Category Archives: Housing

How Chicago Learned Privatizing Public Housing Isn’t Enough

Source: Debra Bruno, Politico Magazine, July 20, 2017
 
The city tried, but never managed the fundamental transformation that was so obviously required. Then, slightly more than 15 years ago, Chicago embarked on just such a plan to improve the lives of the families that called public housing home.  Broadly, the new plan introduced three options: vouchers for residents to choose their own homes, mixed-income housing to remove the isolation of many of the most poor residents and improved public housing. But the $1.5 billion Plan for Transformation, which included the demolition of 18,000 units and the rehabilitation or new construction of another 25,000, has had mixed success.  …  Susan Popkin, one of the smartest and most thoughtful observers of Chicago’s housing history has—for the past 30 years—visited families, monitored living conditions and tried to make sense of the ways urban revitalization has created unintended complications. Now, the applied sociologist and senior fellow at the Urban Institute has written No Simple Solutions: Transforming Public Housing in Chicago. She sat down with Politico Magazine to talk about what solutions worked and what didn’t. …

America’s public housing crisis may worsen with Trump budget

Source: Lawrence Vale, Associated Press, July 12, 2017
 
… As someone who has spent 25 years researching and writing about the travails of public housing in the U.S., I had this immediate thought: Could the same thing happen here?  Various commentators have pointed out that American regulations require sprinklers and do not permit the use of cladding materials with combustible plastic cores in high-rise structures.  Yet while the facades of American public housing may be less flammable, the system suffers from a toxic convergence of long-deferred maintenance, squeezed budgets and cost-cutting measures. Privatization policies, deeply rooted suspicions about the character of public housing residents and long-term inattention all threaten the capacity of stigmatized low-income families to remain in their homes. …

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Ben Carson reckons with proposed HUD budget cuts
Source: Jonathan Easley, The Hill, June 30, 2017

… Now, as HUD secretary, Carson controls the $46 billion government agency that oversees housing for the poor. President Trump’s proposed 2018 budget would cut HUD spending by $6 billion. “We will use whatever resources we have very efficiently,” Carson said. “The other thing to keep in mind is that the traditional view of HUD and government is we ride in on a white horse with a bucket of money … and go off to the next thing,” he continued. “That particular model has led us to the point where we have three to four times as many people in need of affordable housing and it’s getting worse.” Carson, who had no experience in government before becoming HUD secretary, is grappling with decisions about which programs to keep, which to shutter, and how to improve the ones that remain. …

Carson: HUD will focus on public, private sectors partnerships
Source: Mallory Shelbourne, The Hill, April 26, 2017

Ben Carson, President Trump’s secretary of Housing and Urban Development (HUD), said in a new interview that his forthcoming agenda will promote partnerships between the public and private sectors.   “The biggest tools are the partnerships — public, private, nonprofit and faith community partnerships — which allow us to leverage those federal dollars …” Carson told The Associated Press in an interview published Wednesday. …  

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Did Miami’s biggest developer avoid labor taxes? The feds are investigating.

Source: Nicholas Nehamas, Miami Herald, July 6, 2017

Federal investigators are seeking to learn if the Related Group, Miami’s biggest developer, lowered costs on an affordable-housing project by hiring subcontractors who failed to pay employment taxes, the Miami Herald has learned. … Related’s business practices are under scrutiny because of a long-running federal investigation into South Florida’s affordable-housing industry. … Even so, the U.S. Attorney’s Office and IRS are investigating the project’s cost structure to determine if Related padded bills and hung onto profits illegally, violations which could bring criminal charges, sources said. Prosecutors have already successfully targeted three other affordable-housing developers in Miami-Dade — Carlisle Development GroupBiscayne Housing Group and Pinnacle Housing Group — that used federal tax credits. The new investigation focuses on whether developers misused county funds.

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Miami Developer in Hot Seat Over Low-Income Housing Fraud
Source: Samantha Joseph, Daily Business Review, March 21, 2017

A South Florida developer is in the hot seat after an uptick in fraud among developers using government credits to fund low-income housing ventures grabbed prosecutors’ attention. Pinnacle Housing Group Inc. affiliate DAXC LLC is accused of inflating construction costs to gain about $4.2 million from low-income apartment complexes in Miami, Sunrise, Homestead and Winter Haven. It paid $5.2 million, including forfeiture, and a $1 million fine to the federal government under a deferred prosecution agreement released Monday. Pinnacle’s affiliated contractor solicited bids for concrete shell work for housing developments from 2009 to 2011. It received final bids from a subcontractor to build the concrete structures, but instead of signing contracts with that company, it entered agreements with DAXC at rates of up to $1.5 million above the bids. DAXC in turn paid the subcontractor at the lower rates, making net profits of about $3.1 million. … The apartments rose during the housing market collapse, when contractors tasked with creating concrete shells often went out of business, leaving developers on the hook for stranded projects. Pinnacle’s use of DAXC as a middleman might have been part of a strategy to shield the developer from potential liens. The company has developed more than 8,500 affordable housing units over about 20 years in business. …

Lawmakers Question Trump’s Stake in Subsidized Housing Complex

Source: Yamiche Alcindor, New York Times, July 10, 2017
 
Two congressional Democrats are demanding more information about President Trump’s potential conflicts of interest stemming from his part ownership of the nation’s largest federally subsidized housing complex, which they say could benefit financially from decisions made by the Department of Housing and Urban Development. … Mr. Trump stands to make millions from his 4 percent stake in Starrett City, a sprawling affordable housing complex in Brooklyn, according to a 10-page letter written by Representative Elijah E. Cummings of Maryland, the House Oversight Committee’s top Democrat, and Representative Hakeem Jeffries of New York, whose district includes the complex. … The men added that they also worry that Mr. Trump’s proposed budget would make steep cuts to many housing programs but “would leave the type of federal aid that flows to the owners of Starrett City mostly intact.” … Mr. Cummings and Mr. Jeffries are also concerned about the appointment of Lynne Patton, a longtime Trump family associate, to lead the department’s New York and New Jersey office.

Trump Administration, Senators Put Fannie, Freddie Overhaul Back in Play

Source: Andrew Ackerman, Wall Street Journal, May 11, 2017
 
The Senate Banking Committee has begun behind-the-scenes work on the issue of how, exactly, to revamp the companies. The senators want to develop a framework to decrease the government’s outsize role backstopping the nation’s $10 trillion mortgage market. On Thursday, the panel will hear testimony from Mel Watt, the director of the Federal Housing Finance Agency, which controls Fannie and Freddie, in the first step of a process that could play out in the coming months.  It remains unclear if policy makers can overcome philosophical differences and hammer out a final deal. Conservative Republicans have called for a private market with no new federal guarantees. Some centrist Republicans and many Democrats have said a federal role is needed to preserve liquid markets for the popular 30-year fixed-rate mortgage that drives home buying. …

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Fannie, Freddie shares dive after U.S. appeals court ruling
Source: Nathan Layne and Svea Herbst-Bayliss, Reuters, February 21, 2017

Shares of Fannie Mae and Freddie Mac tumbled more than 30 percent on Tuesday after a U.S. appeals court shut down efforts by hedge funds and other investors to pursue numerous legal claims accusing the U.S. government of seizing their profits following taxpayer bailouts. By a 2-1 vote, the U.S. Circuit Court of Appeals for the District of Columbia said a lower court had correctly barred claims that the government overstepped its authority in 2012 by eliminating dividend payouts to various shareholders and requiring the companies to pay the U.S. Treasury an amount equal to their quarterly net worth. … Both stocks are still up by about two-thirds since Donald Trump won the U.S. presidential election on Nov. 8. Investors said part of that rally stemmed from comments that month by then-Treasury Secretary-nominee Steve Mnuchin that both companies should be privatized. Mnuchin, however, said in January he was against such a plan. … Both companies have since become profitable under the conservatorship of the Federal Housing Finance Agency. According to court papers, they have returned roughly $68 billion more to the government than they drew down during the financial crisis. … Analysts said the ruling was consistent with others on FHFA’s guardianship of Fannie and Freddie, making it less likely the Supreme Court would take the case. …

The Time Is Ripe: MBA Introduces GSE Reform Proposal
Source: Patrick Barnard, MortgageOrb, February 1, 2017

With government-sponsored enterprise (GSE) reform highly likely under the new administration, the Mortgage Bankers Association (MBA) is wasting no time and yesterday introduced its own proposal for what should happen to Fannie Mae and Freddie Mac. Similar to previous proposals that have been floated about during the past several years by various groups (including the association), the MBA’s plan calls for the GSEs to be “congressionally re-chartered” – in other words, re-privatized – and, importantly, calls for an “explicit guarantee” on the mortgage-backed securities they issue. The MBA’s plan, as outlined in a soon-to-be-released paper, calls for the establishment of a “new, durable foundation for the secondary mortgage market,” the MBA says in a release. … Consistent with the MBA’s previous recommendation, the paper calls for an “end-state that would encourage multiple guarantors” that “would be organized as privately owned utilities with a regulated rate of return.” …

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Federal Cuts Could Force N.Y.’s Creative Hand

Source: Paul Burton, Bond Buyer, March 24, 2017

The specter of massive cuts in federal domestic aid could force New York City officials to think outside the box about how to salvage programs now financed by the feds. … The New York City Housing Authority alone could lose up to $150 million in operating funds and up to $220 million in capital funding. … “The biggest issue for New York City is the housing program,” said Howard Cure, director of municipal bond research for Evercore Wealth Management. One creative option, according to Cure, is to convert some properties to the federal Rental Assistance Demonstration, or RAD, program, which the Department of Housing and Urban Development operates. It allows public housing agencies to fully own their public housing units and to renovate or redevelop the housing using private financing sources. The renovated or new housing receives rental support for the residents through a project-based Section 8 subsidy. … While Trump has called for more public-private partnerships, New York and other Empire State cities still need approval from state lawmakers to execute P3s. …

Deep in debt, flood insurance program expected to boost rates

Source: Dylan Baddour, Houston Chronicle, March 17, 2017

The cost of federal flood insurance will likely rise for thousands of Houston-area homeowners after Congress hits its September deadline to renew and reform the deeply troubled program. The National Flood Insurance Program was created because private insurers couldn’t bear the risk of catastrophic loss, but the program is $24.6 billion in debt and struggling to remain solvent. “The program offers rates that do not fully reflect the risk of flooding.” the U.S. Government Accountability Office concluded in a report last month. … Congress tried to fix the problem in 2012, but the program lapsed for a month amid the effort, stalling home sales in flood-prone areas. The reforms that finally passed caused some rates to soar, so they were swiftly repealed. Now, a five-year extension is set to expire this fall, demanding fresh action. No one can say exactly what measures lawmakers will take, but one thing seems probable: rates will rise, especially in flood-prone places.

… The most likely outcome of flood insurance reform will be increased privatization of the program to relieve FEMA’s burden of risk. In a letter to flood-weary constituents last week, U.S. Rep. Ted Poe, R-Kingwood, wrote that Congressional committees are beginning work on flood insurance renewal, and that “preliminary plans allow private insurers greater and easier access to the marketplace.” … Virtually all reform proposals issued by industry groups call for increasing privatization of flood insurance, but that won’t be cheap. The federal program was created precisely because private insurers couldn’t bear the risk of catastrophic loss. A small number of private insurers have begun offering their own insurance in recent years, mostly for extremely high-value properties. … FEMA acknowledged in a statement that private carriers offer a viable alternative to the federal program. Still, without a renewal of the program this year, the agency noted it would stop selling and renewing policies for millions of properties nationwide. …

Law Firm sues FEMA, seeks agency’s records on Sandy Claims Review program

Source: David Yates, SE Texas Record, March 7, 2017

In late February, the D.C. law firm Weisbrod Matteis & Copley filed a complaint for injunctive relief against FEMA, asserting the federal agency has withheld records related to the agency’s Sandy Claims Review program. WMC represents more than 1,200 Sandy claimants who purchased flood insurance through the National Flood Insurance Program. FEMA administers the NFIP with the aid of private insurance companies participating in the Write Your Own program. According to the lawsuit, Sandy litigants uncovered significant evidence of misconduct by WYO insurers and others working on the agency’s behalf that led to the improper denial or underpayment of many Sandy flood insurance claims. … FEMA’s combination of “delay and deliberate underpayment” has resulted in aggregated payments of more than $500 million to federal contractors, while homeowners received less than $200 million during the same period, according to the suit. … WMC submitted Freedom of Information Act requests on Jan. 6, 2016 and Feb. 9, 2016 to unearth documents “concerning these troubling aspects of the SCR” but FEMA has apparently “failed to respond or even to acknowledge these requests for more than a year,” the suit states. …

The Steady Destruction of America’s Cities

Source: Gillian B. White, The Atlantic, March 9, 2017
 
How to Kill a City: Gentrification, Inequality, and the Fight for the Neighborhood, a new book by the journalist Peter Moskowitz, brings some much-needed clarity to thinking about a slippery concept. … Moskowitz tells of how gentrification has swept through some of America’s biggest cities, writing case studies of Detroit, San Francisco, New York, and post-Katrina New Orleans. In each city, there are specific problems and circumstances that helped the process along, but it’s striking how similar the choices made by politicians, business leaders, and developers and their effect on poor really are across the country. … While Moskowitz includes the important stories of those who called a neighborhood home long before coffee shops and luxury condos appeared, it’s his outline of the systemic process of displacement that is the most devastating.  He convincingly shows how the choices that a city and its government make in the name of a booming economy assign value to some residents and not others: From choices on where and how to fund affordable housing, to invest in public schools, to support new local businesses, but not old ones, the process that goes by the name “revitalization” is often something more pernicious.

… And despite stable economies, liberal leanings, and high involvement in municipal politics in both New York and San Francisco, policies that could potentially help poorer residents have been much slower to come and less robust than the influx of new private capital that devours neighborhoods and displaces residents. In just about every city Moskowitz examines, he finds that choices by city and state governments limited the creation of affordable housing and changed public-housing policies, giving poorer residents little refuge in increasingly expensive cities. Ultimately, Moskowitz says that a big part of the problem when it comes to the unremitting pace of gentrification is that it is a process that often involves the investments and decisions of the private entities, including developers and big corporations, that decide to set up shop in new neighborhoods. In some ways, that’s great for areas that are floundering, but when city leaders become too reliant on the plans and dollars of the private sector, the people who had been living and working in these neighborhoods all along have no one to look out for them and the lives they’ve built. Private organizations have different interests and responsibilities when it comes to making plans to spruce up a neighborhood. And that can mean that their investments don’t happen an egalitarian manner, or benefit a diverse group of residents.  ….

Rare Win for Affordable Housing Over Gentrification

Source: Habitat Magazine, March 1, 2017

In a vote watched closely by opponents of the gentrification now sweeping Brooklyn, shareholders at the 326-unit St. James Towers co-op in Clinton Hill have voted to remain in the affordable Mitchell-Lama program instead of going to market-rate sales. The vote was a victory for Mayor Bill de Blasio, who has vowed to add and protect thousands of affordable housing units in a city that is becoming less affordable by the day. The vote was also a blow against the wave of gentrification that is particularly visible in Brooklyn, Manhattan and parts of Queens. … There are compelling arguments on both sides of the issue. Opponents of privatization, like Cumbo, view it as a threat to a vital, and beleaguered, piece of the city’s housing stock. Proponents of privatization counter that after serving the required time in the Mitchell-Lama program, with its tax breaks and limited resale prices, shareholders are entitled to reap the rewards of the city’s currently hyper-inflated real estate prices. Last week’s vote at St. James Towers was the second in the three-step process of privatization, each of which requires approval by a two-thirds super-majority of shareholders. In the first vote, held in 2014, a sufficient number of shareholders voted to authorize a privatization feasibility study. Last week’s vote was on whether or not to authorize the money to prepare an offering plan. A third vote, which will not be held, would have determined whether the co-op stayed in the Mitchell-Lama program or went to market-rate sales.