Roundtable: Was There A Housing Commission “Trojan Horse”
Friday, August 26, 2011
This week, Will Carless of Voiceofsandiego,org wrote about the San Diego Housing Commission's "Trojan Horse." The report begins with the Commission's plan to deal with the foreclosure crisis by buying foreclosed properties and making them into affordable homes for needy San Diegans.
This week, Will Carless of Voiceofsandiego,org wrote about the San Diego Housing Commission's "Trojan Horse." The report, which raises visions of sneakiness and double-dealing begins with the Commission's plan to deal with the foreclosure crisis by buying foreclosed properties and making them into affordable homes for needy San Diegans.
Guests: Will Carless, investigative reporter, VoiceofSanDiego.org
John Warren, editor and publisher, San Diego Voice and Viewpoint
Mark Sauer, senior editor, KPBS News
PENNER: You are indeed. And we would like to hear from you, our listener, your questions and comments on any of the subjects we covered today. Call us at 1-888-895-5727. Well, this week, Will Carless of VoiceofSanDiego.org wrote about the San Diego housing commission's "trojan horse." The report which raises visions of sneakiness and double dealing begins with the commission's plan to deal with the foreclosure crisis by buying foreclosed properties and making them into affordable homes for needy San Diegans. But as Will Carless reported, that's not exactly what happened. Okay, will. When the City Council enacted this plan, counsel members were panicking about foreclosures upon what was going on in the city at that point?
CARLESS: So basically we're right coming out of the housing bubble. And you've got these foreclosures dropping all over the place. And there's also the broader thing that's happening in the economy with the collapse of Lyman brothers and the stock market just falling apart. And there's this over all feeling of escalated panic about what might happen. And in the midst of that, the sort of -- the one core issue that the City Council has some sort of influence or control on in that whole miasma of stuff is the foreclosure crisis. So in late 2008, they are fishing around for ideas, basically, and they send over instructions to the housing commission, look, guys, you're our affordable housing agency. What can we do about this? What are some different things we can do to tangibly try and take this issue by the horns?
PENNER: And that's how it all started.
CARLESS: So the housing commission responds in early 2009 and basically says we've got this three point plan to deal with foreclosures. The first is to put some information on a website, the second is -- not really that important. The third of these three things is we want you to rewrite our acquisitions policy that's been in place since 1978, and we've searched through our different policy, and this is the one that you need to change so we can try and mitigate the foreclosure crisis with it. It's all packaged up as being a small part of this fight against the foreclosure crisis.
PENNER: Okay. At this point, one wonders whether an issue like this really does curtail the activities of the housing commission. What do you think, John? Do you think, okay, the rules changed, so some oversight was gone. But would this change the function of a housing commission?
WARREN: I think one has to be familiar with how the housing commission works. It has a history of helping developer it is put projects together that in turn created housing. So for the commission to talk about taking advantage of the foreclosure crisis at the same time it never stopped working with developers or the acquisition of properties or joint partnerships, none of those things stopped. So when you take it in that context, it's not an unusual request. It's not like the commission just woke up one day and said give us power, and then wee going to go out and buy all the real estate we can. That's not the way it works, and that's not what happened.
PENNER: Let me ask our listeners before I turn to mark on this. These are public funds we're talking about. This is taxpayers' money that we are discussing. How familiar are you and what the function of a housing commission is, primarily. It's to provide affordable housing for people in low to moderate income categories. Do you feel as though the housing commission is doing its job? Or is there something else going on out there? We'd like to hear from you at 1-888-895-5727.
CARLESS: So of course the crucial thing is what happened next. It's sort of this -- what sounds like an imminently sensible plan, which is give us the freedom to go buy these foreclosures, without bringing them to the City Council, which can slow them up. But what happened over the next two years, out of 756 units that the housing commission developed, only 45 of them were in foreclosure. So the vast majority around -- I think it's 90% of the money they spent was actually spent not buying foreclosures at all but going out and doing other types of deals. Public/private partnerships, and loaning developers' money to build partnerships and that sort of thing.
PENNER: Isn't that their job? The commission says it is proud of having created seven hundred and 41 affordable housing units. That sounds like a pretty good record.
SAUER: That is their job. The idea here was to be a nimble player in the market. You had this foreclosure situation, you had cities, Cleveland comes to mind, where foreclosures were devastating neighborhoods and driving all prices down and causing over night blight, as it were. So it seems a part of their mission, come is a noble mission especially in an expensive place such as San Diego. The question is, how do they go about this? In response to your lengthy story on this this week, what did Rick gentry and the folks at the housing commission have to say?
CARLESS: Their argument has been, look, we've been completely above board about the way this was going through. And one of the challenges with this story was to not just say, look, I've read these documents, and I think this isn't true. But to go and ask the people -- I basically -- this wasn't a story until I went and asked the people who made the decision to change the policy. And that's --
PENNER: That's the members of the City Council.
CARLESS: Exactly. Once I went to them and three of them said categorically this was obfuscated from us, this was hidden from us, this was a way that they pushed this very controversial policy.
SAUER: Donna Frye called it the Trojan horse.
CARLESS: Exactly. At that point it became a story.
MAUREEN PENNER: I think we have to be really clear, will, when we say that the oversight of the housing commission was reduced. Oversight by the City Council. What are we talking about? What kind of oversight? What was the City Council supposed to do in order to monitor what the housing commission is doing?
CARLESS: That's a great question. Basically, what this policy did was prior to this policy being changed, every single deal that the housing commission put together, whether it was to buy a property or to go and spend tens of millions of dollars of the public's money building new properties, every single one of those deals would have had to go to the City Council for approval after that point, after the housing commission had voted on it. What this did, and it had to go in front of a public meeting of will couple so that anybody with concerns about it could get up in front of the City Council and say I don't agree with this, I don't agree with that, and the other City Council people can question it. Post this decision being made, that no longer happens. What instead happens is the housing commission has essentially free reign to go and cut deals itself to spend public's money. The housing commission are unelected people who are not politicians. They can make decisions on how to spend millions of dollars. Then what they do is they have to notify the City Council. And they give them seven days to put the wash on the deal if that's what they want.
WARREN: I did an editorial a couple weeks ago and walked about this issue of due process. Of the authority of the housing commission is delegated. San Diego, we must remember two things here, that unlike other cities, we never have had this low income housing. We have the affordable alternative. And that has created a scenario in which there's always been a demand for housing, there's always been some hint of scandal surrounding the developers and the housing commission itself. And so in this instance, it's very careful what they did. The housing commission asked for authority, but it never said that it would exclusively use the money or the authority given just for foreclosures.
WARREN: It made it I point that foreclosures will be a part of what it did. The fact that they only had one project means they met the letter of the law because they said they were public hearings.
CARLESS: John hit the nail on the head.
PENNER: Will Carless?
CARLESS: I think John absolutely hit the nail on the head. The point -- what this comes down to is, look, the housing commission as you said earlier, Gloria, did a fantastic job or has done a fantastic job creating affordable housing. It's created much more than it was asked to create. No one's arguing about that. If the housing commission had come in 2009 to the City Council and said here's what we want to do, we want to go out and spend $100†million doing these development, and we want you to give us free reign to go and do that, that would have been fine. That's not what they did. They said we want to battle foreclosures, and one little part of that is this thing, which is, by the way, they didn't even mention is going to allow us to did and spend this hundred million dollars in this way.
PENNER: We have a call from Tim in San Diego. Tim, you're on with the journalists on the panel today.
NEW SPEAKER: Thanks for taking my call. And it's great to hear you on the radio.
PENNER: Thank you. I'm back.
NEW SPEAKER: Actually I'm involved in affordable housing. Will and I talked a number of times over the past couple of months. And I just want to add a couple more insights to the discussion and the story in that -- and Will can elaborate on this, and I'm very certain what he's talking about, a couple of deals are financed with bond financing. And in the State of California, for an affordable housing project or a school for that matter, it has to go in front of a public body to get approval. And when it comes to affordable housing financing for bond financing, I believe at least a couple of these projects, and Will can clarify this, these are financed with tax exempt bonds.
PENNER: Okay. Are we getting a little too complicated for a general audience here, Tim?
NEW SPEAKER: The point is with bond financing, you have to go in front of a City Council for approval.
NEW SPEAKER: So they were -- these projects that have bond financing were in front of the City Council for approval. Not necessarily for the funding of the housing commission had. But for bond financing. And last point, Gloria, really quick, on any project that I've been involved with over the years, and most developers would do this, they will go meet with a City Council representative way before it ever comes in front of approval process. So there's this disclosure and continuous communication between developer and government bodies. So just a little bit more elaboration on the terms of the historic context.
PENNER: Thank you. Mark sour?
SAUER: That's true. And I would say having worked down at the council in that role he just described, Rick gentry was on the tenth floor quite a bit. You.
PENNER: Tenth floor is where the council --
SAUER: That's where the council office is, the trenches, the reps are. And having been involved in some of the housing issues myself in District six when Donna Frye was there, Rick was a frequent visitor there. And I talked to Donna, talked to her about this story here. And it does very your story does beg the next question. Okay, if this was an Enron, and we use the foreclosure as a way to get this free reign and not have to bring this stuff to the council, is there evidence that public funds now have been abused?
CARLESS: That's a really good question. And it's something --
CARLESS: It's something I haven't really been able to establish. It's not something I haven't looked at.
SAUER: It's the next story.
PENNER: John Warren, last word.
WARREN: The last word is this, the way this was set up, and Donna Frye raised the question, the council -- the housing commission says we met with each council member and informed them individually. The council members do not have any power or authority individually. All they have is the power that flows from collective action. So there again we have the letter of notice, but the true spirit has been omitted.
MAUREEN PENNER: It sounds to me as though this is a story that is ongoing, will. I'm sure you're going to be writing some more, and I'm sure we're going to be hearing more from the housing commission. Coming up next we're going to be talking about the campaign -- actually that's gonna be our last segment. We're going to be talking about the decision made this week by the San Diego redistricting commission on the new political maps for San Diego.
To view PDF documents, Download Acrobat Reader.