‘A rudderless ship’ With little oversight, the San Antonio Housing Trust has offered $39 million in tax breaks for affordable housing. But rents are too high for most low-income residents.

‘A rudderless ship’ With little oversight, the San Antonio Housing Trust has offered $39 million in tax breaks for affordable housing. But rents are too high for most low-income residents.

February 14, 2020

A nonprofit created to provide affordable housing operated with little oversight and produced few apartments for San Antonio’s poorest residents as the city’s housing crisis worsened in recent years, a city-commissioned report shows.

Instead of focusing solely on the needs of low-income residents, the San Antonio Housing Trust and its affiliates often approved residential units out of their reach, according to the study by the National Association for Latino Community Asset Builders.

The 66-page assessment commissioned by the city shows the trust operated for years without a clear sense of what kind of housing it should support. And the trust lacked the expertise to help create affordable housing, the report says.

Read the report: An Organizational Assessment and Strategic Recommendations for the San Antonio Housing Trust

City Council members who sit on the board of the San Antonio Housing Trust Public Facility Corp., the most active arm of the trust, often had little information when approving deals that removed housing developments worth tens of millions of dollars from the tax rolls and provided a questionable level of affordable apartments.

Furthermore, council members mostly relied on an outside attorney who acted as a go-between for developers and the council to guide them through various housing deals, about a third of which went to a developer that he had previously done legal work for.

“This process was a rudderless ship hoping to reach the shore.”

—Mayor Ron Nirenberg

To local affordable housing advocates, the problems laid out in the report are symptomatic of the city’s decades-long lack of clear goals regarding housing policy — and the city’s knotty housing bureaucracy.

Mayor Ron Nirenberg agrees.

“This process was a rudderless ship hoping to reach the shore,” Nirenberg said of the trust. “And without some consistency in the process and clear criteria for goals and reaching the overall strategy on affordable housing, hope is not a plan that was successfully executed.”

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The trust’s defenders say it’s doing a good job of providing affordable housing.

Nearly half of the 9,436 apartments created or in the works with backing by the trust are aimed at families making 60 percent of the area median income. The income figure, which is set by the U.S. Department of Housing and Urban Development, stood at $66,800 for a family of four in the metropolitan area in 2018. Housing activists say HUD’s income figures are too high for San Antonio, which is one of the poorest cities in the country.

Developers are allowed to charge whatever rents the market can fetch for more than a fifth of those units. Another fifth is set aside for households making 80 percent of the area median income.

For needier households, the picture is grim. Less than 5 percent of those apartments are geared toward families making 50 percent of the area median income.

And housing for the city’s poorest families — those making 30 percent of the area median income — stood at a paltry 2.2 percent.

Verónica Soto, who heads the city’s Neighborhood and Housing Services Department, said the trust may have been “over-producing” pricier apartments that low-income residents couldn’t afford.

“Yes, they have been a good producer” of affordable housing, Soto said of the housing trust. “Now, we need to make sure they and other partners are good producers for where the greatest need is.”

Here's how it works The housing trust and its many arms are difficult to understand, even for officials with decades of experience in affordable housing. Here’s a breakdown: San Antonio Housing Trust: Started in 1988 with $10 million from the city to produce and preserve affordable residences for families with low to moderate incomes, overseen by an 11-member board San Antonio Housing Trust Foundation: Created in 1991 to make low-interest loans to nonprofit housing developers, hire staff for the trust and deploy its resources; shares an 11-member board with the trust San Antonio Housing Trust Finance Corp.: Established in 1997, issues bonds for housing projects; overseen by five City Council members appointed by the mayor San Antonio Housing Trust Public Facility Corp.: Set up in 2009, finances housing developments by making them exempt from property taxes, shares a board with the finance corporation

But officials also say some affordable housing developments wouldn’t be possible if not for the nonprofit’s involvement.

“Without our participation, the projects just don’t ‘pencil,’” said Pete Alanis, interim executive director of the trust, using developer jargon that means a project is financially viable. “We’re here because this tool is very strategic, very effective.”

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To date, about $1.4 billion in apartment complexes supported by the trust’s public facility corporation have been completed, are under construction or are in the planning stages.

In these deals, the trust buys the land, exempting it from property taxes under state law. The developer also doesn’t have to pay sales taxes on purchases made for building the project.

In exchange, the developer must rent at least half the units to tenants making at or below 80 percent of San Antonio’s median household income, a requirement set by state statute.

Those developments are slated to get annual property tax breaks worth more than $39 million that would otherwise go to the city, Bexar County, local school districts and other taxing entities. The estimate is based on the prevailing tax rates and value of the projects.

“All of your school districts get ripped off, the city gets ripped off, the county gets ripped off,” said developer Mitch Meyer, a critic of many of the trust’s real estate deals. “For what? If we were providing affordable housing, that would be OK. But they’re not. It’s a huge injustice.”

The developments will be exempt from about $20.4 million in taxes to area school districts including Northside Independent School District, San Antonio ISD and Edgewood ISD. The districts can recoup much of that from the state through a mechanism that reimburses school districts for property tax exemptions on low-income housing.

But homeowners and other commercial property owners will nonetheless bear a greater share of the tax burden as a result of the exemptions, said Michael Amezquita, chief appraiser for the Bexar Appraisal District.

“Any time property is exempted, you’re shifting the burden to somebody else,” he said.

No competitive bidding

Investigators with NALCAB raised several questions about how the trust’s public finance corporation has operated since its inception in 2009 — particularly the role of an outside attorney who shaped the deals.

Jim Plummer, a partner at global law firm Bracewell LLP and an expert on affordable housing finance, isn’t employed by the city, trust or the PFC.

Yet Plummer has had an outsize role in determining which apartment developments do not have to pay property taxes, according to the NALCAB report.

Other Texas cities often hire Plummer for his experience when they create their own PFCs. He also has had a hand in shaping the statewide legislation that allows PFCs to operate.

Plummer assumed de facto leadership of the San Antonio PFC, taking on roles that an executive director or CEO would normally execute, the report says. He acts as a go-between for developers and council members, “assessing potential housing projects” and “negotiating the financial terms of projects with private developers.”

Developers who want to do deals with the PFC or the trust’s finance corporation, another council-helmed arm of the trust, communicate directly with Plummer through an “informal” process.

About a third of the deals have gone to The NRP Group, a Cleveland-based company Plummer has previously done legal work for.

“The result has been a significant concentration of deals with a small number of for-profit developers,” the report says. In contrast, the entities have “little engagement with nonprofit developers.”

When Plummer presents the deals to the five council members who make up the PFC board, he includes a clause that approves his firm as the bond counsel or closing attorney without a competitive bidding process. Plummer has been with Bracewell for about two years. He previously worked on the housing trust projects for the firm of Norton Rose Fulbright.

Depending on the project, Plummer receives 1 percent of the bond used to finance the deal or a flat $200,000 fee.

Trust officials said they don’t have records showing how much Plummer has been paid. But under the fee formula, he could have been paid $4.9 million in legal fees. If he stays on as bond counsel, he could be paid another $2.9 million.

“The assessment team has never observed a similar situation in a public or quasi-public agency,” the NALCAB said.

“To me, that has to change,” said María Berriozábal, a former councilwoman who served on Nirenberg's Housing Policy Task Force. “That’s a big problem. It’s been there for a long time. And I’m surprised that it has been there for such a long time without anybody looking at it seriously. That’s very, very sad. And millions of dollars are involved.”

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Council members who oversee the public facility corporation also have raised their eyebrows.

“We need to be very careful that it doesn't look like one man is running the show,” District 4 Councilwoman Adriana Rocha Garcia said.

District 9 Councilman John Courage said he has been “very hesitant” about Plummer’s role. Plummer has provided plenty of useful expertise to the board, but perhaps should be doing so exclusively to eliminate any potential for conflicts of interest, he said.

“I’m not trying to say there’s anything wrong with what may have been taking place,” Courage said. “But I think we owe it to ourselves as an organization to know that whoever is giving us the best advice is doing it under the auspices of our organization without any outside influence.”

Plummer said Bracewell, his law firm, has not represented any of the developers the housing trust has done deals with in San Antonio.

“There is no conflict of interest,” Plummer said. “I negotiate every deal hard against them. If you want to call any developer that has done a deal with us, they’ll tell you the same thing.”

Alanis said the trust will soon start a bidding process to rehire Plummer or find a new bond counsel to advise the PFC. But he defended Plummer and his work.

“Jim Plummer is the best in the business right now within the state of Texas at doing these deals,” Alanis said. “These are extremely complicated.”

Records lacked ‘substance’

The housing trust and its many arms are difficult to understand, even for officials with decades of experience in affordable housing. For years, the trust and its entities operated with little transparency and published little information about their meetings or their deals.

“We definitely knew when we began the work through the mayor's Housing Policy Task Force that there were issues with the housing trust,” said Lourdes Castro Ramírez, the San Antonio Housing Commission chair who also headed the task force. “We couldn’t quite get a good handle on them.”

When Nirenberg named Garcia, a freshman, to the trust’s two council-led boards, she said she had trouble finding documents on the trust’s website to understand how they work. Garcia eventually had to ask the trust to provide past meeting documents so she could get her bearings.

Even then, she wasn’t satisfied.

“I didn’t find a whole lot of substance to them,” Garcia said.

The trust’s opaque and convoluted nature is part of the reason why Nirenberg’s Housing Policy Task Force asked the city to fund a study examining its performance. The council in January 2019 approved a $150,000 contract for the work with the NALCAB.

While the housing trust is geared to support affordable housing production, officials familiar with the deals scratched their heads about a handful of projects that didn’t seem to fit that standard.

At Cevallos Lofts, a 252-unit complex in the Lone Star neighborhood south of downtown, a quarter of the units are set aside for households making 50 percent of the area median income. Another quarter were set aside for families making 80 percent of the area median income. The property managers are allowed to charge whatever rents they want for the remaining apartments.

Officials affiliated with the trust said the Cevallos Lofts project was funded to show that residential development in the area could be profitable. The affordable housing aspect was secondary. Others saw the project as a harbinger of gentrification.

The Baldwin at St. Paul Square, a 271-unit development just east of downtown, was billed as workforce housing for “essential employees ... vital to the urban core,” the study found. But some officials felt it wasn’t affordable enough for the surrounding area, the near East Side, where housing costs are rapidly rising but incomes are flat. The project was intended to draw new residents downtown rather than house the area’s existing residents.

To some, that’s a good thing. The deals have created more private investment in areas lenders have traditionally shied away from, while providing a source of revenue for the housing trust to reinvest in other developments, said Debra Guerrero, vice president of governmental affairs for The NRP Group, which built the Cevallos and Baldwin complexes.

The thinking goes that funding projects at all income levels will stem rising rents by increasing supply.

“There’s a massive housing supply issue in San Antonio,” Alanis said. “We don’t have enough housing.”

To others, that sounds like wishful thinking.

“I think it’s a complete absurdity to say that building more expensive housing is somehow going to mean that low-income families of three are going to magically have a place to live someday,” said Sofia Lopez, a San Antonio Housing Authority commissioner. “If we’re not building housing for those families, they’re not going to have a place to live.”

Next steps

City officials and housing trust leaders say they’re already implementing a number of changes recommended by NALCAB, though the assessment hasn’t been formally released.

By the end of summer, the trust could have guidelines that lay out what kind of housing it should aim to produce each year and how much, Soto said. Those recommendations will come when the city’s Housing Commission — itself in need of a new leader with Ramírez set to take a job in California Gov. Gavin Newsom’s administration — releases its housing plan.

But affordable housing advocates note that many of the trust’s problems will persist if the city doesn’t soon hire a chief housing officer to oversee a coordinated system to create housing for the city’s poorest residents. City Manager Erik Walsh recently told council members he expects to hire that officer by April.

“Until we have that kind of coordination and focus, I think all of these entities are going to continue to sort of flounder around,” Lopez said.

Joshua Fechter is a staff writer covering San Antonio city government and politics. Read him on our free site, mySA.com, and on our subscriber site, ExpressNews.com. | jfechter@express-news.net | Twitter: @JFReports

Madison Iszler covers real estate, retail and tourism in the San Antonio and Bexar County area. Read her on our free site, mySA.com, and on our subscriber site, ExpressNews.com. | Madison.Iszler@express-news.net | Twitter: @madisoniszler

Design by Joy-Marie Scott.

A version of this article appeared in print on February 16, 2020 on Page A1 of the San Antonio Express-News. | Today's Paper

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