A Houston affordable housing program is now on hold, following a state review

The Texas General Land Office released the findings of its investigation into the city’s housing department, following ethics allegations against Mayor Sylvester Turner from the city’s former housing director.

Houston City Hall Legacy Room
Lucio Vasquez / Houston Public Media

The Texas General Land Office has put a Houston affordable housing development program on hold until city officials can demonstrate they're awarding funding to developers based on a "fair and open competitive process,” following allegations that Mayor Sylvester Turner tried to steer millions in federal funds to a favored developer.

In its review of the program made public Tuesday, GLO officials determined the city of Houston failed to choose projects based on a "predetermined set of criteria,” and didn’t always provide sufficient documentation to justify its discretion in choosing more costly, lower-scored projects over cheaper options suggested by Turner’s housing officials.

“The subjectivity with the use of discretion and the lack of documentation undermine the integrity of the published scoring methodology and contribute to a lack of transparency,” the report found. “These qualitative reviews often render the published scoring methodology obsolete, resulting in a competitive process that is not fair and open.”

The state agency is giving the city until Dec. 10 to submit a corrective action plan to make changes within 90 days.

Mary Benton, Turner's communications director, said that the city’s housing department was reviewing the GLO’s assessment, and added that the “city has operated under the GLO-approved guidelines.”

“The GLO also reviewed and approved all program guidelines before they were sent to the city council and subsequently approved,” Benton wrote in an email. “The City is committed, as it always has been, to transparency and improving its Housing processes."

The agency released its findings two months after former city housing director Tom McCasland accused Turner of running a “charade” selection process to award funding to a preferred affordable housing developer.

McCasland criticized Turner over his decision to distribute more than $15 million in federal funds to the Huntington at Bay Area project as part of the city's Harvey Multifamily Program — money that comes from the U.S. Department of Housing and Urban Development and is intended to help replace damaged housing lost in Hurricane Harvey. He said the mayor's decision — which he described as unethical but not illegal — would grant the city 274 fewer units than other projects recommended by housing officials at four times the cost per unit.

The GLO provides oversight of the city's program to distribute $450 million in federal funding to meet the housing needs of disaster-impacted rental households. Starting in 2019, the city put out three rounds of requests for developers to apply for the funding and selected 29 projects to receive awards. As of October, the GLO had approved 26 projects valued at $282 million.

The newly released report identifies a "multitude of errors and inconsistencies" in the city's selection process, particularly in the city's methodology for scoring projects.

The city uses a point system to rank applicants, awarding more points to projects that meet the city's priorities. Under the more than two dozen scoring measures, a project could earn up to four points if it's located in a low-poverty area, up to two points for each nearby highly-ranked school, and up to five points if the applicant is deemed an experienced nonprofit developer.

The Huntington at Bay Area project was awarded 48 points under this scoring methodology, coming in eighth overall out of 12 ranked projects. The project with the highest score was the Avenue Scattered Sites, with 63 points.

The GLO review adds to the city's already fraught relationship with the state agency. In May, the GLO came under fire for failing to award any Harvey relief money to Houston or Harris County. The agency later reversed course and promised $750 million to Harris County.

Now, the GLO review will require the city to reevaluate all projects that it previously approved and rejected under the multifamily program, rescoring all applications and justifying the decisions. The city will also be required to create specific instructions for scoring the applications.

The GLO review calls into question decisions made in which projects with a lower score were approved over those with a higher score, as in the case of the Huntington at Bay Area. It requires the city to limit its use of mayoral discretion going forward.

The agency also found that five of the eight applications tested by investigators did not have conflict of interest disclosure forms signed by all applicants. State documents list Turner’s former law partner Barry Barnes as a co-developer on the project, something the GLO report specifically raised as a concern.

Turner has denied knowledge of Barnes’ involvement in the project, and has denied any wrongdoing in response to McCasland's allegations. He quickly terminated McCasland, naming Keith Bynam as the city's interim housing director. He also reversed his support for the Huntington at Bay Area, preventing it from going to city council for approval.

Turner instructed City Attorney Arturo Michel to review the deal. However, Michel, a city employee who reports to the mayor, recommended the council hire an outside law firm to investigate the matter instead. The council has so far declined to authorize such an investigation.

City council members discussed the allegations during two meetings last month. The first meeting received criticism from some council members who felt the agenda didn't address their concerns, while the second meeting shed more light on the selection process under scrutiny.

Councilmember Tiffany Thomas, who chaired both meetings, said the GLO’s hold could harm seniors and low-income Houstonians by halting more than $60 million in affordable housing funding.

"It is devastating that the five council-approved developments noted in the corrective plan that was certified by the GLO are now subject to clawbacks,” she said. “These developments have nothing to do with the allegations.”