The Myth Breaker
Bart Harvey and Enterprise, the 2008 winners of the ULI J.C. Nichols Prize for Visionaries in Urban Development, have helped dispel some myths about affordable housing.
On weekday mornings, Whatcoat Street in Baltimore’s Sandtown neighborhood is a quiet place; most of the residents of the neat brick townhomes have left for work. However, on a sunny day in August, Sandtown homeowner Deborah Hammond had a few hours to spare before heading to her job at a local medical institution. She smiled as construction workers completed the installation of an awning over her patio. It was the latest of several improvements—including new wood floors—she has made to her home since purchasing in Sandtown.
“I love it here, and I am never leaving,” she says. “All the neighbors here look out for each other. We are a very close community. There is no crime. The troublemakers know to stay away from this block. I would not want to live anywhere else. This is my home, and I don’t have to worry about losing it. I did not buy more than I could afford.”
Hammond’s 1,200-square-foot (111-sq-m) townhouse, which she bought for about $60,000 in 1995, is one of 300 built during the early phase of a comprehensive neighborhood rehabilitation conceived in the late 1980s by legendary community builder James Rouse, the late co-founder and chairman of what was then called the Enterprise Foundation, based in Columbia, Maryland.
The nationally acclaimed affordable housing investment and development organization, since renamed Enterprise Community Partners, has continued to revive the area, working with other organizations either to rehabilitate or build nearly 300 additional units. Though nearby streets still have plenty of boarded-up buildings, it is clear that the neighborhood as a whole is in the throes of promising transition.
Sandtown, the first comprehensive neighborhood transformation project tackled by Enterprise after Rouse formed the organization in 1982, is a “fabulous symbol” of what the organization has accomplished in cities across the United States, says Enterprise Homes President Chickee Grayson. “As you drive around cities all over the country, you see a lot of ‘for sale’ signs popping up like weeds. There is not one ‘for sale’ sign here in Sandtown. People really value what they have here and they want to hold on to it. They intend to keep their homes for generations to come.”
A highly regarded leader in the funding and production of affordable housing, Enterprise now has operations in 17 metropolitan regions across the United States, working with local community development corporations, other nonprofit organizations, developers, investors, and elected officials to build affordable housing that is integrated into the greater community. The organization has grown exponentially over the past two decades. Enterprise has raised more than $9 billion in private capital for the production of nearly 250,000 homes, the majority of which are targeted to people making no more than 60 percent of the median income for their communities.
Enterprise’s impressive expansion is due, in no small part, to the leadership of F. Barton Harvey III. Harvey joined Enterprise in 1984, serving as chairman and chief executive officer of Enterprise Community Partners from 1994 to 2007 and as chairman of the board of Enterprise Community Investment from 1993 until his retirement this past March. During Harvey’s time at the helm, Enterprise’s impact grew from $200 million annually to help provide 5,000 affordable homes per year to more than $1 billion raised and invested annually to create more than 20,000 units per year.
Harvey, 59, attributes the success of Enterprise to committed and able colleagues and an endless demand for affordable housing. “Enterprise has been so successful in good and bad economic times because of the large need in this country for affordable housing—obviously for those with very low incomes, but also for working-class people who have been priced out of the housing market,” he says. The demand, notes Harvey, steadily increased over the years and shows no signs of diminishing, due to the lack of new supply and the persistent nationwide loss of low- to moderate-income units that either have been torn down or have been converted to higher-end, market-rate housing. “It is a huge issue for hardworking people and those with special needs,” Harvey says.
The extraordinary strides Enterprise has made in filling in the affordable housing gap has earned both Harvey and the organization the 2008 Urban Land Institute J.C. Nichols Prize for Visionaries in Urban Development. The $100,000 annual prize, which honors ULI founder and legendary Kansas City developer J.C. Nichols, recognizes an individual or both an individual and organization demonstrating a longstanding commitment responsible development.
“Enterprise represents the more altruistic aspect of the development community,” says ULI Nichols Prize Jury Chairman Jeremy Newsum, group chief executive of Grosvenor in London. “What it brings [to the land use industry] is an understanding of the less-advantaged society, and the need for affordable housing and expertise in how to create it. In every city of the world, there are people doing great things that are unsung and unheard. The fact that Enterprise has been able to do this type of work on this scale is what impressed the jury.”
Jury member Paul Schell, former mayor of Seattle and strategic adviser for NBBJ in Seattle, praises Enterprise’s success in galvanizing and working with local nonprofit organizatons, which he views as critical in helping communities thrive. “As a former mayor, I have always been struck by how much the nonprofit sector does in our cities. [The nonprofit sector] takes on the issues that are real challenges for mayors. Enterprise has fostered a tremendous involvement by community-based organizations.”
Indeed, Enterprise’s work makes for a very positive housing story in the midst of a stubbornly persistent national housing downturn and subprime home mortgage calamity. While the vast majority of units developed and financed by Enterprise are rental units, the owner-occupied homes that have been financed by and/or developed through the organization tend to have low turnover rates and low mortgage foreclosure rates. This is due primarily to comprehensive home-ownership preparation and counseling that prospective buyers must complete. One example: in 2007, the Federal Reserve Bank of Dallas analyzed the city of Dallas’s mortgage assistance program (MAP), a downpayment and closing cost assistance program for below-median-income buyers that is administered by Enterprise Community Partners. The Fed found the foreclosure rate for homes purchased through MAP between 1997 and 2005 to be 2.4 percent, far below the 6.7 percent rate for all subprime conventional loans in Texas during approximately the same period. “MAP households are not as likely to purchase homes that are too expensive in relation to income. As a consequence, the MAP default and foreclosure rates are much lower than those for subprime loans—the most likely alternative for low-income households—in Texas,” the analysis states.
Whether rental or owner-occupied, Harvey points to the communitywide benefits generated by providing safe, fit, affordable housing in pleasant living environments. “The people in our communities are rooted,” he says. “When people have a stake in the community, they want to see better things happen. They fight for better schools; they look out for their neighbors; they try to make sure crime is diminished. It’s a tremendous positive for the whole community.”
The opportunity to provide an environment that instills community pride, and ultimately, long-term sustainability, is exactly what Harvey says kept him at Enterprise for 24 years—far longer than the six months he initially planned to serve while on a sabbatical from a Wall Street investment banking career. Rouse, he notes, had convinced him within one year to switch gears permanently, to “become an investment banker for the poor instead of the rich.”
Harvey was not immediately hooked, but it didn’t take long. At their first meeting, Rouse enthusiastically described his purpose for creating Enterprise—to see that all low-income people in the United States have the opportunity for fit and affordable housing and to move up and out of poverty into the mainstream of American life within a generation. Although Rouse was a highly acclaimed developer of marketplaces such as Baltimore’s Inner Harbor and the planned community of Columbia, Maryland, he emphasized that what he sought to accomplish through Enterprise would be perhaps his most important work.
“I left thinking Jim was crazy,” Harvey recalls. “I thought, ‘You and what army are going to do this? How are you going to singlehandedly change the country?’ But, he had achieved so much in his life, that I thought, ‘Well, I can do this for six months. And, [during those months] as I watched him work, I realized there can’t be anything better than helping people help themselves,” recalls Harvey.
“I had a remarkable set of experiences meeting people who were positive grassroots leaders, who had seen enough of the bad and wanted to change their neighborhoods for the good. I was enthralled with them, with the hope and possibility they presented, and the ability to use what I’d learned on Wall Street to connect money and resources with people who had the nerve and daring to believe there was a better life and a better way for these communities. The next six months became 24 years and I never looked back.”
Over time, it became evident that Harvey was just as committed to advancing Enterprise’s mission as Rouse, says Rouse’s wife, Patricia Rouse, cofounder, vice president, and secretary of Enterprise Community Partners. “With all the other things Bart could have been doing, we both were very impressed that he was spending time with us at Enterprise. He was innovative and willing to take on things that people generally did not want to take on. Without Bart, Jim wouldn’t have been able to accomplish what he did.”
Doris Koo, president and chief executive officer of Enterprise Community Partners, recalls working with the organization 25 years ago, while serving as a community organizer in New York City. She was aiming to rehabilitate two burned-out buildings into 59 affordable units, a project she realized was relatively small, but one she felt was well worth pursuing. “Jim and Bart convinced me that there is nothing more important and fulfilling than to follow your heart, to be grounded in communities, and to trust in the wisdom and instincts of the struggling families whose lives are not connected to you in any way other than by the fact that their fate could be forever changed by your work,” she says. “There are a lot of cynics who say, ‘Poverty is too big for us to attack.’ I’ve learned that poverty can be alleviated building by building, block by block. But, at the end of the day, we have to scale up our solutions.”
To accomplish more, Koo cites three goals to which Enterprise is unwaveringly committed: to provide practical solutions to the nation’s toughest challenges in housing; to continue seeking resources and capital to aid in overcoming those challenges; and, to make significant, positive changes in housing policy that result in the best housing practices becoming commonly applied practices.
The numerous local partnerships Enterprise has forged with community nonprofit organizations has “cleared a pathway for community builders” to make an extraordinary difference, Koo says. “Bart’s biggest legacy is that he gave a voice to a generation of community builders, allowing them to believe in themselves because he believed in them. Bart is happiest when he’s among the families and children who have had a chance to move into these communities. He has truly humanized the community development world.”
“Bart has the same gift Jim had, which is the gift of meeting and gathering people who can get the job done,” says Jeffrey Donahue, president of Enterprise Community Investment. “We have a wonderful development company, to be sure. But of the $1 billion that Enterprise invests each year, over $900 million goes toward helping someone else build housing. [In that regard,] we’re a service organization, and if you are a service organization, it’s the quality of the people you have that really makes a difference. You work here because you really like the work and you want to work with the other people here. Bart was the salesman for that [enthusiasm] for 24 years, 24 hours a day. He was always fired up.”
Notes Carol Galante, chief executive officer of BRIDGE Housing Corporation in San Francisco: “Enterprise has always been interested in the community from a holistic standpoint, in that it’s not just about the housing, it’s also about the safety, and the educational institutions—everything that makes a community work. As a community investor, Enterprise seeks to ensure that the social components are doing equally as well as the real estate components. They [the staff members] understand that social investment keeps communities sustainable.”
Richard Baron, cofounder, chairman, and chief executive officer of McCormack Baron and Salazar in St. Louis, Missouri, was selected as the 2004 ULI J.C. Nichols Prize laureate in recognition of the great strides he has made as a private sector developer of affordable housing. Enterprise has invested in some of the McCormack Baron and Salazar projects; and Baron has a longstanding relationship with Harvey. He participated in an advisory group of real estate industry leaders that Harvey convened over a period of years to vet ideas and discuss new directions for Enterprise.
“Bart started out as a missionary, in terms of his commitment (to nonprofit development of affordable housing). But over time, he understood that there are private sector approaches [to building affordable housing] that work,” Baron notes. Mixed-income housing, which incorporates below-market-rate with market-rate housing, was one approach embraced by Harvey during his “metamorphosis,” Baron says. “He grew with the program, and became much more of an advocate for rebuilding whole neighborhoods as opposed to just providing affordable housing. Bart was the perfect person to take Enterprise to the next level and expand its programs.”
One expansion has been in the area of workforce housing, a category of housing distinguished from affordable housing, in that it is targeted to people who do not qualify for any government housing assistance programs, yet fall far short of being able to afford housing in the communities where they work. J. Ronald Terwilliger, former ULI chairman and current Enterprise Community Partners trustee, provided a substantial boost to this initiative for Enterprise in 2007, when he donated $5 million to the organization for the development of workforce housing. Terwilliger, chairman and chief executive officer of Atlanta-based Trammell Crow Residential, also donated $5 million to ULI for the creation of the ULI Terwilliger Center for Workforce Housing, which seeks to work with local stakeholders to increase the supply of workforce housing in markets nationwide.
Terwilliger, who is also a member of the Enterprise real estate advisory group formed by Harvey, explains that his decision to make the donation to Enterprise was guided by Harvey’s intelligence, skill, commitment, and financial acumen. “I was impressed with his ability to leverage equity capital and donations to raise substantial funding,” Terwilliger says. “I liked Enterprise’s business model. I felt that Bart could make $5 million go a long way, and that the organization would be a good steward of the funds.”
Another expansion of the organization is Enterprise’s Green Communities® initiative, launched four years ago under Harvey’s leadership. It represents an unprecedented commitment to bring the economic and environmental benefits of sustainable development to low-income communities. To date, Enterprise has committed over $570 million to cities nationwide to develop more than 12,500 green and affordable homes. The initiative was honored earlier this year as one of nine global winners of the 2008 Urban Land Institute/Financial Times Sustainable Cities awards, which recognize ongoing programs that exhibit new ideas and perspectives for future practices in sustainable land use.
As Harvey contemplated the green concept, he sought advice from Jonathan F. P. Rose, president of Jonathan Rose Companies LLC in New York City. Rose convinced Harvey that environmentally conscious affordable housing could be built in a cost-effective manner. He also persuaded him that providing healthier living environments by “going green” fit perfectly with Enterprise’s goal of investing in people. “In a brief time, Bart not only got that, but he imagined something that was unimaginable, which was how to make all affordable housing green,” Rose says.
Harvey started “changing the pieces of the system,” which led to guidelines from Enterprise for green construction of affordable housing that were designed for use by community development corporations. In addition, a growing number of states started offering tax incentives for green and affordable development. The swelling support for green and affordable housing as a result of Enterprise’s involvement leads Rose to believe that it will be sooner rather than later when all new housing will be green. “Bart has a real knack for being able to say there is something there, and then turning what’s there into a big reality,” Rose says.
The Green Communities® initiative includes a partnership with the Washington, D.C.–based U.S. Green Building Council (USGBC), which years ago started a certification system for green development. Both organizations “share values that really focus on the people that live and work in the buildings,” says Rick Fedrizzi, president, chief executive officer, and founding chairman of the council. He credits Harvey with helping USGBC concentrate its expertise in an area of real estate that had been largely overlooked in the green building movement. “For instance, when you start looking at the ability of a single mom to be able to pay a lower monthly utility bill, and more of that money can go for food, or into her child’s education—to improve that family’s way of life—then you realize the agenda is solid,” Fedrizzi says.
Harvey, Fedrizzi adds, has also emphasized that housing that is located close to transportation and jobs is part of the greening factor. “Bart’s leadership really helped take the thinking on this from the building level to the community level.”
Harvey says he was shocked at how quickly local public officials clamored for the money allocated for the program’s first phase; the $500 million allotted for grants and technical assistance was gone within half the time scheduled for its use. “The rest of the country is way ahead of the federal government on this. There is an understanding that we need to build in a different way,” Harvey explains. “Out of this initiative came a sense that we’re still just touching the surface; that the environmental community and the building community need to come together in a whole new way to look at land use. I see Enterprise as being one step in a whole building movement that will change the way we build in the future.”
Harvey has long been recognized as a strong advocate on Capitol Hill for the affordable housing industry, pushing for federal housing policy changes designed to spur development of low- and moderate-income housing. He and Rouse are credited with spearheading the creation of the Low-Income Housing Tax Credit, a federal tax credit created under the Tax Reform Act of 1986 that provides incentives for contributions of private equity in the development of affordable rental housing.
The tax credit provides funding for the development costs of low-income rental housing by allowing an investor to take a federal tax credit equal to a percentage of the cost incurred for development of the low-income units in a rental housing project. Development capital is raised by syndicating the credit to an investor or, more commonly, a group of investors. The program is administered at the state level with each state getting a fixed allocation of credits based on its population.
According to the U.S. Department of Housing and Urban Development, more than 1.3 million units were constructed using the tax credit through 2005. The current economic downturn has diminished demand for the credits, as investors such as financial institutions have incurred losses and have less income to shelter. Still, the tax credit has a history of being highly effective. “It has proved to be one of the single most important tools in producing low-income housing,” Harvey notes.
Enterprise joined several other housing advocates to rally for key measures in the federal housing legislation enacted last summer to assist homeowners facing foreclosure and financial institutions stuck with bad loans and foreclosed properties, as well as to help communities in acquiring foreclosed homes and placing them back on the market. Among the key provisions: authorization of $300 billion in Federal Housing Administration loan guarantees for a voluntary program to help at-risk borrowers refinance with viable mortgages; and a $3.9 billion grant program for state and local governments to purchase foreclosed homes.
“I look at this housing legislation very positively, but I think it may be only the first step in stabilizing the housing market,” Harvey says. “It’s time to right the ship, for the government to intervene in a prudent way to keep people in housing.”
Koo of Enterprise Community Partners points to a silver lining in the housing debacle—an increased national awareness of the importance of decent housing as a key contributor to community stability. “It’s unfortunate that it’s taken a housing crisis of this magnitude to highlight the significance of having a place that one can call home. But, we will take this challenge and turn it into an opportunity to further strengthen neighborhoods to make sure they are not destabilized as a result of the financial crisis.”
Although Harvey feels that Enterprise continues to fight an uphill battle in reducing the shortage of affordable housing, he looks back with pride on its accomplishments —not just in building units, but in changing perceptions.
“We’ve dispelled some myths about affordable housing,” he says. “The first was that it is an uneconomical and financially risky investment, and should be considered as a charitable write-off. Enterprise showed major financial institutions that this is a financially responsible investment. The second myth was that the housing we build will be trashed. The reality is that virtually all our housing is more valuable now than when it was first built. It’s a community asset. The third myth was that all Americans ought to be homeowners. They shouldn’t. There is a critical role for rental housing in this country, and there are certain families who are just not ready to be homeowners. I’m very proud of the role Enterprise has played in affordable rental housing.
“The final myth is that affordable housing destroys communities and destroys home values. We’ve proven time and time again that this is not the case. My greatest joy in being part of Enterprise has been to see a family who never thought they would be able to afford a home get into a home, and feel that they have achieved permanence to their existence and a better future for their kids,” he says. “If we can provide a platform that is more nourishing, and which helps more people to succeed, then that translates into a more productive society.”