Publish to Newswire
Add an EventFrom the Open-Publishing Calendar
From the Open-Publishing Newswire
Indybay Feature
The looting of our public trust
How profitable is the privatization of public housing projects and why will San Francisco city officials, lie, cheat, evict, harass, and generally wreck the lives of the mostly black, and certainly poorest of the city's residents, the tenants of the SF Housing Authority's public housing projects, so that they can be turned over to a small and really nasty group of predatory profiteers - the John Stewart Co. being the worst offender.
The looting of our public trust
The San Francisco Housing Authority (SFHA)’s – Mayor’s Office of Housing sponsored
341 unit North Beach Place mixed use public housing project example analyzed
By Michael Strausz and Ulysses J. Montgomery – April 25, 2008
This project was privatized through transfer to the ownership of the development team of the John Stewart Co., Bridge Housing and EM Johnson Interest, Inc., who used mostly public money to demolish 229 public housing units and developed 229 replacement public housing units (119 with H.U.D. Sec. 8 rent subsidies), 112 tax credit units affordable to 50% of median income and a 30,000sf, specialty grocery store – Trader Joes.
Affordable Housing Finance (AHF), August 2005, reported just how much public money usually goes into government sponsored, for-profit, developer owned affordable housing projects – 78% or $84M in this case + 22% bank loan – and how much actual developer equity is involved – 0% in this case – which is typical. AHF reported that the developers did advance $451,451 cash (a peculiar figure), but did not note the significant fact, which was reported elsewhere, that they also received a $1 million development fee, which means that the developers were actually paid more than half a million dollars to develop and own this property!
AHF did not report the project’s net income, but we made an educated guess, based on SFHA website income and rent averages (considering the average unit was 2 BR, for each type of unit – public housing $750/mo, Sec. 8 $1750/mo, 50% MI $1420) and $3/sf/mo NNN retail rent for a total gross income of $6.5M/yr, less $750/mo/un expenses, generating a net income of about $3.4M/yr. Assuming the $23.7M permanent loan was for 30 years at 6%, the payments would be $1.7M/yr, and so the developers would then have enjoyed a 1st year cash flow + 5% management fee totaling about $2.0M/yr. Not bad for a nothing down deal!
After 15 years, when the tax credit investor is out of the picture (N.B. – none of the government grants or tax credit investments need to be paid back – these funds are basically a taxpayer GIFT to the developers) considering 4% inflation of all rents and expenses, the cash flow + management fee will be $5.0M/yr.
Total cash benefits received by the developers over 15 years would be nearly $44 million!
At that point the net income would be about $6.1 million. If the developers still own the property (and the SFHA doesn’t exercise its option to purchase the property – at terms undisclosed – which it very well may not), the developers would own a property worth about $87 million (at an 7% cap rate – higher cap rate than the present market cap of 5% for fee simple apartment properties, because this property is subject to a ground lease), less $16M outstanding debt calculates the developers’ 16th year equity at $71M.
Thus total owner benefits over 15 years – with $0 – nothing, whatsoever, invested – would be:
$115 Million!
No wonder these affordable housing developers will do anything to make these deals!
In addition to the $84M in public money originally invested in the development, over this 15 years there will be an additional approximate $21M (assuming the average Sec. 8 tenant pays $750/mo 1st year rent and H.U.D. pays the rest) in Sec. 8 rental subsidies for a total public cost to the taxpayers over this period of $105M!
Even though this seems contrary to all manner of wise public policy and a perverse denial of the United States Constitution’s preamble – “in Order to… insure domestic Tranquility and…promote the general Welfare” – this loony public trust looting scheme is the chosen and favorite method by which the SFHA, the Mayor’s office and a small and really nasty group of well connected and predatory profiteers plan to utilize in the privatized (i.e. – piratized) redevelopment of ALL of the city’s dilapidated public housing projects, beginning with the widely reported, planned redevelopment of the SFHA’s incompetently and disastrously managed (recently described by federal inspectors as one of the very worst conditioned public housing projects in the entire nation), mold and rat infested, sewage-bubbling-out-of-its-gutters, Hunters View public housing project.
What has not been reported is that H.U.D. regulations (Section 412 of the National Affordable Housing Act of 1990) requires that the tenants of any public housing project slated for demolition MUST be first given a reasonable opportunity to purchase and redevelop these properties themselves.
After three years of repeated and denied requests by the mostly African American, 100% poor, member Hunters View Tenants Association to be granted a share of the ownership and development control of the Hunters View redevelopment project, the SFHA finally realized that they had been violating the law by refusing these requests, and so duly gave notice of this first purchase right to the Hunters View Tenants Association, Inc. On March 14 of this year the association submitted an application to buy Hunters View, in behalf of itself and its members.
We fully expect that the SFHA will refuse to accept it. That is because our mayor and his gang of thugs are using every malfeasant trick in the book to stop the tenants exercising their rights – at any cost, what-so-ever.
Should the city officials proceed, as above, as they surely will, we expect that we will be forced to appeal to the courts, the US Attorney and California Attorney General to bring the dreadful wrath of a superior sovereign might crashing down upon their heads – and so force them to act for the tenants, instead of against them.
A successful redevelopment of Hunters View, to be fully owned by its downtrodden tenants, does not bode well for Mayor Newsom’s accelerating privatization plans for public property (being implemented with a scandalously callous disregard of his poorest constituents’ civil and property rights); so he and the SFHA are doing everything possible to spoil the tenants’ chance to do so (and in the process wreck their lives) – including operating a horrendous eviction-harassment scheme – since the exclusive negotiating development rights to Hunters View were granted to a John Stewart Co. led group nearly 3 years ago, 87% of the tenants at Hunters View (some of whom have lived there for over 50 years) have either been evicted or are in process of being evicted.
Thus, the city fully intends to remove everyone from Hunters View – no more tenants – no more first right.
This heavy handed and racist eviction scheme is four fold: 1) scare and confuse the tenants, 2) rid the property of troublemakers demanding rights, 3) nearly completely, or entirely, eliminate the need to pay relocation and re-occupancy costs, and 4) re-people the new property with a hand-picked, higher class of public housing residents – who will also pay nearly quadruple the existing average $203/mo rent at Hunters View – thereby insuring buyers’ acceptance, at profitable prices, for the planned market rate condos (more than 50% of the total).
If the tenants can beat back these deceitful and larcenous efforts to stop them from exercising their purchase-redevelopment rights, and instead compel the SFHA to sell them Hunters View, and they then successfully redevelop it, using the same methods and funding sources that the big development companies use, this will clearly show that the standard government claptrap claims that such properties can only be developed by well-connected developers with lots of cash – is nothing more than an insidious, and clever, pack of lies.
If that happened, all public subsidies and newly created wealth would remain in this very poorest of all of California’s communities and thrust San Francisco’s most luckless citizens into the dwindling middle class.
This would result in an enormous social, environmental and economic empowerment, providing a new found hope of a real chance for a prosperous future, which would likely ensure that the tenants and their children would obtain new self-confidence to enable them to finish school, get decent jobs and become productive citizens. The plague of un-imaginable terror and crime that now besets these poor communities would become a fading memory.
Should tenant sponsored and owned redevelopment spread nationwide, it will likely squelch such looting operations, because, anytime henceforth, when officials attempt to steal the commons and gift it to their greedy friends, an angry citizenry will pound down their shut doors and demand: “Do it like San Francisco – OR ELSE!”
Michael Strausz and Ulysses J. Montgomery are development consultants to the Hunters View Tenants Association, Inc., and community benefit development planners and can be reached at Michael [at] Strausz.com
The San Francisco Housing Authority (SFHA)’s – Mayor’s Office of Housing sponsored
341 unit North Beach Place mixed use public housing project example analyzed
By Michael Strausz and Ulysses J. Montgomery – April 25, 2008
This project was privatized through transfer to the ownership of the development team of the John Stewart Co., Bridge Housing and EM Johnson Interest, Inc., who used mostly public money to demolish 229 public housing units and developed 229 replacement public housing units (119 with H.U.D. Sec. 8 rent subsidies), 112 tax credit units affordable to 50% of median income and a 30,000sf, specialty grocery store – Trader Joes.
Affordable Housing Finance (AHF), August 2005, reported just how much public money usually goes into government sponsored, for-profit, developer owned affordable housing projects – 78% or $84M in this case + 22% bank loan – and how much actual developer equity is involved – 0% in this case – which is typical. AHF reported that the developers did advance $451,451 cash (a peculiar figure), but did not note the significant fact, which was reported elsewhere, that they also received a $1 million development fee, which means that the developers were actually paid more than half a million dollars to develop and own this property!
AHF did not report the project’s net income, but we made an educated guess, based on SFHA website income and rent averages (considering the average unit was 2 BR, for each type of unit – public housing $750/mo, Sec. 8 $1750/mo, 50% MI $1420) and $3/sf/mo NNN retail rent for a total gross income of $6.5M/yr, less $750/mo/un expenses, generating a net income of about $3.4M/yr. Assuming the $23.7M permanent loan was for 30 years at 6%, the payments would be $1.7M/yr, and so the developers would then have enjoyed a 1st year cash flow + 5% management fee totaling about $2.0M/yr. Not bad for a nothing down deal!
After 15 years, when the tax credit investor is out of the picture (N.B. – none of the government grants or tax credit investments need to be paid back – these funds are basically a taxpayer GIFT to the developers) considering 4% inflation of all rents and expenses, the cash flow + management fee will be $5.0M/yr.
Total cash benefits received by the developers over 15 years would be nearly $44 million!
At that point the net income would be about $6.1 million. If the developers still own the property (and the SFHA doesn’t exercise its option to purchase the property – at terms undisclosed – which it very well may not), the developers would own a property worth about $87 million (at an 7% cap rate – higher cap rate than the present market cap of 5% for fee simple apartment properties, because this property is subject to a ground lease), less $16M outstanding debt calculates the developers’ 16th year equity at $71M.
Thus total owner benefits over 15 years – with $0 – nothing, whatsoever, invested – would be:
$115 Million!
No wonder these affordable housing developers will do anything to make these deals!
In addition to the $84M in public money originally invested in the development, over this 15 years there will be an additional approximate $21M (assuming the average Sec. 8 tenant pays $750/mo 1st year rent and H.U.D. pays the rest) in Sec. 8 rental subsidies for a total public cost to the taxpayers over this period of $105M!
Even though this seems contrary to all manner of wise public policy and a perverse denial of the United States Constitution’s preamble – “in Order to… insure domestic Tranquility and…promote the general Welfare” – this loony public trust looting scheme is the chosen and favorite method by which the SFHA, the Mayor’s office and a small and really nasty group of well connected and predatory profiteers plan to utilize in the privatized (i.e. – piratized) redevelopment of ALL of the city’s dilapidated public housing projects, beginning with the widely reported, planned redevelopment of the SFHA’s incompetently and disastrously managed (recently described by federal inspectors as one of the very worst conditioned public housing projects in the entire nation), mold and rat infested, sewage-bubbling-out-of-its-gutters, Hunters View public housing project.
What has not been reported is that H.U.D. regulations (Section 412 of the National Affordable Housing Act of 1990) requires that the tenants of any public housing project slated for demolition MUST be first given a reasonable opportunity to purchase and redevelop these properties themselves.
After three years of repeated and denied requests by the mostly African American, 100% poor, member Hunters View Tenants Association to be granted a share of the ownership and development control of the Hunters View redevelopment project, the SFHA finally realized that they had been violating the law by refusing these requests, and so duly gave notice of this first purchase right to the Hunters View Tenants Association, Inc. On March 14 of this year the association submitted an application to buy Hunters View, in behalf of itself and its members.
We fully expect that the SFHA will refuse to accept it. That is because our mayor and his gang of thugs are using every malfeasant trick in the book to stop the tenants exercising their rights – at any cost, what-so-ever.
Should the city officials proceed, as above, as they surely will, we expect that we will be forced to appeal to the courts, the US Attorney and California Attorney General to bring the dreadful wrath of a superior sovereign might crashing down upon their heads – and so force them to act for the tenants, instead of against them.
A successful redevelopment of Hunters View, to be fully owned by its downtrodden tenants, does not bode well for Mayor Newsom’s accelerating privatization plans for public property (being implemented with a scandalously callous disregard of his poorest constituents’ civil and property rights); so he and the SFHA are doing everything possible to spoil the tenants’ chance to do so (and in the process wreck their lives) – including operating a horrendous eviction-harassment scheme – since the exclusive negotiating development rights to Hunters View were granted to a John Stewart Co. led group nearly 3 years ago, 87% of the tenants at Hunters View (some of whom have lived there for over 50 years) have either been evicted or are in process of being evicted.
Thus, the city fully intends to remove everyone from Hunters View – no more tenants – no more first right.
This heavy handed and racist eviction scheme is four fold: 1) scare and confuse the tenants, 2) rid the property of troublemakers demanding rights, 3) nearly completely, or entirely, eliminate the need to pay relocation and re-occupancy costs, and 4) re-people the new property with a hand-picked, higher class of public housing residents – who will also pay nearly quadruple the existing average $203/mo rent at Hunters View – thereby insuring buyers’ acceptance, at profitable prices, for the planned market rate condos (more than 50% of the total).
If the tenants can beat back these deceitful and larcenous efforts to stop them from exercising their purchase-redevelopment rights, and instead compel the SFHA to sell them Hunters View, and they then successfully redevelop it, using the same methods and funding sources that the big development companies use, this will clearly show that the standard government claptrap claims that such properties can only be developed by well-connected developers with lots of cash – is nothing more than an insidious, and clever, pack of lies.
If that happened, all public subsidies and newly created wealth would remain in this very poorest of all of California’s communities and thrust San Francisco’s most luckless citizens into the dwindling middle class.
This would result in an enormous social, environmental and economic empowerment, providing a new found hope of a real chance for a prosperous future, which would likely ensure that the tenants and their children would obtain new self-confidence to enable them to finish school, get decent jobs and become productive citizens. The plague of un-imaginable terror and crime that now besets these poor communities would become a fading memory.
Should tenant sponsored and owned redevelopment spread nationwide, it will likely squelch such looting operations, because, anytime henceforth, when officials attempt to steal the commons and gift it to their greedy friends, an angry citizenry will pound down their shut doors and demand: “Do it like San Francisco – OR ELSE!”
Michael Strausz and Ulysses J. Montgomery are development consultants to the Hunters View Tenants Association, Inc., and community benefit development planners and can be reached at Michael [at] Strausz.com
Add Your Comments
We are 100% volunteer and depend on your participation to sustain our efforts!
Donate
$115.00 donated
in the past month
Get Involved
If you'd like to help with maintaining or developing the website, contact us.
Publish
Publish your stories and upcoming events on Indybay.
Topics
More
Search Indybay's Archives
Advanced Search
►
▼
IMC Network