Houston’s tax incentive programs hurt those who need them most

Leticia Jones, an up-and-coming tattoo artist who lives in Uptown, runs a tattoo parlor out of her own apartment. Since this installation is far from legal, it keeps the panels off until nightfall. | MAlachi Key/The Cougar

Starting a business in Houston is by no means easy, especially when you come from a marginalized background. The City of Houston has implemented some programs to help overcome this obstacle, but many of them may end up doing more harm than good.

One method the city has used in recent years is to establish specific tax incentives aimed at helping underdeveloped areas of the city. And yet, somehow, much of that money actually benefited wealthier neighborhoods more than poor neighborhoods.

Houston’s “Tax Increment Reinvestment Zones” were, according to the City of Houston websiteinitially intended to “help fund redevelopment costs and promote growth in areas that would not otherwise attract sufficient timely market development”.

Essentially, the city identify areas that would naturally not be able to grow enough to finance major developments like sidewalk repairs and would then “capture” a certain amount of taxes based on the appraised value of the area which they could then use to these projects.

Although it was a great idea on paper, it attracted a lot of criticism, especially after a Houston Chronicle. investigation in the areas found, they tended to be created in areas that were already quite wealthy to begin with, like Uptown.

Many critics, like Dr. Steven Craig, an economics professor at UH, say the way the zones are currently created tends to ignore low-income areas of the city that could benefit from the program.

Additionally, Craig is concerned that even the most “successful” implementations of the zones will harm low-income and minority business owners.

“Aside from enriching an already fairly wealthy region, these types of zones tend to benefit a lot of outside businesses run by wealthy investors and don’t do much for smaller, more local businesses,” Craig said .

Craig’s main concern was that these areas have become incredibly lucrative to invest in without providing significant incentives to local business owners.

So in a neighborhood like the Galleria, you might be more likely to see minority business owners struggling in the face of higher costs and outside investors trying to set up shop.

To investigate this claim, we pulled a spreadsheet showing all of the city’s minority- and women-owned businesses from the City of Houston’s “Open Data” portal.

We then organized the list of businesses by zip code to try to determine how many minority-owned businesses are located in Uptown and how that compares to surrounding areas.

Our main goal was to see if the TIRZ within Uptown stimulated the growth of minority-owned businesses. Ideally, this area would have a greater number of these types of businesses than surrounding areas if the program was successful.

Uptown is located in the 77024, 77056, and 77057 zip codes, so we primarily looked at businesses located in those zip codes.

The three zip codes that constitute Uptown are highlighted in purple, while data for the other seven zip codes was randomly selected from other parts of Houston for comparison and highlighted in blue.

As we suspected, Uptown has far fewer minority-owned businesses. companies located within it than other parts of the city.

One zip code, 77024, contained only 39 businesses, an incredibly small number when compared to the 120 businesses in zip code 77035. In fact, there were 108.9% more minority-owned businesses in the latter area than in the Uptown zip code.

But for many Uptown entrepreneurs trying to launch their businesses, it’s more than just numbers: it’s real life, and the consequences of these programs are hurting their businesses.

Leticia Jones, an up-and-coming tattoo artist who lives in Uptown, has been trying for several years to scrape together enough money to afford her own studio.

“My mom had a lot of tattoos, so when I was little, I would sit with her and trace the designs on her arms for hours,” Jones said. “I love doing it because I help people become more like themselves, in a way.”

Surprisingly, Jones runs a tattoo parlor from his own apartment. Since this setup is far from legal, it keeps the signs off until nightfall and it tends to attract new customers through word of mouth.

Jones said she never intended to stay in this situation for this long, but she ran into many obstacles that prevented her from opening a physical storefront.

“It’s hard for people like us,” Jones said. “I have friends who are trying to keep their stores open, but they say the spaces at the Galleria and local buildings are too expensive for them. For me, I can’t get a loan or anything to try to get started.

Jones said she has been particularly struggling with skyrocketing rent prices that have strained both her ability to continue living in Uptown as well as whether she can afford to rent space to open a business. This is closely linked to the increase in rental prices nationally.

Over the past few years, prices have increased by 127 percent in the South alone. According to Dr. Craig, this increase in rental prices is at least partly due to increased demand created by TIRZs.

He said the increased investment was likely to create a “bottleneck” impact where wealthier companies could “exclude” minority-owned businesses as they rush to take advantage of tax breaks.

“It can be difficult to get started as a business owner, and unfortunately these types of projects tend to attract people who already have large sums of money,” Craig said. “It is therefore likely that many more large companies will move into the area, while smaller companies will see their prices drop.”

Overall, it is difficult to prove with certainty that the TIRZ is responsible for the low number of minority-owned businesses in Uptown. After all, some variables in the data were difficult to explain.

For example, while there were significantly fewer minority-owned businesses in ZIP codes 77024 and 77057 compared to the rest of Houston, there were actually more minority-owned businesses in ZIP code 77056 compared to other postal codes.

So, in theory, it’s possible that the TIRZ could help spur local growth in some parts of downtown while stifling it in others.

Whatever happens, Craig worries the new elected official mayorJohn Whitmire is unlikely to seriously re-evaluate the program, as the project benefits the city on the surface. Time will only tell if the project will continue to help Houstonians who need it most.

But for people like Leticia Jones, each year that passes in Uptown’s current state tightens the belt a little more, leaving her fearing she’ll be forced out of her childhood home.

” They Do not Care About Us. All they care about is getting big companies and big investors to come here,” Jones said. “But these people didn’t grow up here. My whole family has lived in this neighborhood for generations and they want to give it away to people who don’t care.

Malachi Key is a journalism senior and Josh Holzapple is a communications junior who can be reached at (email protected)