A years-long attempt to bring a controversial public housing project to Lake Highlands failed after the state’s housing authority refused in July to extend the term of the agreement’s tax credits.
Instead, the land for the Cypress Creek project south of Forest Lane off U.S. 75 North Central Expressway will once again remain vacant after a series of legal maneuvers failed to build about 100 affordable housing units in a neighborhood rich in opportunity in north Dallas.
Philip Kingston, a lawyer representing developer Sycamore Strategies, said The Dallas Morning News His client did not take the decision by the Texas Department of Housing and Community Affairs, the state agency that reviews and approves applications for public housing, personally on Monday.
“We are totally disappointed,” Kingston said. “As you can imagine, this was a bad day. But if it’s so hard to get our project and other projects done, then the responsible thing for TDHCA to do is use the money for other things.”
Kingston added that the TDHCA board ultimately acted in the best interests of taxpayers who pay to partially fund such projects. Although the developer received a tax credit from the TDHCA in 2021, it had been fighting to close the deal for at least three years.
Affordable housing tax credit developers have used a Covid-era practice to keep alive projects that were awarded during the pandemic or shortly after but were slow to get off the ground due to supply chain bottlenecks, high costs and the rapid rise in interest rates, Kingston said.
“There are a number of projects that were affected by this, and so the board, on the recommendation of their staff, has typically extended these tax credits…” Kingston said. “The board decided that was no longer appropriate, and they decided our project would be the first one they would eliminate.”
In May 2023, Dallas approved a deal allowing the city to purchase the property with a 100 percent tax exemption and lease it back to Sycamore Strategies, making a property restriction unenforceable.
In December, neighboring property owners sued the developer, the property owner and the city of Dallas, arguing that circumventing a commercial-only land deed restriction would harm property values.
The lawsuit describes the leaseback agreement between the city of Dallas and the developer as a “scheme” to circumvent a 1976 deed restriction on Forest Central Office Park that requires the land to be used exclusively for office space, hotels, motels and restaurants.
William Roth, a partner at FC Investments, LTD, sued Sycamore Strategies and the City of Dallas, arguing that the construction of apartments near his Forest Creek office park would “substantially impair and diminish the value of his property and interfere with its use.”
Roth did not respond to requests for comment. But in previous interviews with The news, Roth said the deal between the city and the developer to circumvent property restrictions was illegal.
In a statement on Tuesday to The newsThe city of Dallas confirmed that the deal had fallen through. The developer had failed to arrange financing for the project within a set deadline, the city said.
“The City of Dallas had agreed to purchase the property for the developer and to lift title restrictions on the property if the developer obtained financing using the tax credits within a specified time period,” a city spokesperson wrote in a statement to The news on Tuesday. “That did not happen, and the tax credits went back to TDHCA. No city funds were spent on the property, and the city does not own the property.”
In testimony to the board in July, the project’s developer, Zachary Krochtengel, called his efforts to create affordable housing in a high-opportunity neighborhood in the city the toughest fight of his career.
“These resources are scarce and really important,” Krochtengel told the board. “When we were awarded Cypress Creek at Forest Lane in 2021, it was awarded to us over the objection of the council member, over the objection of the state representative, who wrote us a negative letter from the state representative, and it was on a piece of land that was zoned for multi-family housing, and it’s not even a quarter mile to the nearest single-family home.”
In his brief testimony, Krochtengel lamented the challenges associated with creating affordable housing in high-opportunity areas.
A “high opportunity” area has low poverty rates and is designed to provide lower-income residents with better access to good schools and healthy food, as well as lower crime.
“Everyone always says we don’t want you to build it near a house, we don’t want you to build it overlooking our backyard…” he said. “So we found this property that’s zoned, near a DART train station, within walking distance. It’s in an area with offices, it’s on the highway, it’s next to an Academy Sports, a tire shop, an oil and lubricant station, a car wash and all these other things that are inconsistent with that deed restriction. So we thought this would be OK.”
He argued that the property restriction had not been enforced against any other landowner or developer, but had been enforced against the construction of social housing.
Attempting to circumvent the ownership restrictions resulted in Krochtengel’s company being sued.
“This fight has been going on for three years now and you will probably put me out of my misery,” Krochtengel told the TDHCA board.
The board actually rejected his request.
The deal was unorthodox from the start. And it was not done alone, Kingston said.
“This was a miracle in many ways and without the strong support of TC Broadnax, Kim (Bizor) Tolbert and the City Council, it would never have had the energy or the opportunity to happen,” Kingston said. “While we are disappointed and would have really liked to see this project happen, we are so grateful to these people and the economic development and housing staff for supporting this truly unorthodox project.”
“In city government, unorthodox behavior is not necessarily rewarded,” Kingston said. “They took a risk and we appreciate that.”
The Dallas-based Inclusive Communities Project, which fights against the harmful effects of discrimination and segregation, supports the project because it gives lower-income residents the opportunity to live in an area with many opportunities.
