The Controversial Art of Building More Housing

Barrett Linburg didn’t expect to have to pull on a jacket before dawn on a November morning in 2022, but his apartment complex was on fire. A site manager woke him up with news that the three-story development, still snug with construction wrap in North Oak Cliff, had smoke pouring out of it.

Dallas Fire-Rescue extinguished the blaze before it caused any major damage, and a police incident report later confirmed a pair of masked men were spotted running from the property. If the arson was a message to get out, Linburg didn’t listen. 

The co-founding principal of the Dallas-based development firm Savoy Equity Partners began buying up small, aging apartment buildings a half mile east of Lake Cliff Park in 2020, when this was a much different neighborhood than it is today. Linburg says a drug dealer operated out of a home on the corner, serving the few remaining tenants who lived in the crumbling two-story red brick garden apartments across the street.

Five years after Linburg’s first purchase, Savoy now manages about 750 units across four square blocks in the neighborhood between the park and Interstate 35E. The portfolio includes 16 renovated apartments, most of which were built in the 1960s, and three new buildings that look like they could have been airlifted a mile west from the recent multifamily development in Bishop Arts. A fourth is under construction. Some apartments are priced at market rate while others are reserved for tenants with low and moderate incomes. Rents range from about $800 for a 400-square-foot studio to about $2,600 for a two-bedroom loft with roof access and views of downtown.

Linburg is making this deal work by using a somewhat obscure, and now increasingly controversial, public financing tool called a Public Facility Corporation, or a PFC. Largely driven by entrepreneurial developers and operating with little public attention since the Dallas City Council created the tool in 2020, the city’s housing department has spent the last six months centering the PFC program under its microscope. 

The tool is a tradeoff, and tax dollars are at stake. The corporation acquires land and leases it to developers who receive a full 75-year property tax exemption in return for setting aside half the units as income-restricted and making annual lease payments, which typically hover between $300,000 and $400,000. 

The PFC program is one of only two public mechanisms responsible for producing the majority of new income-restricted housing added to the city’s stock in recent years. In the three years since the first project was approved, the PFC has added workforce housing to higher-income areas and brought new construction and market rate rents to some of the city’s poorest communities. 

The lack of affordable housing in Dallas touches a wide variety of wage earners: from teachers and firefighters who make 80 percent or below the area’s median income, to those whose incomes are so low they qualify for federal housing vouchers. While the PFCs don’t solve the city's most pressing housing crisis—too few units for the lowest-income residents—they do provide some that are accessible to a tier of wage earners who currently can't afford to live in neighborhoods considered Dallas’ most desirable. 

Data show that aging rental units account for about 90 percent of housing for lower income residents in Dallas. But as land gets more expensive, those old rentals are at risk of being mowed down and turned into luxury housing or something else entirely. The city has done very little to protect against a future that may no longer include the small apartment buildings dotting Old East Dallas or the fringes of North Oak Cliff. And it has not invested enough public funds to build replacements.

Amid this approaching crisis, both housing advocates and fiscal hawks have become increasingly curious about these programs over the last year. Are they solutions to Dallas’ perennial failure to build affordable housing, or are the benefits—especially the tax exemptions—too valuable to dole out to developers for what the city gets in return?  

“We just need to build more of everything,” says Council member Chad West, who represents the Oak Cliff district where Linburg works. “The city should be doing all that we can to enable the construction of all types of housing, along with infrastructure and services to support it.”

The state law that governs the PFC program dictates that developers must reserve at least 40 percent of a project’s units for individuals making 80 percent of the area median income (in Dallas, that’s about $66,000 for a single person and $94,000 for a family of four). Another 10 percent are held for those who make 60 percent or below ($46,380 and $66,180). State law now requires any PFC property built after 2023 to accept housing choice voucher holders, opening a valuable opportunity for those making less than the PFC program was created to serve.

The other program responsible for progress in recent years, the Dallas Housing Finance Corporation, most often uses federal tax credits and tax-exempt bonds to develop, acquire, and rehabilitate apartments for individuals making below 60 percent of the median income. Last year, the two programs accounted for 73 percent of the city’s entire affordable production, just shy of 2,000 units. 

The HFC program generally aims for deeper affordability and, unlike the PFC, has converted older complexes to deed-restricted housing. The PFC focuses on new construction, largely redeveloping lots that are empty or currently hold some unused structure. The program combines workforce housing and economic development, bringing to life underutilized plots that, officials hope, will incentivize adjacent growth.  

“The previous use of the project, most often vacant land, was not its highest and best use,” Dallas Public Facility Corporation Board member Ken Montgomery said in a briefing last May. 

The city is in a troubling development pattern. Even before the pandemic, Dallas’ spigot of subsidized affordable units had slowed to a drip. Last spring, an analysis by Cullum Clark, the director of the George W. Bush Institute’s Economic Growth Initiative at SMU, found that production of income-restricted housing citywide fell by 88 percent over the seven years spanning 2017 to 2023 compared to the prior period, a plunge so steep he could find no other example in the country.    

Clark attributes this collapse to a policy change in which Dallas officials in effect acknowledged shunting the city’s affordable housing into what the federal government calls “low opportunity” neighborhoods. These were areas mostly south of the Trinity River and deeply impoverished, farther from jobs and other services, and where land is cheapest and easiest to develop. Doing so concentrates poverty, which could violate federal law. The city’s first housing policy, passed in 2018, included a directive to stop this practice. And it worked. Too well. “The policy implicitly amounted to building almost no new subsidized units at all,” wrote Clark in his report.

Clark’s analysis found that from 2017 to 2023, the city created just 744 income-restricted units, about 5,400 fewer than in the previous seven years. City Hall didn’t account for how to replace the units it would lose.

“Dallas is an extreme outlier,” Clark says in an interview. “There’s nothing else even close.”

Both the PFC and HFC programs are in line with Clark’s advice that cities diversify strategies to build more housing. Since the first project was approved in 2022, the PFC has created 649 affordable units that are currently leasing and another 1,855 are either under construction or have won City Council approval. In the last three years, Council has approved more than 5,300 total new units through the program, a blend of market-rate and income-restricted units. HFC Board President Mary Helfand recently told Council the second corporation has helped create nearly 3,900 units considered affordable under the state’s definition.

“By harnessing the financing power of the private market, we can deliver workforce housing at an efficiency that’s simply unattainable by conventional municipal levers of housing creation,” Montgomery said in May. 

He’s saying the quiet part out loud: City Hall has long been a lousy developer of affordable housing at scale, especially so in more affluent neighborhoods. The federal government investigated this practice in the 2010s, and a lawsuit arguing that Dallas and the state had used federal subsidies to reinforce segregated housing was argued before the U.S. Supreme Court in 2015.

Clark suspects the matter had a chilling effect that was codified in that 2018 housing policy. “There was a real freeze at City Hall, and it’s not hard to see why,” Clark says. “Dallas City Hall was traumatized by the U.S. Supreme Court case.”

In the wake of City Hall worrying about affordable housing to the point of inaction, the HFC and PFC programs have hummed along. Both operate with relative independence, but have critical city oversight requirements; they each have appointed boards that vet and approve the deals, which then must be OKed by the Council’s Housing and Homelessness Solutions committee and the full City Council. If the projects don’t require a zoning change, developers avoid the community outcry that sometimes kills affordable housing developments.

Using the PFC program, City Hall doesn’t have to provide upfront cash, just the tax break. The developer gets exemptions from property and sales taxes, then makes the annual lease payments to the PFC and pays a flat fee at closing. Pending City Council approval, the PFC can later spend this revenue on additional affordable housing resources, such as “gap” financing to incentivize even cheaper units or home repair programs. The PFC currently has about $4 million in its coffers.

“All those funds go back into the pot for the greater good,” says Keith Pomykal, the PFC’s board president.

Developers like Linburg use the program both to bring market rents and high-quality construction to lower-income neighborhoods and deliver income-restricted housing to more affluent parts of town. Without the full property tax exemption, unique to the PFC, most developers and members of its board warn that the projects would not be able to secure financing. Hilltop Securities, the accounting firm that vets these deals, confirms whether they could be financed without the use of the tool.

In its early years, deals breezed through City Council, often bundled with other items approved without discussion on the consent agenda. But not everyone is sold on how the program is operating. That party includes the city housing department, which has presented policy changes that include PFC projects only be built in high poverty Census tracts. 

They argue this change will bring market rents to low-income neighborhoods. But it also misses integrating workforce housing in more expensive parts of town. Twelve of the 23 projects are in Census tracts that are not considered high poverty; those 12 projects would not have been approved if the city’s changes were implemented.

For other critics, the sticking point is the tax break. Council member Cara Mendelsohn, who represents Far North Dallas, has been the primary “no” vote on these deals. She has advocated to cap the value of the tax exemptions on PFC projects. “At this point, we have unlimited dollars being removed from our tax rolls,” she said during an April 22 briefing. “It’s significant. It is not some decimal point. It’s not a cup of coffee.” 

PFC board members counter by arguing that many of the lots in question have been vacant for decades. The board has signed off on a 476-unit complex that will replace a vacant former call center in Northwest Dallas. An old warehouse near Trinity Groves has been torn down and construction is underway on 300 apartments, 151 of which are income-restricted. A new development of 72 smaller “micro-units,” called Bloc House, will replace what was a vacant lot in Old East Dallas, just off the Santa Fe Trail. Another previously empty parcel in Cedar Crest, one of the city’s poorest neighborhoods east of Oak Cliff, will soon be home to 153 units. An early PFC project is located about a quarter mile from Linburg’s work, on Colorado Boulevard next to Interstate 35E. That lot had been used as a construction staging site for the Texas Department of Transportation and was otherwise empty. Now half of its units are set aside for workforce housing. 

Heather Way, the director of UT Law School’s Housing Policy Clinic, investigated the program in 2020. Her analysis found the average property tax break to be $1 million. The Dallas PFC last month vetted a project that would receive an estimated $1.6 million annual break. “Are the tax breaks being passed onto the renters?” she asks. 

Her report also notes that the program is not serving the populations most presently struggling to find affordable housing. She raises concerns of compliance, reiterating that the city must ensure that developers are delivering what they have promised—and that “junk fees” for various apartment amenities and utility costs are factored into the affordability equation. (Pomykal says the PFC board analyzes rent rolls that show the total amount each tenant pays.)

While the PFC program does provide workforce housing, it does not address the city’s current greatest rental need. Dallas’ most significant supply gap is for units affordable to earners at or below 50 percent the area median income, which equals to $38,650 for a single person and $55,150 for a family of four. But Dallas is also not delivering enough new units for earners who would qualify for an income-restricted unit in a PFC. A present surplus of just about 43,000 units for those earners today devolves into a deficit of nearly 63,000 over the next decade, according to research by the Child Poverty Action Lab.

That’s because those older rentals, be that single-family homes or duplexes or garden-style apartments from the 1960s, are rapidly disappearing from the city’s housing stock. They’re simply cheaper because of their age and condition. 

And so the build-build-build chorus has a point. The data show affordable rental stock will inevitably shrink as land grows more expensive and smaller landlords look to exit the market. It’s important for the city to create new income-restricted units.

“Before we start putting roadblocks and start putting speed bumps in front of the programs that are working, we need to be honest and we need to be transparent about what city policies are actually producing,” Council member West said during the April briefing.

Linburg, the developer, recently had a free morning to walk the neighborhood he is calling Bishop Ridge. In addition to their proximity to Bishop Arts and Lake Cliff, the Savoy-owned apartments are a little over a mile from Halperin Park, the deck park that will open next spring above Interstate 35E. Downtown is 10 minutes north.

The city had long neglected this pocket of North Oak Cliff, including leaving water and sewer lines that dated back to the 1920s. The police department’s gang unit considered one of the buildings he acquired to be a crime hot spot. Savoy also had to widen and upgrade the jagged sidewalks abutting its buildings. The company replaced the grim 40s-era buildings pockmarked with AC units dangling precariously from open windows with new three-story multifamily complexes—of the same “Class A” quality you’d find in Uptown. Those now sit next to the renovated 1960s-era apartments. 

The nonprofit Builders of Hope flagged this neighborhood as being among the city’s most vulnerable to displacement, based on its changing demographics. A zoning change over a decade ago would’ve allowed a developer to acquire and clear cut the existing buildings to build luxury housing. Instead, Savoy’s venture has upgraded old apartments and built new ones with workforce units through the PFC program.

“We knew that this is a neighborhood that was catalytic, but it was also a neighborhood that historically had provided lower income housing,” Linburg says. “We wanted it to continue to be workforce housing. We didn’t want it to change character overnight.”

The nonprofit AIDS Services of Dallas already offers housing in the neighborhood for lower-income individuals who are HIV positive. And there is a complex of three-story, market-rate townhomes for sale near where Savoy’s holdings are located. 

It’s the kind of mixed-income neighborhood Dallas pines for, particularly after the city spent the better part of the last decade tussling with the federal government over whether it used federal money to pack poor people into low-income neighborhoods. These programs need oversight, both to ensure the tools aren’t being misused and that the public benefit warrants such significant tax breaks. But what is coming seems inevitable: fewer places for people to live near where jobs are.

“It’s just extraordinarily hard to build new subsidized affordable housing in the wealthiest parts of any big city,” Clark says. “But these mechanisms, in the most recent data we have available, are the ones that are actually working best.” 

The City Council will soon decide whether it agrees. 

Matt Goodman is the co-founder and editor of The Lab Report. [email protected].

By the Numbers

• $66,000: The maximum amount a single earner can make to qualify for an income-restricted apartment at 80% the area median income.

• $46,380: The maximum amount a single earner can make to qualify for an income-restricted apartment at 60% the area median income.

• 73%: The total percentage of new affordable units created through the PFC and HFC programs last year.

• 88%: The percentage decline of new affordable units created in Dallas from 2017 to 2023 compared to the prior seven-year period.

• $4 million: How much money the PFC can spend on additional affordable housing initiatives from fees collected through its developments, pending City Council approval.

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The Lab Report Dallas is a local journalism project published by the Child Poverty Action Lab (CPAL). Its newsroom operates with editorial independence.

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