Washington, D.C.–Michelle Whetten, who heads up Enterprise’s work along the Gulf Coast, talks to MHN about the work they are doing there, the financing challenges in building affordable housing projects and the importance of eradicating blight in many communities in the Gulf.
MHN: What is Enterprise doing in the Gulf?
Whetten: In 2006, Enterprise opened an office in New Orleans serving the Gulf Coast, and at that time we made a commitment to invest at least $200 million in loans, grants and equity towards production or renovation of 10,000 homes in Louisiana and Mississippi. Our focus was on the most heavily damaged parts of both states—which are also the areas included in the GO zone [Gulf Opportunity Act of 2005]. While we did not have an office here before Hurricane Katrina, we now have a full time staff of five people.
MHN: What does the office focus on?
Whetten: Our focus is really on four areas: We work on public policy issues, which means focusing on low-goal state and federal policies to support affordable housing production and specifically green affordable housing. Another focus is increasing capital to support affordable housing production. We have tried to help both states use their disaster recovery funds to leverage private-sector resources to support housing production. We have created different financial tools like loan funds for developers to acquire properties, do pre-development work on properties and raise private dollars for capacity building for non-profit developers. The third area is working with developers—mostly non-profits but some for-profits as well—to increase their affordable housing production. We provide a lot of technical assistance and support and have invested a lot of capital in tax credit deals through equity, predevelopment loans and grants. Our total investment to date is $135 million.
We are co-developers on the redevelopment of the Lafitte public housing community with Providence community housing and L+M Development Partners based in NYC.
MHN: What have you been seeing with regards to construction financing in the Gulf?
Whetten: Through the GO Zone Act, there was a huge increase in allocation of tax credits in the GO zone, and up until about mid-2008, the market for credits was super strong. There was a lot of demand for these credits. A year and a half after Katrina there were a lot of deals getting done and there was a lot of investor demand. There was a lot of activity in the first few months. But when the market fell apart in late 2008, we really saw investor demand for credits come to a complete stop. At that time, because there were very few investors with an appetite for credits across the country, they were able to pick the best deals that were perceived to be least risky—which meant that deals in the Gulf weren’t really getting done. A few things combined brought the construction at least for tax-credit deals to a complete stop.
There were a good number of tax credit deals that were able to go under construction and get completed before the market declined. So there were new really high quality mixed-income housing projects in Louisiana and Mississippi. Both states were pretty intentional about targeting resources for mixed-income projects instead of concentrations of poverty, which was common before Katrina. A lot of these great mixed-income projects are now doing really well.
MHN: What are the Gulf office’s goals?
Whetten: We are still working towards our investment and production goals—$200 million and 10,000 units. Specifically, we are focused on building a stronger infrastructure here to support affordable housing and community development. That means working with city and state governments to design and implement programs that will lead to high-quality affordable housing. We want to increase non-profit developers’ capacity to play a major role in housing development and increase financing resources and capital available for affordable housing.
What are the biggest challenges in accomplishing these goals?
Whetten: Right now, the biggest challenge is the GO zone deadline LIHTC placed-in-service, which is December 2010. There are over 6,000 affordable homes and apartments at risk if the Act does not get extended. A lot of non-profits we work with and developers who have invested a lot of time, money and effort into projects in this area that will potentially provide much-needed housing for the workforce here. There is a big concern that all these deals might fall apart and there won’t be another way to finance them unless this deadline is extended. Congress has an opportunity to pass this extension during the upcoming lame duck session.
Another challenge with financing is that there is a lot of focus and attention on this area after the storm and individuals and national foundations were very generous in their support of rebuilding activities. But all these years later, we are seeing a lot of support naturally drop off.
We are very focused on helping to make sure that other resources are in place here once the federal and disaster resources have been used up. We encourage everyone who has the resources to consider continuing their support of this area.
MHN: Are blighted properties a big problem?
Whetten: The city of New Orleans has over 50,000 vacant and blighted properties across the city. We are seeing that the real future of development is fewer large-scale multifamily properties and more of the smaller-scale projects. The challenge for all of us in the industry is to get those smaller-scale housing projects built. The eradication of blight is the new mayor’s number-one priority. They have put out a blight strategy, and the nonprofit development industry is well positioned to participate in the eradication. The Neighborhood Stabilization Program and Enterprise’s Green Communities program are a big part of helping in eradication of blight.