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Autumn 2001
 
City Journal Autumn 2001.
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CDCs and Cities

To the editor:
Community development corporations get pelted by the Left for building houses for moderate-income families, for developing shopping centers and commercial strips, and for converting public housing into mixed-income complexes. So it's satisfying to read Howard Husock's refreshingly rightist "Don't Let CDCs Fool You" [Summer 2001] claim that CDCs are trapped in the War on Poverty. Satisfying, but silly.

Consider the Hough area of Cleveland—a former riot zone. There, CDC-sponsored houses are under construction and pre-sold for close to $250,000. Some units are rented with long-term options to buy, at reduced prices, through the Low-Income Housing Tax Credit [LIHTC]. Hough is still mostly African-American, and largely poor. But look at their community, before and after! Hough has been transformed into a clean, safe, attractive area.

True, the carefully planned mix of incomes and prices was designed to give current, poorer residents a chance to buy similar new houses on the same blocks as wealthier families. Middle-class residents move in; current residents climb into the middle class and choose to stay in the neighborhood. Some families never get much richer, but they live next to those who do. Far from keeping such places "ghettos," CDCs build normal, balanced communities.

Like most CDC projects, the Hough houses get no federal rent subsidy. Husock mistakenly claims—at least three times—that "most" CDC housing is swollen with ill-gotten Section 8 money. It has been at least 15 years since any appreciable number of CDC houses or apartments got Section 8 set-asides. The rent vouchers Husock discusses are given to poor tenants—not to CDCs—and there are few of them. People use vouchers to rent from private landlords, not CDCs. Those in CDC-owned buildings can take the voucher elsewhere at any time.

CDCs use the LIHTC—not Section 8—to subsidize construction or renovation—not rent. In the process, LIHTC imposes market discipline on all the housing it supports—the very discipline Husock urges. Isolated cases of CDC failures only serve to show that the policing mechanisms of the LIHTC work: investors wrest housing from unsuccessful sponsors, and turn it over to more capable organizations. If they don't, investors and lenders—not the federal government—lose serious money. The same discipline applies to private landlords in the program. If "generous subsidies" are Husock's worry, he can rest easy: the seventies are long gone.

Paul S. Grogan & Tony Proscio
Authors,
Comeback Cities

Howard Husock replies:
Grogan and Proscio mean well. But their bid to distance themselves from the Left fails to rebut my essay's central arguments.

True, CDC-built rental housing is no longer guaranteed "project-based" subsidies; but since housing-voucher holders can't find apartments that will accept them (see "Let's End Housing Vouchers," Autumn 2000), and CDCs are eager to do so, voucher holders wind up as CDC tenants. The handbook of the CDCs' main lobbying organization lists vouchers as one of the sources of federal money that CDCs should seek out, urging them to "encourage . . . legislators to provide new vouchers to meet the affordable housing needs of . . . low-income communities." That's the 2001, not the 1985, edition.

CDCs use federal funds and tax credits to build houses to sell to private owners. But "normal, balanced neighborhoods" do not necessarily result. LIHTC money comes with strings: HUD requires units to "remain affordable in the long term." Owners don't get to realize a profit upon resale and are discouraged from moving up and out.

And Hough is not a fait accompli. No one knows what will happen "after!" its pre-sold homes are occupied. Some middle-class buyers will see less disciplined, CDC-subsidized neighbors make their street less desirable—and their greatest asset less valuable. A crack house or bordello next to a middle-class home might make for a "balanced" neighborhood but not an upwardly mobile one.

True revival of older neighborhoods requires minimal regulation, low taxes, and the initiative of residents. You can dragoon the private sector into building middle-class homes, but that does not make a middle class. Alas, we now have an entrenched CDC industry with a vested interest in building Potemkin villages—and keeping their fingers crossed.

 

 


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