TEXT-Fitch affirms Houston Housing Corp No 1, Texas

Sept 25 - Fitch Ratings affirms the 'BBB-' rating on the Houston Housing
Corp. No. 1, TX (Long Drive Apartments Section 8) 1996 bonds.

The Rating Outlook is revised to Stable from Negative.

SECURITY
Bonds are limited obligations of the issuer. The primary security for the bonds
is the Section 8 subsidy for all of the units, which is governed by the
remainder of a 40-year project-based Housing Assistance Payments (HAP) agreement
that expires in 2021. The bonds are further secured by tenant rents, a first
lien on and security interest in the project and improvements and a cash funded
debt service reserve fund sized at maximum annual debt service.

KEY RATING DRIVERS

MANAGEMENT DRIVES OCCUPANCY AND EXPENSES: The project manager's ability to
maintain high occupancy and control expenses, particularly as the project ages,
plays a key role in preserving sufficient debt service coverage ratios (DSCR).

IMPROVED DEBT SERVICE COVERAGE: The project's DSCR increased on an annualized
basis to 1.7x for year to date 2012, which is up from 2011 when coverage was low
at 1.1x as anticipated due to units off line.

CONTINUED RENT INCREASES NECESSARY: The project rents are currently below HUD's
Fair Market Rent (FMR) for the Houston area despite a recent rent increase, and
therefore the project should be successful in petitioning for future increases
to keep pace with project operating expenses.

NO LEGAL OBLIGATION FOR DEFICIT FUNDING: There is a lack of any legal obligation
on the part of the corporation to fund project deficits; however, the issuer has
a demonstrated history of doing this in the past.

WHAT COULD TRIGGER A RATING ACTION

OCCUPANCY LEVELS: Failure to maintain high project occupancy;
EXPENSE MANAGEMENT: Failure to manage project operating expenses;
FUTURE RENT INCREASES: Inability to secure future rent increases from HUD.

APPROACH
Fitch's approach to rating bonds backed by a single-asset multifamily Section 8
project includes a review of the following: debt service coverage ratios,
occupancy, rent levels, management and reserve levels.

CREDIT PROFILE
The project is currently demonstrating debt service coverage of 1.7 times (x) as
of the year to date unaudited operating statements. This is an improvement from
2011 when coverage was a low 1.1x. Coverage levels for the project have declined
over the last three years; in 2010 it had coverage of 1.3x and 1.4x in 2009. The
remaining debt service schedule for the bonds, which mature in 2020,
demonstrates a declining amortization schedule that should help coverage levels,
assuming management can maintain occupancy and expenses over the remaining life
of the bonds.

During 2011, the project suffered from 11 down units due to foundation repairs
which resulted in average annual occupancy of 93%. The corporation reports that
the repairs are complete and the project is currently 100% occupied. However,
debt service coverage for 2011 was affected negatively.

Based on the 2012 FMR rates for the Houston Metro area, all of the units
maintain rents below FMR. Historically, the corporation has been successful in
obtaining rent increases from HUD for units below FMR and it received the most
recent rent increase in June 2012.

Currently, all reserve and maintenance funds are fully funded and provide
additional security to bondholders in the event of future property financial
difficulties.

The corporation suffers from less than adequate asset management and high staff
turnover. As the project ages and cost pressures increase, management could
potentially complicate the issuer's ability to maintain an investment grade
rating on these bonds.

Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable Criteria and Related Research:
--'Revenue-Supported Rating Criteria', dated June 12, 2012.

Applicable Criteria and Related Research:
Revenue-Supported Rating Criteria