Economy

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Dealing with the housing crisis: The Hong Lok example

The housing crisis in the United States is more than home sales, lending rules and interest rates.  Yes, these are important to the economy, but so is the inability of people to find safe, affordable rental housing in a place they feel comfortable.  One of the things that has happened with all the federal budget cut-backs is the reduction of federal funds to help develop affordable housing.

One of the last projects I helped get off the ground before I retired was the Hong Lok House development in Boston’s Chinatown and I was overjoyed to see it featured in today’s Boston Globe business section.

The $35 million project accomplishes the rare feat of expanding affordable housing in Chinatown at a time when luxury high-rises are popping up across the neighborhood, bringing an influx of wealthier renters.

Completion of the first phase next month will create 32 units for low-income elderly residents, who will move from the old Hong Lok building to a new one next door. The original building, which has fallen into disrepair, will be demolished to make way for another 42 units by spring 2014.

Perhaps more noteworthy than the project’s recent progress is the decadelong struggle to get it financed, which underscores the extreme difficulty of keeping housing in city neighborhoods affordable to a diverse population.

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Behind the struggle is a dramatic drop in federal funding for new affordable housing.

Over the past decade, Boston’s allocation of community development block grant money has plummeted nearly 40 percent, to $15.3 million this year, and so-called Home funding has dropped 60 percent, to just $3.55 million, according to city records.

A separate US Housing and Urban Development program for low-income seniors has also been slashed about 50 percent.

That forces developers of affordable housing to rely more heavily on private lending and gifts from institutions.

Jamie Seagle, who would be the first to admit that he and I butted heads more than once, deserves the lion’s share of the credit for making this happen.  It was not only the funding that was an issue, but also building in an historic district with historic structures.   I think the agreement we were able to reach that preserved the historic facades and built units behind them were consistent with the character of the neighborhood worked for everyone.  Yes, it wasn’t easy:  many architects, federal agencies, state agencies, the neighborhood, and at least 3 City of Boston agencies had to agree.  But the fact that we could shows that the process can work.

“To create a site in Boston where you can maintain affordable housing is almost an impossibility today,” said James Seagle, president of Rogerson Communities, Hong Lok’s nonprofit developer. “What’s happening for people of lesser means is that the rents are going up, and the properties where they can obtain housing are steadily going away.”

He said the project involved a decade of legal and financial engineering that generated a three-foot sheaf of closing papers; in contrast, Rogerson’s first project 30 years ago, the 75-unit Farnsworth House in Jamaica Plain, took only 18 months and produced a slim 1½-inch binder for the closing papers.

When I retired last August our first banker’s storage box was full.

When thinking about President Obama’s Second Inaugual speech defending the role of government, one need to look no futher than project like Hong Lok which are happening all around the country.  These are public/private partnerships.

In the case of Hong Lok, developers tapped a complex patchwork of 23 funding sources, including a $17 million loan from Boston Private Bank & Trust Co., a $2 million gift from State Street Corp., and $1.4 million from the Charles H. Farnsworth Trust.

That was on top of millions of dollars provided by the state Department of Housing and Community Development and multiple city agencies.

“It used to be that you’d have three or four sources of funding; now it’s 10 or 12 and sometimes even more than that,” said Boston Mayor Thomas M. Menino. “Too many people are being forced to leave Chinatown, and this housing will create more possibilities for people who want to stay there.”

So as we head into budget negotiations, Congress and the President need to think about rental housing and how to fund it.  Yes, people like Jamie Seagle can make the current climate work and I don’t think anyone is advocating for the days when a huge percentage of any affordable housing project is federally funded, but more cuts will only hurt the people on Ruth Moy’s waiting list.

But that program alone is unable to keep up with the demand. When Hong Lok opens, for example, it will have a three- to five-year backlog of applications from people trying to get a unit. The complex will have an attractive mix of comforts, including a rooftop garden, a community center for seniors, and an expanded adult day health program.

“I don’t even want to think about it,” Ruth Moy, executive director of the Greater Boston Chinese Golden Age Center, said when asked about the demand. “We have a very long waiting list of people who want to stay in this neighborhood. But how long can they wait for affordable housing?”

Three facades conceal a building that houses newly built Hong Lok housing units

Three facades conceal a building that houses newly built Hong Lok housing units

Photograph JOSH REYNOLDS FOR THE BOSTON GLOBE

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The “old” House votes on the fiscal cliff

David Jarman posted an interesting analysis of the voting on the Senate Bill to dodge the fiscal cliff in which he credits Nancy Pelosi for getting it done.  Here are some of the highlights.

Tuesday’s House vote on the fiscal cliff is one of those rare votes where you don’t get a straight party line vote like most contentious votes, but one where the House shatters into pieces and the winner is the side that reassembles the most fragments. Of course, this time it was Nancy Pelosi who did that, putting together a strange coalition of most of the Dems (minus a few defections on the caucus’s left and right flanks), plus the bulk of the establishmentarian and/or moderate Republicans (including the vote of John Boehner himself, no “moderate” but certainly “establishment”).

On the Republican side, there were 85 yes and 151 no votes (with 5 non-votes, from Ann Marie Buerkle, Dan Burton, Sam Graves, Jerry Lewis, and Ron Paul). That’s too many votes to replicate the entire list, but there was a significant geographic dichotomy here, one that seems to support the larger idea that the GOP is increasingly becoming a regional rump party.

Look at the New York Times map.  They also have the entire roll call at this link.

Map of fiscal cliff votes

Of those 85 yes votes, only 13 were Republicans from the Census-defined “southern” states, and many of those were either ones with ties to leadership (ex-NRCC chairs Tom Cole and Pete Sessions, Appropriations Chair Hal Rogers) or ones with atypical, moderate districts in Florida (Mario Diaz-Balart, Ileana Ros-Lehtinen, Bill Young). Rodney Alexander, Kevin Brady, Howard Coble, Ander Crenshaw, John Sullivan, Mac Thornberry, and Steve Womack, most of whom are also pretty establishment-flavored, round out the list.

And how did the Democrats vote?

On the Democratic side, there were 172 yes and 16 no votes (with 3 non-votes, from Pete Stark, Lynn Woolsey, and John Lewis). Within those 16, though, there seem to be two camps: Xavier Becerra, Earl Blumenauer, Peter DeFazio, Rosa DeLauro, Jim McDermott, Brad Miller, Jim Moran, and Bobby Scott (most of whom are Progressive Caucus members) voting against it from the left, and John Barrow, Jim Cooper, Jim Matheson, Mike McIntyre, Colin Peterson, Kurt Schrader, Adam Smith, and Pete Visclosky (most of whom are Blue Dogs) voting against it from the right.

It may not be that simple, though: DeFazio has in recent years been one of the likeliest members of the Progressive Caucus to stray from the party line (for example, he voted against both the Progressive budget and even the leadership budget last year); it’s increasingly hard to tell if he’s becoming more conservative or if DeFazio, always irascible, has just gotten more willing to dig his heels in on bills that feel like half-measures. Adam Smith, on the other hand, has generally been a New Democrat establishment-type player, but he might be looking to remake himself a bit with his newly configured, much more liberal district, which now contains a slice of Seattle. And Moran and Visclosky, even though Moran (who represents northern Virginia) is significantly more liberal than Visclosky, are probably coming from the same mindset, whatever that might be; they’re tight, and are some of the last remaining members of that John Murtha/Norm Dicks appropriations clique that didn’t really fit within any of the Dem caucuses.

Jarman doesn’t talk about Bobby Scott and John Lewis but both are in the Black Caucus as well as in the Progressive Caucus.  Lewis just didn’t vote, but Bobby (who I knew from back in my Virginia Days) represents a district that touches Eric Cantor’s and he might also have had the conservative white voter from his district in mind.

Jarman leaves us with this to think about

Fifteen of the GOP “yes” votes were members who, either because of defeat or retirement, won’t be coming back (Charlie Bass, Judy Biggert, Brian Bilbray, Mary Bono Mack, Bob Dold, David Dreier, Jo Ann Emerson, Elton Gallegly, Nan Hayworth, Tim Johnson, Steve LaTourette, Dan Lungren, Todd Platts, John Sullivan, and Bob Turner). Twenty end-of-the-liners, however, voted “no” (Sandy Adams, Todd Akin, Steve Austria, Rick Berg, Quico Canseco, Chip Cravaack, Jeff Flake, Frank Guinta, Connie Mack, Sue Myrick, Mike Pence, Ben Quayle, Denny Rehberg, David Rivera, Bobby Schilling, Jean Schmidt, Tim Scott, Cliff Stearns, Joe Walsh, and Allen West), though I suspect some of the more establishment-flavored names on that list would probably have been willing to offer a “yes” if the vote had looked closer than it actually was.

Tomorrow starts a new Congress so we can’t really look to this vote when we are reading the tea leaves about the upcoming fight on the debt ceiling and the budget.  There will be more Democrats – enough so Nancy Pelosi won’t need so many Republican votes (I think it may be 21, 17 with vacancies) – if John Boehner can be persuaded to bring things to the floor.

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Who benefits from government programs?

Interesting post today on the New York Times Bucks blog.  Posted by Anna Carrns, asks readers to figure out how many government programs each has benefited from.  She writes

Mitt Romney stirred up a hornet’s nest with his comments about the 47 percent of Americans who he thinks are dependent on the government.

It turns out, according to 2008 data from the Cornell Survey Research Institute reported Monday in a Times opinion piece, that 96 percent of Americans have taken part in government benefit programs in one form or another.

Listed below are 21 programs referenced by the researchers. Numbers 1 through 13 are “direct,” meaning that the aid comes directly from the government; the remainder are considered “submerged,” in that they come indirectly, through government tax policies. (For instance, the money you put in your workplace 401(k) plan grows tax-deferred).

  1. Head Start
  2. Social Security Disability
  3. Social Security Retirement and Survivors Benefits
  4. Supplemental Security Income (SSI)
  5. Medicaid
  6. Medicare
  7. Welfare (Temporary Assistance for Needy Families, or T.A.N.F.)
  8. G.I. Bill
  9. Veterans’ benefits
  10. Pell Grants
  11. Unemployment Insurance
  12. Food Stamps
  13. Government Subsidized Housing
  14. Home Mortgage Interest Deduction
  15. Hope and Lifetime Learning Tax Credits
  16. Child and Dependent Care Tax Credit
  17. 529 accounts (qualified tuition programs) or Coverdell education savings account (Education I.R.A.’s)
  18. Earned-income tax credit
  19. Employer subsidized health insurance
  20. Employer subsidized retirement benefits
  21. Federal student loans

I count 8 for myself:  Social Security, Medicare, Pell Grants, Home Mortgage Deduction, Lifetime Learning Tax Credit, Federal student loans, and employer subsidized health insurance and retirement.  Not only that but I spent almost the entirety of my working life administering various government programs or being paid by government grants.  I guess I really am dependent!  How about you?

2011 10 06 - 1237 - Washington DC - Occupy DC

2011 10 06 – 1237 – Washington DC – Occupy DC (Photo credit: thisisbossi)

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Federal Aid for the Local Economy

I’m off work until the end of the year, but my friends in the budget office are working hard to try to figure out how to cut the city operating budget by 10% because the state will likely cut local aid by that amount.  The state has already made cuts in things like pay raises for direct care workers – the folks who provide care for the disabled and elderly who work for non-profits.  Some of our affordable rental housing construction is not beining constructed because there is no funding either from loans or from tax credits. I think state and local workers may be laid off before this crisis ends.  And, jokes about inefficient govenerment workers aside, do we really need more people with skills and education, unemployed?

Paul Krugman wrote about all this in Fifty Herbert Hoovers.  I know that the governors I know, Deval Patrick and Tim Kaine, do not like the comparison.  I’m sure they understand that cutting spending right now is the worst thing they could do but as Krugman explains

In fact, the true cost of government programs, especially public investment, is much lower now than in more prosperous times. When the economy is booming, public investment competes with the private sector for scarce resources — for skilled construction workers, for capital. But right now many of the workers employed on infrastructure projects would otherwise be unemployed, and the money borrowed to pay for these projects would otherwise sit idle.

And shredding the social safety net at a moment when many more Americans need help isn’t just cruel. It adds to the sense of insecurity that is one important factor driving the economy down.

So why are we doing this to ourselves?

The answer, of course, is that state and local government revenues are plunging along with the economy — and unlike the federal government, lower-level governments can’t borrow their way through the crisis. Partly that’s because these governments, unlike the feds, are subject to balanced-budget rules. But even if they weren’t, running temporary deficits would be difficult. Investors, driven by fear, are refusing to buy anything except federal debt, and those states that can borrow at all are being forced to pay punitive interest rates.

I agree that the state and local governments need help.  Funds to help pay for construction projects, funds for social service programs, funds to help pay for health care and unemployment.  And now for my rant.   But those funds need to have less rigid guidelines than normal Community Development Block Grant (CDBG) and other federal programs.  If AIG, Citi Bank, and the other large lending institutions have no oversight or reporting requirements, state and local governements have too many.  Take the new Neighborhood Stabilization money which is to help purchase, rehab and otherwise get foreclosed properties back online.  I will have to learn an entirely new federal reporting system (the email I got with my password says that there are “navigational problems” with the system) and monitor owners and renters for the next 10 to 15 years, with no increase in staff or administrative costs past the first 3 years.  Does this make any sense? 

Krugman again

What can be done? Ted Strickland, the governor of Ohio, is pushing for federal aid to the states on three fronts: help for the neediest, in the form of funding for food stamps and Medicaid; federal funding of state- and local-level infrastructure projects; and federal aid to education. That sounds right — and if the numbers Mr. Strickland proposes are huge, so is the crisis.

I agree with Governor Stickland with one addition:  money should also go into mass transit and intercity highspeed rail.  This could be part of the green solution at the same time.

If you also want to see and hear Paul Krugman, he was on the Rachel Maddow  show.