Wednesday, August 14, 2013

The Affordable Housing Disaster in 2000 . Can Marinwood-Lucas Valley learn from mistakes of the past?

Britton Courts will have 92 low-rise apartments.

The Affordable Housing Disaster

How a cozy alliance of government bureaucrats and nonprofit developers spends tens of millions of dollars building almost no housing for the poor

Editors Note: This is article was written in 2000, the second part is current apartment reviews from Apartment Ratings and the third part is a youtube video of a special program for the residents which I have attached to provide an insight to the current conditions.  It does not appear that they are the local police, firefighters and teachers we are told will be residents at Marinwood Village.

On May 16, 1998, the Federal government blew up the 576 apartments of the Geneva Towers public housing development, located in San Francisco's Visitacion Valley neighborhood. The dramatic implosion, broadcast on live television, symbolized what had long been recognized as a national public-policy failure: the cramming of poor people into high-rise public housing monoliths that became unlivable because of bad management and crime engendered by concentrated poverty.
The supposed cure for Geneva Towers also followed a national trend. To replace these two massive, crumbling, 20-story apartment towers, the federal and city governments entered partnerships with nonprofit developers, who were to build so-called "low-rise" developments -- two- and three-story complexes that would be less isolated from the neighborhoods around them and, therefore, easier to police than the towers that preceded them.
The 1998 implosion of Geneva Towers -- just before the implosion.

Two and a half years after the Geneva Towers failure fell in on itself, however, the proposed replacement for the towers has become its own kind of disaster:

Public records show that the government will ultimately spend $80 million on the three low-rise housing projects meant to replace Geneva Towers, making them some of the most expensive apartments built recently in the Bay Area. Upon completion, the average unit in one of these projects for poor people will have cost significantly more to build than a luxury loft of similar size.
  • The projects are millions of dollars over budget, more than a year behind schedule, and plagued by design and construction flaws.
  • Even as the projects have stumbled, the city has been called upon to repeatedly bail the two nonprofit developers managing them out of financial trouble, to the tune of millions of dollars.
  • Then again, the projects have raised conflict of interest questions, as city and federal officials have spun through the revolving door, drawing salaries from the very nonprofit development operations that the officials helped choose and fund.
  • And even when they are completed, the new projects will not be affordable to most of the poor people they were meant to serve. Because of high cost, construction delays and other reasons, very few of the 1,500 tenants evicted from Geneva Towers with promises of new public housing will be able to inhabit the public housing supposedly built to serve them.
During the last 10 years, as San Francisco was in increasingly dire need of cheap apartments, the nonprofit developers that the city chooses, almost exclusively, to build affordable housing have managed to complete just 350 units a year.

The failure to build low-income housing is not a money problem; a combination of federal grants and tax credits, local development fees, and municipal bonding authority have the city awash in affordable housing funds.

The affordable housing logjam is not a reflection of a space problem. Governmental studies have identified numerous sites in San Francisco that would support the construction of thousands upon thousands of units of affordable housing.
Britton Courts will have 92 low-rise apartments.
Britton Courts will have 92 low-rise apartments.

The problems endemic to building affordable housing in San Francisco are complex, but most of them seem to connect to an entrenched housing bureaucracy, a network of government agencies and favored nonprofit corporations allied in "public-private partnerships" that are studded with apparent conflicts of interest and seem consistently to labor long to produce housing mice.

Geneva Towers was a failure as a public housing project. What happened after Geneva Towers was blown up is a depressing case study in how San Francisco's affordable housing program serves housing bureaucrats rather than poor people who need homes.

The U.S. Department of Housing and Urban Development subsidized private investors to build Geneva Towers in the mid-1960s. It also subsidized rents for the impoverished tenants, 80 percent of whom were African-American. Through the years, HUD also loaned the not-so-impoverished landlords tens of millions of dollars for improvements to the towers, which the landlords duly failed to make.

With almost no maintenance being performed, the towers gradually fell apart. When the ventilation system stopped working, San Francisco's Department of Public Health put a happy face on the situation, saying the dead air was a good thing, because it kept tons of asbestos dust in the complex from finding its way into children's noses. When scalding water started to rise in toilet bowls, burning unsuspecting butts, tenants did not know whether to laugh, or stop paying rent.

In 1991, HUD kicked out the owners of the complex, who had reneged on paying back government loans, and hired a local property management firm, which promptly set about emptying the toxic towers of people, seemingly by any means necessary. Being a day late with the rent, or even sassing the managers, suddenly became grounds for instant eviction. There was no due process, and no appeal; federal property is not covered by local tenant law.

Two-hundred eighty apartments were speedily made vacant in this draconian manner. The Geneva Towers Tenants Association attempted to stop the evictions, with wide support from many sectors of the community. The association's grassroots struggle was featured on the MacNeil-Lehrer Newshour and 20/20 national news shows. HUD was mightily embarrassed. It summarily evicted the tenant leaders.

With the opposition leadership essentially guillotined, HUD unveiled a plan to demolish the towers and build replacement units (even if those units would offer housing for just half the number of people served by Geneva Towers). The agency signed a contract with the city promising that the former residents -- excluding the evicted ones -- would be able to return to the new housing and, eventually, own it.

As 1995 drew to a close, HUD handed out "vouchers" entitling 276 Geneva Towers families to subsidized housing, anywhere in the country. Many left San Francisco at once; others hung on for a while. But rising rents and delays in building replacement housing presumably drove almost all of them out of town. No one is certain how many left. The developers of the replacement housing have lost track of all but 50 of the previous Geneva Towers tenants.

In 1996, Mayor Willie Brown cut the pie for Geneva Towers replacement housing into three slices. These three separate housing projects are being built by combinations of three development entities, all nonprofits.

The primary developer is Mercy Housing Inc., a nonprofit corporation with 50 subsidiaries that is operated out of Denver, Colorado by the Sisters of Mercy, a charitable organization run by Roman Catholic nuns. Another of the nonprofits, the Housing and Conservation Development Corporation, often known as HCDC, is run by a board composed largely of retired public officials. The third nonprofit partner, the Geneva Valley Development Corporation, was created, ostensibly, to represent the ownership interests of the ex-Geneva Towers tenants in the project.

Brown gave the largest slice of this housing pie -- the 148-unit Heritage Homes project, located at the old Geneva Towers site -- to a partnership of Mercy Housing and the Geneva Valley Development Corporation. Mercy and HCDC have partnered to build 92 more units at Britton Court, across the street from Heritage Homes. And at Brown's behest, Mercy Housing and HCDC combined to build 91 apartments for senior citizens at the John King Senior Community, a quarter mile away.
The city bankrolled the developers with city money, including loans, hotel tax funds, community development block grants, and money from a $100 million pot of affordable housing bonds. The developers used this public capital to raise additional money in conjunction with private, for-profit investors who have put about $20 million into the projects. These investors are the actual owners of the developments, and have the right to sell them in 15 years.

Meanwhile, HUD has given Mercy Housing and HCDC about $15 million in cash, millions of dollars in housing subsidies, and the land for the project, valued at $5 million. The IRS has allowed $26 million worth of tax write-offs for the project's private investors.

Neither HCDC nor Mercy Housing put any of its own money into the three projects. Most of the public money advanced does not have to be repaid. To date, the city of San Francisco has given $18 million to Mercy Housing and HCDC in the form of outright grants and forgivable loans.

The total expenses for the three projects, counting $14 million in city money given to "community-based organizations" connected to the developments, pencils out at roughly $80 million.
The three projects are, according to internal reports from the Mayor's Office of Housing, currently running $8 million over their combined budget. The project, overall, is more than a year behind schedule, according to those reports. Mercy Housing disputes this analysis; using its own methods, Mercy Housing calculates that the overall delay is a bit less than a year, and that the cost overruns currently total $2.6 million. Whomever you believe, the Geneva Towers replacement project clearly is well over budget and behind schedule.

Would that time and money were the only problems.

According to public records, Heritage Homes, Britton Courts, and John King Senior Community all have design problems. Utilities were left out of some areas at Britton Courts. Electric wiring designs and spatial configurations had to be redone at the senior center. The naked eye alone can see that some spanking-new houses at Heritage Homes are out of square; they actually lean. The entrance to the main driveway scrapes the bottom of cars. Concrete stairways wobble when tread upon.
City officials complained that, at Britton Court, "construction-related problems are due to unclear directions to the contractor and poorly coordinated construction documents." Structural and civil engineers refused to inspect work in progress for months at a time because the architect would not pay them. The roofs have inadequate warranties, according to a state official.
And to top it off, the developers have failed to procure money to build the multimillion-dollar community center that was a prime component of the plan presented to gain support from the surrounding community.

In plain speech: the developers and their architects have acted incompetently. Yet, the city continues to pour millions into the floundering project.

On the other hand, the Bank of America stamped its foot down -- hard -- to protect an $8 million construction loan it made to the Britton Court partnership. Last year, the bank declared the loan to be "out of balance" because of mounting cost overruns and the banks' belief that "the project will not be complete by the completion date." Work crashed to a halt -- until the city bailed out the developers with a $1 million forgivable loan.

The city's condition for the bailout: Mercy Housing had to completely take over the construction management from HCDC, which would remain a co-developer of the project in name only. Public records suggest that municipal housing officials believed the city had put too much money into the project to let it, and HCDC, tank. But they did force HCDC to give up all of its $550,000 developer fee for the project. (HCDC declined to comment on these matters.)

The developer fees that nonprofits earn from affordable housing projects are calculated as percentages of overall costs. As a perverse result, these development firms are ordinarily rewarded with higher and higher fees, the more expensive the projects become.

In theory, federal and city housing officials watch over these budgets to keep waste and mismanagement under control. But it can be difficult to attend completely to complicated affordable housing projects if you get distracted by the revolving door that seems to connect the public and private sectors of San Francisco's housing bureaucracy.

As HUD was ridding Geneva Towers of residents, L.P. Lewis, a HUD official, regularly attended tenant council meetings, advising the tenants on financial issues. Lewis retired from HUD in March 1995. But he continued to attend tenant meetings as a member of the resident council.

Lewis, although never a tenant of Geneva Towers, subsequently became president of the board of directors of the Geneva Valley Development Corporation, a nonprofit, supposedly governed by former tenants, formed to participate in building replacement housing. In his new role, he was a developer of Heritage Homes, and frequently lobbied his former HUD colleagues for money.
Federal law prohibits former HUD employees from lobbying the agency on matters in which they participated while employed by the government. This is a lifelong conflict-of-interest restriction. Public records show that Lewis apparently violated this restriction on many occasions. (Lewis and HUD officials declined to return repeated telephone calls seeking comment on this apparent conflict.)
Senior officials at the Mayor's Office of Housing were responsible for scrutinizing the finances of the three projects that are to replace Geneva Towers, and apparently took that responsibility seriously, rejecting tens of thousands of dollars in bogus invoices from suspect "consultants" allied with Mercy Housing and HCDC. That made it all the more questionable when the lead official on the project in the Mayor's Office, Alice Talcott, danced through the revolving door and into the private sector.
Talcott oversaw the finances of Heritage Homes, Britton Courts, and John King Senior Community from 1995 until late 1998. HCDC was involved in two of those projects; the nonprofit developer's financial consultant was an Oakland-based company, Community Economics, Inc. When Talcott quit working for the Mayor's Office of Housing in 1998, she almost immediately went to work for Community Economics, eventually billing HCDC thousands of dollars for consulting on Britton Courts.

In other words, Talcott went from approving and overseeing loans and grants of city money to HCDC to being paid from these same pots of money.

Government codes generally prohibit city employees from becoming financially interested in projects over which they have had authority, for at least two years after leaving municipal employment.
Talcott said she sees "nothing wrong" with what she did, and whether Lewis or Talcott broke any laws is a matter for public lawyers and the courts to decide. Clearly, however, they worked on both sides of the public-private housing fence, and they were not the only fence-hoppers.

The public record on Geneva Towers shows repeated attempts by a HUD consultant to pass himself off as a public housing tenant, in attempts to obtain government grants that he and his firm were not due. The consultant was identified, and the grants were not given -- but the consultant apparently was not punished in any way for his actions.

Meanwhile, the board of directors of HCDC is itself composed mostly of former city and federal housing bureaucrats.

These regular shifts from public to private sector cannot help but blur lines of responsibility, and raise questions about the ultimate loyalties of the government departments charged with overseeing the affordable housing program. Yet the revolving door is used so often here that it has become largely invisible, even to the most well-meaning of officials in the public housing bureaucracy.

Years ago, San Francisco put its affordable housing eggs in the nonprofit basket. Although for-profit developers have applied for affordable housing projects, the city chooses, almost exclusively, to use a small set of nonprofits as affordable housing providers.

The results of San Francisco's nonprofit-based affordable housing policy have been entirely unimpressive, particularly in terms of numbers of units built. The city needs 18,000 affordable housing units to serve the existing population of San Francisco, according to the Mayor's Office of Housing. Fewer than 2,000 affordable housing units have been built in San Francisco since 1994. Another 2,000 or so are in the housing pipeline, awaiting approvals from the city (if opposition from neighborhood groups can be overcome).

There seems to be plenty of money available for public housing. In addition to a $100 million pot of affordable housing bond funds, the city has access to millions of dollars in affordable housing fees paid by market-rate developers, and enormous amounts of federal tax credits available to affordable housing developers. Conventional wisdom notwithstanding, there also is plenty of room for affordable housing in San Francisco.

There are, however, many constraints on the construction of affordable housing in San Francisco, including organized neighborhood opposition, illogical zoning restrictions, and rent control. But one very real constraint on affordable housing construction here is a reliance on nonprofit developers who are focused on things other than production. One local housing consultant, who asked not to be identified, said the Council of Community Housing Organizations, an umbrella organization of 20 local affordable housing developers, spends more time on backroom politics and protecting turf than it does on proposals to build more affordable housing.

And many observers say the nonprofit developers are most often the initiators of affordable housing here; when they don't propose, the city government simply does not embark on affordable housing projects.

Of course, the affordable housing problem cannot be laid wholly at the feet of the nonprofits. Even the Mayor's Office of Housing acknowledges the city's own bureaucracy has been ineffectual in attaining affordable housing goals. And some of that ineffectuality has nothing to do with nonprofits.
(For example, in response to public pressure for affordable housing, the Planning Commission required developers of market-rate multifamily housing to set aside 10 percent of their project's units as affordable housing, to be leased at under-market rates. Under that policy, some 1,400 units of affordable housing should have come on line since 1990. For a variety of Byzantine political reasons, however, they agreed to waive the affordable housing requirement for all but 112 affordable condominiums and 27 affordable apartments during that time.)

By and large, however, San Francisco's nonprofit-based approach to affordable housing has simply not built anywhere near enough of it to serve the numbers of low-income people who need places to live. What does get built often winds up being too expensive for the poor people it was meant to serve.

For all its faults, Geneva Towers was affordable. The families of Geneva Towers made $9,000 a year, on average; they paid $275 in monthly rent, on average.

When they are completed, most of the new apartments at Heritage Homes and Britton Courts, however, must be rented to families who enjoy annual incomes of, on average, $33,000. The "target" income for a four-person family in the new housing is $44,000.

A two-bedroom apartment at Heritage Homes will rent for a bit more than $1,000 a month, which is a fabulous price in San Francisco -- and entirely unattainable for the 50,000 local families who earn under $15,000 a year.

The average live-work loft in San Francisco costs about $180,000 to build, not counting the cost of the land under it. Such lofts are aimed at an upscale clientele -- composed mostly of the widely mocked class known as young urban professionals -- with income of well above $100,000 per year.
The average unit in the developments meant to replace Geneva Towers is costing about $240,000 to build, excluding land costs. Such units are aimed, by and large, at families with incomes of less than $44,000.

In other words, luxury housing in San Francisco is being built for 25 percent less than our housing bureaucracy pays for apartment/town houses for the poor.

Comparing the costs of affordable and market-rate housing is a very inexact science; the nonprofits that produce low-income housing have overhead costs -- hiring expensive consultants to broker the complex financing, for example -- that market-rate developers do not. And for-profit developers are not a quick and dirty answer to affordable housing shortages, says national housing expert Judy Reed, president of a Seattle-based consortium of lenders.

"Affordable housing cannot just be left to capitalism, even though private developers tend to build it more quickly and for less money," she says.

Still, Reed does suggest that San Francisco's nonprofit developers begin to partner with generally more efficient for-profits. In that way, the nonprofits can focus on their strengths -- accessing government money and grappling with neighborhood politics -- while for-profits manage the design, construction schedules, and, above all, budgets of affordable housing projects.

There are, of course, exceptions to the general failure of San Francisco nonprofits to build affordable housing efficiently. The Tenderloin Housing Development Corporation, another arm of the Roman Catholic Church, appears to be getting a housing bang for the city's bucks. The Mission Housing Development Corporation has its community supporters, and some for-profit developers, such as the Emerald Fund, are piggybacking affordable apartments into fair-market developments.

But it seems to be time to begin holding the public-private housing bureaucracy accountable for its longstanding failure to perform, and to begin acknowledging that nonprofit organizations -- even those sponsored by people of God -- may not always be the best way to minister to the housing needs
 of the disadvantaged.
Editors note:  The original Geneva Towers were built by Terra Linda/Lucas Valley developer Joseph Eichler as middle class homes.  The towers failed to sell and Eichler lost his shirt.  The development was sold to County of San Francisco for affordable housing.   It is a haunting warning for the foolishness that is about to happen to our community.  Can we learn from mistakes of the past?

Here is the current ratings in Apartment Ratings

I personally would not reccomend this place for any familly. Its a complete dump, I would rather live in a homless sheltor. At least I would feel safe. The company who manages this property, just dont care at all, (Mercy housing). They dont do anything but collect your rent money, thats pretty much it, no timely repairs no resident concerns, no plan of action, just slum loards and liers. Move there at your own risk. But do your reserch first. ... Full Review




This property is poorly managed. The staff overcharges tenants, maintenance is poor, I myself have a work order for a broken balcony door which has pending going on 7 months, and other smaller repairs older than one year. The property ...
Full Review




the community was very nice, then when everyone started moving in, in came TROUBLE with a capital "T", shootings and gang banging, guys hanging on the corner selling dope, it turned into a real war zone, its horrible. I want ...
Full Review

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