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Lessons for Austin abound in cities where crises produced affordable housing

Wednesday, March 13, 2019 by Chad Swiatecki

The good news about Austin’s growing housing affordability crisis – if there can be such a thing – is that the city hasn’t suffered a natural disaster or a financial meltdown that would serve as the impetus to build new homes for low-income residents.

But Austin and other growing cities can still learn from New Orleans’ response to the destruction of Hurricane Katrina and from Detroit’s movement to add mixed-income housing to the city in the aftermath of a historic bankruptcy filing. In both cases, strong nonprofit organizations that were modeled in many ways like traditional real estate development companies emerged and stepped forward to build partnerships and determine how to add the right mix of housing stock and community services to help residents recover.

The successes and challenges of those organizations – Gulf Coast Housing Partnership and Develop Detroit – were the subject of a March 8 panel at South by Southwest titled “The Collaborative Approach to Affordable Housing.” Those groups have many similarities with Austin-based Foundation Communities, which has 3,500 affordable housing units in Austin and is almost certain to be heavily involved in adding to the city’s affordable stock as City Council goes about deploying the $250 million approved by voters in November for that purpose.

In Detroit and New Orleans, the crisis moments served as rallying points for the communities, but in each case existing nonprofit groups and leaders didn’t have the scope or skills to tackle housing development head-on.

“As perverse as this may sound, Katrina was an opportunity for New Orleans to dig itself out of a hole because Katrina provided the federal resources to do that,” said Kathy Laborde, executive director of GCHP. “When everyone in the world is coming to help, you tend to go to the areas that are easiest to help first, but there was a broad need all across the area. The thing is, real estate developers are capital-intensive enterprises. The way the nonprofit community has built itself up as a real estate development community is the way the world markets treat those developers …. it’s transaction after transaction after transaction and you build a balance sheet and hopefully those transactions and equity add back to your balance sheet.”

Sonya Mays, executive director of Develop Detroit, said the challenge of a city without streetlights and an estimated 80,000 vacant properties was seen as too intensive for local groups that had adopted a defensive low-risk stance after 40 years of disinvestment and diminishing resources.

“What you were left with coming out of the bankruptcy was this moment of unusual alignment between civic leaders, business leaders, government and philanthropy who all saw the bankruptcy as this moment of rock bottom when there was nowhere to go but up, and how do we capitalize on that and make it as successful as possible?” she said. “Affordable housing is capital- and resource-intensive. It is expensive, complex, takes enormous investment of time and money, and people don’t really step up to invest in those things without some sort of feeling that their investment is going to pay off.”

Both groups have stacked up successes with developments in their cities that are helping the population recover and grow beyond its pre-crisis levels.

Tom Bledsoe, CEO of the Housing Partnership Network that helped create the New Orleans and Detroit groups, said even with successes and stable investment returns of 5 to 7 percent annually, raising capital to fund construction and management of affordable housing remains a challenge.

“The biggest constraint we have in growing these organizations is the constraint on capital. The models are clearly working and the properties Kathy and Sonya and Walter (Moreau) here in Austin are developing are not what affordable housing is thought to look like. But to do it requires a lot of capital and we’re trying to scale … but we can’t get enough of it because government subsidizing is so limited and private capital wants more government money to subsidize their own money.”

Moreau, who was not on the panel but was in attendance, said city leaders need to have patience when it comes to seeing results from the deployment of the bond money.

“In Austin when we got started in the ’90s you could buy cheap, but now it’s more expensive and takes longer,” he said. “The $250 million … the mayor and Council want to really go, and if we have to build new it takes two or three years minimum, but we’ll get there.”

Photo by Garreth Wilcock made available through a Creative Commons license.

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