As founder and president of Housing and Services, Inc. (HSI), Claire Haaga has been at the forefront of affordable housing development in New York City since 1987. With HSI, Ms. Haaga developed the first supported single-room occupancy hotel in New York during the 1980s; one of only two residences for families with AIDS in the United States; a model residence for victims of domestic violence; and approaches to rehabilitating single-room-occupancy hotels with tenants in place. She also heads Housing and Services of South Florida, Inc., which, beginning in 1993, has provided technical assistance to the City of Miami and Dade County. Prior to the founding of HSI, Ms. Haaga served as associate director of the Vera Institute for justice, where she designed, managed, and obtained financing for a variety of housing and human service projects.
by Professor John Goering,
School of Public Affairs, Baruch College
Claire Haaga represents an absolutely unique and critical force in the development of affordable housing in New York and throughout the nation. In 1987, she founded Housing and Services, Inc. (HSI), which has developed over 1,500 units, but, even more importantly, is recognized as the organization that is often brought in to deal with "impossible" projects. HSI was asked by Mayor [Rudolph] Giuliani, the Secretary of the Department of Housing and Urban Development (HUD), the U.S. Attorney General, and others to tackle the controversial Kenmore Hotel, which had been seized by the federal government because of the drug trafficking activities of the owner. The successful redevelopment of the Kenmore by HSI is well known and respected both at City Hall and in Washington. Ms. Haaga and her colleague Larry Oaks offer the following overview of this area of housing development.
The following is the text of a talk given to students in the undergraduate program in Real Estate and Metropolitan Development at Baruch's School of Public Affairs on April 6, 2000.
A HISTORY OF SUPPORTIVE HOUSING IN NEW YORK CITY
Remarks by Claire Haaga
I'm going to begin by walking you through the history of supportive housing in New York City. Over the past two decades, different factors have appeared in every large city across the country, but there are some similarities in the development of supportive housing that I'm going to describe. Then, Larry Oaks, HSI's Director of Property Management, will cover some of the challenges of managing supportive housing.
One of the first questions you might ask is, why does the nonprofit sector need to develop low-cost housing? Why not just let market forces create housing for low-income people? Why do you need a whole industry to build supportive housing? The problem is that market forces tend to work in the other direction: they create upscale market housing but not low-cost housing. Twenty years ago there was some credence given to the "trickle-down theory"-that if you create enough market-rate housing, people will keep moving up and vacating low-cost housing-but unfortunately that hasn't proven true.
I'll use the 1970s as a starting point because I think it was a critical turning point. Up until then, New York City had been largely a city of renters. There were a lot of "mom-and-pop" owners of small buildings, often tenement buildings, or sometimes buildings with up to 50 apartment units. The owners tended to live on site and manage their own buildings. There were also a few larger real estate companies that owned hundreds or even thousands of units, but they were operated on a low-profit-margin scale.
Although New York has always been a very heterogeneous city with lots of different immigrant waves, the housing market had always adjusted fairly well. There was never a housing surplus, but there was always enough to accommodate people whose incomes were at the low end of the scale.
However, in the mid-1970s, New York City was teetering at the edge of bankruptcy. President [Gerald] Ford told the city to "drop dead." Bankruptcy was forestalled through a combination of public and private efforts, and New York City slowly limped back to solvency. The economy, however, needed various incentives to get people interested in living and working in New York City because the middle class was leaving. People thought that even though it didn't go bankrupt, New York City was not a very secure place to be. Companies weren't investing. There was a very definite flight from the city.
The city did a number of things to try to attract and hold the middle class, but some of those incentives had unintended negative effects on low-cost housing. One of these was a real estate tax abatement program known as the J-51 program, which provided 10- to 15-year real estate tax abatements for the conversion of older buildings into residential use. The J-51 law spurred the conversion of thousands of rental units into co-ops.
On the one hand, the abatements were a great success. New York City started to see more home ownership through the co-op movement. Many saw this as a positive sign because former renters were putting down stakes and becoming owners. However, a major downside of this incentive program was that many of the converted units were in single-room-occupancy (SRO) hotels on the Upper West Side of Manhattan, in mid-Manhattan, and in downtown Brooklyn.
Between 1972 and 1982, largely through this conversion process, New York City saw the loss of 100,000 SRO units. What happened to the former tenants of these units? How did the co-op converters get them out, as there were rent protection laws even back then?
There's no single answer, but suffice it to say that not all of the units were vacated legally. The next question is, where did these SRO tenants go? Most were people living on fixed incomes, social security, disability, or public assistance. Few of them had families or friends, so they did not have many options when they were squeezed out. They soon became a large part of the homeless population that began populating the streets of New York City in the early 1980s.
At the same time, owners of small apartment buildings in areas such as Harlem and Washington Heights in Manhattan, Bushwhack and Brownsville in Brooklyn, and Jamaica and Corona in Queens were hit by high operating costs spurred in part by the fuel crisis of the 1970s. Then insurance costs went up because the insurers got nervous.
Many property owners had been family businesses, and the sons and daughters were no longer interested in being owners and supers of small buildings. They were getting more education, and they were looking for jobs that required and rewarded such education.
Owners were walking away from their buildings in droves. Some of them torched or set fire to their buildings for insurance proceeds. In the late 1970s, an all-too-frequent headline in New York papers was "The Bronx Is Burning." I personally went out with fire marshals to fire scenes in the middle of the night in the South Bronx. One fire station might have 10 calls a night, and firemen would just go from fire to fire. Needless to say, this disinvestment and abandonment phenomenon reduced the city's housing inventory substantially.
In the 1980s, we had a Republican president who didn't believe there should be federal involvement in housing. Ronald Reagan began to "dis-mantle" HUD. One of the first programs that was targeted was the Section 8 Rent Subsidy Program, which had provided market-rate rent subsidies for 20 years, creating a powerful incentive for private owners and developers. For example, in 1976 a developer of a building in the South Bronx could get $800 to $1,000 a month for a one-bedroom apartment. That was far above fair-market rent at that time. When the federal government with-drew from the Section 8 program, private developers walked away from low-income housing.
At the same time, it was becoming public policy not to build additional public housing. Indeed, the worst example of public housing, the Pruitt Igoe in St. Louis, was simply blown up, dynamited, because it was considered too bad to save. So we saw the withdrawal of both the public and the private sector from low-cost housing by the early 1980s.
While there's a happy ending to this story, I'm going to give you a few more grim chapters. At the same time that all this was going on, New York City changed its real property tax foreclosure laws and reduced the time of vesting from three years to one year. Previously, if an owner didn't pay his real estate taxes, he had three years to catch up. The city shortened that period to one year. This is the interesting public policy question: Was that one-year threat going to make people hurry up and pay their property taxes more quickly?
The answer is "no," because smaller owners usually didn't have enough money to pay their property taxes. There were some real scofflaws, but many of these people were just squeezed because of factors cited above. Speeding up the vesting process didn't spur them to pay their taxes sooner.
In the early 1980s the city found itself taking title to thousands of properties for failure to pay taxes. This process is called an in rem proceeding because the city was attaching "the thing" or "the property." Within several years, the city became the owner of 60,000 housing units, but it had no plan for managing these units. The former Housing and Development Administration became the Department of Housing Preservation and Development, which set up a large property management operation to manage these in rem properties. It is an understatement to say they were scrambling about how to do this.
Stan Altman, now the dean of the School of Public Affairs at Baruch, was one of the people brought in to consult about how to manage this problem. He went out and saw the condition of the buildings and noted that they didn't even have superintendents. If any of you live in apartment buildings, you know that the superintendent is sort of a fixture. He sweeps the hallway, takes out the garbage, makes sure the lights are on, and in some cases collects the rent.
When the city took over these buildings, they didn't offer jobs to the existing supers. Consequently, there were no superintendents on site. Dean Altman suggested that they hire supers immediately, but they didn't know how to do this. Through a nonprofit that he headed at the time, Dean Altman created a superintendent training program, Project Match, that trained thousands of people as superintendents of buildings over the next six to seven years. Trained supers helped, but the overall task of managing these properties was a mammoth one that the city is still not out from under today.
Adding to this mix of problems on the social front, New York State was releasing thousands of patients from mental hospitals to the community under the guise of a more humane approach to treatment. The missing link was the absence of treatment services in the community; people were just discharged to nothing.
The Rockefeller drug laws also led to an increase in homelessness. When Nelson Rockefeller was the governor of New York in the 1970s, penal laws were amended to impose much more severe penalties for even minor drug offenses. This resulted in many more people going to prison for longer periods of time. Most people eventually get out of prison, but they are generally released without skills or income. By the early 1980s, many offenders were being released with nowhere to go.
I was involved in creating a work program for ex-offenders in the late 1970s. We employed 200 people at a time and had to turn away many more. They had been released from state prisons with $40 and from the city prison with one dollar. As you can imagine, they either started mugging people right away or they hit the streets as homeless people.
To add more to the mix, by the mid-1980s we had a new factor known as "crack." Crack was test marketed in the Bahamas in the early 1980s. The distribution processes were refined, and it hit the streets in nickel bags in 1985. This was a highly addictive, cheap, and very available drug sold through a very complex and accessible distribution network. Crack became the drug of choice not only for hardcore drug users but also for many who had never experimented with drugs before.
In summary, the confluence of several major factors led to the crisis in homelessness and low-income housing in New York City. These factors were:
- co-op conversions spurred by the J-51 Law;
- the fuel crisis and rising insurance costs;
- the accelerated seizure of property from delinquent owners;
- the release of thousands of mental patients and prisoners; and
- the loss of the federal Section 8 program and no increase in public housing.
These factors were not the result of government officials saying, "This is going to be our public policy." Rather, it was just the opposite: people at different levels of government didn't talk to each other and didn't think about what happens when you make policies such as drug laws or a real estate tax abatement in a vacuum. So we ended up with a huge increase in the homeless population.
My organization at the time, the Vera Institute, was asked to come into the Third Street Shelter on the Bowery and find out why all these people were suddenly showing up as homeless. It was a very quick study. You didn't have to be very smart to figure out why so many people had become homeless.
The city began to provide shelter under a court order, but its efforts created high costs and few long-term benefits. An alternative housing structure with alternative financing and management approaches was needed. The city simply didn't have any proven models that could be adapted to current circumstances.
We also needed a new breed of owners and operators. So, in 1984 and 1985, my organization began experimenting with ways to develop low-cost housing. In 1987, we created Housing and Services, Inc. (HSI) to serve as a developer for other nonprofits. Our original idea was to do policy development and a pilot project, and then document it so that others could replicate it.
We found, however, that there weren't other people to replicate the model and that there really was a niche that needed to be filled by a nonprofit developer. Another hurdle we faced in the mid-1980s was that nonprofits, particularly those in New York City, did not think of themselves as landlords. They fought landlords. The role of owning and managing property, being tough on tenants, and maybe even evicting tenants did not seem appropriate to them at first. Nonprofits had to be re-educated, because there were many cases where they could fill the breach between the public and the private sector.
The Comeback of the SRO
When you start on something like supportive housing, the road map is not clear. It's not as if government says, "We've got this problem, so we'll create funding sources, we'll make property available, and we'll just lay it all out." Quite the contrary. The government was not trying to be difficult, but its officials just didn't believe nonprofits could solve the problems. Government had no experience with lending to nonprofits nor with the homeless population, for that matter. (By "the homeless population" I mean people living on fixed incomes at the lowest end of the income spectrum, making less than $6,000 or $7,000 a year back in the mid-1980s. That number might be closer to $10,000 today, but it's the same situation.)
Our first step was to identify a building. We find that the more concrete (no pun intended) you are, the better you are able to make your point about public policy. We found a building in Harlem that had been a single-room-occupancy hotel (SRO). It was one of the buildings the city had seized under a tax foreclosure. It had been vandalized and vacant for about ten years.
We told the city that we wanted to re-create SROs. They replied, "That is a terrible idea. We think everybody should have a one-bedroom apartment. Who wants to live in a small unit and share facilities?" We then gave the city a basic economic argument. We said, "If you can afford to provide one-bedroom apartments, great. But for a lot of people, you've also got to look at their other needs." For former alcoholics, drug users, or people with mental health problems, the experience of living in their own unit and worrying about furnishings and utilities may be an isolating experience. You don't want to over-institutionalize people, but people who literally have been disconnected from society in many cases need an opportunity to reconnect with some support.
We envisioned an SRO that would have a staffed front desk all the time, a manager on site, some social service staff, and links to services in the community. We didn't want to duplicate mental health or other services, but we wanted to provide access to those services.
The city wasn't really thrilled about selling this building to us, but they finally agreed. We knew the renovation costs would be about $40,000 per unit, about half of what they would be today. The model had four units sharing one bathroom and about ten units sharing a kitchen.
To finance these renovations, we went to the various public loan programs. While the state had created a grant program for homeless housing under Governor [Mario] Cuomo, it did not envision serving SRO populations. We convinced various programs to commit pieces of the total development budget.
Then, we convinced the Harlem Urban Development Corporation to buy the building and give us a 50-year net lease. Next, as an example of a product of the times, the state attorney general had been contacted by some former West Side SRO tenants who claimed that they had been illegally evicted by goons who had basically frightened them out. The owner had done a co-op conversion, he had issued an offering statement, and he sold co-ops. The project thus fell under the jurisdiction of the state's securities law, because a co-op sells shares in a corporation. The attorney general investigated and found that these tenants had indeed been forced out. Although the conversion had already taken place, the state attorney general brought an action against this owner for violating the securities law.
If the state had been successful in their prosecution, the owner would have been prevented from doing a co-op or condo conversion in New York for a long time. Consequently, he agreed to come to the table and discuss a way out of this dilemma. He paid a $300,000 fine, which we put into the financing for this project, and we agreed to house those people who had been evicted. So the Cecil Hotel, on 118th Street and St. Nicholas Avenue, was financed with about $4 million made up of six mortgages in a transaction that was very complicated for its size.
We also learned that we had to promise and then continually work very hard to build community support. I'm glad to say we've always built community support for what we do. It's fair to say that most communities aren't really in love with the idea of more low-income people moving in. You have to convince them that this is somehow going to be in their interest.
For starters, it helps a bit to renovate an abandoned building that the community sees as an eyesore. Second, you have to convince the community that you're going to be a good manager and you're going to be responsive to them. Third, in the case of the Cecil Hotel, we promised that it would have a mixed population: some elderly people, some working people, some people with criminal records, and some people with mental health histories. However, there would be no preponderance of any one group.
Right before we opened, Columbia University published a study that said that the chronically mentally ill were the neediest group of the homeless. The city, thinking they were going to adopt a good public polity, called us and said the only people we could take into that building were the chronically mentally ill people. We said we wouldn't do this; we didn't have the services for 115 chronically mentally ill. They said, "Well, you have to do it," and we said, "We have a mortgage with you, and you can't unilaterally change the mortgage." We took the position that the city would have to declare us in default if they wanted to force us to do this. They could take us to court, but we were not going to violate our promise to the community of a mixed population.
We had a standoff for a couple of months and didn't rent the building. Finally, the city caved in. Thirteen years later, none of the public officials we were dealing with at the time are in office, but we are still here and still have to answer to that community every day. While I didn't have a crystal ball, I could see that that much was probably going to be true. And now, with term limits, public officials will remain in office for an even shorter time.
As Larry will explain, we have some real challenges in management. Renters on public assistance, which is most of the population in SROs, have not had an increase in their public assistance checks in 13 years. And so, while nonprofit landlords like HSI file rent increases with the state every year, we cannot actually increase the rents because we know the people cannot pay more. Some of our tenants receive Section 8 vouchers, and that helps, but fiscal management is definitely a challenge. I should note that the city mortgages on the Cecil bear an interest rate of one percent that is not repayable unless you sell the building or cease to use it for low-income housing. The building has one "real" mortgage from the Harlem Urban Development Corporation.
Housing the HIV/AIDS Population
I'm going to give you two other quick examples. One of the things we had hoped when we started in this business is that we could create some "cookie--cutter" approaches. That, unfortunately, has not come true. No two projects are the same. We use a lot of the same state and city financing tools that are available. As you do with a Chinese menu, you mix and match. Some have leveraging requirements. Some have matching requirements. Some have unit limits. And frankly, you need an intuitive sense about how best to put all these pieces together.
In 1989-90, we began to see a big increase in the HIV population, which was including more women and intravenous (IV) drug users. Two percent of the babies born in the Bronx at the time were HIV positive. Before the new medications came on the market, people were languishing in hospitals with no place to go. Those who were IV drug users also needed help overcoming their drug abuse. Regular housing wasn't going to work for them. Our sense was that they needed more services. Again, there was no model for such a project, except for some in Europe.
We decided to create a supportive residence that would also serve women and children. We looked around for financing approaches, but most didn't seem to provide enough funds to cover medical care, meals, and child care. In considering a wrap-around financing approach, we came up with the idea of the nursing home as a model, even though we wanted to house children and adults in their mid-thirties. We went to the State Health Department and said we needed to house these people and wanted to use the nursing home mechanism because all the people we wanted to serve were eligible for Medicaid, the federally subsidized health insurance.
We then said we wanted to finance this project with tax-exempt bonds. We found a 65,000-square-foot former orphanage-our first building was for women and children, as well as single adults-near Yankee Stadium in the Bronx. The building was under contract for sale from a religious organization to a middleman. The price was $1.5 million, and we had only $10,000 to our name. We said we would sign a contract and put up a $10,000 refundable deposit. Another key to our development is that whenever we put real money down on a property we always try to make it refundable in case we don't get the financing. Sellers don't like this, but if they're desperate enough they agree to it.
We then applied for something called a "certificate of need" and ran into a catch-22. To apply for the certificate of need, you must own the site. Because our $10,000 deposit was not enough to meet this requirement, we went to the City of New York for a bridge loan. They reluctantly lent us the money to buy the building. We applied for and got a license. We designed the building with individual apartment units so it did not look at all like a nursing home. We designed a clinic and dining room on the ground floor. Again, I think when the public sector is desperate enough for a solution, they're willing to work with you if you have an innovative idea that makes sense. We opened our building.
One of the things I can't stress enough in supportive housing is doing the homework. One developer said to us, "Because you guys are so poor, you have to be smart," and I guess that's a compliment. You really have to "pencil things out" very carefully, because nonprofits do not have the deep pockets of a private developer. Fifteen years go by very fast, so you really have to do careful projections that build in reserves and working capital.
When we went into an arena like housing for people with AIDS, we looked at it and asked, what are the big unknowns? We basically figured, just by common sense, that the cost of medical care, doctors, and drugs was critical. We got the state to agree to a daily rate, but outside that rate was the cost of drugs and doctors. We figured that if we needed very expensive doctors or drugs all of a sudden, financing would become a problem. A few years later, when the new protease inhibitors came out, we determined that we should prescribe them. The state initially said it wouldn't pay for them, but we pointed out that it had committed to this in the offering statement of the bond issue. Their response was, "Well, you know, that was another governor, that was a long time ago, and we're not interested." Pretty soon these drugs were very expensive. They've leveled off a little bit now, but within six months we were $300,000 in the hole. People were living longer, which was a good thing, but we were going bankrupt.
We then got a major law firm in the city to threaten legal action. The state backed off and started to reimburse us. You can come very close to the brink. You're going along, and you're operating in the black, but then you can get hit with an unforeseen circumstance.
The tax-exempt bond route works if you have a reasonably predictable stream of income like Medicaid. An important piece of leverage is to get a triple-A rating on the bonds, which will give you the lowest interest rate. The Federal Housing Agency (FHA) issues bonds insurance, as does the State of New York Mortgage Agency (SONYMA). In our case, we got both private bond insurance and SONYMA bond insurance. When the state threatened to not reimburse us for the new drugs, SONYMA, as our insurer, was our ally because if we defaulted on the bonds, they would have to pay the bondholders. They didn't want to have to cough up this money.
Low-Income Housing Tax Credit
Another thing we use creatively is the tax code. The Low-Income Housing Tax Credit is a very valuable tool that was included in the 1986 Tax Reform Act. We had a project about five or six years ago for a nonprofit group that wanted to house older people, people with AIDS, and young people. They were all in one low-paying industry that did not offer much in the way of pensions or disability benefits. The organization had created a relief fund, and every year they were raising money to help subsidize people in apart-ments that were often substandard, so they wanted to develop a building.
We were lucky to be in the down cycle of the market, when a lot of developers had gone belly up. We found a building-a 90-percent-completed luxury condo building. The owner was declaring bankruptcy; he was in default on three major mortgages, and there were about 25 mechanics' liens because all the contractors sued when the construction stopped. It was a legal nightmare. The building, however, had never been placed into service, and the "step in the shoes" provision of the tax code allows you to take the basis of the existing owner for a building that has not yet been placed into service. This case was a $50 million project. We got the owner to apply for tax credits, and we worked together with him. We said, we're not going to make you whole financially, but we will get you out from under all this legal mess; that was the quid pro quo. We got the tax credit allocation and then found investors to buy the credits. The credits were at that time selling for about 50 cents on the dollar, and we raised $25 million. We then settled all the bank loans and all the mechanics' liens for $25 million. We took a $50 million project with no debt, and we turned this 96-large-unit building into 178 studios and one-bedroom apartments.
On that note, I'm going to turn the floor over to Larry Oaks, who has learned the business of property management at HSI through trial by fire. He came on board about four years ago when we took over the Kenmore Hotel on 23rd Street, right across from Baruch's main building. This building had been seized by the federal government because of the former owner's propensity to operate it as a drug den.
Remarks by Lawrence Oaks,
Director of Property Management, HSI
My role with HSI is to manage the three single-room-occupancy hotels and supportive housing programs we have in Manhattan, as well as a scattered site program for people with AIDS in the Bronx. As Claire said, our most recent and largest project is Kenmore Hall, a 326-unit supportive housing program for formerly homeless single adults that is a block away from Baruch College, on the north side of 23rd Street near Lexington Avenue.
I will explain the challenges that distinguish property management of supportive housing from traditional property management. It is important to point out that nonprofits are good mechanisms for managing supportive housing because, unlike traditional property management, nonprofits do not try to make money by managing the building. If a nonprofit is managing well enough to have excess revenue, the money must be put back into the organization in one form or another. Very often that's important if you're looking to fund building reserves for capital improvements down the road.
I will touch very quickly on five challenges of managing affordable housing. One of them is making ends meet and paying the bills. In the case of Kenmore Hall, we were fortunate at the completion of a gut renovation to have a plan that involved the city setting new rents for the new units we constructed and a set-aside of Section 8 vouchers to provide a subsidy. We are able to get $700 a month for each unit, with the tenant paying only 30 percent of his or her income in rent. In other, older projects, the incoming rent levels are not nearly this high, so making ends meet and paying the bills are bigger challenges there.
The second significant challenge is balancing sound property manage-ment practices against your nonprofit's mandate to house people who would have extreme difficulty finding regular housing. It means balancing the collection of rents and the maintenance of units for the tenants against the reality that many of your tenants have a mental illness when they come to you. Many of the people we house are coming straight from city shelters where sometimes they've been linked with support services. If they have a history of mental illness, they might be under a psychiatrist's care, but very often they're not. Very often they lack the ability to manage their money. Very often they're unemployed and have no entitlement stream. It's always a challenge to change your property management hat for your social services hat when you need to.
Negotiating and navigating your way with government is the third issue. All of our projects have a contract with one public agency or another. For Kenmore Hall, we have one contract with HUD, the federal housing agency, and one with the New York City Department of Homeless Services. We are subject to constant inspection by the city. We must maintain a certain standard in the housing and adhere to city guidelines. It means very often you have to do things to satisfy the government that may not seem important to the everyday management of the property.
The fourth challenge is maintaining community support. Kenmore Hall, located a block and a half away from Gramercy Park, one of the city's most affluent neighborhoods, is a good example of that. At Kenmore Hall we have 326 very low-income people, many of whom were on the street or in a city shelter six months ago. We have to keep close ties to the Gramercy Park Block Association of local homeowners and the 23rd Street Association of business owners. Without good communication, a problem that affects the community could become a very big issue.
Finally, we have to recognize that we are almost always working in renovated, older buildings. Kenmore Hall was originally built in the 1920s as a rooming house. Our project on the Upper West Side is a turn-of-the-century building, and the Cecil Hotel dates back to the early 1900s as well. The consequences of leaky roofs and boilers that don't run properly keep us focused on always looking for money for the project. While many property managers have similar challenges, ours are increased by the fact that the people we are trying to care for are tougher on the facility. They often bring a host of problems that typical tenants in typical buildings don't bring.
When you put people from shelters into decent housing, they can attract a lot of other people who may not be willing to apply for public assistance or supplemental security income or to go to an interview for an apartment. They just want to hang out, and they attach themselves and become "guests" at your building. So you can easily find yourself with 600 people staying at a building designed for 325. At the same time, you don't want to have armed guards or metal detectors at the door, so you have to engage in a subtle, friendly, and professional screening of guests. It's important to work very closely with your tenants so that they under-stand these policies are for their protection as well.
A lot of scams can take place, like loan sharking of public assistance recipients to keep their public assistance cards or lending people money to buy drugs, so the people we employ have to be trained very carefully. Our desk clerk, who's not a highly paid person, has to know how to ask for ID, to be pleasant, and not to get involved in an altercation with somebody who says, "I demand to come in." Negotiation and diplomacy must be used to educate tenants, particularly in a building like the Kenmore, where we inherited about 250 tenants who were used to the former lawless way of operating.
It's also essential to have good relationships with law enforcement. We have some working people and elderly people who pose virtually no problems. From 1985 to 1995, however, when the Kenmore was at its worst, the police had one 911 call from there per shift. That's three calls a day, or a thousand calls a year for ten years: a total of 10,000 police calls. If you figure that it takes at least flue or six hours of police time to process each 911 call, the cost to the taxpayers is huge. After we stabilized the building, the 13th Precinct had one 911 call to the Kenmore in all of 1998. So the cost reduction has been great. We're hoping that slowly, over time, public officials will recognize the unsung benefits of projects like this for the City Treasury. They can't avoid police costs when there's a natural disaster or when the president comes to town, but 911 calls are "avoidable costs" if the property is properly managed.
QUESTIONS AND ANSWERS
Do you see this kind of supportive housing replacing public housing?
Well, I don't think public housing projects are going to be done away with. The federal government has a program called Hope VI, which government jurisdictions can apply for to retool pub-lic housing. For example, the New York City Housing Authority has a Request for Proposals to take a public housing project and turn 600 units into 350 rental units, creating 100 assisted-living units for the elderly and others.
I think we're going to see more retooling of public housing projects. We've met rather extensively with the chairman of the Housing Authority, and he's very interested in moving public housing residents at the higher end of the income scale into home ownership. HUD will provide Section 8 mortgage subsidies to help move people from public housing to home ownership over a 10-year period. One project we have waiting for city approval would create limited equity co-ops, which require a very low down payment. Our plan is to move people now served by the Housing Authority into these units.
Do you seek corporate support for your projects?
Corporate responsiveness is something we always try to tap. For example, we have an effort on the drawing board with the 23rd Street Association that would involve local business. You may have noticed that in other parts of the city there are business improvement districts (BIDs). You see men and women cleaning the streets with uniforms that say "Times Square Business Improvement District" or "Grand Central BID." In those formal BIDs, the businesses are taxed by the city and their payments contribute to a fund that employs people to clean up the streets, plant flowers, and do a lot of other things. Because there is no formal BID in the 23rd Street area, we're working with the 23rd Street Association to create a virtual BID to employ Kenmore residents. We have created a space in our basement at the Kenmore to provide storage lockers and a classroom so that people cleaning the streets can get some education about job skills, find out about jobs, or create their resumes. We have a source for the initial funding, but to succeed we will need ongoing support from the merchants. We're hoping they will contribute voluntarily and preclude the need for a taxing authority.
How do you deal with a tenant who is not able to pay the rent at a place such as the Kenmore?
Our agency's philosophy, typical of supportive housing programs, is obviously to use all staff people-building maintenance staff, the manager, security staff, case managers, and entitlement and social service personnel-to help reinforce the issue of managing money and paying the rent. For the health of our project, we preach this basic life skill to our tenants all the time. It helps avoid evictions. On the other hand, we make a concerted effort to work with tenants and identify those who are unable to pay rent. Most often the problem centers around the issue of money management. When people are on a low fixed income, their money often goes through their fingers before they know it.
In some cases, if the person is mentally incapable of managing money, a guardian is appointed through a legal proceeding. Often the solution comes down to good old-fashioned social work-intervening, talking to people, and rolling up your sleeves to help them manage their money.
If a tenant loses his or her job, we will work out a payment plan. We also try to provide an activities director to keep the tenants involved in constructive activities. On Monday, we had 20 people in the French class at the Kenmore. We have people learning all kinds of things you might not think they would be interested in. We have a library and a gym. We also serve a continental breakfast every morning for two reasons: one is to give people food that they often do not have enough money to buy, and the second reason is to get them out of their rooms, to get them socializing, and to try to "engage" them. Many of these people have been so alienated that they don't want to be engaged, and it can be tricky to break through that barrier. I don't think we have ever evicted a tenant who was trying to cooperate with us. The "safety net" in terms of entitlements is not as without holes, but generally we have managed to keep everybody who is really working with us.
How long can a person stay at the Kenmore?
We enter into a one-year lease agreement with the tenant when he or she moves in. This is partly because the Kenmore is designed as permanent housing, as opposed to transitional, but also because we're taking advantage of Section 8 subsidies. People can stay forever if they want to.
We found that in the Cecil Hotel, our oldest project, we had about 80 percent turnover after five years. Very few people went back to the streets as homeless people. Most were able to use the Cecil as a stepping-stone to a better place. Having had a home and a rent-paying record, many of them got into public housing without a lot of help from us, other than a letter saying that they were good tenants. I think they learned to do what any of us do if we want some-thing: get on a list, follow up, go back to the place, bother the people and say, "I'm ready for a new apartment."
We have even seen this happen with some people who were diag-nosed as mentally ill but stabilized once they were on their medication. At the Kenmore, which houses people with so many disabilities, our relationship with Bellevue provides a psychiatrist. We have a lot of people in their outpatient program, and we also have a visiting nurse service, which has a small room as an office that is staffed 24 hours a day, seven days a week. They bill Medicaid directly for their visits. So we have nothing to do with their reimbursement, but there are enough people that it's worth their while to have two nurses there all the time.
Are other cities or projects replicating your pioneering models?
We have tried to be pioneers in dealing with particular issues as they arise, and we've often piloted a project in a particular arena. We did 140 of these AIDS nursing home units. We helped shape this program for the state, and since then another 850 units have been built on our model.
When we did the Cecil Hotel, the city didn't have an SRO program; they thought it was a terrible idea, as I said. Then they saw that the cost to house somebody at the Cecil Hotel was about $6,000 a year, compared with $20,000 a year at a shelter. The math made sense, so they created an SRO loan program that now lends $75 million annually.
HSI also did a project for people with AIDS on the Upper West Side, where the city had literally dumped 800 people with AIDS in about 10 SROs between 86th and 96th streets. Most of the people were still using drugs, and the community was up in arms. Community Board 7 was about to pass a rule saying that no people with AIDS could live in their district. We were at the community board meeting that night with cops and riot gear. It was a little scary. A very well- dressed man stood up and said, "I'm a gay man with AIDS living on 77th Street. Are you telling me I have to move out?" And before you knew it, people were saying, "Yes." And you looked at the people and said, "Wait a minute, is this the United States? What have we got here?"
The community was not upset about people with AIDS; they were really upset about out-of-control drug addicts, which was understandable. Most communities would be. So we refrained the discussion and agreed to tell the city it shouldn't dump these people without services. We suggested the city agree to support either leases or purchases of buildings by nonprofits that could help the people stay off drugs and obtain services. This was during the Dinkins administration. The city didn't really want to do this, but the community outcry was very strong, and they agreed to give us a 20-year bankable contract. We went to the bank, and we bought a building. We renovated it, and we now have 60 people with AIDS living there along with 40 rent-stabilized tenants. From that model, the city created a program where it will support either purchases or net leases of these buildings. It also agreed to disperse the people so they were not all concentrated in a 10-block area.
What are some of your future plans?
We hope to stay at the forefront of change. Larry has put on our agenda a project we began working on about eight months ago to provide housing for kids aging out of foster care at 19 or 20. When these kids graduate from high school, they may go to college or they may get a job, but they have no place to live. If they've been in a halfway decent foster care agency, they do well, but they need support. Typically their families aren't terribly functional and may start leaning on the young person until he or she falls apart. The city's Agency for Children's Services has supported the project we have proposed. At the same time, President [Bill] Clinton signed a bill providing some subsidies for this population.
We're also looking to do more in the way of elderly housing. Everybody knows that baby boomers will start turning 65 in the year 2010. The elderly population is growing tremendously. In New York City we have some housing for very poor elderly people, some very high-end assisted living for $7,000 a month, and virtually nothing in between. So we are looking to create some new elderly housing and convert some part of some existing elderly housing into assisted -living accommodations.
Right now we're also working on some preservation efforts. Over the last 10 to 12 years, 14,000 SRO and other supported housing units have been created in New York City, which is great. Those projects that are between seven and 14 years old, however, are often in need of repair and some infusion of money. They have very little in the way of reserves, so we're working on a program to provide some funds. You have to go through cycles, and preservation is now one issue on our agenda. Housing for young people and housing for old people are two other major issues on our agenda.
Can you explain in more detail how you foster community support?
I could tell a story about the Kenmore that the local block association has told me several times. This place was so bad that they had a block association meeting about five years ago where the president wanted to talk about any issues affecting the community. She was expecting 10 or 20 people to attend. Nine hundred people came, and all they talked about was the Kenmore. This whole community was so sick of what had been going on there-- televisions coming out the windows, drug dealing spilling out onto the street, and people getting killed inside the building-- that they were ready for a group to come in with a solution.
I think if many of them had had their druthers, they would have liked to see the building closed. What we did was to work with your director of community relations here at Baruch, Jane Crotty. Baruch College was an important institutional neighbor. We talked with her about how to build community support and identify the major stakeholders. Jane introduced us to the Gramercy Park Block Association. We knew some of the elected officials tangentially, but she played a very important role based on her support for what we wanted to do.
We went to Arlene Harrison, president of the Gramercy Park Block Association, and said we wanted to talk and to present a plan. We then took members on tours of all of our projects. We had them talk to community board members in other parts of the city and get references on us. We spent hours talking to them.
Larry referred to what people used to call "airmail from the Kenmore." People would get hit by objects coming out of the windows, so they walked on the other side of the street. One of the things the community said right away is, "We want you to install air conditioning so in the summertime people aren't hanging out the windows and dropping things on us." Although it was not in our original budget, it was a good idea, so we put air conditioners in every unit.
In the very beginning when we took over the building from the federal government, they insisted that we have armed guards because neighbors had been so terrified; there had been murders. We had never before employed armed guards, but as an expensive concession to the community we agreed to hire them for six months. After we had no incidents, we downgraded the armed guards to regular security staff.
We continue to meet quarterly with the block association. We also meet regularly with the police. Gaining community support requires a lot of talking, a lot of listening, a lot of open-mindedness rather than going in with fixed ideas, and a willingness to work together to reach a consensus about the desired outcomes. For that reason, a year ago when the state Office of Mental Health wanted to give us a lot of money on an annual basis if we would take more mentally ill people in the Kenmore --we already have 75 people with pretty severe diagnoses-- -we said we would look at the candidates. When we assessed them and reviewed their records, we decided the community would not be able to handle more people with such severe problems, and we declined the funding. So it's a lot of balancing.
Is this similar to what you would experience in other neighborhoods? Or is it because it's so diverse that you've got a lot more input, and your options are better in a neighborhood like this?
While there are a lot of social service agencies and aca-demic institutions in the Gramercy Park neighborhood, I don't think the homeowner and renter bases are any more liberal. The head of the homeless committee for the community board was a speechwriter for conservative Republicans, so he is not exactly in tune with a liberal agenda. Gramercy Park has a very high-income population.
About a year before we took over the Kenmore, the block association had been embroiled in a very bitter fight with a community group that had not come and talked to them. The group wanted to house 15 mentally ill people in a building near 18th Street and Broadway, which is not exactly in Gramercy Park. The community sued and brought in HUD on a fair housing action. The FBI also got involved. It was a very nasty fight. Basically, HUD lost the fair housing action because the community group had not done proper community support building. The project was seen as a detriment to the neighborhood, and the community was deemed not to be discriminatory.
At the end of the day that project got nixed, and so we were stepping on eggshells a little bit, because we weren't sure how they would react to us coming right on the heels of that rather embittered fight. I think most neighborhoods don't like to see change; sometimes they don't even like to be gentrified. Sometimes people don't even like street lighting. They need to be brought along very carefully.
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