Eminent domain done right: Part 1, the transaction
While the foes of eminent domain for economic development (ED4ED) have done an outstanding job of bringing to prominence their poster plaintiffs like Suzette Kelo (and hiding their more questionable ones), eminent domain’s proponents have noticeably failed to personalize their successes, falling back instead on hoary nostrums about responsible government and deliberative process.
As equal time for responsible spokesmen — or at least, spokes-properties! –
“Jane, you ignorant slut, eminent domain is always bad.”
… we present the impressive and instructive tale of Phoenix Park in Sacramento, as highlighted in a recent issue of Affordable Housing Finance:
Sacramento—Thanks to a concerted effort by this city’s political and housing leadership, Phoenix Park has been transformed from an overcrowded, crime-ridden blight on the neighborhood to a safe and positive environment for some 1,500 people, about half of them children.
Built in the 1960s as individually owned condos, the housing development had become one of the worst in the city as absentee owners and ineffective homeowners’ associations failed to stem the theft, violence, drug dealing, and gang activity in the area.
Indeed, how the area became so decrepit is a worthy study in its own right. As the Sacramento Housing and Redevelopment Authority (SHRA) describes it:
The housing community was built in late 1960’s as privately owned condominiums for seniors. Originally comprised 700 fourplex units and 243 townhouse units in five separate subdivisions each governed by its own homeowners association (HOA).
Fourplexes, by the way, are an American Midwestern and Western architectural innovation, a compromise between the English semi-detached and the Midwestern courtyard-style brick walkups.
Fourplexes in
Particularly in the West, fourplexes were a common low-cost (and therefore, often low-quality) new construction higher-density alternative to single-family homes, with occasional unfortunate results:
By mid-1970s many units hadchanged ownership; most landlords are absentee. During 1980s, housing falls into severe disrepair and deterioration; community is plagued by violent crime, poverty, high unemployment exacerbated by ineffective property management. In early 1990’s gang violence and drug activity reaches alarming proportions.
Eulogy for a dying neighborhood in telegraph prose: the original owners sold to investors, whose motivations inclined them to maximizing cash flow and gave no thought to neighborhood consequences. Meanwhile, ownership had fragmented so there was no possibility of concerted revitalization activity.
Enter the locality, proffering services:
Since 1994, more than a dozen social services and local agencies have been providing and enhancing resident services and programs including:
· Employment training
· Job skills and parenting classes
· Child care
· Adult education
· Shuttle bus transportation
These laudable efforts were as showers in the desert, soothing but vanishing, so:
In 1998 Sacramento City Council adopts Franklin Villa Revitalization Plan to create a safe, stable, livable community and establishing a goal to rejuvenate the community by:
· Encouraging homeownership
· Creating open space
· Improving security.
After the economic extractors had done their work, they abandoned the properties:
In March 1999, SHRA partnered with HUD to allow the Housing Authority to purchase boarded and vacant FHA-foreclosed homes.
Among my varying definitions of a slum is this one oriented to the slum’s business model:
A slum is a wealth-extraction machine
In a slum, many small sums are aggregated in a neighborhood and then shipped far away from that neighborhood. Indeed, as it becomes worse it becomes more efficient, for ever less of the wealth must remain in the slum, and ever more can be siphoned off.
Unfortunately, a slum also creates parasitical new business opportunities for those who want a small, private, convenient ’safe house’ in which to transact urgent business on a cash basis: drug manufacturers, drug users, drug dealers, prostitutes, smugglers, and fences. Franklin Villa (as it was then known) was an ideal location, a warren of absentee-owned apartments abutting a major north-south road:
Easy on, easy off.
Naturally, entrepreneurs who have found a successful location defend their area, or return when convenient such as at night, thwarting piecemeal efforts and a decade’s worth of good intentions:
A decade of social service efforts convinced city leaders they needed to take physical control from those owners, said Janet Rice, president of Norwood Avenue Housing Corp. (NAHC), the managing general partner on the deal.
Enter eminent domain to change the neighborhood by curing its blight.
Step 1, assemble land large enough to make a neighborhood-level difference.
With solid backing from the city council, the Sacramento Housing and Redevelopment Agency (SHRA) used eminent domain to acquire 464 housing units scattered between 141 four- and five-plex buildings and convey them to NAHC.
The city wisely recognized it would never be a good developer. Instead it completed a ‘reflector sale’ to a local (non-profit) neighborhood community development corporation.
Step 2, de-densify by roughly one-quarter:
Lots of small alleys and cul-de-sacs: high-density ground coverage
Some were rehabbed and some were torn down to create 360 apartments.
Step 3, diversify use by adding residential amenities:
A 10,000-square-foot resident activities center and a swimming pool were constructed, along with three laundry rooms.
Step 4, reconfigure apartments and modernize layouts:
The rehabilitation focused on reconfiguring the buildings to turn garages into useable indoor space.
Units range from one-bedroom units with 550 square feet to four bedrooms with 1,400 square feet. Rehab began in early 2004 and was completed in 2006. Rents range from $600 for a one-bedroom to $1,387 for a four-bedroom.
Step 5, reorient public and social spaces:
NAHC employed Crime Prevention Through Environmental Design strategies, including opening up more space in front of the units for parking and to open up sight lines and converting alleyways into private backyards.
For reference, here are the four CPTED action principles (and their application to multifamily):
1. Natural Surveillance - A design concept directed primarily at keeping intruders easily observable. Promoted by features that maximize visibility of people, parking areas and building entrances: doors and windows that look out on to streets and parking areas; pedestrian-friendly sidewalks and streets; front porches; adequate nighttime lighting.
2. Territorial Reinforcement - Physical design can create or extend a sphere of influence. Users then develop a sense of territorial control while potential offenders, perceiving this control, are discouraged. Promoted by features that define property lines and distinguish private spaces from public spaces using landscape plantings, pavement designs, gateway treatments, and “CPTED” fences.
3. Natural Access Control - A design concept directed primarily at decreasing crime opportunity by denying access to crime targets and creating in offenders a perception of risk. Gained by designing streets, sidewalks, building entrances and neighborhood gateways to clearly indicate public routes and discouraging access to private areas with structural elements.
4. Target Hardening - Accomplished by features that prohibit entry or access: window locks, dead bolts for doors, interior door hinges.
Step 6, assemble the best owner: non-profit control, for-profit management, bringing complementary skills:
Managed by The John Stewart Co., the project offers a Head Start program, a computer lab, and lots of other services.
[Full disclosure: JSCo is an alumnus client of my for-profit, Recap Advisors, and John himself, a sterling individual, is a personal friend. — Ed.]
Step 7, offer the observant herd both tangible carrots and visible sticks:
There is a zero tolerance policy for rule violations. The project also features extensive security patrols, strict tenant screening, and a keycard system for gaining access to the gated community. Managers place a high priority on getting tenants to police the property and to keep it running smoothly.
All residents earn less than 60% of area median income [LIHTC cap — Ed.[ and most are below 50% [Section 8 cap — Ed.]. More than half the residents are new to the community, selected from the Housing Choice Voucher waiting list.
Today’s property success required eminent domain to assemble the land. Transforming the neighborhood required securing the site and neighborhood, redesigning street flow, de-densifying the site, reconfiguring apartments, adding social amenities, and imposing a community-friendly environment through private management. All of this required eminent domain, because it all flowed from the initial scale of redevelopment.
And it required one more thing: money. Lots of it.
[Continued tomorrow in Part 2.]
