2008 CHC Forum and Hall of Fame Summary

As the audience took their seats, California Redevelopment Association Director (and CHC Board Member) John Shirey took a few minutes at the outset to update the audience on the urgency of the June California primary where the fight between Propositions 98 and 99 has far-reaching consequences.  Couched as ‘eminent domain reform’, John characterized Proposition 98 as being bad for renters, seniors, our neighborhoods, and our environment.  In addition to enabling landlords to hike rents, unfairly evict tenants, and withhold security deposits, the measure would undermine laws that protect our land, air, water, and coastline.  John described Proposition 99 as the responsible alternative to enact real eminent domain reform by prohibiting governments from taking homes to transfer to developers.  With a last minute and duplicitous advertising push, the proponents of Proposition 98 hope to prevail on June 3rd and John exhorted CHC’s members to raise money and raise awareness as to what’s at stake in order to defeat 98 and see Proposition 99 pass.

CHC Board Chair Elizabeth Bluhm (Senior Managing Director, Red Capital Group) then welcomed everyone and set the stage for the morning’s focus on the ramifications of the current mortgage meltdown and credit crisis on California’s standing affordable housing challenge.  Beyond the immediate effects born by 100,000 first-time and sub-prime borrowers whose mortgages have been foreclosed across the state in the past 18 months alone, falling home values have not resulted in new homeownership opportunities for working families.  Stagnant income growth, constrained lending, and rising rents have collectively exacerbated the demand for affordable multi-family housing in all areas of California.

 

Elizabeth introduced CA State Treasurer Bill Lockyer to set the tone for the morning forum by reflecting on efforts at the state-level to grapple with the effects of the housing and credit crisis.  The Treasurer began by citing the grim statistics – housing starts down 2/3s to only 40,000 units expected this year, the ‘swath’ of foreclosures that is evident in communities up and down the state.  Retrenchment continues in the low income housing tax credit world despite Wall Street’s claim that the current liquidity crisis is abating.  Mr. Lockyer sees other ominous signs on the horizon with precarious equity home loans and soaring credit card debt. 

 And yet, despite the dire indications, the demand for tax credits is keeping pace with 2007 (91 applications so far) and interest in tax-exempt debt is as robust as ever.  In fact, for the first time the Treasurer’s Office will cap allocations by CDLAC at its July and September rounds in order to have money available in the fourth quarter as well.  Finally, Mr. Lockyer described a nascent $100MM Cal-HFA program to assist over 900 families threatened with foreclosure in Merced, Riverside, San Bernardino, and Contra Costa Counties, among others.  The Treasurer wrapped up his remarks by alluding to the fluid nature of the current crisis saying that he would be staying with us for the morning forum as he was eager to hear some additional constructive recommendations.

On behalf of Wachovia as forum sponsor, Senior Vice President (and CHC Board of Governor) Eve Ryan introduced the roundtable panel and moderator Raphael Bostic, Director of USC’s Master of Real Estate Development Program.  Raphael began by explaining that since the capital markets seized in August of 2007 the ramifications not only on the homeownership sector but also the multi-family rental housing sector have reached across segments of society not typically faced with these problems.  He proposed to put forth a series of questions to engage the six members of the interdisciplinary roundtable, including:  Sean Burton (CEO of CityView and member CHC Board of Directors), Sergio Barajas (Expanding Markets Manager, Freddie Mac), Bob Nielsen (Vice President, National Association of Homebuilders), Catherine Talbot (Managing Director, MMA Financial), Fran Wagstaff (President, Mid-Peninsula Housing Coalition), and Jim Yacenda (Community Investment Officer, Federal Home Loan Bank of San Francisco).  Pictures and biographies of the speakers can be viewed here.

1.    What has the mortgage and credit crisis meant for your business?

Sean Burton described how it is becoming virtually impossible to build homeownership opportunities for low-income working families – the lack of mortgage product and downpayment continue to be the biggest obstacles despite fervent demand.  As an example he cited (5) homes CityView recently offered in the San Fernando Valley that sold in less than one week.  Fran Wagstaff mentioned that the lack of certainty in the tax credit market has a ripple effect on the availability of debt and equity available from the banks; she also stated that the money shortly to be made available under the nascent state TOD and infill programs would only go toward a handful of deals where affordability is not a top priority.

Catherine Talbot of MMA Financial remarked that the current crisis actually preceded the August 2007 seizing up that Raphael referred to – rather, it began a year earlier when Fannie Mae and Freddie Mac began pulling back on their investment volumes; it’s difficult not to overemphasize the effects of the GSEs pulling out of the tax credit market -- a $2 billion loss in the annual $6 billion market where the largest remaining investors are in the $300-500MM category.

Jim Yacenda of the Federal Home Loan Bank likened his organization’s role of late to ambulance chasing – trying to react to a rapidly changing situation; he noted that market feasibility of a project has become a pivotal criterion in the bank’s AHP program.  Meanwhile, Bob Nielsen of the National Association of Homebuilders said that the Catch-22 is that the way out of the current credit crunch is to get back to selling homes again.

2.    In California why is homeownership still out of reach while rents continue to rise – and do solutions have to pit homeownership against rental resources?

Sergio Barajas of Freddie Mac noted that as part of transitioning out of the current crisis, it would make sense to promote a lease-purchase option on foreclosed homes by way of relieving the pressures on the already constrained rental market.  Fran observed that in the South Bay the phenomenon of rentals converting to condos has led to an 11% increase in rents and in many instances perfectly good rental housing had been demolished to make way for more lucrative condominium projects. 

Sean Burton stated that CityView’s experience in some parts of California indicated a ‘conversion/reversion’ cycle whereby apartments that had been converted to condos are now being remarketed as long-term rentals when the homeownership market fell through.  Catherine Talbot noted that Jim Silverwood of Affirmed Housing (a member of CHC’s Board of Governors) has taken a 25-story Downtown San Diego property originally entitled for condominiums and is now developing the project as family rental housing.

Several panelists pointed to the significant mismatch in California between income and housing affordability.  In part to address this for struggling homeowners while not siphoning resources traditionally allocated to spur affordable rental housing, Jim Yacenda mentioned a new $10MM FHLB program to assist approximately 400 families with subsidies of up to $25k each to help restructure or refinance their mortgages.  In addition, Representative Barney Frank’s bill currently under consideration in the House would offer a 2-year tax credit for first-time homebuyers.  Other panelists mentioned the viability of land trusts in enabling long-term affordability. 

3.    How effective will solutions targeted to helping existing homebuyers be – from increasing GSE mortgage limits and regulating lax lending standards to directing the resources of redevelopment agencies to reposition foreclosed homes?

 Catherine Talbot stated that while there is general support to make permanent the 2008 increase in mortgage limits, she wonders how this would practically help low-to-moderate income buyers.  Sergio responded that in the California context where the median home price is still well over $500,000 it would be helpful – and that providing more liquidity would have a salutary effect on the homebuyer market in general. 

Sean Burton reiterated that downpayment assistance is still the single largest barrier to homeownership in California and that FHA reforms were helping and homebuilders were supportive of federal efforts to assist homeownership entities like Nehemiah. 

At the same time, Fran was quick to point out that with respect to state funds it’s a zero sum game:  that pending legislation to enable redevelopment agencies to use the 20% housing set-aside funds for rescuing foreclosed properties was a classic instance of ‘robbing Peter to pay Paul’.  In this case, in an attempt to reposition foreclosed single-family homes we would be depriving low-income rental housing developers of a precious capital subsidy.

4.    Considering the effects of politics in policymaking, will the housing stimulus currently contemplated by Congress bring liquidity back the lending and investing markets? 

Bob Nielsen of the National Association of Homebuilders said that the Shelby-Dodd stimulus bill in the Senate should come together by July 4th.  In addition, FHA would be encouraged to step in, as they have in the past, to deal with unregulated mortgage brokers.  Revitalizing FHA, increasing the conforming mortgage loan limits, and regulating investment banks were the three things the federal government could do best – but that beyond that, state-by-state approaches would be important.

Catherine Talbot noted that while money for lending and investment was not gone but only ‘on strike’, a meaningful state reform in California would be extending the typical 150-day closing period to acknowledge current market constraints.  Jim Yacenda said that the Federal Home Loan Bank is necessarily a reactive entity and that as a sign that tax credit equity pricing is resulting in sizeable funding gaps the number of AHP requests in the $500k-$1MM range have been increasing steadily.

Fran Wagstaff of Mid-Peninsula Housing Coalition picked up on comments about state-level approaches to improving the housing market by pointing out that multiple funding applications for a myriad of state-managed sources is not helpful.  In a time of diminishing resources, she stated, transaction costs are at an all-time high. 

5.    Finally, how could the long term effects of the current debt crisis change the affordable housing production markets in the future?

Fran made the observation that for far too long, particularly under the current administration, federal housing policy has pushed homeownership at the expense of rental housing development.  She sees the current state of the housing market as a reflection of this overemphasis and raised the concern that various federal bailouts run the risk of simply stabilizing the financial markets while doing little to actually encourage more affordable housing to be built. 

There was general consensus among the other panelists about this perspective.  It was suggested that CHC members remain actively engaged in the policymaking discussions ongoing in both Washington and Sacramento as the precise means to various short-term ends will have long-term implications.

Raphael Bostic then asked the audience to engage and challenge the panel with questions to take away from the forum, for example:

•    Laurie Weir of CalPERS asked the panel to comment on how addressing the current housing crisis presented a unique opportunity to champion smart land use planning policies – that without a sea-change in the ‘driving to affordability’ paradigm that has dominated land use planning for several decades, we run the very real risk of seriously diminishing the quality of life in California;

•    Elizabeth Bluhm of Red Capital wondered how wise federal initiatives to raise the per capita limit on tax credits are when adding to the supply of credits would only exacerbate already depressed tax credit pricing; 

•    Jane Barr of Mid-Peninsula Housing Coalition asked whether bulk purchases of foreclosed single-family homes could be made more productive for affordable housing by prevailing on lenders to make concessions; while it was noted that lender trustees have to operating on the basis of very explicit work-out instructions and are typically not allowed to cut special deals, Liz Tracey of WaMu stated that staff support from housing developers and local government can be very helpful in assisting banks and other lenders in the repositioning of homes for resale or rental;

•    Lori Bamberger of the Asset Policy Initiative of California wondered whether in the current foreclosure crisis we would lose sight of the immense opportunity homeownership affords low-to-moderate income households to build wealth and move into the middle class; Sean Burton of CityView pointed out that while nationally homeownership stands at about 68%, among minority communities it’s only 40% versus among white households it’s closer to 76%; he stated that the efforts of CityView in promoting homeownership among minorities involves the use of private capital and pension funds and not public funding traditionally used to spur affordable rental housing;

•    Janet Kelly of PATH (People Assisting the Homeless) brought the morning forum to a close by asking whether in addressing the current housing crisis we weren’t forgetting those most vulnerable members of society; Fran responded eloquently on behalf of the panel that, indeed, all of the media coverage and the policymaking proposals under consideration are heavily geared toward the large middle class that in many places is experiencing the housing crisis first-hand; without effective advocacy within and outside the housing sector, we run the very real risk of neglecting the poor and the working families whose need for safe, affordable housing in California has been acute for some time now.

Awards Luncheon

CHC’s 3rd Annual California Housing Hall of Fame Awards Luncheon was a festive event held at the LA Central Library Gardens.  In honoring heroes of the state’s affordable housing industry, CHC brought together professionals from the private, non-profit, public, and community development/philanthropic sectors.  As sponsor of this year’s awards luncheon, Bank of America California President Janet Lamkin welcomed everyone and said that recognizing the excellent examples of this year’s honorees is just the kind of encouragement our industry needs at a difficult time.

CHC Board Vice Chair Jack Gardner preceded the awards ceremony by first inaugurating a CHC Board Emeritus Committee.  One of the unique strengths CHC’s Board of Directors is its diverse representation and term limits have helped ensure fresh perspectives to long-standing challenges confronting the housing sector; at the same, as early board members began to term off last year, the current Board has expressed the strong desire to retain the wisdom and active participation of former members in CHC’s efforts.  To that end, Jack announced the formation of the CHC Board Emeritus Committee and was joined at the podium by four former board members who will serve as the core of this advisory body.

The inaugural CHC BOD Emeritus Committee is comprised of Ted Chandler (Fannie Mae); Will Cooper, Sr. (WNC & Associates); Janet Falk (Mercy Housing); G. Allan Kingston (National CORE); Nancy McLaughlin (Housing Consultant); Alex Sanchez (Housing Authority of Santa Clara County); and Johrita Solari (Solari Enterprises, Inc.).

CHC Board Chair Elizabeth Bluhm served as host for the ensuing 2008 California Housing Hall of Fame awards presentation.   Noting that individuals and organizations inducted into the Hall of Fame have demonstrated substantial contributions to the affordable housing cause for several years, she turned over to colleagues on CHC’s Board of Directors the duties of making the introductions of each of the award recipients who in turn made their own remarks.  CHC’s Class of 2008 inductees into the California Housing Hall of Fame (and their respective board member introducers) are:

•    Phil Angelides, former CA State Treasurer 1998-2006 (introduced by Jeanne Peterson of Reznick Group who served as TCAC Director under Phil);

•    Keeley Kirkendall, PNC-ARCS Commercial Mortgage (introduced by Jack Gardner of The John Stewart Company who was a colleague of Keeley’s at Edison Capital);

•    National Farm Workers Service Center – Paul Chavez and Manuel Bernal (introduced by Jack Gardner of The John Stewart Company who has been a long-time supporter of the Service Center);

•    Alan Stein of JMP Securities – represented by son Paul of SKS Investments who is currently a member of BRIDGE Housing Corp.’s Board of Directors (introduced by BRIDGE President Carol Galante); and,

•    Fran Wagstaff, retiring President of Mid-Peninsula Housing Coalition (introduced by Mid-Pen and CHC Board Member Terry Freeman of Klein Financial).

Full biographies of each of the 2008 awardees are available here

Previous year’s honorees can be found at the virtual Housing Hall of Fame here

 

CHC Member Project Tour

Following the awards luncheon, 20 attendees participated in a tour of Meta Housing’s Emerald Terrace Apartments, a transformative 85-unit family rental infill development in the Central City West district of Downtown Los Angeles.  Opened in late 2007 (and featured in CHC’s January 2007 Newsletter), Emerald Terrace Apartments is an excellent example of how high quality housing near jobs, schools, and transit can improve the lives of low-to-moderate income working families. 

Meta Housing President John Huskey summarized the initial struggle to overcoming community opposition to developing the fallow site.  Once a haven for crime and graffiti, the project today looks out prominently over a rejuvenated neighborhood that features a sizeable 80/20 mixed-income rental development and a 9% tax credit development (both also facilitated by Meta Housing) and a spectacular new high school known as the Miguel Contreras Learning Center on an adjacent hilltop. 

CHC Board Emeritus Member Johrita Solari and her daughter, Gianna Solari (Vice President of Operations for Solari Enterprises) described the challenge of taking on the lease-up and management of Meta’s first foray into family housing.  As an indication of the overwhelming demand for this kind of infill rental housing, applications exceeded openings ten-fold.  Today, on-site Manager Cathy Perez and Maintenance Technician Edwin Romero head up a property management team that ensures this attractive residential community lives up to all expectations.

Century Housing CEO Ron Griffith explained the role his company took at both inception and completion of this remarkable development:  first with critical acquisition financing and now by running on-site tutoring and after-school mentoring services to residents under Century’s highly successful LIFT program. 

CHC would also like to recognize the invaluable contributions of a number of other CHC members that have helped bring Emerald Terrace Apartments to fruition, including:  Wells Fargo Bank, Los Angeles Housing Department, and the California Community Reinvestment Corporation. 

This wonderful project not only demonstrates the transformative effects of infill housing but also served to cap off CHC’s annual convocation on a very constructive note:  in June 2008, the CA Department of Housing and Community Development (HCD) will announce $400MM in awards of catalytic funding under the Proposition 1C housing bond to spur additional infill and transit-oriented development across California.

 

Acknowledgements

The CHC Board of Directors would like to commend the staffs of the Millennium Biltmore Hotel (host of the May 14th Annual Meeting of the Board of Directors and Board of Governors), the LA Central Library, and Café Pinot for their excellent service on behalf of our organization’s signature events.  Finally, the board would also like to recognize the hard work of CHC’s staff, namely Executive Director Jeff Loustau and Program Manager Eric Mackres for planning and executing a very successful annual convocation. 

Again, if you are not already a CHC member or underwriter, please consider joining now by clicking here while you’re visiting our website.  And put Thursday, May 14, 2009 down on your calendar for next year’s CHC Policy Forum and CA Housing Hall of Fame Luncheon!