By Aaron Reiss
By Angelica Leicht
By Dianna Wray
By Aaron Reiss
By Camilo Smith
By Craig Malisow
By Jeff Balke
By Angelica Leicht
Two years ago, on a fine summer day, Mayor Bob Lanier herded President Bill Clinton and Vice President Al Gore out Interstate 10 to the Winwood Club Apartments, off Dairy Ashford Road on Houston's western edge.
The mayor was taking the visiting dignitaries there both to score a few political points and to make a show of the city's commitment to some of its poorest and most needy residents. Winwood Club -- an impressive place with an atrium-windowed facade, an abundance of big, leafy trees and two swimming pools -- was one of several apartment complexes around the city that had been taken over by the Resolution Trust Corporation, the agency Congress had set up to sell the assets lost to foreclosure during the collapse of the savings and loan industry.
But the RTC wasn't simply about marketing real estate; it was also about using the property that had fallen into government hands to the public advantage. The centerpiece of the RTC's social conscience was the Affordable Housing Disposition Program, which gave public agencies, such as a city or local housing authority, or a nonprofit organization first dibs on RTC assets. The notion was that such a group would buy, for example, an apartment complex such as Winwood Club from the RTC with little money down at a fraction of the complex's market price. If repairs were needed, the necessary financing would come from the RTC or federal Community Development Block Grant funds. Then, according to a congressional mandate, at least 35 percent of the complex's units would be set aside with rent restrictions to provide affordable housing for the working poor.
It was a simple tradeoff: the federal government would get less money than it probably would if it sold the RTC property to the highest bidder, and in exchange for that sacrifice, the buyer would help the public out by offering low cost housing. To Lanier, it sounded like what he calls "Baytown economics," a professional philosophy named after his hometown: if you can buy existing property cheap, it beats having to spend more to build from scratch. As a man who recognizes a good business deal when he sees it, Lanier was pleased to take advantage of this one. Under his auspices, the city bought ten RTC apartment complexes, Winwood Club among them, between November 1993 and September 1994.
On that summer day with Clinton and Gore, before the first property had been closed on, Lanier made a pronouncement that was supposed to capture the spirit of what the city was trying to do. "The single most important thing we can do to enhance the availability of affordable housing," Lanier said at Winwood Club, "is to grant local authorities the financial means and the flexibility to implement programs based on our own special knowledge of local needs. The RTC's program accomplishes that."
Nice rhetoric. But in retrospect, it appears that rhetoric is all Lanier was spouting. The city bought 3,021 apartment units from the RTC, and agreed to set aside more than 2,000 of those for low-income Houstonians. But shortly after the ink had dried on the deeds, the city added an unprecedented twist to the RTC program: it sold seven of its ten properties to private investors. The city reaped more than $9 million in profits on the resales. Meanwhile, the new owners of the complexes have raised the rents on most of their units, on average, 10 percent. In some cases, the bump in rents has been as much as 20 percent. And the city hasn't been the only one to benefit from the RTC's fire sale. Wayne Duddlesten, a close friend and real-estate crony of the mayor's, helped broker many of the city's resales, something that brought him more than a quarter of a million dollars in fees. And that's not counting the nearly $2 million his companies were paid for other services related to the RTC properties. For Lanier and Duddlesten, the RTC has proven a real-estate man's dream. For the city's working poor, the RTC deal has been a dream as well. Only for the poor, it's a dream in the sense of something that sounds good, but disappears in the harsh light of day -- a promise that turns out to be not quite real.
That, of course, is not at all how Lanier and Houston housing officials would describe the city's dealings with the RTC. They argue that even after the increases in the properties' rents, they still fall within the federal affordable housing guidelines, which are the guidelines followed by the RTC. And they have a point: according to those guidelines, which are set by the U.S. Department of Housing and Urban Development, a family of two with a net income between $18,100 and $29,000 can qualify for the RTC set-asides. And as Margie Bingham, the city's director of housing and community development, notes, "There are a lot of people out there in that category."
But that's apparently the problem. What constitutes "working poor" to the federal government may have little to do with what Houston's working poor are all about. Housing advocates and real-estate analysts point out that in many cases, the average rent for an apartment in Houston is less than the maximum rent allowed under the HUD guidelines. According to Paul Nichols, owner of a property management firm and chairman of the board for the nonprofit group, Houston Interfaith Housing, that fact makes "low-income housing" a relative term that more often than not means nothing.