The Inclusive Communities Project (ICP) filed suit on August 22, alleging that the U.S. Department of the Treasury (Treasury) and the Office of the Comptroller of the Currency (OCC) administer the Low Income Housing Tax Credit (LIHTC) program in the Dallas, TX metro area in a manner that is discriminatory and that violates their duty to affirmatively further fair housing. ICP asserts that Treasury and OCC “knowingly, consistently, and repeatedly allow and approve investments in LIHTC units that perpetuate racial segregation and unequal conditions.” Neither agency has a regulation relating to the perpetuation or elimination of racial segregation in the LIHTC program. The siting of LIHTC properties has aggravated, rather than alleviated, racial segregation in Dallas.
Under the Fair Housing Act, “All executive departments and agencies shall administer their programs and activities relating to housing and urban development (including any federal agency having regulatory or supervisory authority over financial institutions) in a manner affirmatively to further the purposes of this subchapter…”
Treasury administers the LIHTC program, and the OCC, an independent bureau of Treasury, administers national banks’ investments in LIHTC projects. By statute, the OCC must approve all federally regulated national bank investments in LIHTC real estate developments by finding that the investment is designed primarily to promote the public welfare. National banks benefit from the LIHTC program by using tax credits to offset profits and by claiming depreciation and interest expense resulting from their LIHTC ownership interest. The OCC encourages national banks to invest in LIHTCs, stating that the investment will earn them favorable regulatory consideration under the Community Reinvestment Act. OCC estimates that 85% of the $9.5 billion in equity from corporate investors used to finance LIHTC projects in 2012 came from the banking sector.
As of 2013, 19,511 of the non-elderly LIHTC units in the City of Dallas (97%) were located in census tracts with a concentration of minority residents greater than 50%. ICP uses non-elderly units because elderly LIHTC residents are more likely to be white, non-Hispanic, and because in white, non-Hispanic neighborhoods, elderly LIHTC housing is approved more often than non-elderly LIHTC housing.
On the seven-county Dallas metropolitan area level, HUD reports that between 1995 and 2006, 69% of the 24,325 LIHTC units placed in service were in tracts with a concentration of minority residents greater than 50%. By 2012, 86% of the LIHTC units in the Dallas metro area were in census tracts with a concentration of minority residents greater than 50%. Nationally, HUD reports that between 1995 and 2006, 44% of the 1,181,435 LIHTC units placed in service were in census tracts with a concentration of minority residents greater than 50%.
Treasury created a Distress Indicator Index for the Community Development Financial Institutions Fund program. The Distress Indicator ranked every census tract in the nation from 0 to 4, with 0 indicating least distress and 4 indicating the highest level of distress. The index is based on a combination of poverty, median family income, and unemployment levels.
The City of Dallas has 18,398 non-elderly LIHTC units located in a census tract with a Treasury Distress Index of 3 or 4 and concentration of minority residents greater than 50%; this represents 91% of all LIHTC units in the city. Only 59% of all City of Dallas renter-occupied multifamily units are in a census tract with a Treasury Distress Index of 3 or 4 and a concentration of minority residents greater than 50%. Eighty-nine percent of the total $661,512,325 LIHTC allocation for non-elderly developments in the City of Dallas are in a census tract with a Treasury Distress Index of 3 or 4 and a concentration of minority residents greater than 50%. In the seven-county Dallas metro area, 27,632 of the LIHTC units (73%) are in a census tract with a Treasury Distress Index of 3 or 4 and a concentration of minority residents greater than 50%.
The public welfare provisions allowing national banks to own LIHTC projects became law in 1992 and remain in effect. Initial OCC regulations in 1993 included a public welfare-based requirement that the profits, dividends, tax credits, and other distributions from equity investments or interest income received by a national bank from the public welfare investment be devoted to activities that primarily promote the public welfare as determined by OCC. However, between 1995 and 2003, OCC removed all non-financial regulatory requirements for public welfare eligibility.
The lawsuit asks the court to, among other requests, enjoin Treasury’s and OCC’s approval of investments in LIHTC projects by regulated banks unless the units will contribute to a concerted community revitalization plan and program that provides for the actual revitalization of a neighborhood in a meaningful and substantive way. To be meaningful and substantive, the revitalization should address the factors causing the conditions of slum, blight, and distress; and should result in housing and neighborhood conditions similar to those in Dallas metro area census tracts that do not have a concentration of minority residents and that have a Treasury Distress Index of 0 to 2.
The complaint filed by Inclusive Communities Project with the United States District Court of the Northern District of Texas, Dallas Division is at http://nlihc.org/sites/default/files/ICP_v_Dept_of_Treasury.pdf.