#090 Nov/Dec 1996 — Saving Affordable Housing

The Elements of Success

What follows is a discussion of the important, parallel elements that emerged from the six successful cases in this report, from NHI’s conference, from several meetings with housing experts, and […]

What follows is a discussion of the important, parallel elements that emerged from the six successful cases in this report, from NHI’s conference, from several meetings with housing experts, and from prior research.

The housing we studied exists in areas where private development is absent. Market forces dictate where development and businesses go. In these low-income and deteriorating neighborhoods, high returns on investment are not feasible. The groups we studied have a different standard of return and are the only players willing to risk the time and money to restore neighborhood housing.

Why did these community organizations and tenants decide to acquire their units? Why did the nonprofit organizations decide to go into the business of rehabilitating endangered apartments and troubled foreclosed housing? An awareness of the motivations of these organizations and resident groups is needed to understand how they succeed.

For CDCs, a deep and abiding commitment to social justice and the improvement of community is imperative. For co-ops, necessity is the mother of invention. For both, the existence of “entrepreneurial leadership ” seems essential. Such leadership, combined with strong motivation and the critical ability to deal with a range of unanticipated problems, prepares a community group for its task.


Deep Commitment to Social Justice

The CDC sponsors were activist, often faith-based organizations driven by a long-term vision and commitment to core values, including social justice and saving the community for its residents.

ACORN Housing Corporation (AHC) of Illinois was an outgrowth of a national organizing campaign around bank redlining and HUD disposition policies. ACORN of Illinois, a branch of the national ACORN network, had worked with squatters in Chicago in the early 1980s to take over abandoned buildings and “put pressure on the city to start dealing with low-income housing issues.” Later that decade, ACORN decided its advocacy work needed to be accompanied by development, and it established AHC.

Boston’s Urban Edge also grew out of a project to fight redlining, a nonprofit real estate brokerage begun in the 1960s by the Ecumenical Social Action Committee. As it evolved, Urban Edge began to take control of run-down, scattered-site properties that no one else was willing to save as low-income housing. Mossik Hacobian, Urban Edge’s executive director, has a personal mission identical to Urban Edge’s original mission, which helps keep the organization focused.

Atlantis Community Inc. in Denver, well known for its advocacy for the disabled, seeks to launch a tradition of independent living opportunities for people with disabilities. This vision helped propel them into the affordable housing business.

Mercy Housing Inc. (MHI) in Denver was established by a group of women’s religious communities and works to provide transitional, supportive rentals and independent rentals. Its main work is with family-oriented developments. MHI believes that members of this targeted population require supportive services that empower them to get out of the cycle of poverty.

The CDCs we studied had origins similar to other successful CDCs. For example, Brooklyn’s highly sophisticated St. Nick’s CDC is also a church-based organization, founded in 1975 by Monsignor Vetro, pastor of St. Nicholas Roman Catholic Church. St Nick’s has evolved into a strong force for neighborhood betterment and preservation, with a staff of 100, a budget near $20 million, and over 600 housing units that it manages. (Keyes 1992)

Necessity and Struggle

For the co-op tenants in Harlem and Boston, it appeared that the only way to save, improve, and secure their housing was to take the initiative and acquire the property. In New York City, an uncaring landlord neglected his Harlem apartment building until fed-up tenants finally seized the initiative to convert the building to a co-op. They had to engage in an intense grass roots struggle to survive.

The other co-op we studied, Marksdale Gardens, a 178-unit townhouse complex in Roxbury, was originally developed as a rental by St. Marks Congregational Church. Under Church management, the residents got along, cared about each other, and paid affordable rents. But the project was poorly managed, and by 1978 it faced serious financial difficulty, with the church more than $1 million behind in mortgage payments. HUD took possession of the project and started foreclosure proceedings. HUD also brought in management companies that were insensitive to residents and staff and failed to properly screen new tenants and make needed repairs. The project began to fall apart, until tenants, led by Minnie Clark, struggled to turn it around as a co-op. Residents acquired Marksdale, on the verge of being resold by HUD, in 1984 and began self-management in 1988.

Tenants in the New York City and Boston co-ops were involved in tough, protracted struggles, against an uncaring slumlord in one case and government bureaucrats in another. Long-term success of co-ops is often correlated with this kind of struggle. In his comprehensive study of New York City co-ops, Ron Lawson found that the process of converting run-down apartments to co-op ownership works best when tenants take the initiative and develop group cohesion during a struggle to save their building. Lawson found that strong co-op organizations were often fostered by rent strikes prior to tenants taking over their buildings.

At the opposite extreme to pre-co-op joint struggle-a situation where a well-meaning outside sponsor chose to save a troubled building, expecting later to organize the tenants and persuade them of the value of co-op ownership-success was much less likely. This was the case with six of the eight buildings that Lawson examined that failed to become co-ops.

Co-ops that succeed through joint struggle provide valuable lessons for the future. When co-ops form as a result of a grassroots struggle-a squatters’ action, a rent strike-residents appear to develop a shared vision, group cohesion, group decision-making skills, and self-confidence. The period of struggle is also a time for leaders to emerge and mature. One of the early leaders of the New York City co-op movement argued, in retrospect, that “if tenants have a long history of problems and it has prompted the emergence of internal leadership, this is important to ultimate success as a co-op.” (Shur 1980)

Entrepreneurial Leadership

While some might consider community-based nonprofits and low-income co-ops the least likely candidates to succeed in the formidable challenge of saving low-income housing, our case studies prove just the opposite. That is because the organizations we studied have at least one dynamic, innovative leader who is not only hard-working but also savvy, like a successful small-business entrepreneur.

Calling these leaders entrepreneurs may surprise or unnerve affordable housing activists. Entrepreneurs are usually associated with private business. But these groups are in business-the business of saving affordable housing. This requires business skills including real estate finance, rehabilitation, and marketing. Further, an entrepreneur is defined as a person who uses resources in new ways to maximize productivity and effectiveness, according to J.B. Say, the French economist who coined the term. The leaders in this case study certainly fit that definition.

People described as “urban entrepreneurs” have played differing roles in the history of urban America. The individuals who lead the CDCs and co-ops in our case studies are part of this long tradition. In the early 1900s, urban entrepreneurs predicted and participated in the industrial growth of the city. In the 1970s and 1980s, they helped shape our post-industrial urban centers. The entrepreneurs that NHI studied, through their efforts to provide stable low- and moderate-income housing, contribute to a renewed confidence in cities in general and their communities in particular.

These urban entrepreneurs demonstrate a rare skill in bringing together disparate segments of society. They operate as “producers,” mobilizing the participants, motivating other members of the community, and attracting capital to their communities. They are likely to initiate “booster” type strategies to attract others in an effort to accelerate growth or revival and increase the value of their own investment. Where this type of entrepreneurial leadership and commitment is present, government policy should ensure that groups have access to the money and technical assistance needed to help create or restore safe, decent affordable housing and make their cities more hospitable to capital investment, consumer confidence, and the poor and an aspiring new middle class.

Managing and Limiting Risk

Peter Drucker, the sage of management theory, tells a story of a symposium on entrepreneurship that he once attended. The papers presented disagreed on everything except the characterization of the “entrepreneurial personality” as having a “propensity for risk-taking.”

Drucker, who was asked to comment on the papers, said he was baffled by this consensus. “I think I know as many successful innovators and entrepreneurs as anyone, beginning with myself. I have never come across an ‘entrepreneurial personality.’ The successful ones I know all have, however, one thing-and only one thing-in common: they are not risk-takers. They try to define the risks they have to take and to minimize them as much as possible. Otherwise, none of us could have succeeded.”

Drucker defines successful entrepreneurs as people who “systematically analyze the sources of innovative opportunity, then pinpoint[s] the opportunity and exploit it.” This ability is necessary to accomplish the complex task of saving affordable housing, especially with the unforeseen problems that will necessarily emerge.[26] The leaders in our study also demonstrated this propensity. They are usually the only ones interested in trying to save the neighborhoods and buildings.

No one was interested in the Grace apartments (then called Le Baron) in Denver because the buildings were run down and in a bad neighborhood. Mercy Housing did some quick pro formas and challenged the building’s high appraisal. When the sales price dropped dramatically after an incident drew negative publicity to the area, MHI’s financial consultant Ken Hoagland recalls, “It seemed like such a good deal, Mercy couldn’t not buy it.” Although the Colorado Housing and Finance Agency tried to convince Mercy not to buy the property and refused to finance it, the group went ahead with the purchase. Mercy quickly ran into trouble, but, like other successful entrepreneurs, defined the risks and then took steps to minimize risks and maximize opportunities.

Effective Leadership

The ability to reduce risk says something about the leaders we studied. Yet it does not necessarily demonstrate a certain personality type, as noted above. It has become conventional wisdom that effective leaders possess a common style. The successful groups we studied, however, have leaders with varying styles.

Mossik Hacobian of Urban Edge is a highly respected, smart, determined, and dedicated professional. You might call him a democratic empowerer. He encourages the exchange of ideas and debate at board meetings and is always looking to support good ideas that go along with the vision and mission of Urban Edge. His general philosophy is to empower the residents and community using encouragement and support from Urban Edge. Although Urban Edge has faced its share of obstacles, Hacobian has successfully integrated all the “empowerment” rhetoric into positive action.

Minnie Clark of Marksdale is a patient and benevolent dictator. “She rules with an iron hand,” said one close observer. “She’s very smart, doesn’t let anything get out of her control. Minnie doesn’t take anything for granted, she wants to make sure everything is in good shape.” Clark is very soft-spoken, the associate said, and her calm demeanor rubs off on other people. She sits and listens, and then tells people what she wants. She will not make a rash decision. She doesn’t let things get to the point where she loses control. She’s a positive influence and a cautious thinker.

Clark’s contributions evoke impassioned tributes from her neighbors and co-workers. “She’s virtually fearless,” Sandra Jenkins said. “You don’t say to her ‘you can’t do this’-that’s what people said to them [the resident organizers]. Especially because they were all ‘girls’-and girls with no experience.” Jenkins continued, “She’s really committed, and not just to Marksdale, but to the community. …She’s more than the president of the board; she ends up being the friend, the surrogate mother, the person who helps fix problems.”

In his writings on the King-Garvey project in San Francisco, Langley Keyes discusses Carmen Johnson, the dedicated leader who has helped make the project a success. Through the force of her personality, her relationship with the local police station and the court system, and the respect she has among residents, Ms. Johnson was able to turn an endangered project around and even drive drug dealers from the development. On Johnson’s style, Keyes writes, “Friendly and low-key, Ms. Johnson is not the ‘charismatic’ type. She does not command a powerful rhetorical style nor take center stage when talking to a group of people. Yet … it is obvious that she is a force to be reckoned with. She is a manager who knows her project and is out walking the development and talking with people all the time….”

What Johnson, Clark, Hacobian, and other effective leaders of community-based housing share, rather than similar personalities, is a deep conviction in and a smart approach to their work. They make their commitment a reality through sheer hard work and by gaining widespread respect among those involved. They are savvy, tenacious, pragmatic, results-oriented, and customer-sensitive. They often possess technical skills. They solve problems through trial and error and quickly learn from their mistakes. They are also highly skilled at conflict resolution, and they encourage a sense of community and involve residents in decision-making. These entrepreneurs are able to access technical assistance and other resources, use resources in new ways, and benefit from long-standing relationships with consultants. Many play an active role as affordable-housing advocates and seek opportunities to share information, learn from others, and help shape housing initiatives, both locally and in the broader community. While these common practices vary in degree from case to case, and may not all be necessary in every case, they are links that have helped the projects we studied progress.

Technical Skill

Leaders who possesses some of the technical skill associated with housing rehab and management are an essential element of success, this study and previous research have found.

Neil S. Mayer’s study, Neighborhood Organizations and Community Development, Making Revitalization Work, which evaluated 100 neighborhood development organizations in urban areas, reported that all had participated in the HUD Neighborhood Self-Help Program in 1980. Their activities focused primarily on housing construction and rehabilitation, commercial rehabilitation, new business start-ups, and business assistance. The study, like ours, attempted to evaluate what conditions and factors contributed to successful community. Mayer found that one of the most significant contributors to good performance is a skilled executive director who, while not necessarily an expert, is familiar with community economic development.

Likewise, Keyes found that executive directors who had experience as housing practitioners and held positions at the state and city levels in jobs related to community development were important to success. One executive director, Keyes found, was well versed in the complexity of Boston’s political institutions, having worked previously for the Boston Redevelopment Authority.

This was also true in our study. Marksdale’s Minnie Clark, for example, had a background in property management and had related skills from her work with a tenants’ rights organization as well as previous employment with two Boston property management firms. Mossik Hacobian joined Urban Edge in 1978 and eventually became Executive Director. Hacobian had studied architecture at Columbia in 1964, and had worked in housing rehab and as a community organizer.

ACORN Housing Corporation’s experience in Chicago shows what can happen when some critical technical skills are lacking. The organization was inexperienced in rehabilitation contracting, and found that this affected the quality of the houses it was selling and drove up costs. AHC subsequently hired an architect to write rehab specifications to make the contracting process more precise, and a construction specialist to oversee the contractors.

Adaptability-Learning from Trial and Error

ACORN Housing Corporation learned from its mistakes, which is typical of an entrepreneurial approach. The leaders all exhibited the capacity for learning, through their pragmatism, use of trial and error, and awareness of changing conditions in the surrounding environment.

AHC was committed to using homesteaders as a rehab labor pool, but found that this limited the number of houses that it could rehab, caused uneven quality of the work, and actually drove up costs by extending the construction process. In spite of its intense belief in using “sweat equity ” to strengthen the homesteaders’ commitment, AHC significantly scaled back that aspect of the program in favor of a more professional approach that used experienced staff overseeing outside contractors.

Mercy Housing has also overcome early mistakes and achieved success through trial and error. At the outset, Mercy appeared to be doing everything wrong. When Mercy acquired the Grace (then LeBaron) complex, the building was in a poor shape, in a crime-infested neighborhood, and in need of substantial rehab. Then, after reconfiguring the units, Mercy discovered it had created more two-bedroom units than its target market could support, and not enough three- and four-bedroom units. The organization had not understood its market, and had underestimated the need for security. Yet Mercy leaders raised money, reorganized, and reduced the risks by changing tenant selection and on-site management practices.

Atlantis Community Inc., with its deep commitment to the disabled, tried hiring one of its disabled clients to clean vacant units at its New Heritage project. When the client turned out to be unreliable, Atlantis went back to contracting for that service. Hiring a cleaning service cost more than hiring a client and strayed from the organization’s ideology, but Atlantis needed vacant units cleaned promptly so they could be rented.

Creating a Shared Vision

Most of the leaders in this study demonstrate an ability to inculcate a shared vision among all those engaged in their attempt to save affordable housing. They work to get all involved parties focused on what they have in common, rather than on what divides them.

To describe this process in the case of the Dorchester Bay Community Development Corporation, Langley Keyes uses the metaphor of lenses, through which different parties see the world, converging into one clear image. At Dorchester Bay, there is a shared sense of appropriate roles for the board and staff, as well as a convergence of goals and purpose among the board, the executive director, the managing entities, and the tenants themselves.

The “shared vision” of St. Nicholas Neighborhood Preservation Corporation (St. Nick’s), a CDC studied by Keyes, comes from the organization’s unity around a set of community objectives. To maximize the likelihood of a shared vision, St. Nick’s, which is both manager and owner of its residential properties, employs a tenant relations specialist to act as the bridge between tenants and management. While some conflicts do exist between management and tenants, St. Nick’s now has a solid track record of uniting all parties.

Leaders of the projects in our study also work to unite those involved. At Urban Edge the players move beyond housing and view the community in a holistic way. Urban Edge attacks problems involving youth, security, jobs, housing, and social services. This requires leaders with vision and staff dedicated to achieving the organization’s goals.

Urban Edge sustains this vision by looking for board members committed to the mission of the organization. Urban Edge is committed to diversity, affirmative action, and affordable housing. Urban Edge only recruits board members committed to these broad goals. Within that framework, however, there is much room for disagreement and debate. To reinforce its vision, in 1994 Urban Edge added a one-hour workshop before board meetings, to discuss in-depth topics such as property management, diversity plans, Urban Edge’s history and accomplishments, the demographics of its service area, and what these demographics say in terms of policy-making and program design. The focus on vision and substance at board meetings helps Urban Edge attract members willing to make a serious time commitment. This vision also helps the staff avoid discouragement and contributes to keeping experienced, competent employees.

AHC involves its homesteaders in a continuum of training activities that communicate its vision of neighborhood improvement. Homesteaders are involved in pre- and post-purchase counseling and sweat equity rehab, and are recruited to join The Homebuyers Club that works to improve the neighborhood.

Most of the residents of the New York City and Boston co-ops also seemed to share the vision of their leadership. As in other successful projects, the example of these leaders and tenants shows that the more widespread the shared vision, the more likely the project will succeed.

Building Resident Participation, Self-Help, and a Sense of Community

Just as important to reinforcing a shared vision among residents and management is the idea of resident participation in decision-making. Most successful CDCs appear to believe strongly in the need for cooperation among owners, tenants, and management. Experience has shown that it is best for rental housing when on-site resident-managers act as a bridge between the residents and the owners or management company.

Some CDCs go further and encourage participation by forming tenant organizations. These often have high participation rates by tenants. At the Dorchester Bay CDC, for example, tenants play a significant role in running the buildings and have been vocal about management firms that have run the developments. (Keyes 1992)

Of the projects in this study, Urban Edge appears to take its commitment to resident participation furthest. Urban Edge encourages residents to be as involved and active as possible in all decisions that affect their homes and neighborhood. Before approaching HUD with its proposal to rehab the Bancroft property, Urban Edge consulted residents to develop a proposal that reflected their needs.

Urban Edge’s tenants council is made up of representatives of its various developments, organized with help from Urban Edge’s Community Services division. Residents also participate in community action campaigns, such as the anti-crime “Take Back the Streets Campaign.” In addition, Urban Edge arranges meetings with resident. But obtaining resident participation is not easy, and few tenants usually attend.

Encouraging resident participation also requires training for oversight and conflict resolution, in order to work through unresolved problems. Urban Edge also recognizes the need to provide for ongoing training for residents, especially for new members who need orientation.

Urban Edge’s long-term goal is for a majority of the board to consist of residents. The board often reaches decisions by consensus, so people come prepared to talk and have ideas aired. As Hacobian said, “It’s a good way for people to try out their ideas in an open exchange, see how the ideas fare; and hopefully, the best ones will survive and we’ll learn through each other.”

St. Nick’s, another CDC on which Langley Keyes reported, also takes resident involvement further with its “unique blend of traditional management skills and a strong grassroots community organizing component-the tenant relations specialists. The combination results from the historic existence within the organization of both community organizing and in-house management skills. The management and organizing arms of the group have come together in a synergistic way.”

Management of St. Nick’s housing is personal. While the coordinator of property management may not know each resident by name, she said she recognizes all of her nearly 600 tenants. She sees the tenant organizations in each building as “critical” to her success as a manager. There is a historical, underlying presumption of management and tenants being on the same side because of St. Nick’s grassroots origins. Both sides need each other to keep the buildings safe and protected.

“While the solidity of the tenant organizations varies from building to building, each has a tenant relations specialist (TRS) who works with the tenants not only on issues of organization but also to connect them with social services on a retail basis. The TRS plays the critical role-part advocate, part manager, part organizer, and part social service worker,” Keyes wrote.

For low-income co-ops, tenant participation is just as important. Tenants of the Marksdale and New York City co-ops are automatically co-op members. While they attend board meetings in varying numbers, depending on the issues, the boards have little turnover in membership. Yet the long-term commitment of board members has the advantage of encouraging respect, good teamwork, and consensus decisions.

Marksdale’s board members, who meet monthly and oversee all management decisions, encourage resident participation in annual elections to choose board members. A nominating committee reaches out to see who may be interested in serving on the board, and during elections people can nominate from the floor.

Marksdale’s Sandra Jenkins described how the board makes decisions, which reflects the style of the New York City co-op as well: “We sit and talk to each other….until we come to a consensus. We don’t have a group of people that jump up and down or are intolerant of people who don’t agree with them. One time we couldn’t agree and just decided to table it until the next meeting. We know each other really well and respect each other. There’s no need to push your point because Suzy over there is going to take over the floor. It’s a very comfortable situation, and that’s a big part of why we work so well together.”

Marksdale also conducts annual membership meetings. “Resident turnout at meetings varies depending on the issue,” said assistant site manager Pam Carter. “You get the same crowd at the annual meetings, about 30 to 40 people….It’s never what you want, but you take what you can get.”

In their efforts to reach out to residents, co-op staff circulate a newsletter and notices of upcoming votes. However, most communications are informal, made when residents call or visit the office to report needed repairs or pay rent.

Despite the lack of member participation at times, residents interviewed seemed satisfied with the way Marksdale was running and made the usual polite excuses about why they were not involved in community activities. When it comes to security, however, resident participation certainly pays off. According to Minnie Clark, “People kind of network. We send out a notice if there is a suspicious character, or event. …They call and say ‘be on the look-out, there’s someone around.” The comments of residents interviewed confirm this aspect of resident involvement. “As a development, we try to keep it all [crime and drugs] out of here. You see strange people around there and you know they don’t live around here. You keep your eyes open,” said one resident.

For Atlantis, tenant participation means allowing residents easy access to the property manager, program manager, and director, and plenty of opportunity to voice their opinions. Residents who have complaints or are looking for information can find the resident manager at home most of the time.

Building resident participation also involves encouraging self help and a sense of community responsibility. Although self help is very difficult to bring about, many organizers of successful projects believe in the idea, both as a cost-saving technique and as a way to develop a spirit of cooperation and community responsibility.

In our successful projects, many residents help keep their place in good condition, confirming the notion that people take better care of their developments when they feel they have a stake in them. Residents help with security, trash pickup, minor repairs, and reducing expenses.

ACORN Housing Corporation’s sweat equity requirement acts as a self-selection process-appealing to those willing to engage in self-help efforts. It also gives potential homesteaders the opportunity to learn more about the organization, the land trust, the requirements of the lease-purchase commitment, and in general what they are getting into. After the approximately six-month sweat equity period, the homesteader is informed and much better prepared to participate in the program than a tenant who simply signs a lease and moves in.

Urban Edge’s efforts to foster a sense of responsibility among tenants is summed up in this way by one of its managers: “There’s lots of wear and tear on these units, even if the tenants are good housekeepers. We challenge our tenants to be responsible for any damages…. When tenants realize they are partly responsible for maintaining their apartments, they take better care.”

The staff at Marksdale keep people informed about what they can do by sending out flyers. Marksdale residents were quite conscious of the need to conserve water to keep costs down. Although water and sewer charges have increased, water usage has declined. As a Marksdale board member said, “All of us live here, and so it’s in our interest to keep the cost down. You’re the one left holding the bag.”

This shared sense of ownership was conveyed by a resident this way: “If you see a person working in their yard on a nice day, you’ll see other people getting out there. That’s one of the things you need for a co-op to work.”

Another resident remarked, “Call me the guard; if I see anyone doing something wrong I correct them. I’m very conscious about how the yards look, even in the winter. If someone throws trash down, I tell them to pick it up. The same with people with dogs, I tell them to use a pooper scooper.”

“We try to get residents to do as much as possible for themselves,” Minnie Clark said. “For example, cut their grass, except for the elderly, handicapped or disabled. We also encourage people to upgrade their interior; we provide the labor if they supply the materials. We have said to people, especially those who pay market rent, if they can’t afford the materials, we’ll pay and add the cost to the monthly carrying charges.”

Clark added, “We’ll do it for the elderly who can’t afford it, just because we think it’s needed.” Marksdale residents also make informal arrangements to help elderly members get to meetings, or to at least send them copies of the minutes afterwards. This pitching in by residents and staff at Marksdale and the other projects we studied helps build the sense of community and willingness to help each other.

The sense of community is built in many other ways. For example, most of the disabled residents at Atlantis’s New Heritage project are clients, and many have worked as volunteers in the office. Some were also members of Americans Disabled for Attendant Programs Today (ADAPT), the organization’s national advocacy group. A few ADAPT members moved to Denver from other parts of the country specifically to live at New Heritage. And at Marksdale and the New York City co-op, church connections contribute to the high degree of social cohesion. Leaders and staff build on a foundation of existing family, church, and social networks in the neighborhood.

Some of the groups in our study, however, have had problems trying to turn the goals of resident participation, self help, and community building into reality. A scattered site housing program such as ACORN Housing Corporation’s, for example, is not conducive to creating a sense of community. In addition, the experience with self help rehab proved cumbersome and caused serious delays. AHC has tried to adapt to the situation by retaining a scaled-down version of sweat equity designed to enhance homesteaders’ sense of community.

At MHI’s Grace complex, the sense of community also seemed underdeveloped. Yet the leaders recognized the initial need to invest in people-rather than in rehab or the latest security system-and took steps to improve the situation. Mercy tries to encourage community spirit by holding resident meetings. Even with less than half the residents participating, the effort appears to be paying off. The sense of community is growing among tenants; according to one staff member, parties are well attended, and residents smile at each other in the halls.

Networking with Other Groups, Neighborhood Institutions, and Consultants

Successful rehab and management of affordable housing requires leaders capable of establishing good working relationships with all potentially helpful parties. Good leaders understand, or quickly learn, the importance of reaching out to other groups. These include individuals and institutions at the neighborhood, city, state, and even national levels.

Many institutions and groups can be important assets to community groups in their work of saving affordable housing. Among these groups are churches; neighborhood associations or crime watches; police departments, especially community policing divisions; technical assistance providers; and advocacy organizations. There are countless other organizations that can help a community-based organization build its capacity to run subsidized housing. The ability to reach out to this network is vital, and failure to bond with other institutions is often fatal.

Nonprofit housing sponsors, unfortunately, have a history of failing to exploit all potential help and leverage other people’s experience. In Lawson’s study of New York City co-ops, he found that, rather than building ties to the tenant movement, many co-ops became increasingly isolated. Although 36 fledgling co-ops initially had ties to community organizations, which often acted as their sponsors, only 10 reported the continued presence of such ties by 1983. Lawson also found that most weak co-ops became isolated not only from their sponsors but from other low-income co-ops as well. Indeed, few co-ops he studied are in contact with one another-even those with the same sponsor. The weak co-ops stand alone, devoting their energies to mere survival.

Each of our housing groups, by contrast, found themselves nested in an array of organizations and institutions that helped them progress. The leaders of Marksdale and Urban Edge, for example, are active in the Boston housing community, and seek out opportunities to share information and learn from others. Both projects also were influenced by and helped shape housing initiatives in the broader community. As Keyes also found when he studied successful groups like the Dorchester Bay CDC, most of our groups were a part of a complex “ecology of institutions” bound together by formal and informal ties. These informal connections and relationships can be difficult to conceptualize and articulate. Successful groups invest the time and energy to become aware of all the possible institutions and people who can help and reach out to pull these networks together.

The most important relationship is the one developed with a group or individual who provides ongoing technical assistance. Lawson found that the failure to procure technical assistance to train the New York City co-op tenants in management inhibited the formation of strong organizations. In co-ops that failed, tenants were not well organized or informed about proper maintenance of the building and concern for other tenants. Some tenants, including the chairman of one tenants’ association, were willfully delinquent in rent. Others were purposely disruptive. The success of some co-ops was totally dependent on a few staff people from the sponsoring corporations, which provided little or no education on general cooperative principles and procedures. The board of directors often functioned only perfunctorily-signing checks, etc. Work was done “for the tenants” and, with the exception of one or two individuals, no significant number of tenants were involved.

Both Marksdale and Urban Edge were able to access and maintain long-standing relationships with consultants. Almost immediately after beginning, Marksdale retained Michael Gondek, executive director of the Community Economic Development Assistance Corporation (CEDAC), as development consultant. Since then, Gondek has met with the board president weekly to review the budget and other matters such as needed improvements, funding sources, tax issues, and ways to save money.

ACORN Housing Corporation’s success has been enhanced by its relationship with the Chicago Rehab Network and its recent connection to LISC, which will help improve its property management capacity. And MHI worked closely with consultants to put together the financial package, improve management, and encourage greater tenant involvement.

The groups we studied learned to build a level of trust among agents and organizations in the community. This trust comes from informal and personal relationships, as well as formal agreements, that have helped their projects succeed.

Financing and Entrepreneurial Spirit

All the groups we studied understood that the major problem facing low-income housing projects is the need for money. Nothing better illustrates the entrepreneurial spirit of these groups than the way they pieced together financing for acquisition and rehab.

The sponsors in our case studies were all undercapitalized, yet they were able to access complex public and private funding sources. They were capable of assembling and layering financing from multiple sources and tailoring the funding to fit their needs. The way these groups arranged the financing necessary to acquire and rehab their buildings can best be described as “creative scrounging,” which refers to piecing deals together through complex financing arrangements with legal entanglements and long time-frames.

To achieve affordability in under-funded housing developments, capital is, in the words of Bratt et al.,[27] “spliced together with other subsidies and sources of financing in a melange of grants and loans, the complexity of which would make private, for-profit developers cringe.” Such “creative scrounging” is integral to the entrepreneurial spirit.

For example, the actual purchase price of the Atlantis organization’s New Heritage property was $100,000. Rehab cost $375,127, with another $32,511 in soft costs, including the developer’s fee, bringing the total to nearly $15,000 per unit. CHFA provided permanent financing and capitalized the rehab costs into the first mortgage. Gap financing came from the Federal Home Loan Bank Affordable Housing Program, the state Division of Housing, and the city’s rental rehab program and Skyline trust fund.

To buy their building, 80 percent of Marksdale tenants had to agree to the plan and have two month’s market rent in place. Since not all the tenants could come up with this kind of cash, the Episcopal City Mission Urban Buyers Fund supplied seed money with a forgivable loan of $40,000.

Marksdale relied on HUD and National Cooperative Bank loans, guaranteed by a 15-year project-based Section 8 contract. Marksdale leaders at first tried, unsuccessfully, to obtain loans from several local banks. Because HUD never owned Marksdale, the FHA insurance fund could not finance the rehab. Marksdale had to use its Section 8 contract as a guaranty and shop for subsidy. Marksdale has a blanket appropriation of project-based Section 8 certificates, for which about half of the residents are eligible. HUD, which sets the subsidized rents annually, agreed to pay all past due real estate taxes as well as absorb the amount in arrears from the original mortgage of $2.4 million.

ACORN Housing Corporation could not have acquired properties and paid for pre-development costs without access to a source of readily available cash that was not dedicated to a specific property with an identified buyer. However, the group managed to negotiate a $200,000 line of credit from Bell Federal Savings Bank.

Other Key Organizational and Leadership Qualities

Certain elements about the groups we studied seemed important, but, due to the limits of our study, we were unable to explore all of these in detail. Nonetheless, we think they are important to note.

Customer-Driven Attitude

The CDCs and co-ops are “customer driven,” meaning their leaders feel accountable to their customers, the residents. They interact with residents with the knowledge that these residents could take their business elsewhere, and they regularly seek comments from their residents. A good example of this is how Mercy Housing Inc. reached out to its original tenants who were concerned about the building and about to move out.

Project-Driven Strategies

Most of the organizations in our study look for development opportunities wherever they might occur. Urban Edge, for example, aggressively seeks funding for needed programs and brings in boards with members who are experienced in development, finance, property management, and community youth programs. Hacobian explained, “Anytime there’s a new program area that looks like it’s going to be around awhile, we try to recruit a board member for that. ….We are about to reconstitute one of our committees to…focus on community services activities and youth programs.”


The groups we studied often employed innovative practices. Urban Edge, for example, organized into two separate corporations: the Urban Edge Housing Corporation, the main organization, a tax-exempt nonprofit; and Urban Edge Property Management, also a nonprofit but not tax exempt. ACORN Housing Corporation developed an innovative financing mechanism previously nonexistent in the marketplace by convincing Fannie Mae to tailor its underwriting criteria to meet homesteaders’ needs. Local banks could then write the mortgages and be able to sell them to Fannie Mae.

Ability to Reduce and Resolve Disputes

The ability to reduce and resolve disputes is another way the groups we studied minimized risks. This is especially important for co-ops. Lawson found that the frequency of serious internal conflict was greater among weaker co-ops, causing leadership burnout, nonpayment of rents and bills, lingering indecision, reduced involvement, and collapse of the organization.

Leaders of the co-ops we studied in New York and Boston are adept at minimizing and resolving disputes amicably. AHC exhibits a unique ability to develop relationships with institutions, including some with which ACORN was previously in conflict.

Management Practices that Preserve Affordable Housing

Rental property management is a distinct profession and a difficult task under normal circumstances. Low-income occupancy just increases the challenges. Ignoring or failing to understand the importance of good management is fatal, according to Ron Lawson. He found that tenants and community organizations typically focus on acquisition and rehabilitation, while the crucial, ongoing importance of management is not understood. The groups NHI studied, on the other hand, all had technical assistance or a strong, professional manager to back up on-site or tenant control.

Professional Skilled Management: Self Management vs. Contracting Out

Although each group we studied was committed to the concept of self management, all were distinguished by their commitment to establishing professional, skilled property management. How they successfully resolved these two important objectives is instructive and key to each project’s success.

Some nonprofits opt for self-management, while others contract with outside management. Self managers focus on providing the care, concern, and empathy of the community-based manager, which is what makes nonprofit-sponsored housing much different from for-profit housing. Others assert that community sponsors are likely to become too preoccupied with the needs of individual tenants and lose sight of the bottom line. Critics of self management also argue that management of low-income rentals is just too complex for nonprofits.

Our case studies highlight examples of sponsors determined to keep the management function within their control, but who also recognized the need to employ skilled professionals.

Urban Edge has from the beginning been determined to retain day-to-day control of the management of its properties, while still insisting on sound management. With a portfolio that includes 475 units in 10 developments, ranging in size from six to 183 units, that goal is vitally important.

Urban Edge has established a successful, sound management system by using an outside company that works alongside the Urban Edge staff and teaches them professional management skills. The Community Builders (TCB), a nonprofit organization established 20 years ago, sometimes serves as managing agent and sometimes as consultant. (Urban Edge’s unique system may not be replicable without a management company like The Community Builders, a unique operation itself.) Currently, the property management operation is structured almost as a co-manager relationship, with TCB teaching management skills and developing systems that Urban Edge will adopt.

To professionalize its management operation, Urban Edge set up a separate entity-Urban Edge Property Management-and hired experienced leaders to oversee its 50 staff members. Jack Geary of Urban Edge Property Management is former assistant director of the San Francisco Housing Authority and was previously a property manager at the Boston Housing Authority (BHA). Twenty five percent of the property management staff are also residents in Urban Edge’s developments.

Urban Edge’s approach to training these residents stands out as an exception among nonprofit, community-based housing managers. For most of the New York City co-ops in Ron Lawson’s study, there was little training of the residents by sponsors-only 11 of 38 co-ops with external sponsors reported even minimal management training.

At the Marksdale co-op in Boston, which is now self-managed, the group brought in Michael Gondek of the highly respected Community Economic Development Assistance Corporation (CEDAC). The co-op has benefited from this long-standing relationship, which includes weekly meetings between Gondek and the board president. The board has developed a consistent and competent management system that relies on six professional staff members, supervised by the co-op president, who is paid part time.

Marksdale began self-management in 1988, after four years of management by outside professionals, as required by HUD and the National Cooperative Bank. Marksdale’s prime motivation in switching to self management was to reduce operating costs.

MHI achieved sound professional management at Grace Apartments after its initial attempt to take control of the project failed. The combined effects of restructuring its management function and hiring an experienced on-site manager-who has over 11 years of experience managing low-income housing-stabilized the tenant population. The restructuring created Mercy Services Corporation, a separate entity designed to ensure high-quality, long-term property management for all MHI complexes.

Atlantis relies on a hybrid management structure similar to Urban Edge’s. Atlantis contracted with Faith Management to provide property management services and training to Atlantis staff for the first two years of operations. Wanting to retain management skills in-house, Atlantis received a foundation grant to help pay for this management training. The hiring of an experienced on-site manager also improved management at New Heritage.

The successful King-Garvey project, studied by Keyes, is managed by a major private manager and owner of subsidized housing. The on-site manager is Carmen Johnson, an extraordinary woman with a rare combination of courage, commitment, street smarts, and professional skills. The management company provides backup and support for Johnson and other staff.

On the question of what management approach is best, we would generally agree with the conclusions of Bratt et al.:

      Most knowledgeable observers agree there is no universally right answer as to whether or not housing sponsors should manage their property. What matters is that the owner’s decision is based upon careful analysis. The LISC Guide to Comprehensive Property Management provides a thoughtful overview of the pros and cons of self-management. Briefly, these include: consideration of the organization’s goals (i.e., does it see itself as in the housing business or in the advocacy and service business); the number of units owned; the operating budgets of the properties; the experience and availability of its own staff; the availability of good outside management; and the neighborhood context of the development.

Some community-based sponsors still hold the view that property management generates “real money” which can be plowed back into the nonprofit organization. The evidence indicates that while there are good reasons for a nonprofit to self-manage, the management fee as a source of revenue is not one of them….

While most knowledgeable observers agree there is no right answer, there are strongly held views in the field as to which option is preferable. Many nonprofit sponsors…argue that they will care more about the development than an outside manager and will therefore do a better job of running it. The property is in their neighborhood; it houses people their organization serves. Self-management allows the owner to keep in close touch with area residents, and provides both visibility and an opportunity to hire local residents. Unlike the private manager who is pulled in many directions by the multiple owners of its portfolio, the self-manager can simply “take care of its own.”

Those who favor outside management are usually spokespersons for organizations involved in the financing of nonprofit sponsored housing. They emphasize the understanding of and specialization in technicalities that an experienced professional firm can offer. These spokespersons emphasize economies of scale and the difficulty of mounting an effective self-management operation with insufficient numbers-the “threshold” argument: that below a certain number-250, 500, 750 units-the “numbers simply don’t work.”

….To a great extent, the ability of a nonprofit housing sponsor to influence the quality of the management carried out in its buildings is determined by its choice of and influence over its management agent. How the sponsor deals with the inside/outside issue is one indicator of its efforts to gain that control and to strive toward professionalism.”

Elements of Good Management

Screening and Tenant Selection: Who Gets In And Why?

Demand for subsidized housing has always exceeded the supply. How did our groups determine who among the income-eligible gets in? To some extent, tenant selection is dictated by government agencies-state housing finance agencies, housing authorities, or HUD. Within those regulatory confines, it’s fair to say that most groups favor employed tenants over unemployed or those receiving public assistance, see job-holders as leaders and role models, and think it important not to over-concentrate the poorest of the poor.

Because of the tight housing market for low-income households, there is great pressure to take those with the greatest need-such as homeless families from a shelter. Subsidized housing is always under close scrutiny by other housing advocates who push for housing for very low-income families. Successful projects, claiming that accepting tenants wholesale without careful review of each family only leads to trouble, seem to be able to resist the pressure to take too many troubled tenants.

One thing is clear. The screening in these projects is a lot more intense than in public housing, and all the groups in this study took the screening process very seriously, looking at such criteria as past conduct of prospective tenants.

While Urban Edge has a little more latitude to evict people and keep them out if they’re causing problems, it faces the same dilemmas all apartment managers face. An example is the ambivalent attitude residents have regarding tough screening and eviction. As one of the managers said, “Everybody wants you to be tough until you’re tough with the person they don’t want you to be tough with.” Urban Edge tries to be consistent and balanced. The staff primarily looks at ability to pay and any criminal record that may exist. The Massachusetts Housing Finance Agency (MHFA) will support the rejection of a tenant if one can do a “reasonable” job of documenting a problem.

But Urban Edge does take risks that private owners would not. For example, the organization works with the Latino Health Center and accepts some HIV-positive, former drug users as tenants. Urban Edge takes these risks because it is committed to helping this population.

Urban Edge, with a turnover rate of about 7 to 10 percent annually, tries to place working families in many of the units. As one staff member recalled, “I remember growing up in public housing; you might have a couple of people who weren’t working but you had firemen, cops, city workers, and you saw your neighbors going to work. That’s changed a lot. My sense is that in properties like Urban Edge, it’s more like the real world, as opposed to just generations after generations of people not feeling as though they have the skills to go out and get a job.”

The tenant selection process at Marksdale is rigorous, and heavily depends on Minnie Clark. She hand-picks tenants, and looks for working families with two parents. Clark also looks for stability in potential residents. “People move around a lot. [We] look at how many places they lived. We look at need and try to look at mix, age-wise, without discriminating.” The development also has a mixture of Section 8 and market-rate households.

Marksdale fill its vacancies from a waiting list. The tenant selection process involves a credit check and landlord references. Clark and another board member may also do a home visit, and Clark conducts at least one interview with the family in the co-op office. “We sit down with the whole family, get to know them, their lifestyle, whether they leave their children unattended after school. Since we try to do it on weekends, so that some board members can sit in, the staff is usually gone,” Clark explained. According to one resident, if a child is not sitting still in his or her seat during the interview, Clark will reject the application. She looks for a certain type of family that values discipline and education. (Many of the kids who grew up in Marksdale went on to good colleges.)

During the intake interview, the family is thoroughly introduced to the concept of co-op housing and what is expected of members. Tenants get a copy of a handbook explaining the rules, what a co-op is, and the history of the Marksdale co-op, including a copy of the lease. “We try to find out whether they are willing to compromise and be part of the community,” Clark continued. “We say, ‘Look around. As you can see there is no playground. And we have these expectations of you. If you can’t live with what we have, you should look for other housing.'”

Resident Isaiah George, who was turned down the first time he applied, as a single father, approves of the strict policies. “They do very good screening. Working people tend to be more careful about their property, where they live. They uphold family value systems.”

Clark said Marksdale leaders generally have had good success so far. They have been able to use intuition, which she said might not work for everybody. “And we have made a few goofs,” she admits.

Mercy Housing Inc. in Denver retained only 10 or 12 of the Le Baron (now Grace) development’s original 27 tenants. MHI staff reached out to the good tenants who were about to move and said, “Please stay. What are your needs? We want you.”

Tenant screening procedures include criminal checks on everybody, although Mercy did run into the problem with dealers who found women with no criminal history to front for them. Mercy’s target market is employed people, with or without children, who are earning the minimum wage or slightly higher. The group moved away from concentrating so much on families with children and are allowing smaller families in the larger units.

Tenant screening at Mercy’s Grace complex is complicated by eligibility requirements. Tenants must not only be income-qualified but also must be willing to reveal much about themselves. MHI’s manager said “there are some good residents at Grace that are in danger because their employers won’t verify their earnings. People don’t recognize that for residents it is a hardship to live in income-eligible properties, especially if the market rate and subsidized rate are relatively close.”

Residents who link with others in the neighborhood are important to MHI. Mercy’s Sister Geraldine said, “We have also found that [with] people who are successful, one of the main ingredients of their success is that they make linkages to the community support networks, whether that’s a church or school or whatever that might be, to maintain their success. You don’t want to pull them away from those community linkages.”

For its New Heritage development, Atlantis relies on a good application form and a good set of rules. “The application form is crucial” claimed resident manager John Bailey. Using this form, Atlantis gathers information on credit, job history, past residences. “If you don’t follow the form and check the information out, I’ll guarantee that if you’re running an apartment house, you will go broke,” said Bailey. Atlantis’s rules look formidable, covering two legal-size sheets. According to Bailey, “People come in and look at the first few paragraphs, and the people you don’t want won’t come back. I give them the rules first, then I hand them the application.”

However, there is a price to pay for such tight screening. Often a unit stays vacant too long. Yet most of the staff would agree that it’s better to have vacant units than problem tenants. As one observer commented, “A few people can have a negative effect on the whole project.”

Studies of other successful CBOs indicate a similar approach to tenant selection as in our case studies. For example, Keyes reported that the tenant selection at Dorchester Bay is fairly rigorous with a reasonable amount of control in the hands of the sponsor.

However, tight screening is not a panacea. Keyes cites an experienced management company, the Stewart Company, that has mixed views about the efficacy of a tight screening process. “[Stewart] does all the record checks that are possible and conducts home visits on every prospective tenant. [Stewart has] been involved in efforts to create a tenant database system for the Bay Area Counties. This system would be set up in conjunction with public housing authorities as well as other managers of subsidized private housing and the conventional market. Yet given the nature of crack, there are real limits to what screening can do. One of the frightening things about the drug is the extent to which it can move through a project and take with it ‘good’ tenants who had unblemished records when they came into the development. Tough screening is important and necessary but it doesn’t keep problems from arising. Pushing too hard at the data source lures one into a false sense of security about being able to keep problems out.”


How to deal with evictions is an important concern of all the groups we studied. Their mission to provide not only affordable but also well-run housing gives them a strong incentive to evict bad tenants. Building a successful case for eviction can be complex in states such as New York, Massachusetts, New Jersey, and California because of the “Eviction For Cause” statutes in those states. None of the owners in our case studies, however, had a serious problem evicting bad tenants.

Although the staff at Urban Edge agree that it is hard to evict bad tenants, especially because Urban Edge’s Bancroft development is overseen by the rent Equity Board, a local agency that regulates rent and evictions, Urban Edge seems capable of working within the tough-to-evict Boston regulatory system. “With one problem tenant, we started the eviction process and went to court. We held a meeting with all the tenants; two went to testify, even though they were afraid, and we were able to move her out, four years ago. Since then, that building hasn’t seen any form of vandalism. There is one problem tenant now, but the manager is on her like a hawk.”

Altogether, there have been 10 evictions at Bancroft. When Urban Edge first took over, there was a great deal of drug dealing, and people were behind in rent. Four drug evictions in 1986 helped clean things up.

Marksdale has had to go to court only three or four times to remove a resident. Marksdale leaders say it’s difficult because courts don’t want to evict. “We have to prove that it’s no matter of discrimination, just that they are not paying the rent. We go through a mediator sometimes and work out a payment schedule. But if they fall behind again…”

To turn its Grace (then LeBaron) project around, MHI had to evict about 10 residents. Mercy spent the first six months ridding the project of undesirables-gangs and drugs users.

Drug dealing and using were also problems at Atlantis’s New Heritage. While Atlantis did not evict any dealers for criminal behavior, staff did harass them until they left. Over the past two years, Atlantis has removed tenants for drunk and disorderly conduct, or for problems related to domestic violence. One person was evicted for failing to pay rent. One tenant who claims to have been wrongfully removed is suing Atlantis.

In Keyes’ study of the King-Garvey project, he characterized management as tough-minded and supported by the court system. According to Keyes, the managers’ view is that if you put the case together properly, there is no problem in getting people out for cause. Even though there is an “eviction for cause” regulatory system, management is able to work within the system and obtain evictions. Management has a deal with the local police whereby individuals who were raided and busted would be processed for something called “automatic eviction” and a stipulated judgment rendered. The concept of “stipulated judgment,” which has been used effectively in the development, is when management gets a judge to support an agreement between a tenant and management as to how the tenant will behave. If there is a violation, the tenant can be evicted without returning to court for a hearing or a finding.

While drug dealing at King-Garvey is cause for eviction, management has an interesting twist on how to most effectively write a lease to ensure flexibility and speed in evicting an individual who is dealing drugs. Rather than stating explicitly in the lease that one will be evicted for dealing, the operative word is “nuisance.” If a tenant is busted twice, management can begin court proceedings to evict the tenant for “nuisance.” The issue then becomes the nuisance generated by the raids, not a conviction for the drug charge. (Keyes 1992)

Of evicting tenants in Massachusetts, Keyes writes, “Unlike New York, eviction for cause for drug dealing is a clear and present possibility in the Boston Housing Court system, which has undergone a long period of education about the need to recognize the rights of the collective in the face of problematic behavior of individuals….Managers believe it is much simpler to get an eviction for non-payment or to find a way of dropping a tenant during the rehabilitation process.”

The MHFA has spent much energy and effort on the eviction issue and has prepared a guide that is as upbeat as its title implies: Successful Evictions from MHFA Housing for Misconduct and Criminal Activity. Written for housing managers and owners, it is presented as “… more than the map of the eviction procedure. The goal is also to provide you and your attorney with practical advice so that evictions will be successful.” The clear message in the MHFA document is that if the steps it outlines are followed, drug traffickers can be driven from the development. (Keyes 1992)


Security-like screening and eviction-is taken very seriously by successful housing groups. The best way to manage security is through a comprehensive crime prevention plan that includes evictions, resident participation, and effective networking, especially between staff and the police.

Urban Edge provides an excellent model for dealing with security. According to the executive director, “There’s two ways you can deal with security. One way is the punitive way. Something happens and you punish it. The other way is to eliminate the opportunity for it to happen. You prevent it, by enhancing the things that are safe and instill a sense of community pride. One of the things that has happened over the last 15 years-and in large part this had to do with us getting involved in multifamily housing-is the recognition by Urban Edge that we have to be more than developers.”

Urban Edge will do, as one manager said, “whatever it takes to achieve the goal of reducing drug activity in the neighborhood,” including subpoenaing reluctant tenants to testify in court and allowing police to use vacant apartments in stakeouts.” Residents are encouraged to keep an eye out. Tenants are usually good about keeping the front door locked. If they notice suspicious traffic, they notify the manager. And the custodians are in and out every day, except weekends. The parking lot and the alleys now have security lights.

The way Urban Edge dealt with a neighboring building is a good example of how it networks in the community to reduce crime. Urban Edge met with the owner of a nearby run-down building where drug dealers lived. The owner said he was doing capital improvements, but Urban Edge didn’t believe it. Urban Edge staff read the police blotter in the community newspaper, to see if residents at that address were involved in a crime. If they were, staff would call and get a copy of the police report, to see if there were grounds for eviction. Urban Edge also participates in monthly neighborhood meetings with police, churches, and other community activists and leaders to talk about recurring problems.

Other security measures implemented by Urban Edge include an MHFA initiative that helps fund a contract with a security company to patrol CDC-owned properties that have MHFA mortgages, as well as surrounding CDC-owned properties. And Urban Edge has begun a new arrangement with police, who have a list of all the residents of a given development and keys to common areas. “If there is something that the police suspect is illegal going on, they have the means to pursue somebody into the building,” explained Hacobian. “If the person goes into a building, at least we know which apartment it was, and Urban Edge can gain entry to that unit. This was an idea that came out of the tenants’ council. And we just put in a proposal under HUD’s drug elimination program to get a grant for a particular location where we’ve had a real hard time controlling drug activity.”

MHI’s Grace complex has security guards every night, even though it’s only four stories and, as a Mercy staffer said, “after all, this is Denver, Colorado.”

“We would have the police… here two or three times a night,” said property manager Richard Birkey, who was hired in August 1993. “We were on the police department’s top ten public nuisance list. Now we’re off the list. The police are also cooperating, they are more responsive and get here quicker when we call.” Interest has waned among the other landlords in the area, but Grace’s management hopes to rouse participation among owners in surrounding buildings to beef up security and work more closely with the police.

Keyes shows how St. Nicks’ commitment to organizing its tenants not only brings unity between residents and management, which helps maintain their buildings in good condition, but also serves to strengthen building security. Tenants who respect a management that responds to their demands to fix plumbing are also willing to provide information about who is dealing drugs, and where they are being dealt.

Security is a continuum, ranging from tenant patrols to in-house guards to the police. In an ideal system, each of these players is in place and each knows the opportunities and limits of their role. If the local police department has “gotten religion” on community policing, so much the better. If off-duty police who are based in the neighborhood during working hours can be hired as additional security, better still. In maintaining security, consistent police presence and resident participation are the goals.

Security and the Courage of Staff Members

Staff of the projects we studied showed exceptional courage in working to keep their buildings safe and secure.

A staff person from Urban Edge said, “When we evicted a problem tenant, her boyfriend threatened to shoot me. Urban Edge wanted to reassign me, but I was determined to be there and make a difference. My tires were slashed in the same incident. But I don’t want to give them the upper hand. Some people might say I’m foolish, but this attitude comes when you’re committed to something and want to see changes.”

Another Urban Edge staffer agrees. “My car window was broken, and Urban Edge wanted to provide me with 24-hour security. But you cannot show that you’re afraid. People are fighting back here, they are not moving. Some people have been here 10 to 20 years. The residents genuinely feel a special commitment to Urban Edge, the community, and the building. When I was first assigned to Bancroft I said to myself, ‘Oh God, what did I do?’ But just to see the progress in a short period of time, you’ve got to have a good feeling. We feel very attached to Bancroft. …There are some strong personal relationships. We just want to make them happy.”

Keyes wrote of King-Garvey’s Carmen Johnson, “When asked if she was afraid when she started to take the dealers on, her answer was an emphatic ‘yes.’ When asked how she managed to proceed in an environment in which those around her were fearful and the security forces useless, she responded that the power of prayer, her faith, and her church gave her the courage…. One cannot understand or explain her willingness or capacity to confront the dealers without acknowledging the degree to which her religious beliefs as well as her enviable relationship with the district police officials have informed her actions.”

Those managing King-Garvey do not think security guards are a solution to management’s need for security personnel. They see such guards as young, underpaid, often afraid, more inclined to take a walk than to get into the middle of a drug scene, and susceptible to being bought off. Management at King-Garvey would rather hire off-duty policemen. An outstanding manager, like Carmen Johnson, is far more valuable (and less expensive) than security forces or continual police presence. On the other hand, it is hard to find people like Johnson, with her combination of organizational talents, personal and professional connections, and fearlessness.[28]

At Marksdale, the staff employs no formal security measures, but encourages informal surveillance-making sure there are “many eyes on the street.” Said Minnie Clark, “The board used to in the evening walk the grounds to see what security [was] needed. We were just another set of eyes to report problems.”

Maintenance and Staff Retention

Two more elements relating to management appear to be important in working to save affordable housing: maintenance techniques, and how projects retain staff.

With regard to specific repair and maintenance techniques, for example, ACORN Housing Corp. adopted basic project management techniques, such as the use of detailed schedules to monitor each project’s progress.

Concerning how projects retain staff and create better work conditions, Keyes quotes an experienced housing manager: “Any financing mechanism must include allowances for higher pay for site administrators….Just as management agents must be sophisticated in all areas of management, maintenance, finance, employee relations, and the changing laws related to housing, our site administrators must be trained in the same global context….Good administrators with potential, skills, and training, who are willing to put in the tremendous amount of work required at our troubled properties, must be adequately rewarded for the task….”

Rent Levels and Collection

Nonprofit housing owners face serious problems in establishing appropriate rent levels and collecting rent. There are good reasons rents are often set below what is needed, yet nonprofits need to receive enough rental income to stay alive.

Nonprofits keep rents low, for one, to retain low-income tenants who receive no subsidies. The working poor who have to pay the entire rent out of their paychecks cannot afford high rents. And rent allowances for residents receiving welfare have remained static while housing prices keep increasing. Management is often unable to overcome the widespread resistance to rent increases and to impose an increase when needed, often because residents are not included in decision-making to the point where they realize the connection between the rent level and meeting the needs of the co-op or development.

Atlantis helps tenants who are having difficulty paying rent. In one case at New Heritage, a tenant was behind in the rent, but management couldn’t afford to keep the apartment vacant and didn’t want to see the tenant institutionalized or put in a nursing home. “It’s a real problem, working with a population in need. It’s harder to kick people out if they fall behind in rent,” confessed the manager. “Part of this organization’s philosophy is in conflict with keeping the project up and running.”

According to Lawson, unsuccessful New York City co-ops allowed rent levels to lag and constantly ignored the analyses of their finances and annual recommendations for steep rent increases by the New York City Department of Housing Preservation and Development. Lagging rents occurred in spite of mounting problems with tax and debt service payments and the insecurity, for all but six co-ops, of living without a reserve fund.

Lawson’s reported:

      The response of the co-ops to chronic arrears was a sensitive issue, for it revealed the role conflict of residents in a co-op-they were tenants who were also their own landlords and were obliged to make decisions accordingly. These decisions were the more difficult because of the climate of landlord-tenant conflict in our society, and because oftentimes co-op leaders had earlier led rent strikes or other anti-landlord actions. The number of eviction cases brought and, in particular, the number of residents actually evicted, was quite low.

One of the nice ways in which a co-op differs from a rental building is that since the residents know one another and have a collective commitment they can allow special arrangements for members having financial emergencies. Although skewing rents to favor poorer residents proved difficult to implement, allowing a resident in trouble extra time to pay the owed rent rather than immediately commencing dispossess proceedings was common….. [O]ne leader commented that every resident of his building must have taken advantage of it at some time. Unfortunately, however, such a practice could also be abused and foster laxity in rent payments, which [are] the lifeblood of the co-ops.

Lawson found a strong relationship between co-ops in serious rent arrears and how residents assessed their success: all 10 co-ops evaluated as unsuccessful had serious arrears. As a result, these co-ops were left with insufficient money for maintenance, services, tax and debt service payments, and other bills. This then reinforced a downward spiral, making residents even less enthusiastic, and thus less willing to pay rents.

Demographics and Characteristics of Residents

Of the demographic characteristics in the projects we studied, among race, age, and income, income appeared to be most important in influencing the success of affordable housing projects. Retaining residents with a mix of incomes, from very low-income to working-class, helps stabilize developments and offers working class role models to non-working residents.

Many residents in the affordable housing projects we studied held regular jobs. At Marksdale many residents were working and had children who worked. In the New York City co-op, the tenants are lower-income working-class African-Americans with upwardly mobile ambitions for their kids. Many have sent their kids to college.

Projects outside of this study that have successfully saved low-income housing often have mixed-income populations. King-Garvey in San Francisco houses a heterogeneous population, in terms of income. While 60 percent of the households receive welfare, family incomes range from roughly $4,000 to $65,000. Seventy-five percent of the residents receive Section 8 subsidies, and the remainder rent at market rate.

According to Lawson’s study, properties with the worst payments and conditions also had by far the greatest number of welfare tenants. This correlation is not surprising, since public assistance maximum rent allowances are barely sufficient to cover operating and maintenance costs alone-leaving no rent for financing costs.

Social Services

Social services play an important role in two of our case studies-Urban Edge’s Bancroft Apartments and Atlantis’s New Heritage.

In 1986, Urban Edge started a new department called Ownership Services (OS), which began with a survey of what residents thought of their services and neighborhood, and what additional services would they like. OS gave residents a list of 15 or 20 choices and asked them to prioritize these services. Safety, after school programs, and day care are almost always at the top of these bi-annual surveys.

Atlantis serves severely disabled people, many with multiple disabilities and who were previously institutionalized. As a result, Atlantis has developed a unique range of services, including housing, daily living and home management, life education, attendant services, medical services, employment, recreation, and transportation. Atlantis also runs the Mark D. Ball Learning Center, which operates under a contract from the Colorado Division of Rehabilitation and works with other local programs to offer basic education, life education, crafts and recreation, employment preparation, and job skills training.

Atlantis’ philosophy is that the needs of the disabled population are vast and varied, and the disabled should not be forced to fit into a standard routine for the convenience of service providers. New Heritage has an on-site disabled peer manager who also serves as an advocate/benefits counselor for all the tenants. The job of this person, an Atlantis staff member, is to serve as a combination attendant/maintenance person (‘maintendant’) who takes care of building upkeep and provides personal attendant care to help disabled tenants with dressing, cooking, bathing, or other living activities. Seven Atlantis clients live at New Heritage. Some need lots of help, as many as three visits a day. The availability of home-based services has made independent living a real possibility for these people, who would otherwise be forced to live in institutions. Chris Cordova, an Atlantis employee, serves as the resident super. He appears to be a jack-of-all-trades, extremely dedicated and, as the manager said, “a good-hearted soul.”

Atlantis’s style and approach is different from many other home health agencies. If someone is not home, the attendant comes back later. If someone doesn’t want to get up, it’s okay. The staff doesn’t compromise people’s health, and instead gives them a range of options. As Atlantis’s manager said, “The very severely disabled want to have a life rather than be told what kind of life they can have.” Staffer Karen Tamley adds, “Atlantis is unique because it serves the lowest-functioning of the disabled (as opposed to ‘creaming’). That’s the problem, there are not enough agencies out there to serve the truly disabled, as opposed to just doing some light housekeeping.”

As Keyes points out, in providing services, it helps to have a manager like Carmen Johnson from King-Garvey, who worked for years in a variety of social service organizations in San Francisco. Keyes writes of Johnson:

    …She has a strong connection with the schools, youth and children’s services, and various drug treatment centers, and is continually networking with them to find places on a “retail” basis for residents of the development, either for job training or treatment for addiction. She has an extraordinarily resilient attitude toward addiction: that youth can be turned away from it as a way of life and that there are real job and educational alternatives for young people in the community. Services at King-Garvey are pretty much what Carmen Johnson can pull together. She refers people to the Catholic Charities and Salvation Army and tries to connect people looking for work with jobs. She wants to establish a day care center at the development.

Dorchester Bay CDC obtains social service help from the Resident Resource Initiative (RRI). Established in 1987 and funded by local foundations, the RRI provides half the salary of a full-time staff person for several housing sponsors in Boston. The staff members work with tenants on issues of organizing and human services, and serve as resource persons for the Dorchester Bay EDC. The resident resource specialist position requires the person to be a jack-of-all-social-work-trades, who can organize and provide assistance and services to residents. The RRI staff person’s networking task is formidable, and the built-in schizophrenia of the role takes a high toll on people.

Pat Riddell, the RRI specialist for Dorchester Bay at the time Keyes conducted his interviews, was considered the “best in the business.” “Her execution of the role of RRI specialist seemed to be a model of what the role is supposed to be….” Riddell did some one-on-one counseling and connecting individuals to services in the community, but defined her job more in terms of community organizing and fighting to make the buildings work. She is respected by tenants, the management company, the Dorchester Bay executive director and board. She had a very clear sense of the need for a “shared lens of vision,” and through her energy, intelligence, and street smarts was able to keep the confidence of all with whom she had to work. Keyes added, “She also has much of the ‘still small voice’ quality about her-unassuming and cheerful.”

Size and Configuration of Buildings

Although Lawson hypothesized (following Mancur Olson 1965) that organization is easier in small buildings because residents know each other better and can apply group pressure more easily, his study found size to be statistically insignificant in determining a project’s success.

Similarly, while our study found the size and configuration of the housing to be insignificant in determining success, these features can either serve as assets or create logistical difficulties for property management staff.

According to Bratt et al.:

      [Most nonprofits believe that] the ideal building from a management standpoint is one that has 100 to 200 units, is configured as a single-site development, and has an on-site property manager and a live-in superintendent. The virtue of a development of this size is that it is large enough to generate management fees that cover the costs of necessary on-site personnel and services.

When site managers must assume responsibility for multiple buildings, either because the portfolio consists of small developments or because single developments encompass scattered sites, the burden on them increases. Separate buildings, even if situated on a single block or within close proximity to one another, are more difficult and costly to manage and maintain… since managers and superintendents must oversee several entrances, boilers, roofs, and other systems. Equally important, the more buildings a manager is responsible for, the less time he/she can spend at each, thereby increasing time (and related costs) spent on travel and reducing the level of effective management control of the site.

Because Urban Edge buildings are spread out, in areas with high crime and drug dealing, most housing experts regard its portfolio of multifamily properties as difficult to manage. Urban Edge’s Bancroft Street complex comprises 45 units in four small apartment buildings; three are in close proximity and the fourth is a short distance away. The site manager and maintenance person are based in the central office and visit the property once per week, at most. The site manager of another Urban Edge property reported about the same frequency of contact, visiting each property for about 30 to 45 minutes. The most problematic development in Urban Edge’s portfolio, Jamaica Plain Apartments (which was not included in the study), consists of 15 buildings spread throughout many neighborhoods. The site manager reports that it can take an entire day to cover all 15 buildings.

Marksdale Gardens in Boston consists of 178 townhouses arranged in six clusters. The townhouses are two-story, with private entries and small front and back yards. The houses face inward toward common areas, and the street edge of the complex is lined with a tall wooden privacy fence. While the complex is open to the public, and the pedestrian paths that lead through the courtyards also serve as neighborhood short-cuts, there is a sense of enclosure and privacy; it is clear when you have entered or left the Marksdale grounds. This helps keep crime and drugs out, because it is easy for the residents to watch for strange people and other problems.

This configuration of the Marksdale townhouses helps encourage tenant cooperation and a sense of community, making it helpful, but not critical to the co-op’s success.

Location and Neighborhood Effect

Did location help or hinder the management of successful projects? Did owners save their low-income housing developments by surrounding them with a moat that would protect them from the negative impact of the neighborhood? Or did the sponsors expand the beachhead and help turn around, or at least improve, the neighborhood in order to ensure that their project would succeed?

There is little research that examines the importance of the neighborhood in maintaining affordable housing. There’s no mention of the neighborhood’s impact on management’s capacity to do a good job in The Urban Institute’s 1970s work on housing management. (Isler et al. 1974) Keyes and Lawson are the only two studies we found that looked at neighborhood impact.

Keyes found that if a development is the soft spot in an otherwise strong neighborhood, its chances of long-term success are enhanced by this.

In troubled neighborhoods, however, the “oasis technique” emerged in the mid-1980s as a comprehensive strategy for neighborhood improvement, Keyes also found. This type of neighborhood improvement occurs by first making strategically selected areas in distressed neighborhoods decent and safe. These improved areas, in turn, produce positive ripple effects that form a patchwork of stability.

According to Keyes, “The relationship between the oasis and the surrounding neighborhood becomes critical, as does the connection between the oasis and the public and private institutions to which it must look for help: City Hall, the police, and private employers. When the oasis strategy moved from dealing with parts of neighborhoods to regenerating public housing developments, the approach remained the same: to think in terms of the connection between the oasis and the surrounding area and what was involved in getting a ‘positive ripple effect.'”

Keyes’ study of O’Dwyer Gardens, a decent New York City public housing project surrounded by a wasteland, reflects the New York City Housing Authority’s (NYCHA) tradition “of focusing on its housing developments rather than on the affairs of the surrounding area-particularly if they are socially and politically disruptive….” NYCHA provides an on-site Alternative High School Program, which brings resources into the project rather than connecting students to facilities in the neighborhood. NYCHA circles the wagons while it waits for the society to conquer the larger problems of poverty and jobs.

Keyes studied two CBOs, St. Nick’s in New York City and Dorchester Bay in Boston, that saved almost-abandoned, privately-owned low-income housing. These CBOs define their relationship to the neighborhood as one of expansion outward from their buildings.

Lawson found that a co-op’s location greatly affects its viability. For example, the successful co-ops he studied are either in gentrifying sections or stable sections that are peripheral to low-income ghettos. That is, they are located in neighborhoods with less widespread housing destruction, and less ravaged by the drug dealing and violence associated with the crack epidemic of the last decade. Lawson found more viable co-ops tended to be located in stronger, even gentrifying, neighborhoods. Because of high demand, these co-ops were able to screen new residents more stringently. In contrast, weaker co-ops were situated in neighborhoods increasingly ravaged by drugs and decay, where screening had all but disappeared because management was forced to accept almost any applicant willing to move in. Nevertheless, six continuing co-ops, with the largest mortgage arrears, survived in spite of their environment.

All but one of the housing developments we studied operate in neighborhoods that suffer from most of the following problems: high concentration of poverty; high unemployment, especially among youth; deteriorated housing; vandalism, drug dealing, and other crime; fear of crime among residents; and inadequate municipal services.

Atlantis’s New Heritage project was one of the best-located properties in the Denver bulk purchase of RTC properties. The Capital Hill neighborhood of Denver, where many of the properties in the bulk purchase were concentrated, is an area of older apartment buildings and fairly high-density single-family homes, just southeast of the central business district. Capital Hill borders a large park, which is considered safe and very attractive, and sits adjacent to upscale residential neighborhoods and a historic district of patrician, Victorian-era homes. There are several substantial, architecturally distinctive, pre-war apartment buildings throughout this area, designed and landscaped to fit with their single family neighbors. With its quiet, tree-lined streets and stable, mixed-income population, this section of the Capital Hill area is not a typical low-income neighborhood.

Urban Edge’s Bancroft properties are located in a neighborhood, Jamaica Plain in Boston, that has been rebuilding, rehabilitating, and gentrifying for the past several years. Many parts of Jamaica Plain were run down and abandoned during the 1970s, but the 1980s gentrification transformed several neighborhoods.

Like other successful CDCs, Urban Edge takes a holistic interest in the community. It attacks neighborhood problems dealing with youth, security, jobs, housing and social services. Urban Edge is successful because it has the capacity to identify needs and do something about a variety of community problems.

The New York City and ACORN Housing Corporation projects are in run-down neighborhoods that could threaten their long-term viability. It may be necessary to “expand the beachhead” in these cases, and convince area landlords and institutions to try to improve the neighborhood.

The isolated, semi-abandoned setting of Mercy Housing Inc.’s Grace complex shows all the signs of neighborhood disinvestment. The neighborhood consists of large blocks of low-rise apartment buildings set back from the street and surrounded by expanses of lawn and parking lot. If there is a ghetto in Denver, this is it. In the last five years, this neighborhood has become notorious as a center of gang activity, drug trade, and related turf wars.

MHI is trying to both “circle the wagons” and “expand the beachhead.” But Mercy aims its property management efforts more at improving conditions within the Grace development than in the neighborhood at large. For example, in dealing with crime and security, Mercy now employs 24-hour security for Grace. “There’s no reason for a development this size to put security in the building all night, every night. It’s only four stories, and after all, this is Denver, Colorado,” said Mercy’s Sister Geraldine Hoyler. But according to property manager Richard Birkey, the building next to Grace recently came under new management and seemed to be full of drug dealers. “In this neighborhood,” he explained, “the buildings are either good, safe, like an oasis, or drug-infested. But [the drug dealers] have to get through a manager, so the key is who is managing, who is in that office. The problem here is, some owners seem to be in cahoots with the gangs or really don’t care. They buy a building, fix it up to a minimum, and fill it with dealers.”

Yet while drugs continue to be a problem and the neighborhood still lacks amenities like play facilities for kids, MHI did turn the building around. There is finally a stable management and maintenance team. As one tenant said “they make you want to care. They’re both nice and helpful.” Mercy is successfully building a sense of community within the building. Much work still has to be done, however, to expand the beachhead.

Overall, neighborhood conditions appear to present significant but not insurmountable challenges. The groups we studied understand the realities they face-deteriorated and often dangerous neighborhoods-and are taking specific steps to mitigate the negative impacts of the neighborhood on their developments.

Availability and Access to Technical Assistance

Resident-controlled housing groups, whether co-op or nonprofit-owned, need technical support services to help deal with the many complex issues they face. The groups we studied received technical aid of all kinds-organizing training; legal aid; help in evaluating, purchasing, and managing buildings; and help in setting up nonprofit organizations to purchase buildings. The help often comes from city agencies and other nonprofits; technical assistance providers also often stay in touch and remain available.

In our New York City case, the tenants were able to obtain fairly easily an evaluation to determine whether their project would be financially viable as a low-income tenant cooperative. The technical assistance came from experts committed to community-based nonprofit ownership. The assistance provided by six consulting organizations helped the co-op achieve success. These experts simplified what could have been a long and complex process that, in turn, could have deterred the tenants from buying the building.

This is consistent with Lawson’s study. The co-ops in New York City that performed best frequently began with experienced sponsors who could provide technical assistance to the co-ops in carrying out rehabilitation, securing tax abatements, and management training. There was a high correlation between having a skilled sponsor and obtaining a tax abatement. Low-income co-ops inevitably lacked the skills, sophistication, specialized staff, or resources to hire consultants that the complex tax abatement application demanded. Technical assistance bridged the gap.

The availability of consultants providing technical assistance and legal support was also crucial in our two Boston case studies. Marksdale used Greater Boston Community Development, which helped turn the nearby Warren Gardens into a co-op. In 1978, Warren Gardens became one of four projects in Boston selected for a HUD Regional Office Demonstration project. As part of the demonstration, the leaders of Warren Gardens received training workshops on ownership concepts, inspection of conditions, maintenance, budgeting and parliamentary procedures. This, in turn, benefited Marksdale leaders, who received critical technical assistance from the leaders of Warren Gardens.

For Boston co-ops, a group called Residents to Residents brought support from more experienced resident leaders to the current generation of groups undertaking the arduous process of trying to buy their complexes from HUD. As a participant in the continuing process of housing preservation in Boston, Marksdale benefits from the contacts and access to resources that typically result from such networking and sharing.

Outside technical assistance also helps housing groups confront hard decisions and resolve conflicts. Marksdale uses technical assistance to help work through internal management concerns and, as one consultant said, “to make sure the board doesn’t get too far out of whack.” Marksdale also uses technical assistance to conduct annual membership meetings, chaired for the past several years by Michael Gondek of CEDAC.

The Catherine McAuley Housing Foundation provided technical assistance to Atlantis and MHI in the purchase of properties in the bulk package. The assistance included educating the purchasers about the RTC program and the process, identifying buildings appropriate for each group’s needs, and conducting preliminary analyses.

Atlantis benefited from a significant amount of technical assistance during the acquisition, rehab, and start-up period. Colorado Housing Finance Agency provided the rehab work write-up and estimate, and both CMHF and CHFA helped Atlantis find the right building and funding sources for its program. A Robert Wood Johnson Foundation grant helped pay for management training. In addition, Robert Wood Johnson funds the Institute on Research and Rehab to help Atlantis develop its assisted housing program.

Regional and National Assistance

Soon after MHI became owner of its Grace Apartments, the group had to lend money to its subsidiary, Mercy Services Corporation, to replace the boiler. Later, faced with massive destruction of units by tenants, it had to borrow substantially more to undertake major reconstruction. Without a parent company with such deep pockets, Grace would have been in deep trouble. As one observer noted, “Banks that did not want to lend to the project initially would certainly not lend to it after it had failed once.”

ACORN Housing Corporation is closely connected to ACORN, the national advocacy organization, and consequently has greatly enhanced clout when it sits down with reluctant bankers or city officials. ACORN’s organizing success with Fannie Mae on a national level was important to its local Chicago success.

Most neighborhood problems cannot be solved in the neighborhood alone. Banks, federal and state governments, employers, and others outside the neighborhood shape conditions within neighborhoods. So national advocacy and organizing efforts, such as ACORN’s, provide important lessons for affordable housing providers and advocates.

The Role of Government

The Federal Government

The United States, among all western democracies, relies most heavily on market forces to house its population. Yet federal involvement shapes the economic environment in which all housing investment decisions-public and private-are made. Moreover, without the federal government, we would not be worried about saving low-income housing, because there would be very little to save.

Developments like Marksdale in Boston were originally created in the mid- to late 1960s through HUD’s Section 221(d)(3) program, as replacement housing for low-income families displaced by urban renewal. Marksdale was praised for its architectural design, an alternative to high density, high-rise developments. A HUD-sponsored study found that residents of new Section 221(d)(3) developments were quite satisfied with their housing, and significantly more so than those who had moved into public housing.

Federal assistance was important in keeping Marksdale and the other projects we studied as affordable housing. The ability to gain this assistance, however, was sometimes difficult, as many groups had to endure frustrating delays and bureaucratic indifference to eventually succeed.

When residents of Marksdale attempted to salvage the property from HUD foreclosure, their efforts were frustrated by HUD’s repeated loss of their applications and by the high rate of staff turnover in Washington. In addition, the transition and subsequent rehabilitation were handicapped by the project’s ineligibility for FHA financing, as HUD never completed the foreclosure process and took possession of the property. This simple procedure would have paved the way for greater federal assistance and eliminated the need for subsequent financial resources. And now, despite Marksdale’s success, the eventual loss of the Section 8 subsidy could endanger the project’s long-term survivability. The resident board will have to refinance the project and conduct a continual search for operating subsidies to sustain this community. However, given the composition and determination of board members, their success is likely.

Urban Edge also had to overcome substantial bureaucratic obstacles with its Bancroft property. Prior to Urban Edge’s purchase of the building, HUD had managed the process with indifference. In spite of a HUD-initiated rehabilitation, 15 years of deferred maintenance and a poorly executed capital improvement program left the property strapped for cash and depleted of operating reserves. Urban Edge would literally pay for this neglect. A few years into running the buildings, Urban Edge found its capital expenses exceeded its set-aside funds. Although subsequent negotiations with HUD allowed for increases to the operating reserve, it became clear that a complete refinancing would better serve the project. Urban Edge sought to raise additional capital from a variety of sources. Linkage funds from the City of Boston, a grant from the Affordable Housing Program of the Federal Home Loan Bank, and an infusion of equity from the sale of Low Income Housing Tax Credits would provide the necessary capital to adequately refinance the project. By the time these additional sources of revenue were committed, however, the initial 15-year Section 8 contract was down to its final 5 years. Confronted with uncertain future cash flow, Urban Edge had trouble finding a lender to finance the project. Only when Urban Edge obligated and escrowed its developer’s fee of $100,000 did it secure the necessary money. While HUD is under no obligation to extend the Section 8 contract, as with Marksdale, a 15-year renewal would help ensure the project’s long-term success.

The federal government, however, does much more than supply the money and devise the program. Money and program are important, but bureaucracies matter as well. If the bureaucracy is lackluster, ineffective, and maddening, it can hinder the implementation of a program. Or it can be activist, entrepreneurial, and helpful. Bureaucracies that value the nonprofit as important customers are extremely helpful. The Denver office of the RTC is an excellent example of such an agency.

The Denver RTC office, unlike HUD and many other RTC regional offices, was a customer-driven agency that viewed the nonprofit housing sector as legitimate and viable customers and demonstrated its concern for the ultimate customer-the low-income families who would live in the housing nonprofits were working to save. The RTC hired housing specialists from throughout the Colorado nonprofit housing industry and moved quickly to relax certain rules against providing financing to nonprofits. By assembling 10 multi-family properties into a single pool for sale to eligible nonprofits at a discount, the Denver RTC leveled the playing field and established the trust and support necessary to ensure success. This, however, was not an easy task. The regional RTC staff had to overcome the inherent contradiction between a national mission of representing taxpayers by achieving the highest value possible, while trying to preserve the properties as affordable housing. In the end, both constituencies won. The Denver RTC staff had a clear vision, which it effectively reconciled within the national mandate, to creatively package affordable housing opportunities. The delicate balance of serving many of the nation’s vital interests was admirably served through the Denver RTC’s thoughtful approach.

The presence of affordable-housing advocates in the Denver office also helped to facilitate this process, forging alliances with the Fifty For Housing coalition and disseminating vital information about low-income housing opportunities. It is clear that there would be no Grace or New Heritage projects in Denver if the RTC sold these properties at deep discounts on the open market.

The experiences of the groups studied provide a realistic examination of how the federal government can increase or lessen the difficulties nonprofit sponsors confront in saving and improving affordable housing. While the HUD Disposition Demonstration Program proved valuable as a source of housing in both Chicago and Boston, the intervention of additional federal and state agencies proved critical to the projects’ eventual success. In Chicago, CDBG funds were instrumental in providing initial technical assistance to properly train the emerging CDC community for the single-family conversion project. Fannie Mae and the VA, along with CDBG, were identified as additional sources of distressed property assets and financing.

If more housing is to be saved, the federal government needs to assume a more consistent and cooperative role. The government must be a partner with state and local government and the private sector in devising programs and providing financing for affordable housing. The portfolio of HUD distressed properties must be packaged in a way that encourages and facilitates their acquisition and redevelopment to qualified affordable housing sponsors. This, combined with a more user-friendly environment at HUD, is key to the eventual success of a program to save the endangered housing stock.

The Role of State and Local Government

The role of state and local government is equally critical to the overall success of efforts to preserve and create affordable housing opportunities nationwide. Our case studies demonstrate the need for strong and effective leadership on the state and local level-leadership that understands the risk/reward relationship inherent in real estate, and will guard against the former while encouraging the latter.

One mark of such leadership is the ability to move decisively and avoid bureaucratic delays, which often can spell doom for efforts to rescue endangered low-income housing. For example, in New York City, Lawson found that co-ops that failed faced frequent delays, caused in large part by the City bureaucracy. These delays, in turn, caused significant project overruns, sapped fragile tenant morale, and eventually interfered with resident employment. These circumstances then resulted in rent arrears and other problems affecting the lives of these communities, leaving deep scars in their wake. An official appointed through the city code enforcement program was helpful in explaining the code enforcement program to tenant leaders. This proved instrumental in facilitating tenants’ takeover and the eventual reclamation of their buildings.

On the other hand, the housing finance agencies of Massachusetts and Colorado demonstrated how a proactive state agency can serve as a catalyst for change and help lead the process of housing creation. Colorado’s Housing Finance Agency’s innovative, aggressive methods were extremely helpful in expediting projects.

The State of Massachusetts and the City of Boston have long supported affordable housing efforts. During the administration of Governor Dukakis, the state aggressively pursued a policy to promote affordable housing. With strong political and financial support, the state’s housing community-public and private institutions, for-profit and nonprofit organizations, builders, developers, property managers, advocates, consultants-collectively acquired a level of skill and sophistication that continues to evolve in the current environment of reduced funding.

Boston has one of the nation’s most extensive community housing systems. In 1984, eight Boston CDCs participated in a major initiative sponsored by the new Boston Housing Partnership (BHP). Comprised of representatives from the public, private, and nonprofit sectors, the BHP took on as its first challenge the rehabilitation of deteriorated multifamily structures for low- and moderate-income people in primarily minority neighborhoods. Massachusetts’ Community Economic Development Assistance Corporation (CEDAC) intervened to help transfer 1,800 units, contained within one failed property portfolio, to the BHP for eventual disposition to nonprofit ownership.

Boston’s rich network of housing organizations and programs received strong support from former Mayor Raymond Flynn. For example, in 1988, the City of Boston committed to provide $750,000 from its housing linkage program for capital improvements in four developments, including Bancroft. City support for affordable housing remains intact and vital during the current administration of Mayor Menino.

Given this continued and increasing support from the State of Massachusetts, reinforced by the enthusiastic backing by City Hall, CDCs have emerged as Boston’s primary means of rehabilitating obsolete and deteriorated units for low- and moderate-income people.

In Colorado, state government convened a unique ad-hoc partnership that resulted in the purchase, rehabilitation, and nonprofit ownership of 10 RTC multifamily projects, including two in this study. Colorado’s governor took a small but significant step, appointing a task force to negotiate directly with the RTC. The task force wanted the RTC to market all RTC-foreclosed property in the state as affordable housing.

The state wanted to acquire as much RTC stock as possible, but RTC regulations only offered a narrow window of opportunity for public agencies and nonprofits to purchase units for affordable housing. The task force felt that a nonprofit group or a public agency would have the longest term stake in preserving the affordability of the units, rather than a for-profit owner. The task force intended to both preserve affordability and maintain the newly acquired units in decent condition. The governor’s task force helped forge a common goal among CHFA, RTC, and nonprofit members to pass along the foreclosed property to nonprofits with long-term success/sustainability.

As nonprofits indicated interest in properties, CHFA staff worked to make each building economically viable. CHFA’s technical services staff provided work write-ups and estimates and developed pro forma projections. In addition, they helped establish purchase prices and identified additional funding sources to meet equity and rehabilitation requirements. CHFA raised the financial resources necessary by issuing 501(c)(3) bonds and allocating proceeds to each project. In some cases, such as with MHI, the groups went to local government or private institutions for gap financing. Gap financing came from a variety of sources, including the Federal Home Loan Bank, the City, and the state Division of Housing.

CHFA, experienced with multi-family housing and property disposition, was capable of taking on this bulk purchase. CHFA’s process of due diligence, especially its inclusion of the nonprofit community within its investigations, provided the framework necessary to achieve overall success. This experience is absolutely replicable, and should serve as a model for public agencies, particularly state housing and finance agencies. The inevitable economic cycles of real estate will always produce opportunity, and it will be the more adventurous public institutions that recognize and seize the opportunities of the future.

Locally, Denver’s code inspector was helpful because he was more interested in results than rules. The general contractor on Atlantis’s New Heritage project successfully worked with city inspectors, arguing for and achieving a more liberal interpretation of the handicapped code, for example, by allowing for a k-turn area rather than a circular radius within the bathroom for wheelchair access. This was an entirely different approach, satisfying code requirements based on functional needs and specifications, as opposed to the strict interpretation of the building code. These small concessions add up; as the Atlantis’s contractor noted, “We’re not asking local officials to reduce standards for health and safety, just to allow us to use a different means of [meeting the code]. Our position is: Don’t say that we can’t do something if it works just as well as the code standard.”

State and local governments, public and quasi-public authorities play decisive roles in setting the stage for capturing at-risk and foreclosed housing. By necessity, the acquisition, rehabilitation, long-term ownership, and management of affordable housing, and low-income properties specifically, will require the active participation of many public and nonprofit entities. When public officials on the federal, state, and local levels drive and support this process, the chances for future success will greatly improve.

Bureaucratic indifference and delay by state and local governments can be devastating to community-based groups. When coupled with declining federal assistance, it greatly diminishes the prospects for future affordable housing success.

While it is important to maintain a strong federal commitment to affordable housing, local and state government must also discourage bureaucracy and promote activist, entrepreneurial, and helpful government. Those working to save affordable housing must seek municipal, state, and federal officials and programs equally committed to success.


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    November 1, 1996

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  • Foreword

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