Tuesday, May 22, 2012

Housing finance is in too many separated worlds

[OK, it's Saturday, May 26, and I've just re-read the article by Linda Carson that's linked below, and re-read my initial reaction to it, written hastily Tuesday morning, and re-read my half-apology for it in the brackets below, written almost as hastily Tuesday evening. Actually, this post was a mistake on my part. Ms. Carson's article was mainly talking about specific privatization and HOPE VI replacement schemes at public housing sites in Oakland and Berkeley. I don't know enough to have an informed opinion about what has happened there, except that in general HOPE VI has a terrible reputation for displacement. -- MB]

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Just ran into an angry and partly unfair critical remix on Indybay of a news feature on the top affordable housing developers, the latter written, as straight news, with a lot of good effort, by (disclosure) my former employers at Affordable Housing Finance magazine.

[UPDATE, POSSIBLE CORRECTION, LATE 5/22/12: The Indybay writer, Linda Carson, refers to private investors as "exploiting properties with Low Income Housing Tax Credits" and a lot of other types of subsidies. I may have misunderstood what she meant. She would be quite right, not unfair at all, if she meant that some private investors are trying to take advantage when they see older projects, originally financed with LIHTC or other subsidies, that are nearing the ends of their original financing deals, that need new investments on new terms to keep going. If that's what she was saying, I owe her an apology. I thought she meant investors were "exploiting properties *by means of* LIHTC, which would only be true in a complicated, qualified and occasional kind of way. But if she was talking about the vulture factor affecting tired buildings that need new financing, yes, that worry is for real, and the rest of this item should be read only as a general expression of worry about different people talking at different tables. Bracketed notes below were added with this correction in mind.]

The author of the Indybay article is upset, from a pro-tenant lefty perspective, by the presence of for-profit businesses in affordable housing development, and by the displacements that some housing finance deals have caused. The article is a mix of solid dedication to tenants' rights and angry misunderstanding of the way housing subsidies work. [Or rather, like I said above, maybe not misunderstanding after all. Again, sorry.]

And it doesn't surprise me. Because tenant activists and people in the housing finance business operate in such separate worlds that they often don't understand each other. Which is terrible. They should be arguing in the same rooms across the same tables, bending each other's agendas until they're talking about the same subjects -- and they're not. They're often talking past each other entirely.

So, yes, some private investment does cause displacement and privatization in disturbing ways, but then a lot of private investors' housing finance deals have built or rehabbed housing to achieve low rents where otherwise there would have been high rents or vacant lots.

So, yes, you can argue (and I'm likely to) that direct public funding would be more honorable and long-run helpful in some ways. You can argue that the problem with old-style public housing wasn't government involvement but the absence of local control, and that large-scale privatization of public housing is an intensely scary prospect.

But to say, for example, that housing companies are "exploiting properties with Low Income Housing Tax Credits"? That doesn't compute. [That is, depending on what's meant by the phrase. See above.] Some developers do well by doing good, yes, sometimes. Yes, the LIHTC program can involve some devil's-bargain kinds of public-private partnerships. But the LIHTC program is also one of the main ways low-income housing has gotten built at all over the past quarter-century.

Depicting the LIHTC program as primarily a method of exploitation is missing a basic sense of how housing subsidies work in the United States.

This isn't said out of any special wish to pick on the Indybay author, but as a plea for pro-tenant activists to find their way further into the nuts and bolts of the financing side of housing. There really are wrongs but, as always, they're complicated.

[Added later: Yes, and affordable housing nonprofit managers should invite their tenants and prospective tenants into the financial conversations. For-profit investors, yes, can be expected to concede nothing without a demand. But nonprofit folks could do more inclusion and information-sharing without having to be asked, couldn't they?]

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