Houston’s tax incentive programs hurt those that need it the most

View of an apartment window with a glowing neon red and white sign inside, reading "tattoo open."

Leticia Jones, an up-and-coming tattoo artist who lives in Uptown, runs a tattoo parlor out of her own apartment. Since this set-up is less than legal, she keeps the signs turned off until night falls. | Malachi Key/The Cougar

Starting a business in Houston isn’t easy by any means, especially when you come from a marginalized background. The city of Houston has implemented some programs to help overcome this barrier, but many of these can actively end up doing more harm than good.

One method the city has made use of within the past few years is implementing specific tax incentives meant to help the city’s underdeveloped neighborhoods. And yet, somehow, much of this money has actually benefited wealthier neighborhoods more than poor ones.

Houston’s “Tax Increment Reinvestment Zones” were, according to the City of Houston website, originally meant to “help finance costs of redevelopment and promote growth in areas that would otherwise not attract sufficient market development in a timely manner.” 

Essentially, the city would identify areas that would not naturally be able to develop enough to pay for major developments like sidewalk repairs and would then “capture” a certain amount of taxes based on the appraised value of the area that they can then use for those projects. 

While this is a great idea on paper, it’s been met with a fair share of criticism, especially after a Houston Chronicle investigation into the zones found they tended to be created in areas that were already fairly wealthy to begin with, such as Uptown. 

Many critics, such as Dr. Steven Craig, an economics professor at UH, claim the way the zones are set up currently tends to ignore lower-income parts of town that could stand to benefit from the program. 

Furthermore, Craig worries even the more “successful” implementations of the zones actually hurt low-income and minority business owners.

“Besides the fact that it’s enriching an area that’s already pretty wealthy, these kinds of zones tend to benefit a lot of outside businesses run by wealthy investors and don’t do a lot for smaller, more local businesses,” Craig said. 

Craig’s main worry was these zones have become incredibly lucrative to invest in while not providing significant incentives for local business owners. 

So in an area like the Galleria, you might be more likely to see minority business owners struggle as they grapple with higher costs and outside investors trying to set up shop. 

To investigate this claim, we pulled a spreadsheet showing every minority and woman-owned business in town from the city of Houston’s “Open Data” portal. 

We then organized the list of businesses by zip code in an attempt to figure out how many minority-owned businesses are located within Uptown and how that compares to surrounding areas. 

Our main goal was to see if the TIRZ within Uptown was stimulating growth for minority-owned businesses. Ideally, this area would have a higher number of these kinds of businesses than the surrounding regions if the program was successful. 

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

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

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

One zip code, 77024, contained only 39 businesses, a shockingly small amount when you compare it to the 120 businesses in the 77035 zip code. In fact, there were 108.9 percent more minority-owned businesses in the latter area than there are in the Uptown zip code. 

But for many Uptown entrepreneurs trying to get their businesses off the ground, these are more than just numbers: this is real life, and the consequences of these programs hurt their pursuits. 

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

“My mom had a lot of tattoos, so when I was a little girl, I used to sit with her and trace the patterns on her arms for hours,” Jones said. “I like doing it because I get to help people look more like themselves in a way.”

Amazingly enough, Jones runs a tattoo parlor out of her own apartment. Since this set-up is less than legal, she keeps the signs turned off until night falls, and she tends to secure new customers via word-of-mouth. 

Jones said she never intended to be in the situation for this long, but she’s run into multiple obstacles that have kept her from opening up a physical storefront. 

“It’s hard for folks like us,” Jones said. “I’ve got some friends who are trying to keep their shops open, but they say the spaces at the Galleria and the local buildings are too expensive for them. Me, I can’t get a loan or anything to even try to get started.”

Jones said she’s especially struggled with skyrocketing rent prices that have put strain on both her ability to continue living in Uptown as well as the possibility she could afford to rent a space to open a business in. This correlates closely with increasing rent prices nationwide. 

Just over the last several years, prices have increased by 127 percent in the South alone. According to Dr. Craig, these increasing rent prices are at least partly due to greater demand created by the TIRZes. 

He said increased investment was likely to create a “bottleneck” impact where wealthier businesses could “price out” minority-owned businesses as they rushed to make use of the tax benefits. 

“It can be challenging to get started as a business owner, and unfortunately these kinds of projects tend to attract people that already have large amounts of money on hand,” Craig said. “So you’re likely to see a lot more big businesses moving in on the neighborhood while smaller ones are getting priced out.”

Overall, it’s hard to prove for sure that the TIRZ is responsible for the lower amounts of minority-owned businesses in Uptown. After all, there were some variables in the data that are hard to explain.

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

So in theory, it’s possible the TIRZ helps incentivize local growth in some parts of Uptown while stifling it in others.

Either way, Craig worries the newly elected mayor, John Whitmire, is unlikely to seriously re-evaluate the program, since the project is beneficial to the city at surface level. Time will only tell if the project will continue to help the Houstonians that need it most.

But for people like Leticia Jones, every year that goes by in Uptown’s current state tightens the belt a little bit further, leaving her with fears that she might be forced out of her childhood home.

“They don’t care about us. All they care about are getting big businesses and big investors to come around here,” Jones said. “But those people didn’t grow up here. My whole family’s lived in this neighborhood for generations, and they want to give it up to people who don’t care about it.”

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

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