United Housing Inc. works to revitalize neighborhoods across West Tennessee through low-income housing development and other services, such as financial literacy education and affordable loans. In 2002, United Housing suffered a major blow when it lost its largest funder. The loss of $1 million almost overnight was both a shock and a catalyst that pushed the organization into a new phase of existence and forced fundamental changes in the way United Housing did business.
The foundation had just canceled the third year of its investment. We had been awarded $1 million a year for three years and had used $2 million of it.” That’s how Tim Bolding begins his story about the past five years of roller-coaster ride at United Housing.
Bolding has a large personality. He is knowledgeable, savvy, and sure of himself. So imagine his surprise when the organization he helped found began to fail in some pretty visible ways.
“What happened was a local foundation had the idea to model us after another well-known community development corporation [CDC] in Tennessee. The foundation’s president was very invested in this as a to-scale strategy—so much so that he himself sat on our board, which was an experience in and of itself. He had hoped to use this big investment to try to entice the city to make some very big changes in the area of affordable housing. We were to do this as a single agency. This was a fated idea from the beginning. But then just about as our third year was due to start, there were major board changes at the foundation, and they withdrew the grant, and the president left the foundation at exactly the same time. I then had to lay off half the staff, including all of our construction people, a finance person, and two home-buyer education people.”
Meanwhile, with the loss of the grant, undercurrents of discontent grew on the board. Board members chose sides and began warring openly with one another about how United Housing should do its work and at what scale. To its credit, the board focused on the critical housing needs of the city’s poorest residents, says Bolding. But there was no agreement about strategy or what was possible. “Memphis has 21,000 vacant lots that are tax-foreclosed,” he says. “They used to have houses on them, and that is matched with a severe need for affordable housing. So a portion of the board got in a rut, like an old record with a skip on it that keeps playing the same thing, over and over again. The tune was ‘If we’re not building 2,000 houses a year, we’re wasting our time, and we’re worthless.’ It was so awful. It occurred to me that I was possibly wasting my time trying to find the way forward.”
As a result of United Housing being started at United Way, United Way had a legacy presence at the board level. Acting as the initiator, Bolding believed that United Way was the only local entity that could competitively pursue $1 million in Hope III monies (planning and implementation homeownership grants for low-income families). In retrospect this may have been a case of being careful what you wish for.
“United Way agreed to it,” says Bolding, “but I don’t know that they had any expectation that they’d get funded. They had never done anything where they administered a program themselves; they always funded other people that ran programs. So when they got into the housing business, it kind of freaked them out. They actually had one of their board members resign over the deal. When United Housing spun off, it carried United Way-identified board members with it, and they were the ones that ended up most in the clouds about what could be accomplished.”
Bolding now admits that the original conception for the agency was flawed.
“There was no way that any nonprofit in this town was going to do 2,000 houses a year,” he says. “There was no way that we were going to have any impact by ourselves on how the city did business. We could ask, we could beg, we could cajole, but saying, “We got this money, and this is what needs to happen” was absurd in the face of the scale and price tag of the problem and what else was going on. If you look around at the private-sector guys, for instance, who you would think was at scale? The biggest homebuilder in town is 120 units a year.”
In the face of the upheaval and a good deal of financial and programmatic reorganization, staff began to fray.
“In the midst of all this, I think our financial person became disgruntled, but in any case she ended up misallocating a lot of our operating capital into permanently restricted funds. I believe she was hoping that I would be asked to go away first, and then the day could be saved by her switching things back later. I discovered [her plan], though, when I was really trying to figure out if we could survive, and she was fired. So we got a half-a-million-dollar reprieve right after we lost our $1 million.
“We had a business plan that was misconceived and eventually fell apart, and everything else cascaded from there. It was unrealistic to believe that we could do 2,000 houses a year. The legacy of not calling the question in a forceful way much earlier was that for ages we couldn’t get a critical mass of people on the board to understand what was possible and what was impossible. We were in conflict at that level for a year or more. We hadn’t helped at the staff level either because our method of counting or measuring what our impact was against the mission was to count only those houses for which we were directly responsible.”
Bolding admits that even as things were tanking, it was difficult to ask for help.
“You’re the executive director; you’re supposed to know all this stuff. So if you ask for help, that shows that you don’t know what you’re doing. The macho and the ‘me as an individual’ thing got in the way. My own assumption was I knew housing and that was enough, but it wasn’t. I had to realize that all these other folks and what they thought and knew were critical to our success: the staff, the board, other groups.
“But before I got to that, I thought about quitting. I seriously said, ‘Well, now’s the time to just forget it and go do something else.’ Then I realized, if there’s going to be any headway here, it’s going to be me who has to do it, because it isn’t going to happen any other way. I went in and talked to Nancy McGee at the Program for Nonprofit Excellence (PNE), and I told her the financial situation and all this, and I said, ‘I don’t know if we’re going to make it a year or two, so I don’t know if I should start.’ She encouraged me. She said, ‘This is exactly where you need to be.’”
That began United Housing’s three-year involvement in that program, which provided a variety of healthy challenges and supports to Bolding, the board, and the staff.
“So we went from trying to do everything by ourselves to trying to do everything with groups of other people. We cultivated relationships internally and externally. It became about bringing in more people to be allies in every aspect of our work. Before that, I had been kind of bullheaded. I said, ‘Well I don’t like what the city is doing, so I’ll go out here and get my money from HUD and bypass the city,’ and I got a million dollars directly from HUD. I got money from the state and bypassed the city again. My nickname at the city was ‘that GD Bolding.’
“This naturally was a losing strategy. Yeah, I could build 50 houses or even 100 in that mode. But eventually those resources began to dry up, and I had to recognize that, damn, I hadn’t spent any time making them happy. So I began to pay more attention to the relationships and the politics and how it all can fit differently together toward a larger impact.
“If you look at the list of properties that we’ve got out there now, and the projects, every single one of them is because of somebody else.”
Bolding was taking a leadership course at the time, and it helped him rethink his own style as an executive director.
“I had to discuss in essay form how I perceived the CDC industry in Memphis. As I thought about it, it occurred to me that the CDCs were a lot like guilds in the Middle Ages: everyone had a little fiefdom. This meant that resources were being poorly used, and our capacity to do anything as a field was very limited.
“Then I began to look at the question of support: who supports this and who doesn’t? The epiphany was that all the support United Housing had at that point was outside of Memphis. That was tough to face. We had all this money, but it’s coming from Neighborhood Reinvestment in Cincinnati, it’s coming from the Federal Home Loan Bank in Cincinnati, it’s coming from HUD out of Knoxville, it’s coming from THDA in Nashville, and what was coming from Memphis? It said something about the way we were operating. We needed to focus on building support at home.
“Now I feel like we’ve got three very clear pieces of business that all boil down to homeownership for people who wouldn’t have it otherwise. That includes, of course, what we started with: building and renovating a few houses. But then there is the home-buyer education, which we do for many other groups. So when somebody buys a house that’s not ours, that we have provided counseling to get them ready to buy, then that’s a success. We didn’t used to count that before. . . . We gave it no importance, after a while we didn’t know where those people were. There were hundreds over our first 10 years of operation. Now we spend a lot of time tracking them to see what happens to them over time. What I tell folks is that we spend as much time building our customers as we do building our houses. The third program is lending. That’s what we’re developing now, and that piece will also be in service to all those served by a larger community of groups in the area.
“You need to find what you’re good at doing and do it. That’s called ‘finding your niche.’ So the services we have and our business model now is to make our services available throughout the rest of the nonprofit world. Let’s put it this way: last year we did 273 deals; $22 million with average sales in the mid-$80,000 range. Of that, we only built 15 houses; but we did tons of loans for other people’s houses. We did tons of home-buyer education for other people’s houses. That is a different level of impact. That’s the real change for us and those we serve.
“Our emphasis is on the other CDCs, but as nonprofits go, United Housing is right on the edge of the private sector. Everything we do is to get folks mainstreamed into the private sector. So if I have a down-payment loan, I’m putting $5,000 on the table and getting $90,000 from a bank. If I’m doing home-buyer education, somebody gets qualified for a THDA loan. This means that our leverage is $21 to every $1 that we put in. All this expands our reach like crazy.
“Where our model was really heavily dependent on grant money before, now we unlock a lot more private money, so when I go talk to a lender, and say, ‘Give me $25,000 to help me keep doing this,’ I can say, ‘Look, we’ve done 150 loans with you worth $20 million; you’re making money hand over fist because of what we’re doing, and we’re bringing you the customers that you need for CRA [the Community Reinvestment Act].’
“To knock that up to another level, we’ve been working with the five NeighborWorks organizations in Tennessee. Soon we’ll have our first meeting in Nashville. We’ve been working on this for more than a year. The goal was to create a proposal to go to all of the foundations in the state of Tennessee. We’d fund a statewide loan pool for all five of our organizations to deliver loans on a statewide basis, and we’re going to try to put together a $20 million pool, and we’ll originate loans everywhere. It’d be to support the industry: to support the homebuilders, the home buyers, the real estate agents, everybody. All of the nonprofits would have access to our loan pool. We’re asking them to put it in as a program-related investment, we’re going to show them that they can get a return on their dollars and that we’ll hand them back their $20 million, along with a little bit of interest. But we want to keep some of the interest. So what we’re looking for now—it’s a group of five organizations from Knoxville to Memphis—is to come up with a statewide pool that would benefit everybody.
“Working this way means that housing organizations in the area essentially get 500 percent credit on every deal. If there’s five of us sitting around the table, and you buy the land, I bring the financing, you bring the roofing, you build the house, you bring me the customer, every one of us can look at each other and say, ‘That wouldn’t have happened if it wasn’t for me, so I can take 100 percent credit for it. So we all get 100 percent credit for doing the house: that’s 500 percent credit if there’s five of us at the table. Then the flipside is, we’ve only got 20 cents in it too for every dollar. We’ve just shed 80 percent of the risk. So we can share the risk, and when things go wrong, they won’t be going, ‘Well, that GD Bolding did it.’”
Tim Bolding believes in payback being fair play, so he is now actively paying back PNE through facilitating its popular executive director learning circle.
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