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For this month’s installment of 300 in Black, The New Orleans Tribune revisits an article published in October 2002 that focused on the redevelopment of the former St. Thomas Housing Development. Originally titled “Hope VI Offers No Hope to Former St. Thomas Residents,” the article was an honest examination of the plans to raze the St. Thomas and ultimately replace it with River Gardens. More than a decade and a half later, all of the major traditional housing developments have been forever erased from the city’s landscape and replaced with less dense, mixed-income units with only a very small percentage of the units set aside for residents who rely on assistance to help with housing costs. Meanwhile, New Orleans finds itself in the midst of an affordable housing crisis, with more than 60 percent of New Orleans renters housing-cost burdened.
by C.C. Campbell-Rock
“HOPE VI and St. Thomas: Smoke and Mirrors,” a study by Brod Bagert Jr., a London School of Economics researcher, follows the trajectory of the once-promising Hope VI plan to redevelop the St. Thomas Public Housing Development site, from a mixed-use housing blueprint to an upscale housing market, developed by a private firm with public money, that excludes most of the former public housing residents.
Since its launch in 1992, HOPE VI (Housing Opportunities for People Everywhere) has been HUD’s leading public housing initiative. The program provides grant money to local housing authorities for public/private investment agreements that pledge to redevelop public housing complexes into mixed-income communities. The purpose of the HOPE VI grant is to stop the isolating of poor people in massive housing developments.
According to Bagert’s report, “HOPE VI was created with a dual agenda: a social agenda to improve the lives of residents and a market agenda to make inner cities attractive to capital renters and wealthy residents.”
The study clearly shows what, at best, is a naked land grab and, at worst, a shameful miscarriage of justice. Not only have hundreds been forced out of a community many were born into, but the redevelopment of St. Thomas under the direction of historic Restoration, Inc. (HRI) offers a classic study in corporate greed over the public good.
Bagerts’s research uncovers the “bait and switch” game played on the St. Thomas public housing residents, 806 families, who have been scattered throughout the city in the biggest displacement exodus since “eminent domain” forced Treme residents out to accommodate I-10.
“The study provides documented evidence of what many former St. Thomas residents have alleged about the project for years: that the current redevelopment plans will create very little public housing and constitute a massive misuse of public funds,” Bagert writes.
Statistics show that the public monies dedicated to the project have steadily increased and currently total over $100 million, far exceeding the $47million estimated by HANO (Housing Authority of New Orleans). For the first phase of the redevelopment alone, the average cost to the taxpayer amounts to between $325,000 and $390,000 per low-income unit created.
“Clearly, HRI is not using over $300,000 to construct a single unit of public housing,” Bagert explains. “The citizens of New Orleans are cross-subsidizing a privately-owned, luxury residential development. The project is vastly undercapitalized on the side of private investment, and if the project goes forward in its current form, the taxpayers are footing the bill.
Former residents recently joined Bagert for the release of his study. According to Bagert, the Housing Authority of New Orleans (HANO) and Historic Restoration Inc. (HRI) have misrepresented the actual development plans in order to insulate the project from scrutiny.
The study, which began as a Masters thesis in Social Policy at the London School of Economics, may become the basis for legal action by former St. Thomas residents.
Led by President Barbara Jackson, the St. Thomas Residents Council (STRC) was at the table during the application process for the $25 million HOPE VI grant. “HUD generally does not allocate HOPE VI funds,” Bagert says, “unless residents sign off.”
The next panel to select the developer excluded residents altogether. The group consisted of four HANO officials and one appointee of Mayor Marc Morial. Kabacoff recently told the daily that “Federal and local officials and the St.Thomas Resident Council approved the changes his company made in the 1996 HOPE VI application, which was submitted before HRI became involved with the project.”
Bagert’s study presents the fine details of how the 806 families who formerly resided in St.Thomas got the boot. The bottom line is that HRI’s plan sets aside only 70 units for the 798 former St. Thomas families that earn below 30 percent of median family income.
Now You See It, Now You Don’t.
The original HOPE VI Grant Application submitted by HANO to HUD in 1996 called for a three-tiered income mix at the new development: 50 percent public housing, 30 percent Low-Income Housing Tax Credit Units (LIHTC), and 20 percent market rate housing. It was also specified that 60 percent of the public housing units (176) would be reserved for families earning less than 30 percent of the area’s median family income and 40 percent (116 units) would be reserved for families earning 30-30 percent of the area’s median family income. Ninety-five additional homes would be available for purchase by former public housing tenants, and 95 homes would be sold at market rate.
According to the study, “The HOPE VI Grant Application also stipulated that residents would own a controlling stake in the project, becoming a 51 percent partner in a joint venture with an experienced multifamily housing developer.” Residents would also manage the site and control the residents’ selection process through a newly formed Resident Management Corporation (RMC).
What happened since then is comparable to a slight-of-hand game. An object was placed in one hand for the observer to see, then the “magician” switched the object from one hand to the other, while placed behind his or her back, and said, ‘Now you see it, now you don’t.’ The other kids had to guess which hand the object was in.
Former residents of St. Thomas now know which hands the St.Thomas is in. Today, the site of the former public housing development is barren. Gone are the people, buildings, and community once known as “The St. Thomas.” and along with its demolition, the disappearance of the initial application plan as it related to public housing residents. The resident ownership and management agreement vanished into thin air. Instead of empowering residents, the development plan now gives full ownership to the developer and management control to a subsidiary of the developer.
The number of market rate units skyrocketed from 212 to 884, a 317 percent increase over the 1996 grant application proposal. Conversely, the number of subsidized units dropped from 563 to 258 units, cutting by 54 percent the number of proposed units for the poor. “Most of these subsidized units will rent to income levels well out of the reach of former St. Thomas residents and of nearly all public housing tenants in New Orleans,” according to study. Additionally, the proposal for resident-owned small businesses gave way for the idea of adding a Wal-Mart on land adjacent to St.Thomas.
Bagert argues that the HANO’s publicized version of the redevelopment plan outlined a 60 percent market rate units/40 percent public housing mix. However, the actual HRI development plans included 78 percent market-rate units, nine percent public housing, and 13 percent of low-income tax credit units.
“The developer, Historic Restoration Inc.,(HRI) has said that it ‘has every intention’ to compensate partially for the 305-unit shortfall in on-site low-income housing with 100 off-site rental units, but it ‘was unable to guarantee anything,” because the funding for these units is still uncertain. In protest at these changes to the original redevelopment plan, the Resident Council recently broke off all negotiations with the developers, essentially powerless to influence plans that have the full support of the housing authority, city government, and HUD,” the report stated, citing a daily newspaper article published in 2001.
Private Company Main Beneficiary of Public Dollars
Historic Restoration, Inc. is a business corporation domiciled at 210 Baronne St., Suite 1717. Edward B. Boettner, Albert Gremp, and Stephen L/ Dwyer incorporated the business in July 27, 1982. Among the officers/directors listed are Pres Kabacoff, Andrew G. Fields, and Eddie Boettner. Ray T. Spadafora is the registered agent.
In January 2002, M. Pres Kabacoff organized the St. Thomas redevelopment Company Phase KK, L.L.C. HRI is listed as a member of the organization and Kabacoff as manager of HRI.
HRI’s mixed-finance Development proposal cites Phase I of the St. Thomas redevelopment as owned by a limited partnership called LGD Rental I, the members of which are a subsidiary of HRI, retaining .02 percent ownership and the Low Income Housing Tax Credit (LIHTC) equity investor, which will retain 99.98 percent ownership.
According to the Bagert study, “For an outlay of the zero an investor will own all of a Phase I, a $55 million development that includes 174 market-rate rental units renting for an average of $1008 per month and 122 variously subsidized rental units, renting for an average of $242.00 per month.” According to another analysis, the Lambert study, these units will yield a gross annual income of $2.4 million and a net annual income of over $1 million. The returns for others phases of redevelopment are expected to be even higher.
“In short, the LIHTC equity investors invest nothing and received over a million annually in return. The public invests $39 million for Phase I, alone, and receives no equity and no return for its investment. The only value that accrues to the public sector for its $39 million investment is 122 “low-income units,” which are oversubsidized… and…are not anything close to low-income units.
“The only explanation is as follows: Public money in the St. Thomas HOPE VI is cross-subsidizing the for-profit component of the development, to an extent that is unprecedented in the history of HOPE VI projects nationally. The project is vastly undercapitalized on the side of private investment, and the taxpayers are filling the gap. The housing needs of the poor in New Orleans are not being met by the St. Thomas HOPE VI project.
“Federal money allocated specifically ‘to improve the living environment of public housing residents is being diverted into a massive public subsidy of private, profit-making enterprise, with only a token presence of public housing. The project represents a vast misallocation of public resources and a betrayal of the residents for whose benefit those resources were intended,” Bagert writes.
Perhaps the most telling sign of government complicity, particularly HUD’s involvement, came from a conversation Bagert had with Bruce Katz, chief of staff of HUD under Henry Cisneros during the early stages of the St.Thomas HOPE VI grant proposal.
“I briefly described the betrayal of the St.Thomas residents and the abandonment of the social agenda in the St. Thomas project and asked how HUD could ensure, in the future, that the interests of public housing residents were not undermined by gentrifying pressures and urban mercantilism,” explains Bagert.
Katz’s response was revealing: “Cities have to gentrify, especially bottom of the barrel cities like New Orleans. If they don’t gentrify, they’re going to die because nobody is going to bail them out this time. The federal government is not going to bail them out this time.”
Bagert Brings Concerns to City Council
After a recent City Council meeting about building a Wal-Mart Supercenter near the former St. Thomas public housing site, the Council deferred action for two weeks. Bagert attested the meeting and presented statistics from the study, apparently with some success.
According to a news report, “Many of the speakers rehashed arguments familiar from previous hearings before the council and other agencies, but the focus this time was more on the cost and the amount of housing planned for former St. Thomas residents and less on how a 200,000-square-foot store would affect the Lower Garden District.
Councilmember Rene Gill Pratt, whose district includes the St. Thomas site, refused to vote on a situation she was not comfortable with. Pratt wants to see more low-income housing added to the plan. Councilmember Jacquelyn Brechtel Clarkson was concerned about the cost and the amount of public housing involved in the project.
Bagert told the City Council that HRI’s plans proposed too many middle-class and luxury units and that less than 10 percent of the complex’s 809 former families would be able to live in the new housing.
The director of Hope House, Don Everard, advised the Council to reject HRI’S plan and focus, instead, on providing the maximum number of affordable units for low and very low-income people.
The Council was considering ordinances and a resolution on the financing of the project. The legislation gives the Council the authority to issue $20 million in bonds backed by money for the Tax Increment Financing District (TIF) that would finance the market-rate housing planned for the site. In return, TIF would receive most of the local sales tax revenue from the Wal-Mart. The measures would also create a mechanism for transferring revenue for the TIF bonds to HRI.
According to the news article, Kabacoff said he would meet with Councilmember Pratt but he warned that if the proposed bond issue isn’t ready for action at the state commission’s November 21 meeting, it would probably be delayed at least two months. Mayor Ray Nagin expressed his concern that further delays in getting the Wal-Mart built could cause other national retailers who are looking at New Orleans, to lose interest.
Meanwhile, hundreds of families have been dispersed into other neighborhoods or public housing developments, such as the St. Bernard Housing Development, where conflicts have occurred and violence is escalating as a result. But more than displacement, the misuse of the HOPE VI grant has destroyed a community, separated lifelong acquaintances and neighbors, and taken away the people’s freedom of choice to live where they choose.
The Future of Public Housing in New Orleans
Bagert’s study suggests that the St. Thomas incident is not an isolated case when it comes to the way HOPE VI grants are being manipulated for profit and gentrification purposes. Locally, the resident councils of Desire and the Guste Housing Development have used HANO over its implementation of HOPE VI grants alleging that HANO “reduced the number of low-income units planned” and set up “arbitrary, unreasonable standards” for residents who wished to returned, “in an effort to create an affluent neighborhood to attract middle-class African-Americans and Whites.”
Residents against HOPE VI projects in St. Louis, Cincinnati, San Francisco, Washington, D.C., Charlotte, North Carolina and Boston have also filed lawsuits and petitions.
Of the HOPE VI grant, Donna Johnigan, president of the New Orleans Citywide Tenant Association, told Bagert, “They need to change the name of it, because it’s not about ‘hope.’ It’s about tearing down a lot of public housing.”
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