May 15, 2011; Source: Washington Post | Debbie Cenziper may be one of the nation’s top investigative reporters, often aiming at issues of nonprofit affordable housing and community development. Her latest series for the Washington Post takes aim at a bevy of affordable housing projects subsidized with HOME funds that are stalled or dead, but have drawn down hundreds of millions of dollars of federal subsidies. Please see all of the articles in the series, but be aware of the following:

  • Many of the problems emanate from HUD’s miserably inattentive oversight, but remember, Secretary Sean Donovan inherited an agency that had been crippled by years of disinvestment, mismanagement, and corruption under his Bush era predecessor, Alphonso Jackson. It is recovering, but it’s going to be a long process;
  • HUD blames local housing development agencies for the problems of a program that otherwise is seen as working well. Let’s make this a shared problem, not just of oversight, but effective support. Too many agencies toss some funding at a nonprofit developer and then, like public policy Darwinists, let them sink or swim;
  • The threshold HOME subsidy level for the Cenziper article was $50,000, which reflects that many local agencies put in subsidies that are way too low to claim that they are supporting affordable housing;
  • Much of the HOME subsidies for affordable housing projects are front-end predevelopment costs, the high risk part of the development process. The fact that these subsidies were spent doesn’t necessarily mean wrongdoing or sloth, but that the funds were meant to be spent up front for projects that might not in the end prove viable – but without the predevelopment expenditure, it would be impossible to know.
  • Nonprofits take on the lowest income, highest risk affordable housing projects that for-profits typically shy away from;
  • The bulk of the projects in the Cenziper study were started or implemented as the national financial collapse and mortgage meltdown swung into high gear. Most nonprofit developers – and nonprofit home purchasers – found bank spigots for construction financing and permanent mortgages turned off. (Remember, HOME only provides a part of project financing and is meant to leverage other public and private funds);

Bad nonprofit developers are exactly that, but many of the problems detailed in the Cenziper study reflect not a problem in the nonprofit development community, but the inadequacy of government support and private financing for housing that serves low- and very low-income families.—Rick Cohen