Louisiana Treasurer John Fleming is seen on Tuesday, Sept. 19, 2023 during the National Association of Realtor's Riding with the Brand tour stop in Shreveport, Louisiana, at the Shreveport Convention Center.

Citing pricey development costs, the State Bond Commission has for months stalled funding for two major affordable housing projects in New Orleans, causing conflict between developers and state officials.

Developers seeking to use federal tax credits designed for low-income housing are required by federal law to apply for and receive tax-exempt bond financing allocated by the commission -- a board led by the state treasurer that also counts the governor, the lieutenant governor, the attorney general and other state officials or their designees as members. State lawmakers also serve on the board.

While previous commissions have approved affordable housing funding without issue -- such bonds must be repaid with interest -- the current group, under State Treasurer John Fleming and Gov. Jeff Landry, has taken a more critical stance. That has riled developers and advocates, who say the officials are standing in the way of desperately needed housing in New Orleans.

The commission has deferred two projects -- a 51-unit development on the site of the former Lafitte Projects and a 49-unit housing development for seniors slated for Canal and Broad streets -- repeatedly since April, as officials have pushed developers to justify costs.

At the same time, Landry has pushed to enshrine a cost-cutting requirement into the state's regulations governing affordable housing development: In July, Landry demanded that the Louisiana Housing Corporation rewrite its annual funding allocation plan to include a "robust cost-containment policy," in line with his administration's goal to "provide the most efficient and cost-effective allocation of resources."

Affordable housing developers and advocates have said the bond commission delays threaten to sabotage their projects, as construction costs continue to mount due to inflation and as some projects that are also relying on federal tax credits must be completed by federally imposed deadlines.

At the bond commission's October meeting, Terri North, president of Providence Community Housing, the developer of the Lafitte project, grew exasperated while commission members grilled her on the project's costs. North was seeking $14 million in state-approved bonds. Construction of the project is estimated to cost $20 million total, said Louisiana Housing Corporation Board Chair Stephen Dwyer.

"We finally have identified all the funding we need, and it's very difficult to know that we have the ability to move forward with this project and this is the only hiccup," said North. "I never dreamed in a million years we'd be sitting here right now."

Rep. Tony Bacala, R-Prairieville, pushed back.

"Prove to me that these numbers are reasonable, because I believe somewhere in this project you have some unreasonable numbers driving costs," said Bacala.

Commission has withheld other funding

The logjam is not the first time that the Republican-led bond commission has held back funding from the Democratic city of New Orleans.

In 2022, $39 million for a Sewerage & Water Board substation was held up for two months because the city had vowed not to enforce Louisiana's anti-abortion law.

Then-Attorney General Landry led the charge, urging fellow commission members to "use the tools at our disposal" to bring leaders in New Orleans opposing enforcement of the abortion ban "to heel."

At the third meeting, the lone vote for continuing to delay approval came from his office.

The current delays are playing out as the costs of building housing, affordable or not, have increased across the country in recent years, said Shaun Donovan, director of national affordable housing organization Enterprise Community Partners and a former director of the Department of Housing and Urban Development under President Barack Obama.

"This is not a problem of affordable housing in Louisiana. This is a national problem that costs that we've seen, inflation and costs, have gone up everywhere," Donovan said. "Ironically, they're creating the very problem that they're concerned about by driving up costs with these delays."

In a letter to Louisiana Housing Corp.'s former executive director Marjorianna Willman about Landry's cost-containment policy, John Sullivan, Gulf Coast director of state and local policy for Enterprise, shared a study of its portfolio of affordable housing that found that development costs in Louisiana are significantly lower than in other states. The median total development cost of its projects nationwide from 2019-2024 was just over $300,000, while the median cost of the seven projects completed in Louisiana during that time was under $230,000.

"We have concerns that drastic changes to the cost-containment measures already in place could severely impact project quality," wrote Sullivan.

A spokesperson for Landry did not respond to a request for comment.

Next steps

The commission next meets on Thursday, and the Lafitte and Canal street projects are back on the agenda. Also on the agenda are three other affordable housing projects proposed across the state.

Dwyer said he is hopeful that the projects will be approved.

Louisiana Housing Corporation leaders have met multiple times with the auditors' office and bond commission members in recent months, he said, and the housing agency developed a template for developers to use to break down and justify costs to the commission.

"We think we've come up with a process that is going to satisfy that kind of an examination of what the development costs are," he said.

Jeff Crouere, a spokesperson for Fleming, the treasurer, said that the developers have been cooperative with the commission's requests in recent weeks.

"We're hoping to approve as many of these projects as we can at the meeting on Thursday," he said. "Our goal is to try to be good stewards of state funds and to make sure that this is going to be in line with what we believe to be the correct cost per unit."

Bacala said last week that he had yet to fully review new information the developers submitted to justify their projects' costs. He said he wasn't sure how he might vote.

"The questions that we're asking, we're waiting for definitive answers about exactly the issues that were raised," he said, adding that the commission is "making sure that we're using the money in the most efficient way to provide the most units to the public."

Amanda Spain, an attorney representing the Louisiana Housing Corporation, said at that agency's October conference that continued delays could impact other affordable housing projects in the pipeline. Projects that are being funded with federal Department of Urban Housing and Development aid tied to storms in 2021 have a deadline of 2028 to have units completed and filled.

"If you don't deliver the units and get the housing built, HUD is very, very serious about taking that money back," said Spain. "That's what keeps me up at night."