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Dallas City Council OKs Mixed Income Housing Development Bonus Program Expansion

May 17, 2022 | Public Policy, TREC News | 0 comments

On Wednesday, May 11, Dallas City Council approved the expansion of the City’s Mixed Income Housing Development Bonus (MIHDB) program. TREC and our members worked tirelessly with the city over the past year to ensure that this program would provide meaningful benefits and certainty to developers as Dallas continues to work on addressing our critical housing shortage.

The expanded Mixed Income Housing Development Bonus program has the potential to be a transformative tool available to developers and the City of Dallas. We are incredibly appreciative of the many hours of work that our dedicated TREC volunteers put into working with city staff on this issue. Because of that hard work, we believe that this most recent expansion of the MIHDB program will serve to accomplish the stated program goals and truly help us to build a better Dallas.

The program offers a menu of bonuses available to developers who wish to build multifamily residential beyond what is allowed by right in a site’s zoning in exchange for reserving a percentage of units on-site for low-to-moderate-income renters. For example, a developer can qualify for an additional 30 percent density bonus over the maximum allowable by-right unit density if they reserve five percent of units in a “strong market area” for renters making 51-80 percent of the Area Median Family Income. The project would also have access to several additional bonuses related to height, stories, and floor area ratio, as well as a parking reduction by opting into the program.

In addition to expanding the bonus program to current and future Planned Development Districts, the updates passed by the Dallas City Council include the option for developers to pay a fee-in-lieu of reserving affordable units on-site. This fee-in-lieu is calculated by multiplying a fee (ranging from $2.15 to $7.98 depending on building type and location) by the gross square footage of the residential area of a multifamily or mixed-use development. These fees are paid into a new “MIHDB Fund,” which are then used to support projects that further the City’s Comprehensive Housing Policy goals. This aspect of the program allows projects that are unable to reserve affordable units on-site to access the additional density bonuses and contribute to helping the city address our affordable housing needs.

Background

On March 27, 2019, the Dallas City Council approved amendments to Chapter 51A of the Dallas Development Code to allow by-right development bonuses to incentivize new mixed-income rental development. These by-right bonuses are available in MF – Multifamily Districts and MU – Mixed Use Districts, specifically MF-1(A), MF-2(A), and MF-3(A) Multifamily Districts and MU-1, MU-2, and MU-3 Mixed Use Districts. Today, these districts represent approximately 15,000 acres across the city.

Since its 2019 implementation, the MIHDB program has been increasingly successful and has produced a pipeline of more than 5,600 mixed-income units in three years. In order to build on this success, the City began to look in early 2021 at options to expand the MIHDB program and add a fee-in-lieu component, an idea first proposed by TREC in our 2016 recommendations to the City on mixed-income development.

Over the course of the last year, TREC volunteers and staff worked continuously with City of Dallas staff and their consultants as the program expansion was fleshed out from an idea to a policy. There were several initial concerns regarding the program, including:

  • A lack of clarity and oversight regarding the funds that were paid into the MIHDB Fund. TREC wanted to ensure that there were strict guidelines in place on how the money would be spent, with an emphasis on limiting expenditures for administration and ensuring that the money would go to increase the availability of affordable housing in Dallas.
  • Some of the benefits that were included in the bonus menu were unworkable given realities on the ground. As part of the original bonus package, projects opting into the MIHDB expanded program would be eligible for an expedited review and processing for administrative requirements in the permitting process. As our members know, this was a “benefit in name only,” as the City of Dallas’ Development Services Department does not currently have the capacity to accommodate the additional level of service this would require.
  • The process used to calculate the fee was unreasonable and the resulting fees were too high relative to the benefits received.

In response to TREC’s concerns, the city incorporated the following recommendations into the final ordinance:

  1. MIHDB Fund governance. TREC pushed hard for clear governance documents and a cap on allowable administrative expenses from the fund. The adopted amendments provide much clearer guidance about the governance structure and staff will brief the City Council again prior to accepting fees into the Fund. Additionally, there is a cap on administrative expenses at the greater of $300,000 or 10 percent of annual fund revenue.
  2. Fee-in-Lieu. The initial fee schedule presented by Daedalus Consulting in December 2021 was too high. Since TREC pushed back, the fee has been reduced from the highest rate of $12.28 per residential square foot to $7.98/residential square foot. In Dallas, the fee will guarantee the Tier 1 density bonuses without the requirement to reserve affordable units on-site.
  3. Improved Density Bonus Menu. Staff accepted TREC’s suggested amendments to improve the predictability of the menu and create more generous bonuses that hopefully will help developments ranging from 3-4 stories to high rise construction. Councilmember Paula Blackmon introduced the agreed-to amendments on behalf of City staff and TREC.

Amendments to Ch. 20A. Ch. 20A was amended to strengthen the nondiscrimination language for vouchers while removing the strict requirement that projects accepting public funds like TIF awards set-aside 10 percent of its units for voucher holders. Additionally, TREC submitted four more concerns to the City of Dallas about the proposed changes to Ch. 20A; one was resolved and three of the technical amendments were accepted.

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