairs or demolitions


463:

Number of those homes that remain under affordability restrictions


FILLING THE GAP

To be sure, hundreds of Houstonians have benefited from the local housing fund.

Among them are an estimated 2,200 families whose homes were repaired, inspected or otherwise financially supported.

Then there are the 463 new homes that remain tied to affordable pricing.

Among them are 40 single-family houses in the Near Northside’s Avenue Place, where the nonprofit Avenue Community Development Corp. received $2.5 million to build dozens of affordable homes.

Another $1 million was divided between 23 families looking to buy energy-efficient homes, some near Little York and Homestead in northeast Houston.

The tidy subdivision stands out in an area marked by hand-written signs — “homes for lease, no credit” — above couches discarded on the roadside.


Where does the city’s local housing money come from?

Roughly a third of Houston’s 26 economic development zones contribute to Houston’s local affordable housing fund. State law requires some of these zones to put a third of their revenue into this city-managed fund, which today generates about $16 million a year. Click on the map to see how much revenue each contributing zone has generated.

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