Big Easy District Gets Homegrown Help
Today’s global and domestic Housing Crisis’s most eloquent metaphor formed over the Bahamas on Aug. 23, 2005. But it wasn’t just a metaphor. Six days later, early on a proverbial Stormy Monday morning, it made its second landfall. Known forevermore as Katrina, it was the costliest and one of the five deadliest hurricanes in history. At least 1,836 in New Orleans lost their lives.
Among other things, the event in hindsight serves as a bright-line moment that separates a 15-year housing boom from a bust whose duration no expert can confidently predict, and whose ravages are still being felt and dealt with.
Economics aside, Katrina marked first the exodus of investor buyers from residential real estate and, subsequently, the meltdown of mortgage finance’s international house of cards, which seemed to hiccup one moment and contract double-pneumonia the next.
Almost four years later to the month, amid a delicate balance of morale, movement forward, and memory, the wards, parishes, and neighborhoods of the Big Easy may once again serve as a metaphor–but not just a metaphor–for a painfully slow but sure show of irrepressible resiliency–more like obstinacy–that must foreshadow any noteworthy measure of re-stabilization, not to mention recovery.
Click image to access Make It Right Foundation site.
Down in the Lower 9th, the vaunted Make It Right Foundation, backed by a $5 million bump each from Brangelina and Tom Darden of Cherokee Investments as well as contributions from a number of other donors, intrepidly makes progress as it makes headlines. Some 18 homes–of an intended 150–are either done or under construction, with a number of duplexes scheduled to break ground in August. Still, at a cost of $350,000 or more per home, and a selling price at a fraction of that, the Make It Right model, while laudable in its mission, is far too expensive and time-consuming to be scaleable in its execution.
Symbolically, efforts like Brad Pitt’s, and those of Branford Marsalis and Harry Connick Jr.–who’ve teamed up with Habitat for Humanity to create “Musicians’ Village” for musicians who lost their homes to the hurricane–may work to call attention of the world outside New Orleans for the continued need for help.
But they hardly serve as a self-sufficient, organic market-based approach to solving the sorry Jack-O-Lantern look of so many neighborhoods where many homes still sport FEMA search marking system badges, and others are either “scraped” to the slab or a still-standing, termite-ridden, mold hotel awaiting inevitable bull-dozing.
A middle-class, integrated neighborhood called Filmore (in New Orleans’ Gentilly 6th District), up toward Lake Pontchartrain and just east of the huge City Park, may well soon reflect a new stage of the city’s no-quit mentality.
Former JMP Securities investment group director Phil Whitcomb is working with a S.W.A.T. team of real estate development and construction operations folks on a concept that, if it gets buy-in from important neighborhood associations and local influencers, could pump the blood of life into a 52-block area bordered by Bayou St. John to the west, Robert E. Lee Boulevard to the north,the London Avenue Canal to the east, and Filmore Avenue to the south.
Pratt Park would get a Promethean make-over.
The idea–in contrast with the headline-grabbing Make It Right initiative–would be to home-grow a neighborhood transformation. It would be a mash-up of the best advantages of scaled production home building and economic redevelopment at the street-by-street level to create a sustainable extreme community make-over – jobs and affordable, energy-efficient homes where residents adopt a reinvigorated stake in their place. The neighborhood even has a built-in park, Pratt Park, which would morph into a prized playground and park facility in Whitcomb’s blueprint for Filmore’s renaissance.
The timing? Perhaps within weeks, floor plans that could fly with acceptable local architecture will be developed, even as several public-private partnership dimensions of the plan get traction. Still, it’s not a moment too soon.
With the exception of the higher ground along Gentilly Boulevard (which parallels the Bayou Sauvage Ridge) and the neighborhoods along the Lake that were built upon artificial fill, District 6 experienced some of the worst flooding as a result of Katrina. Many residential structures that were built upon slabs experienced flooding up to their roofs and are uninhabitable for the foreseeable future.
The best term to describe Whitcomb’s plan to build or renovate most of the homes in the neighborhood is “scattered urban.”
It would involve a combination of bidding for New Orleans Redevelopment Authority-owned lots, buying lots from owners who no longer intend to move back to The Big Easy from out of town, and in some cases, acquiring lots from current residents who may want to sell.
On building lots that have already been “scraped” or ones that should be bull-dozed, Whitcomb would work with a development company called Promethean Structures on building homes that would sell in the range of $150,000 to $240,000, a new-home that would comp in an acceptable range that existing homes are selling for in the community.
One of the secret-sauce operational details would be that each of the new homes would go up in 50 days, in part through the use of highly energy efficient and weather resistant structural insulated (polyurethane) panels.
A tighter envelope for air leakage, the ability to withstand high winds, non-combustible, and capable of meeting even the new, higher proposed energy conservation guidelines of the climate act, SIPs would cost about $10,000 more per home.
But, thanks to both builder and home buyer tax credits that could be obtained, the actual cost to home buyers would come down to about a $5,000 premium for a 2,000 sq. ft. home, says Whitcomb. “After the purchase, the electric bill’s going to run about 60% of what it would be for a house of that size,” says Whitcomb. So the cost of ownership winds up coming down over the years.
Whitcomb’s construction concept dives in not just on a box level, but the street and the neighborhood level as well. To start, he’s eyeing a retail site and an elementary school for redevelopment or land reuse to support the revitalization of the community. There are also several multi-family units near the new Greater Gentilly Technical High School under construction on Paris Avenue that need to be rehabilitated. Additional ideas will come forward through collaboration with the local homeowner associations.
Whitcomb won his production builder stripes in the Centex Homes academy in six years as vp of corporate development, and before that, in various management positions at Electronic Data Systems and as a corporate attorney specializing in real estate. Of critical importance to Whitcomb is that all the key management talent, community outreach, and labor supervision be homegrown New Orleans.
Whitcomb
“In various of my incarnations, I had occasion to spend time in New Orleans, and I love this city. But it’s more like a European city in the way business is conducted,” says Whitcomb. ”You work with people here, and you don’t tell them what to do; not if you want to get things done.
“We’re doing this to help, but we are a for-profit organization and want our concept to be scaleable and expandable to other areas of New Orleans and Gulf Coast communities,” says Whitcomb. “Hopefully, we can replicate the revitalization that took place in southern Dade County after Hurricane Andrew–-also called St. Andrew by some locals.”
No Pressure, Shaun
The 100-day HUD Secretary’s got lots on his plate.
The bucket list is a mile long and three miles wide. With roots in affordable housing, he can’t simply focus on the single family foreclosure problem, even though that’s huge.
Demands for his time and attention are compelling. Good thing he’s young.
HUD Taps Carol Galante for Key Multifamily Role
From MULTIFAMILY EXECUTIVE, by Chris Wood: The Department of Housing and Urban Development was a morale morass, and still needs attention internally it probably won’t get until its chief Shaun Donovan chalks up some wins on the foreclosure front… So, we’re talking 12 months minimum.
Click image for access to Multifamily Executive Q&A with Galante.
Every bit of new blood in the department sends a critical message, and clearly, with the hire of BRIDGE Housing Corporation president Carol Galante, Donovan’s playing from strength and resolve to change what has chronically ailed the organization for almost a decade.
Multifamily Executive, which last fall named Galante its executive of the year, assigned senior editor Chris Wood to chat at the end of last week with the new appointee, for her perspective on overseeing $58 billion in development and preservation of privately-owned rental housing as well as a key role in sustainable residential development initiatives.
A Q&A with Galante reveals she intends to serve as an important counterpoint voice to Donovan as priority focus remains on single-family–foreclosures and duress–issues.
There is definitely a role for multifamily, and I think this administration gets that. The administration understands that rejuvenating and refinancing our nation’s multifamily housing stock is critical. Equally important is keeping that housing stock healthy. Greening it, and building more of it in the right places is important as well as economic stimulus.
Read more of Chris Wood’s interview here.
GSE’s Not Having a Whole Lot of Fund Out There
From HOUSINGFINANCE.COM, By Jerry Ascierto: Distinguishing one government sponsored enterprise from another these days is getting more difficult. They’re both in government conservatorship; both still hemorrhaging money; and both still trying to offset mountains of bad investments with some good ones.
Housingfinance.com senior editor Jerry Ascierto tackles the issue of GSE parity on rates, and what it might ultimately mean for those who’re trying to get access to their capital for affordable housing community projects in a credit-crunched environment.
Immediate funding deals for tax credit properties were quoting in the mid- to upper 6 percent range in late February.
But rates on forward commitments from the government-sponsored enterprises remain high. Interest rates for funded forward commitments are in the high 7 percent range, and prices are above 8 percent for unfunded forward commitments.
“They’re pricing in a significant amount of risk premium into forward pricing at the moment,” said Phil Melton, senior vice president of Grandbridge Real Estate Capital. “That’s driven by the fact that there is a significant amount of forwards that are not converting at the time that they’re supposed to.”
Forward commitments are loans on 9 percent tax credit deals undergoing new construction or substantial rehabilitation. In a funded forward, Fannie Mae agrees to purchase the permanent loan and also provides funds to the deal’s construction lender; an unfunded forward commitment provides a rate-lock and commitment to fund the permanent mortgage once construction is complete.
Meanwhile, ahem, we call them results these days because there are so few earnings, and here’s what they amounted to in Fannie’s latest financial period, thanks mostly in part to a 3-year insanity spree into risky home mortgages. The Wall Street Journal reports:
Graphic: Courtesy of the Wall Street Journal
The deepening financial problems at the companies set up some tough choices for the Obama administration, which will have to decide whether to continue pumping taxpayer money into the firms to keep them operating or break them into pieces and strip them of their government support. Another unsettled question is how long to retain as their regulator Mr. Lockhart, a friend of former President George W. Bush since their high school days.
Fannie and Freddie were battered by the worst wave of mortgage defaults since the 1930s and recorded combined losses of nearly $60 billion for the first three quarters of 2008. The government seized management control in September under a legal process known as conservatorship, and has since agreed to make as much as $400 billion of capital available to them. Under conservatorship, the regulator is charged with “conserving” the companies’ operations and nursing them back to financial health.
The conservatorship hasn’t produced all the results the government sought. Thus far, the two companies have rewritten just a tiny fraction of the 31 million mortgages they own or guarantee.
Multifamily is where the GSEs actually still have viability, but that scarcely appears to matter, since they’re on a different performance scorecard.
In an interview [with the WSJ's James B. Hagerty and Damian Paletta], Fannie’s government-appointed CEO, Herbert Allison, said: “It’s not about maximizing returns on equity or profits. It’s really about being of use to the country during this very difficult period.”
The Measuring Tape: Affordability
Some would have us think that the moment home prices descend to a magical trend line tied to cost-to-rent and household incomes, the economy will chug chug-along at a normalized pace, our children will once again be capable of buying a home, and all will be well again.
Think again.
The National Association of Home Builders plots affordability trends, has has plotted them to their most favorable level nationally in the past five years. Which is all good, but to counter the nastiness of the current economy, it’s probably going to take more than hitting home price trends to spark any level of enthusiasm in the home purchasing market.
Still, Housing Wire reports on recently released affordability data from the NAHB, including a ranking of the top 10 most affordable cities.
Problem is job loss in many of these places far outweighs the benefit of more affordable prices.
No household income is a tough trend line to sync up with.
Here’s the list nonetheless.
The most affordable major housing market in the country during the fourth quarter was once again Indianapolis, Ind., which has now topped the affordability list 14 consecutive times, according to NAHB. There, just over 93 percent of all homes sold in the fourth quarter of 2008 were affordable to households earning the area’s median family income of $65,100.
According to the Index, the most affordable cities and their median prices are:
1. Indianapolis, Ind., $103,000
2. Warren, Mich. $125,000
3. Youngstown, Ohio, $73,000
4. Detroit, Mich., $90,000
5. Grand Rapids, Mich. $102,000
6. Syracuse, N.Y., $88,000
7. Dayton, Ohio, $90,000
8. Akron, Ohio, $90,000
9. Cleveland, Ohio, $100,000
10. Scranton, Pa., $85,000
Affordable Leaders on Stimulus & HASP: It’s a Start but Needs Work
From HOUSINGFINANCE.COM, By Donna Kimura: Added up, the past weeks’ signing of a stimulus package and the subsequent unveiling of plans to stabilize the topsy-turvey housing economy has had some blessings, some potential blessings in disguise, and some areas of concern and disappointment for business and community leaders in affordable housing.
Affordable Housing Finance senior editor Donna Kimura spoke with many of the affordable community’s leaders and offers this good-news-bad-news analysis of their initial reaction and expectations.
“By passing this legislation, Congress has acknowledged the need to restart stalled and stretched affordable housing development throughout the nation,” said Doris Koo, president and CEO of Enterprise Community Partners.
The enacted legislation includes an amendment to provide $2.25 billion to states through the HOME Investment Partnerships Program to help fill financing gaps in LIHTC developments. Such funding could immediately finance more than 14,000 apartment homes and nearly $2.5 billion of shovel-ready stalled developments.
Enterprise said it is disappointed that the approved legislation does not include a provision that would increase the carryback for the LIHTC, New Markets Tax Credit, and energy tax credit from one to five years for credits claimed in 2008 and 2009. The carryback provision would help keep existing investors in the LIHTC program and reassure new investors.
The legislation provides $4 billion for the public housing capital fund, with $3 billion being distributed by the capital fund formula and $1 billion through competitive grants. The bill also included $1.5 billion for homelessness prevention and rapid re-housing.
“It is terrific that long-standing problems with HUD [Department of Housing and Urban Development] programs, such as the backlog of public housing capital needs and short-term contracts for Sec. 8 property owners, were addressed in the stimulus bill,” said Sheila Crowley, president and CEO of the National Low Income Housing Coalition. “The $1.5 billion for emergency assistance to prevent homelessness will make a significant difference in the lives of hundreds of thousands of poor families. But ultimately the bill was a missed opportunity to effect real change in the affordable rental housing shortage by not funding the National Housing Trust Fund and new incremental vouchers. That is too bad.”
Kimura also speaks with or reports the statements of Judith Kennedy, president and CEO of the National Association of Affordable Housing Lenders, Sharon Price, director of policy for the National Housing Conference, Michael Rubinger, president and CEO of the Local Initiatives Support Corp., and Renee Rooker, president of the National Association of Housing and Redevelopment Officials (NAHR).
Affordable Challenge
This post, How Will HUD Handle the Affordable Housing Crisis? is from Garland McLaurin and Mike Fritz, American News Project.
Everyone knows about the crisis facing homeowners. But what about those who can’t afford a home? The recently signed stimulus sets aside billions of dollars for the Department of Housing and Urban Development to address the needs of low-income families, but new HUD Secretary Shaun Donovan is inheriting an agency crippled by years of neglect.
Affordable Gains
The news today from Denver signalled gains for those who work to offer affordable living options for workers with low incomes. Housingfinance.com senior editor and blogger Donna Kimura maps out where the critical gains may come from in the new stimulus package, even before the President unveils his housing specific plans tomorrow from Arizona.
The new law provides $2.25 billion in gap funding to help stalled low-income housing tax credit (LIHTCs) projects. The funds will be distributed to housing tax credit allocating agencies based on the federal formula for the HOME program.
The bill also includes a provision to allow allocating agencies to use a portion of housing tax credits as grants instead of credits.
However, a proposal to allow investors to “accelerate” the housing tax credit by claiming 20 percent of the allowable credits in each of the first three years was not included in the final legislation. Many LIHTC program participants had lobbied for this provision, hoping it would be a way to encourage investors into to the stagnant market.
The nation’s public housing was also addressed in the bill. The legislation provides $4 billion for the public housing capital fund, with $3 billion being distributed by the capital fund formula and $1 billion through competitive grants.
There will be $2 billion to fund the Neighborhood Stabilization Program and another $1 billion for the Community Development Block Grant program.
The bill also included $1.5 billion for homelessness prevention and rapid re-housing.
The New Markets Tax Credit program gets $3 billion—$1.5 billion for both 2008 and 2009.“The passage and signing into law of H.R. 1, the American Recovery and Reinvestment Act, is a critical step forward in what is certain to be a long road to recovery,” said Renee Rooker, president of the National Association of Housing and Redevelopment Officials (NAHRO). “NAHRO is particularly pleased that our nation’s housing and community development needs were addressed and made a critical part of a workable strategy to revitalize our economy and strengthen our nation’s infrastructure.”
New HUD Chief Stokes Expectations to Stabilize Housing
From HOUSINGFINANCE.COM, By Jerry Ascierto: Lower expectations and then overdeliver on them. It may be wise advice, but the new Secretary of Housing and Urban Development, Shaun Donovan, ain’t havin’ none of it.
Making it clear that he didn’t come this far in his career to be daunted by the task in front of him, Donovan yesterday laid out a framework for breakthroughs, sustainable progress, and bureaucratic streamlining in describing his agenda for HUD in the coming months and years.
Housingfinance.com senior editor Jerry Ascierto reports from the scene in New York City, as the fledgling HUD Secretary came out on familiar turf but in uncharted economic waters.
HUD Secretary Shaun Donovan
Donovan made it clear that the production of new affordable multifamily housing will be a key component of the new administration. “The president will keep his pledge to fund, at significant levels this year, the National Housing Trust Fund,” said Donovan. “We must begin to build new tools and resources particularly focused on the extremely low-income families that suffer the most in our rental markets today.”
The National Housing Trust Fund, the first new federal production program for low-income housing in decades, was passed into law last year. The fund was to be seeded by money from Fannie Mae and Freddie Mac, but their conservator, the Federal Housing Finance Agency, suspended contributions to the fund in December.
Donovan also called for a wide-ranging modernization of HUD’s multifamily programs, which have been neglected for decades. “When I think of HUD’s programs, it’s as if the low-income housing tax credit was never invented, as if the evolution of HUD’s programs stopped a generation ago,” said Donovan.
Donovan also touted several measures in the economic stimulus package that would help stabilize communities hardest hit by the single-family foreclosure crisis. The stimulus bill contains $1.5 billion for HUD’s Emergency Shelter Grants, to help combat rising homelessness, particularly among families. The bill also has $2 billion for the department’s Neighborhood Stabilization Program, which provides emergency assistance to state and local governments to acquire and redevelop foreclosed properties.
Multifamily is where a fair amount of the new stimulus package upside focuses, but Donovan will also be involved in Treasury and Fed efforts to stanch the tide of foreclosures on the single-family side. Builderonline senior editor John Caulfield was on hand at the event in New York to report on that part of the HUD Secretary’s plans:
Within the first 100 days of the Obama administration, Donovan intends for HUD to start accelerating loan modifications and institute industry-wide standards for those modifications. He also plans to initiate targeted bankruptcy reform that will serve as a safety net that keeps as few homeowners as possible from going into foreclosure in the first place.
HUD will take measures to minimize the impact of foreclosures on families and on communities and will work to ensure the continued availability of private capital for mortgages for home purchases and refinancing.
Donovan’s long term plans for HUD are far more ambitious. He outlined a series of five strategic goals designed to not only remediate the current crisis but also deal with future housing needs.
The first involves remaking the mortgage system. With bank and mortgage company lending standards currently untenably stringent, Fannie Mae, Freddie Mac, and FHA are originating 95% of all home loans. To break this logjam, HUD will need to take steps to ensure liquidity and leadership in the private sector and make the loan process simpler and more transparent for buyers.
The kid hardly looks like he needs to shave, so if he accomplishes all he plans, he’s right on track to become known as a housing “wunderkind,” or possibly cannonization.
Time to Hesitate is Through
The New York Times Friday reports:
By mid-day, after the president called further delays “inexcusable,” the tone of the Senate debate was growing decidedly sharper, with no immediate end in sight, although the Democratic majority leader, Senator Harry Reid of Nevada, remained optimistic about a vote by Friday evening.
President Obama seized on Friday’s economic news — the Labor Department’s report that the unemployment rate shot up in January — to step up the pressure on the lawmakers. “Last month, another 600,000 Americans lost their jobs,” Mr. Obama said. “That is the single worst month of job loss in 35 years. The Department of Labor also adjusted their job loss numbers for 2008 upwards, and now report that we have lost 3.6 million jobs since this recession began.
The note of urgency and frustration increases, as does the political rhetoric. One of the action items today was the announcement of an extra-governmental smart-kids group to advise the administration on how to get out of the mess. Per the Wall Street Journal:
Mr. Obama’s remarks on the stimulus came as he introduced his new Economic Recovery Advisory Board Friday, a panel of dignitaries from the world of economics, business, and labor including General Electric Co. Chief Executive Jeffrey Immelt and conservative Harvard economics professor Martin Feldstein.
Led by former Federal Reserve Chairman Paul Volcker, the group will meet regularly and give Mr. Obama advice on reviving the dormant U.S. economy, independent ideas aimed at avoiding the Washington “echo chamber.”
White House economist Austan Goolsbee will be staff director of the board. In addition to Messrs. Immelt and Feldstein, the group will include former Securities and Exchange Commission Chairman William Donaldson; TIAA-CREF President and CEO Roger Ferguson; UBS Group Americas CEO Robert Wolf; John Doerr, partner at Kleiner, Perkins, Caufield & Byers; and Laura D’Andrea Tyson, dean of the Haas School of Business at the University of California at Berkeley.
President Obama wants to sign this bill into law and then looks to execute.
At the same time, word is he’s forming a separate program strategy, including funding stimulus and entitlement that will address housing’s particular urgencies, foreclosures, orphaned low income tax credit projects, etc. To that end, he’s moving on with casting his housing advisory S.W.A.T. team even as he engages his economics advisory panel.
Affordable Housing Finance senior editor Donna Kimura reports on how senior leadership at the Department of Housing and Urban Development takes shape.
Click Ron Sims image for statement.
President Barack Obama this week said he will nominate Ron Sims, county executive of King County, Wash., to be deputy secretary of the Department of Housing and Urban Development (HUD).
The nomination comes on the heels of Shaun Donovan’s confirmation as HUD secretary.
As deputy secretary, Sims will manage the department’s day-to-day operations, a $39 billion operating budget, and the agency’s 8,500 employees.
His appointment requires confirmation by the Senate.
As county executive, Sims, 60, oversees the 13th largest county in the nation. He has held the post for 12 years, stepping into the office in 1996 to fill a vacancy left by Gary Locke when he became governor. Sims then won election the following year and was easily re-elected in 2001 and 2005. He has lost in his bids for a U.S. Senate seat and for governor.
Sims confirmed Monday that he will be leaving his post to join HUD.
Look for mortage buy-downs, redoubled foreclosure mitigation efforts, and LIHTC programs to emerge pronto, probably via the Treasury, once the housing team is in place to execute.