The city of Dallas’s first-ever comprehensive housing policy is drawing significant interest from real estate professionals, but building affordable housing in one of the nation’s most income-segregated cities remains a significant challenge.

The policy, passed in May, is designed to break up concentrations of poverty, identify “reinvestment zones” that need more affordable housing options, and offer incentives to homebuilders to build more affordable housing in those zones.

A group of housing experts gathered in September to discuss the policy and affordable housing opportunities at an event hosted by ULI North Texas.

Affordable housing shortages, a dwindling supply of homes for first-time buyers, and rising prices at all levels have been creating concern for the Dallas/Fort Worth (DFW) region’s fast-growing economy.

The area median income (AMI) for Dallas is $77,200, and families that fall into 100 to 120 percent of the AMI have become increasingly challenged with housing costs as home prices and rents rise. These middle-income residents typically do not qualify for programs to address the housing cost challenges in that income range.

“There is that segment between the market rates and the affordable rates that is largely unserved, but it’s a growing population,” said Will Henderson, director of affordable housing for Carleton Residential. Dallas-based Carleton has developed more than 20,000 multifamily units across states in the South and Southwest, both in the market-rate and the affordable segments.

Affordable housing developers such as Carleton Residential that use the competitive low-income housing tax credit (LIHTC) typically build housing units at 60 percent AMI or below.

Bill Hall, chairman of the city of Dallas Housing Policy Task Force, said the city’s new housing policy is built around “reducing exclusivity.” The city is economically segregated and the policy is trying to give lower-income families better opportunities to succeed “by place,” he said.

“How does the city use the limited resources it has to create over 6,000 units that are affordable from the 120 percent AMI down to the 30 percent AMI?” Hall asked. The city, he said, switched from grants to loans and has also worked to make a more transparent and equitable program.

“It used to be, ‘Bring us a project and we’ll decide if we like the project or not,’ ” he said. “While that was probably an okay way to do things, it provided ways for people to become discouraged and not come forward with their projects.” Under the new policy, the city puts out a “notice of available funding” or a “request for funding” and then can examine multiple projects at once to determine which projects best meet the city’s housing goals.

The new policy includes both homeownership and rental initiatives.

“The American dream of homeownership still exists, so if you want that middle class to come back to Dallas and have a viable place to live, you need an ownership solution with viable neighborhoods to live in,” Hall said. “The policy is trying to address that and we’ll find out in the next few years how successful it is,” he said.

Christie Myers, managing director of Opportunity Dallas, which promotes economic mobility and prosperity by tackling concentrated poverty and segregation, said the housing policy targets three policy areas:

  1. Redevelopment areas: Areas ready for redevelopment where plans for redevelopment are already in the works and which could serve as a catalyst for future development in the neighborhood. Officials have identified Midtown, the Cedars, Wynnewood, and Red Bird as redevelopment areas.
  1. Stabilization areas: Areas on the brink of being developed and where low-income residents are at risk of being displaced due to gentrification. The city named LBJ Skillman, Vickery Meadow, Casa View, Forest Heights/Cornerstone Heights, East Downtown, the Bottom, West Dallas, and Red Bird North as stabilization areas.
  1. Emerging-market areas: These areas require significant improvement before real estate developers are likely to take interest. There is a lot of land around the Dallas campus of the University of North Texas Dallas and University Hills, for example. These areas have been identified as emerging markets, but they need a lot of TLC: infrastructure improvements, environmental enhancements, code enforcement, and crime reduction. Southern Gateway, Pleasant Grove, and University Hills have been identified as emerging-market areas.

The housing task force also has committees working on fast-track permitting and an incentive structure where the city could potentially take an equity position in an affordable housing project.

Myers said that she thinks the housing policy should situate the city well for the future. “This is just the beginning; it is the foundation, and there will be a lot of things that probably will need to shift and change that will be learned over time,” she said. “We are working now on how to deploy it. [The city] is willing to learn what needs to change over time.”