Affordable Housing

01May09

An anxious and frustrated crowd of leaders in the affordable housing world descended on the Department of Housing and Community Development in Boston late last February. Their modest aim: to save affordable housing as we know it.
Catherine Racer, associate director of DHCD, told the crowd of more than 100 that the $2.25 billion allocated to the states by President Obama’s stimulus plan could ease the pain, but her optimism was tempered by the acknowledgement that finding investors for affordable housing during the current economic crisis “would be the biggest challenge we have faced.”
Reached at his office on the campus of Northeastern University in Boston, Barry Bluestone puts a finer point on the issue. “It’s the perfect storm,” says the professor of political economy and director of the Center for Urban and Regional Policy.
Over the past two years it has become increasingly difficult for developers to stitch together the patchwork of funding needed to push affordable housing projects to completion. Some developers have had to shut down back hoes and earth movers and call off construction crews as funding evaporated midstream.
Now, at a time when credit is seizing and investors are disappearing, the production of affordable housing projects in Boston has ceased all together. Worse, this is happening when unemployment is on the rise and the need for affordable housing is certain to skyrocket.
“I’m going to sound like a broken record here, but what we’re seeing in this industry is unprecedented,” says Richard Becker, the director of asset management at the Massachusetts Housing Investment Corporation in Boston. MHIC is a private lender and investor specializing in the financing of affordable housing and community development.
At MHIC Becker has seen the $40 million to $50 million normally invested with him each year for affordable housing drop by one-half in 2008. State-wide, of the 39 affordable housing developments allocated in 2007 and 2008 only eight have secured complete funding. Until these 31 stalled projects push through the pipeline—a Hurculean task for an industry in crisis—not a single affordable unit will be ready for a family who needs it in 2009.
Sarah Barcan is a senior project manager at the Community Economic Assistance Corporation in Boston. CEDAC is a public-private, community development finance institution that provides technical assistance and pre-development lending, to non-profit organizations involved in housing development. Barcan says the way affordable housing has been funded for the past 20 years is in crisis. Even the most experienced and accomplished developers “are just unable to get it done now.”
The mechanisms for funding affordable housing are in such shambles CEDAC has filed suit against two non-profit developers for breach of loan agreement. CEDAC is suing Harvard Street Neighborhood Health Center, Inc. for $125,000 and Veterans Benefit Clearinghouse Development Corporation for $265,000 to recoup money loaned for pre-development costs associated with affordable housing projects begun by the groups.
Neither CEDAC nor the agency’s attorneys would comment on the ongoing litigation. Directors of HSNHC and VBCDC did not return phone calls. But this much is clear: both projects are casualties of a broken industry that is languishing at the mercy of a larger economic and financial crisis.
At issue is the principal tool for financing affordable housing—the Low Income Housing Tax Credit. The LIHTC program helps people such as Becker and Barcan procure dollars from banks and private investors to complete the funding necessary to build affordable housing projects.
The LIHTC program began in 1986 to provide the private market with an incentive to invest in affordable rental housing. Federal housing tax credits are awarded to developers of qualified projects. Developers then sell these credits to investors to raise capital for their projects, which reduces the debt that the developer would otherwise have to borrow. Because the debt is lower, a tax credit property can offer lower, more affordable rents.
In turn, investors receive a dollar-for-dollar credit against their federal tax liability each year over a period of 10 years. The amount of the annual credit is based on the amount invested in the affordable housing.
A financial industry soon developed around the exchange of these tax credits. Until recently the industry helped create 50,000 to 80,000 affordable units a year during the relative prosperity of the last 20 years in the U.S. What previously had been a responsibility of the federal government has become a privatized industry vulnerable to the vagaries of the market—both good and now bad.
“The aggregate demand for the LIHTC has dropped significantly.” As a consequence, says Davis, “for the first time in the history of this program we’re seeing drops in pricing for the LIHTC.”
For some investors tax credits just aren’t desirable when they have less profit to protect, says Bob Van Meter, executive director of Local Initiatives Support Corporation in Boston. LISC lends money and gives grants to community development corporations and other developers of affordable housing using money acquired through LIHTC investments.
“When there are no profits for the tax credits to shelter, the program doesn’t work very well,” says Bluestone of Northeastern. “And we’re all non-profits now.”
Other investors simply do not have the cash for an industry desperately lacking investor capital. Fannie Mae and Freddie Mac, the failed mortgage giants bailed out by the government last September, accounted for 30 percent to 40 percent of the LIHTC market, says Van Meter. Other investors were Citicorp and JP Morgan Chase. “The tax credit market is just in collapse,” he said.
Provisions in President Obama’s stimulus bill intend to kick start affordable housing development by allowing states to sell back their unused credits from prior years for 85 cents on the dollar. According to a report by David Smith of the Affordable Housing Institute and Recap Advisors, this could amount to nearly $5 billion nationally to be pumped into affordable housing projects.
In the greater Boston area in 2008, a family of four would need an annual income no more than $85,000 to qualify to live in affordable housing.
The stark reality is that with fewer LIHTC dollars, fewer affordable housing units will be built. As the national unemployment rate nears 8 percent, up over three points from this time last year, the demand for affordable housing will only continue to grow. “The irony,” says Don Bianchi, senior policy advocate at the Massachusetts Community Development Corporation, “is that as all this is going on the need has only become greater.”
Back at the DHCD, a room full of people who traffic in the business of affordable housing were still scratching their heads as they tried to make sense of their crippled industry. Speaking to the crowd, Associate Director Racer urged the leaders in the industry to “take a step back and take a deep breath” as they prepare for the work ahead of them.

“It’s not a fire sale yet,” she said. The implication was clear though—the future of affordable housing is hanging in the balance.

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Sagging Pants

01May09

Late last year a Palm Beach County circuit court judge ruled that a law banning sagging pants is unconstitutional after a Riviera Beach, Fla. teenager spent a night in jail on accusations he exposed too much of his underwear.
The ruling is another chapter to a simmering controversy spreading throughout much of the southern United States.
Cities from Atlanta to Dallas to Charlotte, NC as well as more than a dozen municipalities in Louisiana have proposed or passed ordinances banning sagging pants.

Seen by cultural historians as another way African-American youth culture has chosen to express its identity, the style is seen by others as being closely associated with criminal behavior. Civil liberties advocates see racial profiling in the bans.

Regardless of the style’s meaning, proponents of ordinances prohibiting sagging pants can expect to face a skeptical court when these laws are challenged on constitutional grounds.

Marjorie Esman, executive director of the Louisiana chapter of the American Civil Liberty Union, says, “These laws just don’t hold water. I don’t think any of these ordinances could stand any kind of scrutiny at the appellate level.”
The origins of the style are vague and steeped in mythology. A consensus has emerged however that wearing sagging, oversized pants originated from prison culture. Most say that prison-issued garb is many times ill-fitting and usually oversized. With the prohibition of belts to prevent hangings and beatings, the pants of inmates tended to sag below the waist—sometimes showing as much at four or five inches of underwear or more.

Grammy-award-winning rapper Killer Mike disputes these claims. In his 2006 song, “That’s Life,” Killer Mike raps, “we wear our mother f_____-ing pants big because our mother’s were too poor to buy our size . . . call it what it is n____, it’s poverty.”

Whatever its origin, hip-hop artists in the early 1990s, some who served time in jail, adopted the style as a signifier of street credibility. The style migrated from hip-hop culture in predominately African-American neighborhoods, to skateboard culture, to the suburbs and hallways of many high-schools.

Diana Baird N’Diaye, historian at the Smithsonian Institution’s Center for Folklife and Cultural Heritage in Washington, D.C., says that individual expression, especially in dress, has always been an important part of the African-American experience. “In the 1930s we had zoot suits, in the 1970s there was the “Superfly” look with platform shoes and bell-bottoms—all outlaw looks that our parents’ hated.”

N’Diaye continues, “It’s also connected to the improvisation of dance and movement. If you think about the way people move, the pants become an accessory to the swagger. It changes the silhouette of the body.”
Zoot suits share much in common with the extra large, sagging pants favored by African-American males who want to suggest toughness and street credibility. Both can be seen as statements of defiance and both changed the shape of the body. In his biography, Malcolm X described the zoot suit as “a killer-diller coat with a drape shape, reet pleats and shoulders padded like a lunatic’s cell.”

Tom Rogers, historian of the African diaspora and assistant professor of Africana Studies at the University of North Carolina, Charlotte, says that wearing pants that sag below the waist is a “symbol of opposition to the mainstream, a tiny f___- you to mainstream society.” Rogers says that any attempt to ban the style of dress is an attempt by town officials “to maintain existing power hierarchies.”

Despite the charges that the laws are racially motivated, many legal scholars oppose the ordinances on constitutional grounds. Most ordinances banning sagging pants do so citing obscenity laws. The U.S. Supreme Court has created very few categories of speech that are not protected—obscenity however, is one of them. If a town can assert that wearing sagging pants is obscene, it can legally ban them.

Esman of the ACLU dismisses the obscenity argument outright. “The problem is that obscenity is very narrowly defined legally. The law is clear that showing underwear is not obscene. What about plumbers, exotic dancers and jogging bras?” Esman argues that these ordinances would encompass a broad range of dress, criminalizing unintended forms of clothing and styles.

Ethan J. Leib, professor of law at the University of California, Hastings College of the Law in San Francisco says that courts “aren’t too enthusiastic about these types of ordinances.” He calls most of the laws “overbroad and vague, and so trammel upon some pretty basic freedoms our constitution provides for.”

As for the laws’ racial implications, Leib says that “it isn’t obvious that any particular minority community is being intentionally discriminated against, as whites, blacks and Asians all wear the garb.”

The style remains popular in the predominantly African-American Roxbury neighborhood in Boston. Just a few blocks away from where Malcolm X spent several years as a young adult, Hector Fuentes works the counter of his family’s business, the  Fuentes Market and Liquor Store. He says he sees customers coming in and out of his store with sagging pants “every day all day.”

Fuentes, who says he has friends who wear their pants very low, is dressed in what could be considered baggy but not sagging jeans. “Some say it feels comfortable, I don’t think they know how dumb it looks. It’s just a style. From the rappers. But illegal? No. Why?”

Whether or not ordinances that ban sagging pants are discriminatory, irrelevant or an attempt to curb harmful activities related to the style of dress, Rogers of UNC, Charlotte says the whole idea of the laws is “absurd.”
He says, “The laws are ridiculous and hopelessly naïve because you can’t control meaning. What are you going to do, legislate all dissent from a culture? The historical record is pretty clear. It doesn’t work.”

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How We Measure Poverty

21May08

Poverty in the United States is measured by the poverty threshold—commonly called the poverty line. Set by the Social Security Administration, absolute poverty is defined by a poverty line drawn at a given income. The threshold used by the federal government was developed by taking the cost of the least expensive food plan (the Thrifty Food Plan developed by the Department of Agriculture), and multiplying that number by three. It was determined in 1955 that t he average family spent about one-third of its budget on food. This measurement was formally adopted in 1969 and is adjusted for family size, number children under 18, and age of head of household. The number is also adjusted yearly using the consumer price index. This type of measure of poverty espouses the theory of absolute poverty. Absolute poverty refers to an unequivocal standard necessary for survival in terms of calories necessary for physical survival, adequate shelter for protection against the elements, and proper clothing. One either falls above or below that absolute dollar amount.

 

This method of measuring poverty has its problems and is far from an accurate measurement. It excludes in-kind benefits when counting income, it ignores the associated costs of earning income (clothing, transportation, child-care) when calculating net income, it disregards regional variances in the cost of living, ignores tax payments, it ignores the effects of earned income tax credits, it ignores the value of health coverage in determining income and the costs of medical care when determining consumption needs, and it has never been updated to account for changing consumption patterns and expenses. All of these problems distort the numbers of people deemed to be in poverty by the federal government.

 

On the other hand, The European Union defines poverty as, “[the condition] of those whose resources (material, cultural, and social) are so limited as to exclude them from the minimum acceptable way of life in the Member States in which they live”. This means essentially drawing the poverty line at a certain percentage of the national median income. The EU’s position on the measurement of poverty subscribes to the theory of relative poverty. Relative poverty refers to deprivation that is relative to the standard of living enjoyed by other members of society. Relative poverty can be understood as inequality in the distribution of income, goods, resources and opportunities in a given society.

 

The absolute approach to defining poverty is subject to the views of those charged with formulating the yardstick. The U.S. continues to use this method because if we too used the relative approach it would become clear that the richest country in the world ranks near or at the bottom of all six dimensions of child well-being as defined by UNICEF. The dominant economic and political structures would be unable to exist if suddenly the real numbers of those impoverished in this country were exposed.

 

 

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SiCKO

15Apr08

Though SiCKO was released almost a year ago, I’ve just gotten around to seeing it. I hesitated so long because I thought the film would make me angry about the state of health care in America. It did.

In his film, SiCKO, Michael Moore spells it out for us: The United States is the only industrialized country in the world without a universal health care system. Forty-five million Americans do not have health insurance. More than nine million of those are children. A baby born in El Salvador has a better chance of surviving that one born in Detroit. Ninety percent of Americans believe the American health care system needs fundamental changes or needs to be completely rebuilt. Two-thirds of Americans believe the federal government should guarantee universal health care for all citizens.

In yet the richest country in the world refuses to care for its citizens. Michael Moore bluntly exposes the personal horrors our failed health care system has wrought. Mr. Moore, in all of his documentaries, has done an exceptional job in bringing pointy-headed liberal policy debates from the cerebral to the guttural—a task usually reserved for the more conservative political operatives among us. Mr. Moore’s film makes us sad, angry, jealous (of a European belief in universal health care), and alternately depressed and inspired.

The health care problem in the United States has become an increasingly partisan debate. A January, 2008 Pew Research Center Poll indicates that 65% of Democrats believe that insuring the uninsured should be a top priority of the administration. Only 27% of Republicans polled feel the same. What do conservatives stand to gain from an uninsured, debt-ridden class in our society?
In the film, Tony Benn, former member of British Parliament says that, “Democracy is the most revolutionary thing in the world”. He suggests that if you have political power you will use it to meet the needs of your community. In a functional Democracy, the vote moves the power from the wallet to the ballot.

The former MP goes on to explain how ours is not a functional Democracy. He says there are two ways people are controlled: fear (sound familiar?), and demoralization. Benn suggests that privatized health care ratchets up the intensity of fear and demoralization. A country where the uninsured sometimes choose to suffer, rather than go into debt over a medical bill suggests a country whose citizens are afraid. If they do choose health care they are racked with debt. Benn says that people in debt become hopeless, and hopeless people don’t vote. This is why our brand of Democracy is not revolutionary.

Some fault Mr. Moore for his manipulative style of filmmaking. Manipulative? Maybe. I would suggest though, that his manipulations are only more transparent than the manipulations of lobbyists, politicians and CEO’s whose best interests it is to see that there remains an uninsured, debt-ridden class in our society.

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3 Things I Learned About Social Security Last Week

09Apr08

1. Immigrants are saving Social Security. More workers means more tax revenue for the program. Undocumented workers help the system even more. These workers pay taxes while they work but tend not to collect their benefits later. Also more immigrants are entering the country at younger ages and having children of their own who will later pay into the system, easing  the demographic lopsidedness the baby boomers’ retirments foretell.

2. Social Security is a Women’s Issue. Often Social Security is the only income sourse keeping women from poverty. Women still only earn an average of 74% of what men do. Women leave the work-force for an average of 15% of their working careers to care for children, spouses, or parents. In addition women live an average of seven years longer than men. Social Security works for women because it is a program where every worker pays in and every retired worker receives a guaranteed benefit for life.

3. Social Security is particularly essential for minorities. Minorities rely on the program for more of their retirement income than whites. Social Security reduces minority poverty. The progressive nature of the Social Security tax is beneficial to minorities (and other low-wage earners). Minority retirees are less likely than others to have income from savings, stocks, bonds or other wealth generating assets. As a result, Social Security means more to them.

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