Breaking the Fourth Wall: Week of September 9

Today we continue the weekly "Breaking the Fourth Wall" series that directs the blog's spotlight toward a particularly innovative or promising affordable housing project, luminary, or organization. 

Image Credit: Wikimedia Commons 

Santa Clara County, Calif., the largely affluent home of Silicon Valley and its associated titans of industry, is easily one of the most expensive real markets in the country with rents and prices of even modest homes far outstripping state and national norms. The county's increasingly affluence, fed by the attractive salaries of area technology companies, has made affordable housing options scant. The county's high cost of living has displaced many longtime Santa Clara residents have and prevented middle-income and first-time homebuyers from being able to add some socioeconomic diversity to the region.

In order to address the threat of economic stratification in Santa Clara County, Housing Trust Silicon Valley (formerly the Housing Trust of Santa Clara County) was founded in the 1998 under the auspices of Santa Clara County Board of Supervisors. The Housing Trust, "aimed at making Silicon Valley a more affordable place to live", makes a variety of loans and grants and has been remarkably successful in achieving its objectives of increasing the region's supply of affordable housing, assisting first-time homebuyers, and stabilizing local neighborhoods: the trust fund has invested more than $75 million in Silicon Valley community projects and has leveraged $1.88 billion to create nearly 10,000 housing opportunities. The success seems to stem from the fact that Housing Trust Silicon Valley is no ordinary local trust fund- it is a public-private partnership that channels local business wealth into creative solutions rather than apathy.

The innovation in Housing Trust Silicon Valley's model can be seen in two ways, both of which are vital to the proliferation of a trust: the source of funding and the way in which the funding is allocated. While the majority of U.S. affordable housing trust funds at the county level are funded through real estate transfer taxes (RETTs), impact fees paid by developers, and document recording fees, the Trust has targeted the deep pockets of Silicon Valley's corporations since its inception. Building upon the region's reputation as an incubator of ideas and companies' efforts to maintain good corporate citizenship and improve community relations, neighbors like Intel, Hewlett-Packard, and Applied Materials have routinely donated hundreds of thousands of dollars to the Trust's fundraising campaigns and more high-profile donors join the ranks every year. Secondly, the Trust is different from most peers in that is allocates resources to a wide variety of both low and middle-income residents who would otherwise be priced out of Santa Clara County. In addition to a neighborhood stabilization initiative, homelessness prevention project, and programs designed to aid low-income renters and victims of the foreclosure crisis, the Trust also provides special loans to first-time homebuyers of modest means who would likely not receive such help from other housing trust funds. The Trust's ability to delve into the well-resourced private sector and comprehensive view of affordability contribute to its increasingly far-flung exemplary reputation.

While some might argue that the Trust is uniquely situated in a backyard containing an embarrassment of corporate riches to which local housing trust funds do not have access, the increase of start-ups, fluid venture capital activity, and emergence of industries in once-overlooked cities and regions demonstrates that the time for other affordable housing trusts to follow the Santa Clara model is ripe. Corporate and high-tech America extends far beyond Silicon Valley and, in addition to replication in tech-savvy, progressive locales like Seattle, Cambridge, and Austin, housing trust funds in the sites of the "next economy"- think Pittsburgh, Chattanooga, Milwaukee, and San Antonio, among others- may do well by looking westward.

Curtain Call: A Bold Plan for Boston's Housing Future

Image Credit: Boston Housing Authority 

Boston's long-time Mayor Thomas M. Menino, though preparing to step down after more than two decades at the helm of the city later this fall, recently released his office's ambitious strategy to increase the number of affordable housing units in the city by 2020. The plan, entitled Housing Boston 2020, is the result of a collaboration among developers, offices within the Menino administration, various non-profits housing advocates, and the Boston Redevelopment Authority, seeks to update zoning; change the permitting requirements for units size; work with unions to reduce costs of affordable housing development; formulate affordable development pipelines; and expand housing options for low and middle-income Bostonians. By the end of 2013, the plan aims to establish a Middle Income Housing Initiative and Boston Buyers' Advantage Program to help buyers of modest means remain competitive in the city's expensive real estate market.

The overall plan calls for more than 5,000 of the planned new housing to be affordable units with deed restrictions and also provides for a new system of cataloguing city-owned vacant land for the possibility of more affordable development. The venture's advisory committee has also called for the generation of local resources to offset federal cuts to affordable housing.

The issue of affordable housing- and affordable city living generally- has been a constant theme in this year's Boston mayoral election. Just yesterday, City Councilor and candidate Mike Ross (D8) spoke about the need for a "smart" and comprehensive affordable housing policy in a radio interview. Amidst the rhetoric of the final weeks of the campaign, Mayor Menino's final act may set the backdrop for the housing policies of the next mayor of a city that many love to call home and many more cannot afford.

Eminent Domain Uniting Cities and Homeowners to Combat Foreclosure?

Eminent domain, or the legal process by which a government entity takes private property for public use and compensates the landowner for the taking, has historically pitted the government against homeowners and forced reluctant owners to sell property. In particular, the Supreme Court's landmark decision in Kelo v. City of New London that affirmed the city's power to take non-distressed properties by eminent domain and transfer the land to private developers for the purpose of increasing municipal revenues was seen as a blow to small property owners facing government will. 545 U.S. 469 (2005). However, amidst an achingly slow recovery from the housing crash, the city of Richmond, Calif. is working with struggling homeowners to use eminent domain to prevent further foreclosures.

Image Credit: Justin Sullivan/Getty Images 

As Shaila Dewan recently reported in the Times, more than half of the mortgaged properties in Richmond are underwater and the majority of the city's homeowners are in default or at risk of default. In response to this crisis, the city sent letters to the owners and servicers of more than 600 at-risk loans- most of which are bundled into securitized trusts- offering to buy the loans for what the city considers to be fair market value. The city would then allow the homeowner to refinance at the reduced amount of the fair market value the city paid plus a small difference that would be split among the city and investors and would pay for closing costs. At the refinanced rate, most underwater homeowners would go from being hundreds of thousands of dollars in debt to having overnight equity. In the likely event that the servicers and trustees who hold the risky loans for investors refuse the city's offers to purchase, Richmond is prepared to invoke eminent domain to condemn the properties, force the sale, and provide fair market value compensation to the investors.

Richmond's very public willingness to invoke eminent domain has resulted in pushback from mortgage bankers and real estate industry lobbyists, with mass mailing and media campaigns attempting to decry the city's plan as "impermissible" and "unconstitutional" in violation of the Fifth and/or Fourteenth Amendments. The city responds that the Court's previous decisions allowing the exercise of eminent domain on non-blighted properties provided that the government is taking the land for the public good and is justly compensating the landowner (just compensation is usually determined to be fair market value). See Kelo, 545 U.S. 469 (2005); Berman v Parker, 348 U.S. 26 (1954) (ruling in part that non-blighted properties could be razed and the land transferred to developers if part of a large project involving the clearing of blighted buildings in same parcel). The City of Richmond argues that protection of residents from predatory loans, helping homeowners avoid debt and default, and staving off foreclosures in a community whose municipal revenues have already been slammed by the housing spiral qualifies as "protecting the public good" and a number of other municipalities around the country are taking notice. Later this month, cities and towns in New Jersey, Nevada, Washington, and other parts of California will consider eminent domain proposals and a steady number of housing advocates and non-profits are gearing up for courtroom battles with the banks and investors. As the latest chapter of the housing recovery unfolds in the communities hit hardest by foreclosure and the recession, the long-evolving power of eminent domain is also poised to enter a new chapter in which governments and homeowners are joined
together instead of their common positions as adversaries.

Breaking the Fourth Wall: Week of August 5

Today we continue the weekly "Breaking the Fourth Wall" series that directs the blog's spotlight toward a particularly innovative or promising affordable housing project, luminary, or organization. 

Image Credit: Christopher Connelly/NPR

Many reports have documented the effect of the foreclosure crisis and economic recession on urban neighborhoods. Droves of distressed properties owned by banks and absentee landlords have become blighted, further contributing to a sense of decline in some of America's poorest communities. However, intrepid community activists in Baltimore have undertaken a successul campaign to call attention to rundown buildings and shame neglectful landlords and banks. Carol Ott, who began the Baltimore Slumlord Watch blog to highlight the effect of many decades of absentee ownership and pressure landlords to tend to the deteriorating properties. Ott began her efforts in the hopes of shaming absentee owners in her own neighborhood and her website features pictures of abandoned, neglected, or foreclosed properties and the contact information of the landlords or bank representatives (found by combing public records) who are in charge of the buildings' upkeep. The project's newfound notoriety has attracted a coalition of local street artists to Ott's movement. These artists see Baltimore's more than 16,000 vacant properties (though some peg the number at around 30,000) as blank canvases to express their outrage with the predatory policies of landlords and banks and hope for a brighter future in Baltimore. In East Baltimore's once-vibrant Johnston Square, a group of activists/artists who are part of the Wall Hunters Project quickly set to work painting large murals  depicting the fragility of Baltimore's neighborhoods on the sides of vacant row houses. In a twenty-first century twist, each mural features a large QR code that directs onlookers to a page on Ott's blog detailing the contact information of the person or bank who has allowed the property to languish when they snap a picture of the code with their mobile device. The shaming of absentee landlords and foreclosing entities has led to some tangible results in many of the Charm City's neighborhoods and, perhaps just as importantly, have shown that the relationship between art and grass roots activism is still alive and well in the digital age. 

All Not Golden in Southern California Says Justice Department Investigation

This week, the results of a two-year Justice Department investigation of alleged housing discrimination in Los Angeles County and cities of Lancaster and Palmdale, California were released. The investigation revealed that local housing officials and police harassed and intimidated minority residents who receive Section 8 vouchers and the DOJ has ordered these municipalities to pay $12.5 million in damages to these tenants, an order which the cities are refusing to follow. In a recent interview with NPR's Celeste Headlee, Richard Winton of the Los Angeles Times reported that residents had reported home visits by as many as eight housing officials at once and discrimination in housing availability in the area (known as Antelope Valley) based on race. In one particular egregious instance, a deputy posted a picture of a resident's car and garage on a derogatory Facebook page, which prompted racial epithets directed at that tenant as well as the destruction of property and abject racially-motivated humiliation.

Will the new DOJ findings encourage Lancaster and the
Antelope Valley to return to its progressive slogan?
Photo Credit: Arcadia Publishing 

The county and cities are refusing to pay the amount order by the Justice Department. If the municipalities and the federal government cannot reach a negotiated settlement or if the municipalities do not comply, Winton states that the result could be a court-enforced forced consent decree or appointment of a monitor to oversee local officials and the sheriff's department and issue outside audits. Antelope Valley has had a contentious recent history of housing discrimination and, though the information gleaned from the DOJ's investigation is distressing, perhaps a settlement in which local officials compensate victims of housing discrimination will spur meaningful change in the region's housing practices and approach to building one community in which Housing Choice status is no longer a troubling lever of discrimination.

Disparate Impact Theory Goes to Washington

Disparate impact theory, which looks to results of allegedly discriminatory practices as well as the parties' intent, has been upheld by a variety of federal appeals courts as a valid way to prove housing discrimination. See e.g., Huntington Branch, NAAC v. Town of Huntington, 844 F.2d 926 (2d Cir. 1988).  However, until now, the Supreme Court has been notably silent about disparate impact theory. Two years ago, the Court was poised to hear arguments that a St. Paul, Minn. policy regarding low-cost rentals disproportionately affected minority residents and violated the Fair Housing Act before the city withdrew its appeal and the issue of disparate impact was sidestepped. However, SCOTUS recently agreed to hear the case of a group of African American and Hispanic residents of a Mount Holly, N.J. neighborhood that is set to be bulldozed to make way for a redevelopment project. See Twp. of Mount Holly v. Mount Holly Gardens Citizens in Action, Sup. Ct. Docket No. 11-1507. The neighborhood's residents claim that the redevelopment plan is discriminatory because it targets a predominately minority area and disproportionately affects minorities. While the Third Circuit Court of Appeals held that the community group had presented a triable claim of disparate impact, the Supreme Court will decide whether plaintiffs must prove that they were the target of intentional housing discrimination to prevail in a federal lawsuit. See Mt. Holly Gardens Citizens in Action, Inc. v. Twp. of Mount Holly, 658 F.3d 375 (3d Cir. 2011). The case is set to be heard by the nation's highest court in the fall and, as that date approaches, all fair housing eyes turn toward the nine justices and their long-awaited consideration of disparate impact theory.

Bulldozer tearing up houses in Mount Holly Gardens.
Photo Credit: Kent Pipes (via Huffington Post) 

The SAVE Act: Making it a Little Easier to 'Be Green'?

Image Credit: Energy Star 

Despite the recent push for green construction and remodeling, residential energy efficiency remains expensive. The common practice of lenders to ignore the value of green homes when underwriting mortgages keeps eco-friendly living even further out of reach of most moderate-income homebuyers. However, as The New York Times's Lisa Prevost reports, the Senate's bipartisan SAVE Act could make energy-efficient home features more attainable to these moderate-income buyers by incorporating the "green factor" into lender underwriting policies. See S. 1006 (June 6, 2013). The bill, which was introduced last month by Sens. Michael Bennet (D- Colo.) and Johnny Isakson (R-Ga.), seeks to "improve the accuracy of mortgage underwriting used by federal mortgage agencies by including a home's expected energy cost savings when determining the value and affordability of energy efficient homes." Specifically, the bill would require the FHA and lenders under federal conservatorship-namely Fannie Mae and Freddie Mac- to consider energy efficiency and energy savings realized when underwriting loans to buyers who submit a HUD home-energy report. These loans that take into account energy savings would recognize the added value that energy efficient features bring to a property and could result in larger amounts of money available to middle class buyers (the bill's supporters say that the risk of larger borrowing amounts is offset by studies that show that homes meeting federal energy guidelines are 32 percent less likely to go into default than homes that do not meet these standards).

The bill, which has broad support from groups including the U.S. Chamber of Commerce, U.S. Green Building Council, and National Resources Defense Council, is noteworthy not only for its efforts to bring energy conservation into mainstream lending policies but also because it is an uncommon example of politicians reaching across the aisle to collaborate with members of the other party and divergent interest groups. As Senator Bennet stated in his press release regarding the legislation, "it is rare to see such diverse interests come together, and that is because this is a common-sense bill." While the bill seems to hit all the right notes of common sense- including job creation, public-private partnerships, and the expansion of green home affordability- forthcoming debate over the bill may tell us how far common sense can go on Capitol Hill.