New Orleans Affordable Housing: A Bleak Forecast
New Orleans is frighteningly close to another calamity, but this time, it’s not the result of a breached levee or corrupt politics. This potential disaster has to do with the economy: Without a recovery of the credit market, the city could be unable to complete the redevelopment of four desperately-needed public housing projects torn down after Hurricane Katrina.
The impending threat made itself known last fall when the investor and insurer AIG fell on “hard times” and bailed on a multimillion-dollar promise to buy the tax credits that would finance the redevelopment of one of the city’s sprawling brick complexes, a Central City development officially called C.J. Peete (referred to by locals, including former resident Juvenile, as “Magnolia”).
Fortunately for the thousands of New Orleanians who have been waiting three years for it to be rebuilt, the housing project was salvaged this winter when Goldman Sachs bought the credits from developer McCormack Baron Salazar, providing the needed financing. The first shovel hit the site’s soil earlier this month.
But Goldman Sachs’ rescue doesn’t mean the city is out of the danger zone. Juvenile’s proving ground was just one of four public housing complexes demolished after Katrina. The January 7 groundbreaking, attended by U.S. Housing and Urban Development Secretary Steve Preston, was only the second such start on public housing redevelopment, following a December groundbreaking on the site of the St. Bernard project in the city’s Katrina-battered Gentilly section.
The other two developments remain in flux, both struggling with fallout from the collapse of the tax credit market. While Lafitte developers Providence Community Housing and Enterprise Community Partners have secured investors to buy one of the project’s tax credits, the team is still struggling to balance new budgetary constraints created by the perilous 30-percent drop in the credits’ value. The team expects to break ground by the end of the month, but planners say that sacrifices of design elements, including a few greening measures, will have to be made to move the project forward. The other public housing project’s developer, KBK Enterprises, still has not secured buyers for the tax credits funding their $250 million rebuild of the B.W. Cooper complex. Six months after construction was expected to begin, former residents remain mystified at the lack of progress at the debris-strewn tract of land a short ride from the Superdome (KBK Enterprises did not return phone calls from Next American City).
Preston says he’s hopeful that all four housing projects will be ready for partial occupancy by the end of 2010, a deadline for the use of the federal tax credits. But he also says that the poor condition of the tax credit market may necessitate a deadline extension. Affordable-housing advocates say that there is a risk the project will be thwarted if the market doesn’t pick up soon. “C.J. Peete was lucky, but there is never a guarantee, particularly right now,” said Annie Clark, a researcher who studies Louisiana fair housing for the think-tank PolicyLink.
The difficulties the Crescent City is experiencing as it rebuilds its public housing reflect a major failure on the part of both federal housing officials and the free-market strategies that are increasingly the answer to this country’s social welfare problems. People in New Orleans need homes, regardless of the appetite in New York for tax credits.
New Orleans was having trouble rebuilding affordable housing even before the market tanked. Now things are looking downright gloomy. In the fall, the Louisiana Housing Finance Agency was forced to recapture $18 million in tax credits from proposed housing projects that had not been able to close on loans or complete the financing needed to move forward. The recapture translates to 1,248 housing units that will not move forward until other sources of funding are found. More than half of the units were to be built in the greater New Orleans area.
“If we don’t do something now, the capital market crisis is going to rob Louisiana of affordable units that are desperately needed,” LHFA president Milton Bailey said in November.
Owners of small rental properties are also having trouble securing financing to rehabilitate the thousands of apartments destroyed in Katrina. According to the Louisiana Recovery Authority, only 713 apartments have been put back on the market through the state’s rental rehabilitation program. Holding things up has been banks’ resistance to issuing the construction loans needed to get renovations started.
There are no easy answers, except of course, the Obama economic stimulus. Everyone from City Hall to the mud-covered yard where Juvenile learned to rhyme is crossing fingers, hoping New Orleans will receive the funds needed to get more shovels in the ground. But even if the federal money does come, who knows how much of it there will be, or what it will be earmarked for. The needs here are great and many. The housing units are not.
Two Houses
Urban Sociologist on Tue, Feb 03, 2009 at 10:26am
Katrina was a devastating force that swept through New Orleans. This natural disaster was not handled in the best manner. Now that several years has passed and our country’s economic situation has turned south. The property value in New Orleans has done the same, and people are not happy. The government should have subsidized Katrina victims in order for them to have a place to live. Now we have victims who can not afford housing. The government needs to step up to the plate and help these people.
Nola Darling in New Orleans on Sun, Feb 08, 2009 at 2:37pm
This story was seriously embellished in an effort to make it seem that the failure to redevelop the CJ Peete and the rest of the “Big Four” is going to have a dramatic impact on the city’s poor. For example,only A FEW HUNDRED low income people (and not the thousands Ms. Cohen indicates) will be able to rent units in the CJ Peete redevelopment because the total project is only slated to have about 420 unit, with only a third being made available to former residents and another third available to low income people with “above public housing level” incomes. When you do the math, these redevelopments will only provide housing for less than 600 former public housing residents, on tracts of land that formerly had over 5000 units. The real travesty was watching a city and federal government spend hundreds of millions of dollars to build 1700 new units, when less money could have been spent completely gutting and rehabbing three times as many.
Max on Wed, Feb 11, 2009 at 4:05pm
This is a great story.
Beyond bringing attention to the problems the redevelopment in N.O. is this is one of the first, if not the first ‘mainstream’ article I’ve seen referencing the difficulties the LIHTC market. Becuase banks have lost so much money and because of some accouting changes allowing banks to carry losses in a way that further reduces their taxable liability the LIHTC market has seen a really dramatic downturn. This has resulted in ten’s of thousands of affordable units being delayed nationally. Currenrly there is some help in the senate version of the stimulous bill, we’ll see how it plays out inthe final bill.
Regarding, NOLA Darlings comment. At Magnolia, there will be 460 rental units, 193 being public housing, 144 being tax credit which means they are income and rent restricted units, and only 123 market rate units.They are aslo building 50 market rate for-sale units on the site.
Without debating the equity issues, and it is complicated, I think it’s very important that people see ACTION on the large vacant sites in the middle of the city. . .that they know that something is happeneing and they aren’t alone. . .and that some additional housing is added to the city.