Chapter Adverse for Massachusetts Affordable Project
From HOUSINGFINANCE.COM, By Bendix Anderson: Bankruptcy protection is not the exclusive province of single-family detatched housing players, nor is it only striking down the once high-and-mighty profit-making organizations who populated home building.
The housing crisis, for what it is, is a leveler. Into its vortex is swept private and public, for-profit and not-for-profit, greed-fueled and virtue-inspired players alike.
If a local economy’s unhinged, it matters little that a condo project is pro-forma-ed for affordability vs. market rate. It will have too few takers nevertheless.
Affordable Housing Finance senior associate editor Bendix Anderson reports on one such case in Gloucester, Mass., where the wheels fell off an affordable project practically from the get-go.
The filing comes as no surprise to housing watchers. CAHO struggled for years to sell condominiums at its mixed-income Pond View Village property here, which started selling in August 2006, just as the condominium market began its collapse. See related article.
“The condo market softened, and we took our licks,” says Joe Flatley, executive director of Boston-based Massachusetts Housing Investment Corp. (MHIC), a major investor in Pond View.
CAHO planned to use the proceeds from the sale of 81 planned condos to help pay for millions of dollars of work the nonprofit did to prepare the long-vacant, historic LePage Glue factory for redevelopment, including 43 affordable rental apartments that are finished and fully occupied. Pond View was CAHO’s first development, though the local nonprofit was formed with help from Wellspring House, a respected Boston-based nonprofit affordable housing developer.
Housing’s crisis is not about the captains of home building who took pages out of Wall Street investment houses’ lessons in reckless avarice. It’s also about people who worked for decades to line up capital, entitlements, and community support to expand the housing stock for those with less wherewithal, and what’s happening to them as the economic corrects for its sins of profligacy.
Obama Taps Shaun Donovan to Head up HUD
Announcing that New York City Housing Commissioner Shaun Donovan is his choice as Secretary for the Department of Housing and Urban Development, the president-elect said:
”We need to approach the old challenge of affordable housing with new energy, new ideas, and a new, efficient style of leadership. We need to understand that the old ways of looking at our cities just won’t do.”
HUD Secretary Nominee Shaun Donovan
A question that has already arisen in pre-coverage of Obama’s pick would be, ‘why not one of the qualified minority housing leaders mentioned as on the incoming president’s short list?’
Housingfinance.com reported Nov. 24 that names under consideration included a number of African-American and Latino housing leaders, and Builderonline.com mentioned Donovan as a “long-shot“ among candidates for the role.
Even as the president-elect kept his thinking close to the vest on a Housing Secretary, housingfinance.com reported:
Several prominent mayors, including Miami’s Manuel Diaz and Atlanta’s Shirley Franklin, have been rumored to be in the running.
Saul Ramirez Jr., a former deputy HUD secretary and executive director of the National Association of Housing and Redevelopment Officials, has also been mentioned as a candidate in recent news reports. Adolfo Carrion Jr., Bronx borough president, and Nelson Diaz, who has been a judge and HUD general counsel, also have been cited as possible housing chiefs.
Perhaps the choice of New Mexico Governor Bill Richardson as Commerce Secretary opened up the realm of choices for Obama for HUD Secretary. On paper, Harvard-trained architect Donovan’s credentials look impeccable, both from a practical, in-the-trenches standpoint, management experience, and a basis in theory in public service and housing planning issues.
The Wall Street Journal/Associated Press notes:
Mr. Obama praised Mr. Donovan’s record at the New York City Department of Housing Preservation and Development, where he managed a $7.5 billion plan with a goal of putting a half-million New Yorkers in affordable housing. The Harvard-educated architect also kept foreclosures to a minimum in the city’s low- and moderate-income home ownership plan, with just five out of 17,000 participating homes.
A Newsweek correspondent Adam B. Kushner broke the news of the choice in his blog on Friday. Here, he quotes Donovan verbatim on the way the dots connect between Washington and the housing crisis.
At a City Hall briefing in July, Donovan talked about the housing challenges facing Washington policymakers:
Q: Do you think there’s enough of an understanding in Washington of why New York needs the kinds of investments that you want them to adopt for New York?
A: I guess I would enlarge the question a little bit. I think the fundamental challenge has been to demonstrate to the American people that they know affordable housing is important. What they don’t necessarily know is that government knows how to do it right. … The truth is, when affordable housing works, it’s almost invisible. We’re doing today, and lots of folks in this room are doing mixed income developments. We have a project that is moving its way through the approval and construction process right now in the Bronx that will combine market-rate condominiums with supportive housing with the formerly homeless. We are combining and integrating market-rate and affordable housing in a way that nobody would have thought possible a few decades ago. And, frankly, it means that we have to get out and tell the positive story, because a lot of folks don’t even know that there’s affordable housing in that building or that it’s part of their community. The image that remains is this old outdated image of public housing that failed. We’ve got a lot of work to do to explain the advances that we’ve made and what we’ve learned and to demonstrate that yes, in fact, we will use taxpayer dollars wisely in terms of rebuilding. I think there is an opportunity, given the subprime crisis. A mentor of mine that I worked for in my first government job in Washington said, “A crisis is a terrible thing to waste.” In fact, we have an opportunity, despite the terrible things that are happening in neighborhoods because of the subprime crisis, to really reframe the housing challenges, nationally, as a result of what we’ve seen over the last few years. Housing is on the national agenda again maybe for the first time in a generation. We have an opportunity, I think, to really utilize that to reframe the issue.
Is Donovan not the right guy for this job at this moment?
HUD Watch Heats up as Obama Roster Fills
From HOUSINGFINANCE.COM, By Donna Kimura: Each day brings news of an addition to president-elect Barack Obama’s dream team. Each pick gets a litmus test–how smart? how proven? how centrist? how collaborative?–and each selection affirms the moment calls for a cast of heavy hitters the likes of which may never have assembled with so critical a mission since the fledgling days of the first Continental Congress, or just after the War Between the States in the 1860s.
Housing is at the center of the economic scourge as it unfolds across the latter years of one decade, no doubt into the next. However, it’s been noted that when the President meets with the assembled Cabinet, the secretary of the Department of Housing and Urban Development sits down at the end of the big table, barely visible.
Obama's "Econ-Team"
With all the high-voltage talent Obama has recruited into big roles on the economic counsel front–Timothy Geithner as Treasury Secretary; Larry Summers to head up the National Economic Council; Peter Orszag as chief of the Office of Management and Budget; and today, former Federal Reserve chairman Paul Volcker to chair a new White House advisory board that will include economist Austin Goolsbee as staff director–the magnitude of the role of HUD secretary as regards the pall over housing economics remains in question.
That doesn’t mean a HUD secretary won’t play a critical part in carrying out the Obama agenda, reports Affordable Housing Finance senior editor Donna Kimura in her analysis “Obama’s New HUD Secretary?”
In an Oct. 20 letter to John Gage, president of the American Federation of Government Employees, Obama wrote that HUD is critical to the millions of working families. “As we tackled the effects of the current fiscal crisis on Americans, HUD must be part of the solution,” he said.
“I am committed to appointing a secretary, deputy, and assistant secretaries who are committed to HUD’s mission and capable of executing it. I know that the department needs resources to successfully implement the expansion of programs required by the Housing and Economic Recovery Act of 2008. I pledge to work with Congress to secure resources necessary to meet HUD’s important mission,” Obama’s letter continued.
“Because of the fiscal mess left behind by the current administration, we will need to look carefully at all departments and programs. We plan specifically to look at work that is being contracted out to ensure that it is fiscally responsible and effective. It is dishonest to claim real savings by reducing the number of HUD employees overseeing a program but increase the real cost of the program by transferring oversight to contractors. I pledge to reverse this poor management practice.”
Thumbnail profiles of some of the individuals whose names are said to be under consideration for the position are part of an analysis on the HUD secretary sweepstakes Builder senior editor John Caulfield filed yesterday.
Some people who have been bandied about as possible nominees, such as Atlanta’s Mayor Shirley Franklin, have said on the record that they aren’t interested in the job. But two names keep cropping up as front-runners:
•Manny Diaz, a Cuban-American lawyer elected as Miami’s mayor in 2001, and who completes his second term next year. Diaz currently serves as president of the U.S. Conference of Mayors and is credited with resurrecting a bankrupt city government and leading Miami into a resurgent period by attracting major developers, improving city services, and tackling crime. Diaz’s legacy includes Miami21, an ambitious land use and zoning master plan designed in accordance with the principles of New Urbanism and smart growth. He has also pushed for reductions in greenhouse gas emissions via stringent green building codes and other measures.
“I have not received any formal communications from President-Elect Barack Obama’s team regarding a position in his administration,” Diaz said in his official statement on the matter. “The rumors are just that, rumors and speculation. I remain focused on being Mayor of the City of Miami and completing the projects I started seven years ago. My main concerns are taking care of the needs of Miami’s residents and continue to build a city we are all proud of.”
•Congressman Jim Clyburn (D-SC), a former civil rights activist and member of the House since 1993. With his recent re-election as House majority whip, Clyburn retains a powerful position as the third-ranking member of the House and the highest-ranking African American in Congress. Clyburn made headlines when he told former president Bill Clinton to “chill a little bit” and tone down his rhetoric against Barack Obama during the primary race in South Carolina. Clyburn has denied any interest in serving as HUD secretary. “He plans to stay in Congress and continue to serve as majority whip for the 111th Congress,” said Christie Greco, a spokeswoman for majority whip’s office.
Signs of Credit Market Stability–Now, Fix Housing: Fink
BlackRock chairman and CEO Laurence Fink’s comments as a guest this a.m. on CNBC should come as music to the ears of anxious Fix Housing First coalition business leaders. Their big challenge is to get the ear of Capitol Hill and convince policy makers and legislators that their bid is not about them, but about US [read Main Street and the broader economy].
BlackRock's Larry Fink on CNBC
Fink spoke extensively on this morning’s CNBC Squawk Box program of how credit markets are beginning to show signs of stability as government stabilization initiatives wend their way into the permafrost of global bank lending. Equity markets have shown no such hints of a thaw, but for any effort to address the market dislocation to be effective, “we’re going to have to create demand.” That demand can only surface if homes become more affordable, Fink asserted. “Prices have come down, and now we have to make loans more affordable.”
This is precisely the point of home builders’ all-out effort to get a mid-1970s style home buyer tax credit and temporary mortgage rate buydown into a near-term stimulus package that would represent the most bang for taxpayers’ bucks. “Housing valuation is the foundation” of the economy, he said.
Fink cited the U.S.’s post-World War II Veterans Administration program that allowed returning servicemen and women to buy homes at highly favorable low interest rates for home loans. “We stimulated our economy… from one that made machinery and equipment for war time into what blossomed as a consumer economy,” he said.
If the Fix Housing First team can sign Fink on as spokesCEO, they’ll go far toward making their case for inclusion in a near-term Stimulus II package.
Team Building
NBC TV might have called it an “exclusive” interview for Sunday’s Meet the Press segment moderated by Tom Brokaw, but the network’s use of the term to describe a conversation with Valerie Jarrett, co-chairwoman of president-elect Barack Obama is a stretch at best.
Ms. Jarrett, a good long-time trusted friend of both Michelle and Barack Obama is under consideration for a number of jobs, including housing or transportation secretary, and possibly as a successor for Obama as he vacates his role as U.S. Senator from Illinois.
Long before the outcome of the recent election, Affordable Housing Finance magazine’s founder and former editor Andre Shashaty caught up with Ms. Jarrett to discuss one of her passions, housing for low income families.
Valerie Jarrett
Jarrett’s job was tough enough when all she had to do was pull off multibillion-dollar projects with dozens of stakeholders despite cuts in federal housing programs and runaway construction costs. It got harder in July when a story in the Chicago Tribune asked “what went wrong” with the Plan for Transformation, revealing that the original time frame of 10 years had been extended to 15.
It reported that the strategy of building market-rate for-sale homes mixed with lowincome units had failed as a way to cross-subsidize some projects; due to a dip in home values, the market-rate homes had “in some cases become an albatross.”
Also earlier in 2008, Kimball Hill Homes, a key player in the Stateway Gardens project, filed for bankruptcy.
Jarrett, the CHA, and city leaders are fighting back, defending the Plan for Transformation and the continued viability of mixed-income redevelopment that includes market-rate ownership housing. “Progress has been dramatic and consistent,” says Jarrett. The process her firm oversees is a model for community development, in which all stakeholders have a “place at the table,” she adds.
Jarrett defends inclusion of the market- rate units, noting that foreclosure rates at redeveloped public housing sites are much lower than for other ownership housing in the city. She expresses confidence that long-term data on crime rates, income growth, school performance, and other measures of community well-being will demonstrate the value of the mixedincome model.
- The New York Times profiles an Obama “Dream Team” of prospective cast members in what promises to be a drama in the months and years ahead.
- The Wall Street Journal drills into differences and similarities between two contenders for the job of succeeding Henry Paulson as U.S. Treasury Secretary.
Affordable Housing on the Obama Radar
Nicolas Retsinas, director of Harvard’s Joint Center for Housing Studies–an inductee Friday into the Affordable Housing Finance magazine Hall of Fame in Chicago–accepted the same honor on behalf of Congressman Barney Frank (D-Mass.).
“Had Barney been able to be here with you, he would have,” said Retsinas. “Other than ‘thank you,’ he asked me to offer his support with the comment, ‘we have to stop being Marie Antoinettes.’ I said, with all due respect Congressman, but what do you mean, ‘we have to stop being Marie Antoinettes?’ Barney said to me, ‘For too long now, our answer to all our nation’s economic challenges has been to respond, “Let them own homes.” We have to stop doing that.’”
2008 Inductees
AFFORDABLE HOUSING FINANCE inducted five deserving individuals into its Affordable Housing Hall of Fame in November. These inductees were honored at a luncheon at the conclusion of AHF Live: The 2008 Tax Credit Developers’ Summit, held Nov. 5-7 at the Hyatt Regency Chicago.
Conrad Egan
• June: Conrad Egan, president and CEO of the National Housing Conference
• July: The late Clara Fox, founder of the
Settlement Housing Fund
• September: U.S. Rep. Barney Frank
• Silicon Valley Bank
• October: Nicolas Retsinas, director of
Harvard University’s Joint Center for
Housing Studies
• November: Carla Hills, former secretary
of the Department of Housing and
Urban DevelopmentAFFORDABLE HOUSING FINANCE created its Affordable Housing Hall of Fame in 2006 to recognize outstanding achievement in the industry. Past inductees have included leaders instrumental in the establishment of the low-income housing tax credit program and the Community Reinvestment Act.
Washington Post columnist and MSNBC political commentator Eugene H. Robinson addressed the same business community this past week at the AHF Live Conference, offering observations about what a Barack Obama presidency means–historically and for the moment. Where housing winds up among priorities that include healthcare, national security, infrastructure needs, and the immediate need to stimulate the economy, Robinson would not speculate. He did say that it makes sense that Obama’s focus on the less privileged middle class population would translate into housing initiatives as part of a strategic program he puts together once he forms his braintrust for both transition and a new administration.
However, in Multifamily Executive, senior editor Rachel Z. Azoff, zeroes in on expectations among multifamily and affordable community business leaders, who are counting on the President-elect to catalyze new momentum toward affordable housing solutions.
NLIHC's Linda Couch
“The expansion and implementation of the new national housing trust fund should be the No. 1 priority for the new administration,” says Linda Couch, deputy director of the Washington, D.C.-based National Low-Income Housing Coalition (NLIHC). “The resources serve the lowest income households and those are the households most in need of affordable housing.” Couch also expects Obama to push for increased funding for the Section 8 voucher program and to help combat homelessness.
Like every other part of the housing [and broader] economy, affordable development and finance has hit a hard wall as key parts of the complex layering of private and public finance have been sucked into the vortext of credit paralysis and risk aversion.
Multifamily Executive senior editor Les Shaver reports on how even market rate apartment deals have stalled amid wrenching credit and finance uncertainty in his report, Confidence in Apartment Sales, Credit, Even Occupancies Declines, NMHC Reports.
Considering what’s happening on the equity and debt markets, its little wonder deals aren’t going down. Among the other indices, the Equity Financing Index, fell to four, the lowest result on record, while the Debt Financing Index also declined to four—another record. A whopping 93 percent of respondents said financing conditions have worsened compared to three months earlier; one-sixth of respondents said that the crisis hadn’t affected their current activities.