Affordable Housing Developers Lament Cutbacks In HOPE VI Program

Tony and Bill, both you and your organizations have had experience with HOPE VI programs and projects in Southern California and are aware of like projects around the country. It's reported that the Bush Administration, after cutbacks by Congress over the last couple of years, is now thinking about terminating the program. What are the merits of the program that deserve federal support?

Tony Salazar: Let's talk about where it is right now. For the past several years, the funding level's been a little under $600 million. Now, they are proposing to cut it off altogether. The program has been targeting old, obsolete, particularly high-rise public housing sites that have an enormous amount of density, where public housing has been converted to the warehousing of people by housing authorities that have become management entities.

The HOPE VI effort has concentrated on going back into these islands to demolish the buildings and rebuild developments that look like market rate, operate like market rate, that are low-rise, and that fit into the surrounding neighborhoods. The program aims to take an island filled with despair and connect it back into the surrounding neighborhoods, enhancing community development and using other kinds of tools to turn areas around. There has been an enormous amount of success investing these funds back into the communities surrounding them, as well as creating a new social environment in these old public housing sites.

We're now getting new data where kids are doing better in school, people are getting more jobs, and market rate investments are following. So, all of those positive trends ongoing in cities today are now at risk with the Bush Administration's plan to discontinue support for the most distressed parts of American cities.

And Bill, relate the program's goals and impact to Related and McCormack Baron's work with Pueblo del Sol and Aliso Village. To what extent has HOPE VI achieved its intended benefits?

Bill Witte: First of all, the true test will be over time-to see whether the benefits that appear to be occurring in some of these projects, including in Boyle Heights, continue over time. But it should be pointed out that this program, historically, had bipartisan support. Part of the reason for this broad-based support was that it was viewed, and should be viewed, as locally energized community development-a shift from the big government model of public housing to making these developments a part of private housing communities. At Pueblo del Sol, the former Aliso Village project, on the western edge of Boyle Heights, it's particularly compelling because that area, including the Pico Gardens development below it, was geographically cut off from the rest of downtown and Boyle Heights by the freeway and the river-it was a geographical, as well as a public housing, island. Today, the housing appears to be reintegrating into the larger community.

In Pueblo del Sol, we have made a great effort to work with the MTA on its First Street light rail planning. We also are working with the school district, which has the Utah Elementary School right in the center of the project, along with some possible commercial development. It's really community development-not just housing development-and the early signs of success are there.

I would add a story that Tony passed on to me. When the leasing office opened for Pueblo del Sol Asian and other families from across the bridge-from Chinatown or Little Tokyo or other areas-were coming into the leasing office every day asking if they could buy one of the homes. They had to be told that unfortunately these units are for rent, and with income restrictions. But the fact that people would cross what had been an imaginary barrier for years and surmise that the development looked like for-sale housing says a lot. And, as an aside, there is a for-sale housing component that the Lee Group is doing.

It is difficult to evaluate HOPE VI because it's not really a program. It's a set of goals that have arguably evolved in legislation, regulation, implementation and practice since '92. Since you are both practitioners, comment on how it's evolved.

Tony Salazar: A lot of the program started out when Jack Kemp was HUD Secretary. He was talking about selling existing public housing to residents and letting them take ownership.

Bill Witte: That was a precursor. When Henry Cisneros came aboard, I remember a meeting that Tony and I had with his partner Richard Baron had with Secretary Cisneros and his staff. Richard made the point that you've got to think outside the box and use some of the funding that was being spent on maintaining the obsolete housing, which was socially unsuccessful as well as physically, not only to help redo the projects themselves and integrate them into the larger community, but also to leverage or utilize some of those funds to invest in the surrounding community. So, it truly was about community development and thinking beyond the island. I could see, as Richard spoke, that the message was getting through.

I want to read you something from the Brookings Institute on this program that says, " what was initially conceived as a redevelopment and a community building program evolved over time into a more ambitious effort to build economically integrated communities and give existing residents more choice in the private housing market. Because of the flexible nature of the program, local housing authorities have had tremendous latitude in how they choose to design and implement their local HOPE VI initiatives." How do you respond to this quote?

Tony Salazar: That's a fair statement, but it doesn't quite capture the full story. When you go back to Jack Kemp's time, you had HUD not just trying to sell public housing, but also allocating money to develop it themselves. As time went on, there was an effort to take government money and leverage it in the private sector. Today, government funds are going through the housing authorities engaging private sector development companies to create mixed-finance, mixed-income, mixed-use kinds of developments. So they've gone all the way from selling to rebuilding a self contained village that's integrated with the surrounding communities, and doing it with a mixed-income and mixed-use kinds of operations.

Also, even though the program took off while Cisneros was secretary, it was Senator Kit Bond, along with several other Republicans, who were driving this whole effort to make sure that the funding was there to get public housing sites rebuilt. So, it was a very interesting bipartisan coalition that has driven the initiative for the last decade, but it is obviously being put out to dry at this point.

Bill Witte: Let me give you an example on the West Coast of how the flexibility can work. Tony and I did a project together in San Francisco before Pueblo del Sol-the first HOPE VI project in San Francisco-the redevelopment of two projects known as Hayes Valley. Of those 195 units, 60% were to be reserved for current public housing residents. The other 40% were supposed to be reserved for families of the highest level of the affordable range, 60% of area median income, which in San Francisco was actually fairly high.

When Mayor Brown came into office as we were beginning to get started on the project, he and his staff discussed with us the possibility of modifying the plan such that 100% of the 195 units would be reserved either for public housing residents or those with Section 8 certificates. With the Section 8 certificate holders, once they left, they could be replaced by households with 60% of median. The reason behind the change in thinking was that the area already was so gentrified, except for the public housing, and there was such fear given the housing costs in San Francisco that lower-income people had no hope of living in the city except in a community like this. So in that neighborhood in San Francisco, it made sense to limit it as it was.

That may be very different in a part of Los Angeles, or certainly in cities like St. Louis, where McCormack Baron Salazar has done a number of projects, where the goal is to try to get market rate or middle-income people back into the city or to stay in the city. So that's one example of a way in which the program doesn't try to mandate from Washington to do it one way.

Bipartisan as it might have begun, the Bush Administration has already proposed eliminating funding, citing long delays between grant awards and the completion of the revitalization projects at many sites. The Brookings Institution concludes that it ought to be renewed, but raises issues about the appropriate targeting of limited resources for affordable housing. Is HOPE VI a justifiable target of public housing dollars in your opinion?

Bill Witte: Yes! First off, like any large-scale program, it's always going to be possible to point to less successful efforts or, as the report cites, cases where funds haven't been spent expeditiously. So if you want to focus on those, you can. What I think Brookings and others have tried to do is say, "Look, this is basically a hugely successful program where it has been administered efficiently. So, if there are issues in certain HOPE VI awards, then let's address those, or let's focus the program. But, let's not throw the baby out with the bathwater."

As Tony suggested earlier, the HOPE VI program has risen beyond where, in my professional life, any other HUD program has ever gone in the sense of: (a) getting outside the box into community development, rather than just housing, and (b) it's become kind of an icon for the New Urbanist movement, which has embraced HOPE VI because of the principles that it's espousing. So, its effects in many communities have been far greater than just on the site itself, and that type of resource targeting in development ought to be encouraged.

Tony, elaborate more on the impact of HOPE VI on the larger affordable housing supply issues our communities face.

Tony Salazar: In California, that certainly is an issue. If we take public housing and downsize the density of the project while introducing more mixed-income opportunities, there's going to be some net loss in affordable units. The question is what you get in return for a project and if its impact on an overall community is far greater than it would be if you just left it as a concentration of very low income households. It's not just the New Urbanists who are jumping on this bandwagon, it is also the people who favor the dispersal of very low income public housing families throughout the city rather than keeping them concentrated.

The amount of leverage that this program generates, by layering tax credits on top of debt, is another reason why this program should be sustained. HOPE VI money goes towards demolition of the existing buildings, relocating the residents, relocating them back, and the administrative costs. At Pueblo del Sol, our total development cost was somewhere around $90 million, and the HOPE VI money was at $25 million. So, there's an enormous amount of leverage that occurs from the private sector entities. Whereas before, the thought of the private sector even investing a penny in a public housing project was unheard of.

So, now you've got a mechanism to advance these projects forward. There are some projects that are slower, there are some housing authorities that don't want to deal with the private sector-they'd rather try to do it themselves. But, the overall impact once it's built, once it's up and running, is that you have more money invested, you've got a better environment, you've got New Urbanism in play, you've got income dispersal, you've got better communities, you've got healthier communities-it makes all the sense in the world.

Let's close with a forward-looking question about HOPE VI. If you were writing a memo to the next head of HUD on HOPE VI, whether it be a Bush or Kerry appointee, what would you suggest are the lessons learned and reforms that would be essential to make it an even better program?

Tony Salazar: Over the course of the past several decades, housing authorities have ended up being management companies, not development companies. I would tell the incoming administration to make sure that the housing authorities engage and enter into partnerships with private sector development companies. The successful HOPE VI projects have shown that a public/private partnership works. And when you can establish that kind of a relationship, you'll have better and more successful developments.

Bill Witte: I would add HUD should perhaps be more rigorous in requiring housing authorities to show not only private sector involvement, but direct involvement of elected city officials. I don't mean in the political sense so much as in the need for integrating the project into the community. This has been the source of one of the more significant roadblocks under the current administration of the program.

Any predictions on whether it will be re-funded?

Tony Salazar: Not under this administration.