Interview #180 Fall 2015 — Resiliency

Interview with Richard Baron, CEO of McCormack Baron Salazar

It still surprises many people that Richard Baron, the CEO of one of the largest for-profit affordable housing developers, got his start in the field supporting public housing tenants in a rent strike.

Richard Baron, CEO of CEO of McCormack Baron Salazar. Photo courtesy of McCormack Baron Salazar

Richard Baron, CEO of CEO of McCormack Baron Salazar. Photo courtesy of McCormack Baron Salazar

Miriam Axel-Lute: Let’s start back in the ’60s. How did you end up in the rent strike and doing legal services, and how did you go from that to community developer?

Richard Baron: I was at the University of Michigan Law School, and thought I was going to wind up in a career in international law and finance. The riots broke out in the spring of ’68. Dr. King was killed, then Bobby Kennedy. I decided I needed to do some kind of public service, and there was this fellowship program recruiting graduating law students to go to legal services programs around the United States. I went to St. Louis. [The] first meeting I attended was at the Pruitt-Igoe Community Center.

It changed my whole life and career path. It was unbelievable. I sat there with about 50 different social service agencies, talking about what they were doing with the residents of Pruitt-Igoe, which was about two-thirds empty at that point.

I was looking out the windows, and there were dogs running wild, glass everywhere, playground equipment completely gnarled, broken-out windows everywhere. There were all these people talking about all the services they were providing to the residents. There were no residents in the meeting at all.

I couldn’t figure out what the hell was going on. This was the first real contact I’d ever had with public housing. I went home that night to my wife [and] said, “I don’t understand what the hell’s going on here. This is just madness.”

About three weeks later, a group of tenants from other sites in St. Louis said that they had had it with the Housing Authority, that services were horrible [yet] they kept trying to raise the rents. This was before federal operating subsidy for public housing [which] came out of the rent strike in St. Louis—one of the demands of the strikers [was] that no tenant would pay more than 25 percent of his or her income for rent, and the federal government would make up the difference between that and the cost of operations of the local housing authority.

That’s how I got involved. The strike went on for about 10 months and spread all through the city. The housing authority went bankrupt, and out of that came a mediation with Harold Gibbons, head of Local 688 of the Teamsters.

The Housing Authority had a complete change of its board of commissioners. We put two tenant representatives on it for the first time in the country, and basically changed the whole way in which the housing authority was operating.

We started to talk about, as part of the rent strike settlement, the opportunity for residents to take on management of their own sites. At that point I decided I was going to leave Legal Services and set up a public interest law firm. Harold called me down to his headquarters and said, “I understand you’re going to leave Legal Services,” and I said, “I am.”

He said, “I’ve been reading this rent strike agreement you made me sign, and you’ve got all this stuff about tenant empowerment and self-determination and all this other business. Do you have any idea what the hell this means?” I said, “No.” He said, “Well, good. You’re going to talk to your other partners and tell me what it’s going to cost me to buy 50 percent of your time.”
So, it was quite an experiment that ran through the ’70s, and then we did a national tenant management demonstration with Ford [Foundation] and HUD.

I didn’t know what we were going to do about all of these blighted areas around the public housing sites in St. Louis. [In] a lot of North St. Louis, which was the historic black area of the city, there were no developers willing to put in new housing.

[In 1973 I said to] Terry McCormack, who had been on Gibbons’ staff and had done senior housing for the Teamsters, “Maybe we could start a business and see if there’s a way to rebuild some of these blighted areas.”

He said, “How much money you got in the bank?” I said, “I don’t know, $500?” He handed me a check for $500 and said, “Go open up a checking account somewhere. We’re in business. Go figure out how we’re going to make a living.” That’s how we started.

As word got out that we were willing to work on these kinds of neighborhoods, I was called by Legal Services in Kansas City, and went to Cleveland and to Louisville and other cities in the Midwest. Pretty soon, we had a business.

As we [got] into it, I got more interested in taking on larger-scale, multi-block redevelopment projects to really try to have significant impact in neighborhoods, to change the economics, to change the potential for new retail services.

We’ve always managed our developments, and continue to do so. Our portfolio today is in excess of 25,000 units nationally, and it’s always been an absolute critical part of our business. It has made an enormous difference in terms of investor confidence, maintaining these projects over time. We’ve re-syndicated historic deals, which you can do after 20 years. I can’t imagine there’s another development company in the United States that’s kept them affordable all that time.

Miriam Axel-Lute: Are your residents involved with the management?

Richard Baron: Yes

Miriam Axel-Lute: How does that work?

Richard Baron: We always try to hire residents as part of our staff, and in some cases they work with Urban Strategies, which I set up in the late ’70s as a not-for-profit to do human capital programs when we do large-scale family redevelopments.

Harold Simon: Why did you set up Urban Strategies? What was the need?

Richard Baron: When we started dealing with families and children, [I was very keen on] programs that were geared to them. We were always involved with schools that would serve families [with] after-school programming, summer programming, job training. I was always concerned about health care, child care.

Anita Miller [from the Ford Foundation] would say to me, “You come here as a for-profit developer looking for social services dollars. This model is unheard of here, why don’t you set up a not-for-profit?” So, in ’78, I set up Urban Strategies [to] do community and supportive service work with families and kids and seniors. That’s a very important part of what we do. We’re really a mission-driven firm.

Miriam Axel-Lute: What spurred that kind of comprehensive vision?

Richard Baron: When I was working with the resident organization, we were going to the Department of Labor for a youth grant, we were going to the Justice Department for funds to do community policing, we were going to HHS and to HUD for something else again. It was insane the way in which we had to piece together resources in order to effect social change in these areas.

We started to find ways to leverage resources and multiply the impacts of what we were doing. If we were going to have some kind of richness in the lives of these families and children, we needed to have supplemental dollars that we simply couldn’t finance through the housing developments themselves.

What I tried to do back in the days when there were some reasonable amounts of federal money available, before Congress cut everything off, was to leverage up with the cities. I would go to [a] city and say, “The ABC Foundation said they’re willing to entertain a grant of $350,000 for after-school programming, but we need $700,000. If they do 50 percent, will you do 50 percent, or a third and I’ll go find money at the state?”

I was constantly trying to leverage up those funds, and I suspect that we’ve probably raised more philanthropic money with our developments than anybody.

Harold Simon: You [were] more of a community developer than a housing developer. [Is] that how you see yourself?

Richard Baron: Yes. We’re all about place-making. From the very get-go. Shelter was one of the critical issues for families, but schools were right there. We’d go in, and I’d meet with the mayor, and the next stop was the school superintendent.

We were selected to do C.J. Peete [in New Orleans, post-Katrina]. And when we got into the conversations with the Housing Authority and the city and state, I said, “We are willing to go into Peete to do it as a mixed-income community, but I won’t unless we build a new school. I am not having my kids bussed all over New Orleans.” [They said], “Well, [Paul Vallas, Recovery School District Superintendent], he’s got the FEMA money for school replacement.”

So we sat with Paul Vallas, and I said, “We have a new 450-unit community that we’re going to build on this site, but I won’t build it unless the FEMA funds are there to build a new school down the street. Our school, the [Thomy] Lafon School, has been completely devastated by the storm. I’m not doing this unless these children have a decent place to go.”

So, he did. We built the [Carter G.] Woodson School, and we’ve got about 40 percent of the kids from Harmony [Oaks] going to Woodson now. It’s become part and parcel of what we do.

My whole thrust has been school-centered communities. I have fought everywhere we go for the schools close to us. When we did Pueblo De Sol in East L.A., [MBS partner] Tony Salazar worked with the school district. Every one of the kids in Pueblo, which is a Hope VI, mixed-income community, walks to school—from early childcare to high school. There’s not one kid bussed.

Miriam Axel-Lute: Not everywhere is going to have FEMA money to build new schools. So, when you go some place, how do you find the funds?

Richard Baron: We sometimes have to raise it, like in Murphy Park in St. Louis, which was the prototype for Hope VI.
I went to the school superintendent and said if you’ll turn it back to a neighborhood school, I’ll raise the money to fix the school up.
We raised about $3 million, went in, and completely rehabbed the school, put in arts programming through the Center of Creative Arts in St. Louis, which I started back in the mid-’80s.

Miriam Axel-Lute: Is it a challenge to raise money for a public school district?

Richard Baron: It varies, but when we’re coming with a comprehensive plan, and it’s a Choice Neighborhoods project, the school districts have to sign on before they can get a Choice grant. So, some of that is being facilitated now by HUD, to their credit. [But] the problem still hasn’t been fixed, and it was my real regret with the administration [of HUD Secretary Shaun Donovan]. Every time I saw him, I said, “First there was $50 million [for] Hope VIs, then $35 million. . . . Those funds are burning off and we’ve got young kids growing up in these communities. They still need support services, and we’ve got no vehicle for it. We can’t do it out of the operating budgets of the sites. We don’t have a relationship with HHS [Dept. of Health and Human Services]. The state governments aren’t going to do it.”

Look at the investment in these places—you’ve got a $50 million grant and we’ve leveraged it up three times or more. You’ve spent all this time planning and building and working with the residents and getting them involved, setting up community and supportive services programs, and after five or six years you just let [the programs] die? What kind of sense does that make?

Miriam Axel-Lute: There’s critique of some of the Hope VI projects—that they decreased the total number of units, didn’t actually have tenant involvement. What do you think of these critiques?

Richard Baron: There were things that were not done well. There were housing authorities that really didn’t understand what they were doing. In a number of cases, there were developers that really didn’t have sensitivity to the residents.

The argument that you’re losing stock, you’re not replacing one-for-one . . . the truth is, in most of the cities, the stock was so deteriorated and run down, the units themselves were uninhabitable. These places that were finally taken down, they would have fallen down. The housing authorities didn’t have the money to keep them up. So, at least we provided some opportunities for people who were lower income and who could exist on operating subsidies, and then people who, as they moved up the ladder, stayed in the community.

If you’re not trying to do the replacement housing and figure out how you’re going to repurpose these areas, it’s easy to take a philosophical stance against it, draw a line in the sand, and say you can’t cross over. That was never the way I did things.

In C.J. Peete when we started having the meetings with the residents that still were in New Orleans, two sisters would come at me, one in particular. She didn’t want to hear about any developers. She didn’t want to hear about all these promises. “I raised my boys there. I lived here for 30 years. We did just fine. Why don’t you just rehab them and leave?”

She’d go after me every time I came to New Orleans. We invited a group of the planning members to come and take a look at some of the Hope VIs that we had done in St. Louis, and meet the residents. The two sisters came, and on a tour we went into a couple of model apartments. And the sister who had been the loudest one in these meetings in New Orleans came up to me, and she said, “Baron, are you telling me that you’re going to put a full-size washer and dryer in all those apartments in C.J. Peete when you rebuild?” I said, “Oh, yes. I’ve been doing that for 35, 40 years. I always do that. It’s the only right thing to do for the residents.” And she looks at me: “Baron, tear this shit down.” So, that was the end of that.

Ultimately, this is a business about people and kids, and trying to find a way to make their life trajectory improve. Having a decent place for kids to come home to, and a mom who’s working and can throw a load of laundry in while she’s in her apartment, not [have to go] down to some community center [where] the machines are all broken.

I used to battle HUD on some of our early jobs. They would not allow us to spend money on air conditioning other than window units. I said, “we can’t do that [with] the humidity in St. Louis. I’m going to do central systems.” They said, “As long as it’s not in the mortgage, we don’t care what you do, but we’re not paying for it in the mortgage.”

So, I had the limited partners’ equity pay for the air conditioning. Then I started putting in washers and dryers in the apartments, and they gave me shit about that. Basically, what they were saying is that these people don’t deserve to have washers and dryers.

We had some special money that [was] earmark[ed] in ’92 to replace the Vaughn high-rises in St. Louis. I went to the new mayor, [Freeman] Bosley, and said “You can’t rebuild public housing here. You have to do mixed income.”

Miriam Axel-Lute: What was the argument you made for doing mixed income particularly?

Richard Baron: All low income just made no sense to me. In terms of the economics of a neighborhood, trying to restore any kind of retail services, you had to deal with the affordable housing in a way that investors felt confident that the character and nature of a community was going to change.

The traditional way in which it was working couldn’t survive. Over the years, the working poor left because the conditions got so bad in most of the conventional public housing, and most housing authorities weren’t able to keep up. There had to be a new way.

Miriam Axel-Lute: What, beyond your developments, was involved in bringing people together to try to improve the schools in an area? For example, can you tell me about the Vashon Education Compact, which you organized with business leaders to support schools around your developments in St. Louis?

Richard Baron: [In the Vashon Compact] there were a lot of funds put into in-service training. We did a lot of good work with teachers and principals. But we [would] get the principals to a level where they were really becoming effective, and then, for $10,000 more, they would go to a suburban school district. We lost teachers [too]. We had rigid salary rules. As fast as we’d get them trained and they started to really be effective, they would be gone. So finally [we] folded it up. We were there for about five, six years, and it really had some very good impacts, but the private sector partners [who had] put up a lot of money just got tired.

Miriam Axel-Lute: What is the role of a community development group at a neighborhood level [if] they want to be involved in supporting schools?

Richard Baron: It’s important that they have a very clear mission of what they’re trying to accomplish, and I think that’s the biggest challenge. I don’t in any way dismiss the sincerity or the heartfelt positions that people stake out and the passion they have around these things. But, so often, there’s just no real understanding of how to navigate the system to see if there’s a chance to really make a difference. I’m involved in Ferguson now, and it’s been an extraordinary challenge. A lot hasn’t been written about the conditions that existed in Southeast Ferguson where Michael Brown was killed. There are about 1,500 housing units in that pocket of Ferguson that were built over the last 40 years, and of the 1,500 units, about 1,300 are very distressed.

They were bond deals. They haven’t been well run. The environment in that area is horrible. There aren’t any street lights. There are no sidewalks. That’s why he was walking down the middle of the street.

There’s one development there that’s 80 acres. There isn’t a street light in the whole place, interior or exterior. There are no sidewalks. There are no tot lots, no community centers. There are no play fields, nothing. And the 600 children or so in this pocket of Southeast Ferguson are all going to unaccredited schools; they were gerrymandered out of better school districts a long time ago.

Miriam Axel-Lute: You mentioned the Center of Creative Arts. What’s the connection between arts and culture and community development?

Richard Baron: In the mid-’80s a number of arts groups had approached me in St. Louis who needed rehearsal space. I happened to have a call from a guy I knew who was a real estate broker on the board of this congregation, who said [it was] going to be moving out to the suburbs and did I have any idea about what might be done with the existing synagogue.

It was just an unbelievable, beautiful space. I brought [in an] architect friend, Danny Trevors, set up a nonprofit, and got some interested private folks that were willing to put up some funding, and we started to design it. I wasn’t exactly sure what it all would be, but we knew that dance would be an important element of it. I contacted the New York City Ballet and talked to one of [George] Balanchine’s assistants, and they gave me the specification for dance floors so that dancers didn’t get shin splints. Then we started thinking about film, and about gallery space, and some kind of programming for children.

COCA today has probably one of the best dance programs in the United States for children and young adults. We have graduated many, many, many kids in dance and music and arts. We have summer camp. We have children’s theater. The program goes into the inner city schools. And we have after-school arts programming there for kids who wouldn’t otherwise be able to have access to it. We raise about $1 million a year to fund scholarships, and we have a shuttle system that works in the city [to] bring kids out there. We have a homework room. We have tutors. We do SAT prep.

Antonio Douthit[-Boyd], who’s the master dancer now of Ailey, came out of COCA, and he came from a foster home. Antonio and his partner, Kirven, are coming back to be our master teachers. They’re retiring from Ailey after 10 years, and they’re going to pass the torch. It’s wonderful. We’ve got COCA dancers on Broadway. I’ve been watching them since they were five and six years old. Robert Battle, who replaced Judith Jameson at Ailey, got his first choreography appointment at COCA.

And the most important part of it is that it’s the one institution in St. Louis that brought African-American and white families together, by virtue of its location and focus and staff. It was a very racially divided city, but it happened through COCA, through the arts.

Harold Simon: What you just described is really community-building. How do you integrate that into the other developments?

Richard Baron: We try to find organizations in these local communities that are willing to take our kids, offer courses. We’ve introduced walking clubs and biking clubs, and we’ve got our families thinking about nutrition, and [for] the children, fitness and other options besides football and basketball. We have a lot of teams in our communities.

It’s all about place-making, and we’ve used the vehicle of housing. We just opened up an early child care center in St. Louis, the Flance Center down in Murphy Park. It’s the last piece of this project that I started back in ’93, ’94. We get these kids from zero to four, and we can track them on through, we’ve got a real shot with them.

Keli Tianga: How do you follow them?

Richard Baron: Urban Strategies does. We have a whole demographic system now, and so we’re tracking these kids as far as we can. I just was in St. Louis last week, and a young reporter for the St. Louis Post-Dispatch came by. She was one of our first students at the Jefferson School. And she said, “Mr. Baron, I was in the fourth grade when you came and talked about what was going to happen here.”

It takes one kid like that, just one. It’s all worth it, because that’s really where you see it. I got [a call] last year from a woman in Atlanta in Centennial Place, which was the first mixed-finance Hope VI that Cisneros did. She was on the planning committee, and she called to tell me that she had a daughter who was graduating from Georgia Tech. She said, “Mr. Baron, I remember when you had us in that room, and you told everybody that the most important thing that was going to come out of Hope VI was the schools. I never forgot. If you hadn’t done that, my kids would probably be locked up today.”

Harold Simon: So, how do you start to institutionalize this view? If it isn’t at the federal level, are there state-level possibilities?
Richard Baron: There’s nothing about the fragmentation of government that’s any different today than it has ever been. The opportunity to find an opening happens very infrequently. It happened with Henry Cisneros with Hope VI. If you get a creative governor, you can get certain things done.

It’s just in the nature of the system. If you If you don’t have any real advocates for the kinds of things that you’re particularly interested in, then chances are they’re not going to be addressed.

We went down to Galveston after [Hurricane] Ike, got into a huge battle down there with the Tea Party and everybody else that didn’t want to see public housing come back, or mixed-income housing. They went into federal court against us. It was a battle royale down there, I just wasn’t going to stop. I’m too old and ornery, and I’m a ’60s guy. I’m not leaving.

Finally the state, to their credit, funded this, and it’s going to be great. The units look terrific.