[Mpls] Linden Hills affordable housing

[David Wilson]

Bill Cullen wrote:

Mr. Wilson wants policy debates, yet when I have made more professional
posts on these topics in the past, I don't remember him responding to the
policy questions.  I am happy to enter into a debate and be part of a
professional group looking into these issues.

"Mr" Wilson replies:

My suggestion is that the mayor set up a blue-ribbon panel with someone
like Patrick Born as the chair.  The purpose of the panel is to evaluate
the current housing subsidy programs in the same way that the McKinsey
evaluation looked at city departments. I think that what the public misses
about housing programs is that the product or delivery is really a public
financing issue.  That's why I think the finance people should head up
such an effort.  First explain what the subsidies are and how they work.
Then allow people to make suggestions.  There are plenty of landlords,
housing program staff, bankers, inspectors, lawyers, and community
advocates who know how the existing programs work and don't work.  Some
things won't be changed, but
there are ways to structure subsidies and programs that the mpha and the
mcda successor have control over.  If we are trying to get at efficiencies
and solve problems, with the various stakeholders buying in, then it would
be a worthwhile activity.

My answer to Bill Cullen will take the form of an example.  The people who
own and operate the Section 236 housing program operate "as if" it were a
regulated industry.  The 236 program (example, Seward Towers at 25th and
Franklin or the Skyway Towers in St. Paul) is a subsidized mortgage
program administered by HUD.  A private developer takes out a deeply
discounted mortgage and agrees to structure the rents to reflect this and
to make them affordable to low-income people.  The deal is structured to
include replacement reserves, operating reserves.  The owner submits an
operating plan to HUD and if they fulfill the plan they are able to take
out a dividend at the end of the year.

The Section 8 program, on the other hand, subsidizes the rent of
individual low-income people who seek rentals in privately owned housing.
They can rent apartments, duplexes, single family homes, house trailers
etc.  The tenant's rent is subsidized through a payment from the local
housing authority.  They sign leases with the landlord, and the landlord
signs a contract with the housing authority for the subsidy.  There are
regulations, but it does not operate as a regulated industry.

The major differences between the programs is the structure of the subsidy
and the time frame.  Section 236 projects have 40 year mortgages; Section
8 is a year-to-year lease.

My simplification of the 2 programs masks a lot of complexity and detail,
but the overall view shows what our discussion could be.  There are plenty
of problems with both programs, but we hardly ever hear from the owners of
Section 236 housing.  They run their business, collect their money, and
the public is served.  The subsidies are long-term and they are structured
so that there is continuity in the operations.  The Section 8 landlords
(such as the group of posters to the Mpls-Issues listserv) are always
kvetching and carping about how the government has it's hand in their
pockets and that they are constantly being told how to run their
businesses.  Section 8 is short-termed, and there is very little
continuity in the operations.

I can go on and on but I won't.  I can sing a tango about what is right
and wrong in the world but I won't do that either.  What I will do is work
to get the city to convene the type of study that I suggested.  Use it to
educate the public, get valuable information to city staff and elected
officials, and use it to start a series of productive policy debates.

David Wilson
Loring Park