A $20 million tax credit equity deal slated to help developers build affordable housing in San Antonio has evaporated. Instead, the credits will support housing in another community in Texas.
It’s an outcome that housing advocates and seven San Antonio City Council members, including Mayor Ron Nirenberg, warned against in September when four other members blocked an apartment complex in the city’s North Side.
“A few Council members used an archaic rule to kill an affordable housing project, assuring the community they would get state support to build elsewhere,” Nirenberg said in a statement on Thursday. “In the end, despite their assurances, San Antonio lost out on a needed comprehensive affordable housing project along with millions of dollars in state support which will go to another community. It’s an embarrassment.”
The zoning change required a supermajority vote and the minority argued that the funds could be used on a different project in San Antonio.
The state took the credits away from that original Northeast Side project called Vista Park, and developers of another project, Culebra Apartments on the Northwest Side, eagerly applied. But that project was rejected by a state board Thursday.
With a 5-1 vote at the state capitol in Austin, the Governing Board of the Texas Department of Housing and Community Affairs (TDHCA) rejected an appeal from Dallas-based developer Rise Residential and Sonoma Housing Advisors on its application’s deficiencies. The credits would have been used to fund a $22 million, 88-unit apartment complex for lower-income seniors.
The state will eventually allocate the tax credits to another project elsewhere, said Cody Campbell, director of multifamily programs at TDHCA.
Campbell told the board he could not publicly indicate which project would receive the credits next, but “it is certainly not going to be in San Antonio.”
Councilmembers Marc Whyte (D10) and Melissa Cabello Havrda (D6) — who voted against the original Vista Park project — attended the TDHCA board meeting in Austin to advocate for the Culebra Apartments’ appeal. (They virtually attended Thursday’s City Council meeting in San Antonio.)
“No regrets,” said Whyte, whose district includes the Vista Park property, told the San Antonio Report after the vote. “Each project has to be looked at upon its own merits. The Vista Park project, while a great project, was not right for the particular tract of land chosen due to its proximity to the single-family neighborhood next to it and the density issues in that area.”
Neighborhood voices
Whyte and Cabello Havrda, who also said she has no Vista Park regrets, have rejected the suggestions by colleagues and housing advocates after the Vista Park vote that they had caved to not-in-my-backyard (NIMBY) pressures rooted in neighborhood fear of subsidized housing and low-income residents.
Unlike the would-be neighbors of Vista Park, residents who live nearby Culebra were supportive.
“Everything about this project lined up to increase affordable housing in our city: Good developer, appropriate land use, strong neighborhood support, and their council member’s support,” Cabello Havrda said. “This was an opportunity to provide affordable housing for seniors in my district and the TDHCA failed San Antonio.”
But the failure started in City Council’s chambers, said Councilwoman Adriana Rocha Garcia (D4).
“Vista Park had already gone through a strict vetting process by the San Antonio Housing Trust and TDHCA,” said Rocha Garcia, who also serves as president of the housing trust’s board.
The project was the result of a public-private partnership between OCI Development, the San Antonio Housing Trust, the local Essence Preparatory Public Schools and Florida-based Atlantic Pacific Companies. It would have been the first affordable housing complex in the San Antonio area that features free, on-site pre-K services for residents.
“The project was shovel-ready but for the supermajority zoning decision,” she said. “If we had made the decision to rezone the project in the first place, we would be breaking ground right now.”
Cabello Havrda and Rocha Garcia are both running for mayor as Nirenberg’s term ends next year.
Mistakes made
Last month, TDHCA staff posted a report online that Culebra was financially feasible and could, therefore, receive the tax credit award, Campbell said. However, that initial report “mistakenly” included financial changes to the application, which applicants can’t change unless TDHCA asks the applicant to fix an error.
“This certainly is regrettable, and we do apologize for any confusion that it may have caused,” Campbell said. “However, we must still follow the rules.”
And when following the rules, the application does not show a financially feasible project, he said.
The rules and scoring surrounding which project gets an award are strict and complicated in order to pick the highest use of these incredibly competitive and lucrative tax credits.
Bill Fisher, president of Sonoma Housing Advisors, argued that TDHCA staff did ask to fix an error related to the project’s loan term sheet. Even without updated financials, the project was only short between $300,000 and $400,000. He said the developer could easily have forfeited that difference by lowering its fees.
“This is a very feasible transaction,” Fisher said, noting that the application went through several rigorous reviews before the initial report was published.
The board, except for Anna Maria Farias, disagreed. Most members felt that allowing an exception in this case would be unfair to other rejected developers.
Representatives from another group, Structure Development, were at the meeting to speak out against allowing Rise Residential and Sonoma to try again.
Understanding the tax credits
Developers sell the 9% tax credits to investors, who can apply the credits toward their federal tax liability each year for 10 years in exchange for their investment in the property.
The credits originate from the federal government, but each state generally decides how to allocate them.
Through TDHCA, Texas allocated about $95 million worth of credits in 2024, including some leftovers from last year. The agency typically receives applications for funding that total four times the amount available, and the competition can be fierce.
“I believe if we grant this, we’re opening ourselves up to just week-long meetings in the future,” said board Chair Leo Vasquez, noting that the board had completed just two agenda items in its hours-long meeting.
Kenny Marchant, the board’s vice chair, said he didn’t want to open a rabbit hole of complaints about fairness in the application process.
“What I’m trying to avoid is granting something that then comes back to haunt us year after year,” Marchant said.
After the vote, Wallace Lee Reed V, a development consultant at Sonoma Housing Advisors, told the San Antonio Report that the Culebra experience has not soured his desire to build more affordable housing in the city.
“All we can do is lick our wounds and try again next year,” Reed said. “The number one takeaway that I have from this is we’re going to continue to work with the neighbors and we’re going to continue to try to get something done in San Antonio.”
Correction: This article has been updated to correct the spelling of Bill Fisher’s name.
