Eyeing statewide affordability, two new housing conservancy deals include move into Dallas

The Texas Housing Conservancy has closed two new deals for multifamily workforce housing properties, including a Dallas-area acquisition that marks its first step in expanding outside the Austin area.

The nonprofit, which was founded five years ago as Affordable Central Texas and is dedicated to preserving affordable housing for middle-income renters, has completed the purchase as a partner in a 389-unit development just north of the Domain in Austin and a 289-unit property in Uptown Dallas, an area rapidly losing affordability.

These new deals increase THC’s portfolio to 18 properties and more than 2,500 units, marking a significant milestone in the organization’s goal of managing 5,000 units total across the Austin, Dallas, Houston and San Antonio metro areas within the next five years.

Monica Medina, who assumed the role of CEO earlier this year, said the decision to expand beyond Austin was made last year after the board and investors determined the nonprofit’s model was both scalable and impactful.

“Our success in Austin proved the concept,” she said. “We’ve received interest from cities across the country, but our immediate focus is on other Texas markets facing similar affordability challenges.”

Medina said San Antonio initially seemed the most likely first acquisition location, but the Dallas deal presented an opportunity too valuable to pass up in an area that is experiencing growing affordability problems. In addition to pursuing individual deals in the three new markets, she said THC representatives have been working with local leaders to review their housing plans and the specific housing needs for each community.

THC’s approach is meant to draw investment dollars from large banks and investment groups looking for long-term stability in their portfolios without the risk of more typical involvement in real estate markets. By committing to keep housing prices within a range accessible to middle-income workers in each market, THC expects to offer consistently high occupancy and steady revenues from the dozen-plus properties it is involved in.

In 2022, the conservancy was found to have a higher rate of return and lower risk spread than similarly sized investments in luxury and high-end real estate, which is traditionally seen as more attractive for investors.

Medina said the group has also drawn attention from socially conscious investors, including banks seeking Community Reinvestment Act credits that are awarded based on banks’ efforts to revitalize or stabilize their neighborhoods.

“Having properties in multiple markets strengthens our portfolio and appeals to investors who need CRA credit in several regions,” Medina said. “There’s absolutely more interest when you have kind of that geographic diversification of properties. Being in all of those markets, they all have different economies, and it kind of insulates the risk for investors.”

Medina said Austin will remain a priority area for the conservancy, especially now that the slowdown in the local rental market has created opportunities for growth. While rents have decreased from pandemic-era peaks, she believes this trend is temporary because of a pause in multifamily construction that she expects will be brief.

That slowdown in building and rental growth could offer a short window to acquire properties at favorable terms.

“We’re leveraging this period to grow our portfolio before the market tightens again,” she said, adding THC has three Austin-based deals in progress and strong partnerships with the city, which co-owns about half of its properties.

Also related to Austin, Medina said the conservancy is gearing up for next year’s legislative session, and watching for any changes to the rules governing public facility corporations and local housing authorities, which are often used as partner entities in THC’s deals.

“We’re monitoring state-level discussions about public facility corporation structures and housing authority regulations, which are key to how we approach preservation opportunities,” she said.

Photo by Robert Hensley, CC BY 2.0, via Wikimedia Commons.

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