Tough Nut To Crack

Can yet another developer dent the Near Southeast's housing woes?
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Posted February 3, 2010 by ERIC GRIFFEY AND BETTY BRINK, PHOTOS BY NAOMI VAUGHAN in News

There’s a new developer on the block in Fort Worth’s Near Southeast Side who is confident he can do what dozens of other home builders and community leaders have not been able to do in spite of decades of effort: turn a desperately poor but historically significant neighborhood into a thriving community of well-built, affordable homes filled with stable, working-class families who in turn will lure shops and businesses back to the area.

feat_1It’s a dream fraught with figurative potholes as large as the real ones that fill many of the streets in the area now known as the Terrell Heights Historical District. But Dan Markson, senior vice-president for development of NRP Group, an Ohio-based construction company, is confident his company will succeed where others have failed.

“We will build high-quality, two-story, masonry homes that are affordable, historically correct, and ones that will finally turn the neighborhood around,” Markson told Fort Worth Weekly last week.  He said his confidence comes from the fact that his company has done just that in other long-depressed inner-city neighborhoods “very much like the Near Southeast.” NRP, though headquartered in Cleveland, has offices and multi-family housing developments in San Antonio.

Once a thriving center of black culture and entrepreneurship, the area gradually slid into poverty in the 1950s and was essentially forgotten by the larger community until the coming of single-member districts for the city council finally gave minority communities a seat at the governing table. For almost three decades now, Near Southeast residents and their council representatives have been stubbornly trying to restore the community to its former glory – if only one house at a time.

Now Markson says his company will build 54 three- and four-bedroom homes on vacant lots scattered throughout the district as well as a community center to serve the entire population of the area, “whether they live in one of our houses or not.”

Weary residents say they’ve heard this song before.

In recent decades, developers, projects, and promises have come and gone with little effect, for the most part. Builders, whether motivated by profit or public spirit, have foundered on the rocks of the area’s deep poverty and the maddening failures of city departments to help or at least get out of the way.

The most recent promise of renewal was made two years ago by one of the city’s premier builders, Tom Struhs, and his partner, former mayor Ken Barr. But the pair, despite their considerable know-how and clout, have all but abandoned their dream to build as many as 90 homes there. In the past year they built only three homes and were able to sell two of them. (“Falling Down, Getting Back Up,” October 21, 2009.)

Even though the partnership has sold 54 of its 96 lots to Markson’s group, Barr said, “We’re still committed to the neighborhood and still committed to the project. … Unfortunately it hasn’t been the best economy.”

Struhs was more pessimistic. He said he’s not investing any more money right now, blaming the problems on an economy in freefall, a “divisive” community, and a city housing department that failed to meet its obligations to the developers and the residents.

“The city, frankly, never followed through,” he said. “We had the best of intentions of taking money that we made somewhere else and investing in that community, and there has been such criticism regarding our motives [and] with the slowness of what happened, I’ve really just been turned off.”

Markson readily admits his project will be a tough sell. He has been in town long enough and met with enough of the neighborhood residents to know that “there is a lot of mistrust, because of so many false promises made over the years,” he said.

His plan depends on a creative financing scheme that no one else has tried. It utilizes tax credits and a “deferred-buyer” option that have proven successful in the renewal of blighted urban neighborhoods in other states, he said. He also has the backing of Kathleen Hicks, the area’s council representative.

And this time, one key city official is promising that there will be a dramatic shift from past practices. Brandon Bennett, head of the city code compliance department, said his crews will work to address the large numbers of blighted houses and trash-filled vacant lots that plague the area.

Bennett works out of the new Hazel Harvey Peace Center for Neighborhoods on the western edge of the district. He said he and his staff see the problems daily and have formed close alliances with the residents. “We listen to them and work with them to find solutions,” he said. They look for ways to save badly deteriorated historical structures and work with the city’s Historic and Cultural Landmarks Commission to expedite approval for demolition of those that can’t be saved. He also tries to get community development block grant funds for roof repairs and even to turn trash-filled vacant lots into mini-parks. “It is slow, but we are making progress,” he said.

Hicks is backing the NRP project because she “saw the work they did in [multi-family developments] in San Antonio and was very impressed,” she said. “The projects have stood the test of time and helped promote critical commercial development as well.  I encouraged [NRP] to consider doing a project here in the central city.”

Markson’s job now is making skeptical residents believe in the project as well. Gaining their support is not just a goodwill gesture – it is the single most important component of the financing arrangement. Without community support, the deal is dead.

In Near Southeast’s heyday, from the 1920s to the 1940s, the area just east of downtown Fort Worth was a thriving African-American community, a city within a city, with shops, hotels, restaurants, grocery stores, doctor’s offices, a hospital, a bank, and a very active nightlife. Jazz clubs drew some of the country’s most popular black musicians – as well as local white patrons. There they could mix freely with black residents who would not be allowed to do the same in the white enclaves for another 30 years.

But times then turned hard. Following World War II, young blacks began to move out, old homesteads were sold, and in the 1950s, I-35 became a kind of lesser Berlin Wall. Black leaders such as former city councilman Ralph McCloud have described how the freeway cut long-secure neighborhoods in two, isolating neighbors and families from one another and damaging the area’s sense of community and cohesiveness.

Since then, too many builders have seen the neighborhood as a way to make a quick buck, throwing up poorly built houses, then flipping them to out-of-state buyers who turned them into rent property that quickly deteriorated. Builders that have come and gone include Choice Homes with its cookie-cutter rectangular box houses, the city’s Housing Department doing business under the name of City Construction Company, a Dallas developer who came and went so quickly no one remembers his name, and local developer Gabriel Andrade, who built two Craftsman-style houses and lost his financing before they were finished. They were bought and completed by Struhs and have been sold. Struhs may have sold off half his lots, but he did leave behind three quality homes constructed by Arlington builder Ron Hill.

The city’s failure to support development in the Near Southeast is hardly a new phenomenon, according to neighborhood activists such as Eddie Griffin and Shirley Lewis. Repeatedly they’ve seen their dreams of a Near Southeast renewal turn into what Griffin called “dreams deferred.”

Griffin and a few other community leaders formed the Evans & Rosedale Business Association in 1984. The organization tried to get the city’s help for a 25-year redevelopment plan they had carefully crafted to address the blight, build affordable housing, and bring back the area’s small businesses, only to be frustrated for years by the city’s inaction. Without help from the city, the job of buying and clearing out the decaying structures – even if the private group could have raised the funds to do so – became an impossible task. Too many homes had been abandoned by heirs after the original owners died and their children moved away and couldn’t be found.

For years, those houses stood empty or became havens for drug dealers or the homeless. The buildings were mostly ignored by the city as they fell into disrepair so severe that they could not be rehabilitated, making developers even more reluctant to invest in the area.

 


Griffin’s association eventually bit the dust, but not before it finally saw the city take a promising step in 1998: the creation of the Evans-Rosedale Business and Cultural District, financed with $8 million in U.S. Housing and Urban Development funds administered by the city housing department. It was the most ambitious project in the neighborhood yet, built on promises from the city to develop retail shops as well as residential housing throughout the area and to create a streetscape and historic plaza commemorating the city’s African-American heritage. Lewis, as head of the nonprofit Near Southeast Community Development Corporation, was one of the key neighborhood players, overseeing the creation of the plaza and working with the city to find commercial developers for the business side of the project.

 

feat_2Dozens of vacant houses and hundreds of vacant lots were bought with HUD money, and a massive cleanup of lead-poisoned soil and asbestos-filled houses was completed. The corner of Evans Avenue and Rosedale Street was to become the gateway to a vital, pedestrian-friendly commercial corridor with lovely new homes close by.

But that dream also cratered. When the city could not find a commercial developer willing to invest in the district, Lewis did. She found a Dallas commercial developer willing to sign on to begin retail development along Evans Avenue and Rosedale Street. The Near Southeast CDC also had qualified homebuyers waiting to move into the new houses she planned to build throughout the district.

But then housing director Jerome Walker tried to muscle the CDC into selling the 100 lots it owned, as a quid pro quo for his approval of its continued funding. And he made the offer in writing. A furious Lewis refused, calling it a bribe. Walker turned down the grant request. He was later fired for incompetence and mismanaging federal funds, but the damage was done. The NSCDC is now broke. It wasn’t just the CDC that suffered – Lewis’ work toward bringing in the commercial developer ended as well, and the Evans-Rosedale progress came to a halt.

The plaza and streetscape, and a new library, fire station, and municipal building were finished, but commercial development never materialized. New housing was put on hold. The vacant lots and abandoned houses owned by the city added to the blight. Today, more than a decade later, the only new business that has shown an interest in the area is a Jack-in-the-Box.

Lewis and her husband Johnny, a retired probation officer and community volunteer, have been the catalysts for what little progress there’s been in the area, Griffin said. Her group has been working for more than a decade to build or rehabilitate quality, affordable homes in the historic Craftsman-style architecture that predominated in the neighborhood in the 1920s through the 1940s. They built or rebuilt eight homes before Walker cut the CDC’s funding.

Another failure that local developers and activists hold against city hall was the refusal to create a tax increment financing district for Near Southeast – an important financial boost that was granted to another struggling older neighborhood on the other side of the freeway.

A TIF, as it is called, concentrates city tax dollars in a particular neighborhood: At a certain point, tax values on property in the neighborhood are frozen. When values rise beyond that point, the additional tax dollars that result are kept and spent within the district, rather than going into general city coffers. They can be used for public infrastructure projects, from streets to parks, and they help attract developers to those areas.

State law allowing the use of TIFs by cities went into effect in the mid-1990s, but the city council never agreed to create such a district for the Near Southeast Side, even though Nell Weber, who then represented the area, “fought valiantly to include our neighborhood in the first [TIF],” Griffin wrote in a letter published last year in the Weekly.

Meanwhile, across the freeway, the Near South, or hospital district, which also struggled with the problems of poverty and aging structures, did get a TIF. Since then the district has become one of Fort Worth’s biggest inner-city success stories. The TIF district has been a key to redevelopment there, said Mike Brennan, head of Fort Worth South, the nonprofit group that administers the TIF. “It is a tool we’ve used to help private development projects by using TIF dollars for the public improvements that are associated with those projects,” he said.

Without such a tool, he said, the Near Southeast has “no dedicated public funding source for those types of improvements,” making developers reluctant to risk their own money.

The closest the Near Southeast ever got was to get the city to include a sliver of its western boundary in the Southside TIF. That small parcel runs from I-35 east to Kentucky Avenue, which is a strip only two blocks wide and includes the access road to the freeway.  Recently, Hicks said, the Southside TIF board approved $300,000 for sidewalks,landscaping and street lights along Missouri Avenue, which she hopes will help spur development in the Evans-Rosedale district.

Al Piper is one of those skeptics who seems to have softened. He’s president of the Historic Southside Neighborhood Association, an insurance agent, and a 10-year resident of the area. Piper chaired a recent meeting at which NRP officials presented their case to the 30 or so residents gathered in the local community center. It was the third meeting with the neighborhood group in as many weeks for Markson and his colleague Brad Knolle, and they fielded questions for two hours.

The tax credits that the company needs to make the Near Southeast project work are awarded by the state based on how many of the federal criteria the applicant meets. One requirement is a letter of approval from the area’s neighborhood association. The competition for the credits is fierce, and without the letter NRP won’t have a chance, Markson said.

“If I don’t have your support, I won’t put in the application,” he told the crowd. Out of 40 applicants this year, the state will approve only six. The neighborhood group will vote on the project on Feb. 8. The application to the state is due in March.

“I am not speaking for the association, but personally I believe [the developers] are sincere. I have some optimism,” Piper said afterward. “They answered most of our questions and satisfied a lot of my concerns.”

For Piper, part of the good news was that the $11 million project will create 150 new construction jobs in a community with an unemployment rate far greater than the national average. Knolle, NRP director of acquisitions, told the predominantly African-American gathering that he has been working with the black and Hispanic chambers of commerce to ensure that at least 40 percent of those jobs go to minority-owned businesses.

Markson estimated that the homes NRP is planning to build will be valued at about $150,000. Because they will initially be rented with an option to buy, the credit requirements for residents to move in will not be as stiff as for first-time homebuyers.

Some residents fear that the “deferred buyer” option is the same as “rent-to-own” and could make NRP just another of the absentee landlords whose run-down and abandoned rent houses have been a plague on the community for decades. To answer those concerns, Markson and Knolle explained the stringent federal criteria NRP would have to meet to qualify for the tax-credits – including that the company remain in the community for at least 15 years to manage and maintain the houses.

The tax credit program is administered in this state by the Texas Department of Housing and Community Affairs, with the specific intent of providing housing for low-income families. However, a recent report from the agency showed that skittish investors were reluctant in 2009 to take advantage of the credits, which meant the agency was able to fund fewer low-income housing developments than in previous years.

The law also requires for-profit developers to partner with a local nonprofit – in this case the Fort Worth Housing Authority. If the NRP plan is approved, the partnership then sells the credits at a discount to investors to raise money for the project. (NRP’s credits will be sold for 68 cents on the dollar.)

 


Because the tax credit program was originally aimed at multi-family rental projects, some of its requirements seem odd for single-family construction. Most importantly, it requires the developer to lease the homes for the lifetime of the credit, which is 15 years. During that time, the houses would continue to be owned by the partnership, which would collect the rents, maintain the properties,  and pay down the debt.

 

feat_3After that, each lessee would be allowed to buy the home, for a projected cost of about $47,000, including closing costs, Markson said. The fixed monthly payment should be about $431, he said. Getting a $150,000 home for under $50,000 is “a significant way for a person to build net worth,” he said. The plan has worked well for NRP in low-income neighborhoods in Ohio, Michigan, and New York, Markson said. This would be the first single-family home project in Texas to be built under the tax credit program.

Financing with tax credits can be a lucrative deal for both investors and eventual owners. NRP stands to make more than $600,000 from fees and a percentage of the construction costs. Investor are allowed to deduct from their income tax the amount of tax credits they receive on the project each year for the 15 years that the original developers retain ownership.

“At the end of the day, what will we have that we do not have now?” Piper asked at the meeting. “Fifty-four families who will have good homes, and the physical appearance of our neighborhood will be improved.

“That has to be a good thing,” he said. “Such a project will be a catalyst to bring in more developers and new businesses.”

Hicks asked Markson to meet with the Lewises to seek their support.

“We have not decided whether this is a good deal or a bad one,” Shirley Lewis said. “The community is concerned about more rent houses, although these are supposed to be of good quality. But they are asking, why add more poor people to an already poor community” where there are no jobs and no retail development?

The houses, however, will be rented only to those with jobs. An applicant’s income must equal at least 30 percent of the $66,000 median income in this area and be at least 2.5 times the monthly rent for the NRP home. Rents are figured on a sliding scale, Markson said. For example, a four-person family whose income is 30 percent of the average median income will pay $574 a month for a four-bedroom home. For those whose income is 60 percent of the average, the same house will rent for $1,116. The targeted population seems to be medium-income folks from the working classes.

Hicks, who has also expressed frustration over the city’s failure to fix the streets and provide good lighting in the area, sees the NRP project much as Piper does.

“We need quality, affordable single-family housing in the central city,” she wrote to the Weekly in an e-mail. “In recent years much of the new residential [construction] has been quite expensive, pushing low-income families out. This project can truly transform the community in a positive way, replacing empty lots with new homes, paving the way to home ownership. The proposed community center would also be great.”

At the meeting, however, Johnny Lewis questioned the expense of building another community center when one already exists in the area – the one where the meeting was being held. “Why not contract with our existing center to provide the services” that NRP would provide at the new center, he asked.

Resident Geraldine Williams expressed the same concerns. “This center is already here,” she said, “so why not put some money into it?”

They were told that the tax credit laws allow funds only for a community center that is built by the owners. “We have to have one that we can keep open for our residents 24 hours if that’s what they want,” Markson said. The residents make the rules. “If they want it open for coffee early in the morning, then that’s what we will do,” he said.

Neither Johnny Lewis nor Williams was completely satisfied. “We need to have more work sessions [with the association and NRP] before we decide,” Lewis said. Williams agreed.

There have been bright spots in the generally dismal record of redevelopment in Near Southeast in recent years. But time and again, locals say, promising blooms have been snipped, squashed, or left to wilt by the city.

“City involvement [to many] means another failure,” Lewis said, citing Struhs’ and Barr’s project, the Evans-Rosedale business and cultural development, and the city’s unfulfilled vow to install new street lights and rebuild the potholed streets.

The fixes have been promised off and on for years. Struhs said the money for the street lights, for instance, “was appropriated maybe a year and a half ago, and we still don’t have any.”

Crime rates in the area have dropped dramatically in the past decade, driven by the CDC’s use of Weed & Seed funds to provide additional police officers in the area, among other improvements.

The area’s reputation for crime is a misconception, Bennett, the city’s top code enforcer, said. “There is little crime here even though you would expect more with the numbers of vacant houses” – and with an unemployment rate of nearly 20 percent.

Preserving the architectural integrity of the old neighborhood has been another struggle. In the last 10 years, Habitat for Humanity and the city’s internal construction company have built many small, plain, but livable structures on vacant lots in the area. But those efforts drew criticism from the Lewises because of the failure to build in the historic styles of the early to mid-20th century. In an interview two years ago, Shirley Lewis said she knows that houses that reflect the area’s history can be built just as economically, because she had done so. “And why shouldn’t the poor live in beautiful homes?” she asked.

But supporters of Habitat saw the Lewises as obstructionists to the goal of providing decent housing for the poor.

 


Struhs, who had his differences with the Lewises in the past over his housing project, agreed with Shirley Lewis on the need to maintain the district’s historic architecture. If the neighborhood is ever going to recover, “there should be no more support for Habitat,” he said.

 

That won’t be a problem with the homes Markson plans for the neighborhood. He told the group that he has “brought in an architect who specializes in historical districts,” and that the homes’ designs will complement the Craftsman style. “They will be two-story, with wide porches and separate garages,” he said. “We have a vested interest in building high-quality structures to reduce long-term maintenance costs that have to be borne by us, the owners.”

He also said he has a larger reason for wanting to make the project work: “I want to replicate it all over the state.”

Struhs’ frustration with the city dates back three years, he said, to when he sat on the Mayor’s Task Force for Affordable Housing. “We [the task force] got $2 million [from HUD] to go into affordable housing, but I don’t believe we spent any of the $2 million. … Nothing was done,” he said.

Despite lots of discussion, he said, “I don’t think most of that money that was appropriated by the city council for the good of building affordable housing has ever been spent. It’s still being organized … it’s in bureaucratic limbo.”

“In a blighted neighborhood, you [must] have follow-through from all sides,” he said. “The city, frankly, never followed through. We met with them for years every Wednesday, and for whatever reason … the city staff, they couldn’t agree. … That kind of hurt the momentum, because maybe the neighborhood couldn’t believe that something was actually going to happen, even though we already had things under construction.”

Even something like the mowing of lots turns into a battle with city hall. “Even though I spend $3,500 a month mowing the lots I own there, I get a summons every week from the city that I’m being sued for not mowing all of my lots,” Struhs said. “And one code officer threatened to arrest me.”

He seemed especially puzzled by what he called the resentment of the neighborhood at his presence in the area. “I was doing something for the good of the community,” he said. “We’re never going to make any money there. The reason we were there is because it was the right thing to do, and it looked like nobody had done anything to help that community, so we tried to do that.”

But then the partnership sold only two of the houses. “We still have one left,” he said. “We have financial accountability for the debt, and we can’t start more houses on that basis. It just doesn’t make economic sense.”

It made more sense to him, he said, to sell lots to NRP because they have a track record of success in such neighborhoods, and they also have a unique financing arrangement to make their project work. “But we didn’t sell all of our lots,” he said, meaning they may yet come back.

Markson said his meetings with the residents have given him greater insight into the frustrations and long-term problems facing the community. “One gentleman told me that he has no deed to a lot he owns there,” he said. The lot was left to the man by a grandmother years ago, but there were so many title encumbrances that he could never get a clear title, and now he owes the city $25,000 in back taxes for a lot that’s worth $10,000, and he can get no help from the city, Markson said.

Struhs is in a similar quandary with the city. He signed sale contracts on 120 lots owned by Fort Worth but found out much later that some of those contracts didn’t close because the titles couldn’t be cleared.

Title encumbrances are still rife throughout the district, community leaders say. And when owners can be found, one code enforcement officer said, it can take up to six months to get permission from the city landmarks commission to demolish even the most derelict building.

In the past four years, boarded-up houses have proliferated. There are still blocks of good-quality, well-tended houses  to be found in the district. But a drive through the six blocks immediately east of the historic plaza on Evans Avenue and its beautiful new Shamblee Library showed 10 boarded-up and badly deteriorating structures, many with the boards torn off or so loose that children could easily get inside. Interspersed with the falling-in houses are trash-filled vacant lots. The area has no grocery store, but it does have a number of quick-stop stores that sell mostly alcohol – although not as many as it once had, thanks to a campaign led by Johnny Lewis to block the Texas Alcoholic Beverage Commission from issuing or renewing the stores’ liquor licenses.

All of these are the problems that the Lewises, Piper, and other neighbors have been trying to get the city to deal with for years. But Bennett, who has been with the city for six years, said those conditions are being addressed, albeit slowly.

“We are committed, my staff and I,” he said, “to work with the community to find solutions to the problem of the abandoned houses.” Many times when Bennett tried to tag a dilapidated house, he said that the neighbors asked that it be saved because it had “historic value,” and he has bowed to their wishes. “This is their neighborhood, and they know the value of these houses” even when it isn’t apparent to others, he said.

Bennett wants to see more money from the city put into making such places safe until they can be rehabilitated or the landmark commission lets them be torn down. “I want to clean up the yards, cut the overhanging branches of the trees, even paint the plywood that covers the windows and doors,” he said. In a gesture to the community, he and his staff cleaned up two lots near the plaza and created a small park. “We can do that throughout this district.”

While these gestures may seem small to others, he said, he sees them as big steps toward saving the long-neglected historic district.


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