Conversations with Advocates of Fair Growth
Overview | Conversations with Advocates of Fair Growth | Living on the Fenceline
F. Barton (Bart) Harvey III
Bart Harvey is the chairman of the board and chief executive officer of the Enterprise Foundation headquartered in Columbia, Maryland. Harvey has devoted the past 20 years to working for fair housing policies and establishing a pattern of development that makes sense for all Americans, including low-income families .
In his first career Harvey was a highly paid, successful executive at Dean Witter on Wall Street. Then he met James Rouse, the developer of mixed-income housing, who had built the master-planned community in Columbia. Harvey says Rouse changed the trajectory of his life and helped him switched from being a banker to the rich to being one of the pioneers of financing for affordable housing. As a result of this collaboration between Rouse, the visionary developer, and Harvey, the savvy investment banker, the Enterprise Foundation has helped move $4.4 billion into affordable housing and built 144,000 affordable units.
In 1986 Rouse, Harvey and a number of other colleagues talked high-roller corporate financiers into investing in these tax credits. As a result, billions of dollars of investment flowed from the corporate world into the building of affordable housing units all over the United States. The low-income tax credit program now garners about $3.5 billion a year for affordable housing and it has been in operation for 18 years.
Harvey has also been instrumental in fighting off Congressional attacks on this tax credit program. He has successfully fought to expand the low income tax credit program, make it permanent, and indexing it. He is also championing other public/private partnerships, such as the New Markets tax credit program, which gives tax credits to those who invest in economically depressed communities
The bulk of housing subsidies provided by the U.S. government, Harvey points out, go to middle and upper income Americans in the form of a $90 billion a year mortgage interest deduction. Some 70 percent of this subsidy goes to families making over $75,000 while the median income is around $40,000, he continues. Lower-income Americans who don t have enough money to buy a home and are in the rental market are excluded from this program. Currently, the total amount spent on affordable housing for the poor is less than half the mortgage interest deduction which goes to well-heeled Americans, he adds. Simple fairness would dictate that our government provide at least as large a housing subsidy for the poor as it does for the middle and upper classes, he observes.
Recently Harvey served on the Millenial Housing Commission that Congress sponsored and then ignored. While he continues to push for change Harvey remains a political pragmatist: If you really want fair, equitable development in policies you better understand who runs the country and what it takes to get something with legs that will be around and how we begin to move this agenda. The real action in housing is in the private sector, Harvey notes, and that is dictated by local and state laws and regulations.
In Maryland, a state Harvey knows well, all of those policies are directed at making the city the holding pen for low-income blacks, minorities, and others, he notes. Exclusionary zoning rules make it impossible to place low-income housing where it would be most effective in terms of moving low-income families closer to jobs and good schools, he continues. In some of the wealthy counties around Baltimore homeless people are given a couple of dollars and a bus ticket to Baltimore to get rid of them, he adds. Balkanization of jurisdictions is also a problem because it means that each jurisdiction has to invest in its own schools, police department, fire department instead of sharing resources. No one wants to give up their legal control of what development happens in their jurisdiction and how the taxes are spent. Harvey points to inclusionary zoning policies in Montgomery County, Maryland and the Metro Regional approach in Portland and Minneapolis as being positive steps towards a solution.
Harvey believes that we have already moved into an economically racially segregated society in terms of our residential land use patterns as a result of jurisdictional balkanization and exclusionary zoning. However, he seems some hope for change in the fact that there are many Americans living in suburbs that currently exclude affordable housing who are increasingly realizing that the lack of housing options in their neighborhood will make it impossible for them to have their children or grandchildren live next door; or for them to move into a smaller house in the same area after they retire. There is also some hope that residents of wealthy suburbs will come to see that it is not in their economic self-interest to live in metro-regions where the inner city is destitute.
Interview
Steve Lerner (SDL): I recall hearing that Columbia, Maryland was built by James Rouse as a planned community. Was it supposed to be a mixed-income community?
Bart Harvey (BH): It started out that way. Rouse used Section 8s [mobile rental subsidies] and everything else. What has happened is that now that Columbia is thirty years old when he started he brought in a builder to do $10,000 and $15,000 homes. Those are now selling for $100,000. The land has appreciated dramatically. You can send your kids to public schools. It has a good health care system. So if you got in at the right time it was fine. Now there is a smaller Section 8 program. To keep something open to low-income people [is hard.] The other truth is that in his last days when we were doing affordable housing he had to go testify and shame one of the villages that didn t want any more affordable housing. So you come full circle here.
SDL: The lesson seems to be that if you do land use planning in an intelligent way that provides for a mix of incomes the land and properties accrue in value.
BH: Yes. Outside of Columbia you can see where the typical sprawl occurs. Housing policy is education policy. They are the same thing. If you look at a regression analysis you see that very low income areas have very poor results in their schools and higher income areas have better results in their schools. And so this is a battle you will go through over and over again and that is that people who have the resources and the wealth are going to create better mousetraps.
SDL: Another way to look at that is that low-income areas where there is a high concentration of poor people going to the Public Schools you have kids coming in with multiple problems and when you aggregate them together it will be hard to teach them effectively.
How did you help come up with $4.4 billion for affordable housing and build 144,000 affordable units? Where did the money come from? How you came to this work from Harvard to Dean Witter to doing affordable housing?
BH: I got into this work completely unintentionally. I was working on Wall Street for Dean Witter, I was managing director for corporate finance and after ten years there and having some seniority I was reintroduced to the church, Universal Unitarianism and to a very charismatic guy, Forest Church, who is Senator Church s son. He was absolutely terrific. Universal Unitarianism basically says we are born, we are going to die, and what you do between matters. It is a very tolerant church and your search matters. He got me re-involved and I decided that we ought to have a sabbatical program at Dean Witter to not only give money but to give some time. But no one wanted to take one of these sabbaticals because everyone was making too much money and they worried that in six months someone would have stolen all their clients.
I took a sabbatical and I met this guy one night who was a head hunter who was trying to hire me to be a partner for Salmon Brothers and I said no, that what I really want to do is give some time back to the community. And he said that he had been with Jim Rouse the night before and he had started this thing in Columbia, Maryland and he put us in touch. So I met with Jim Rouse here and thought he was absolutely crazy. That was 1984. I had seen what he had done. I thought that for six months I could do anything so I joined him in June 1984.
Jim Rouse was the person who changed the trajectory of my life. When my time was up he talked to me about being an investment banker for the rich but what about being a banker for the poor. So I called my firm and said I would do this for one more year and they said all right that they wanted me back. And that was 20 years ago. That is how I started. At first I was sure that it was absolutely crazy. We fought like cats and dogs be we had a good relationship. I learned a hell of a lot from him about working on a set of values and seeing things the way they really are and not just betting on what would be successful instead of looking at what ought to be and try to bring it around to fruition.
Rouse had a great sense of hope for people. He believed that ordinary people could do extraordinary things if you gave them a chance and the connections. He didn t see obstacles he saw opportunities. We went through many ups and downs building the Enterprise Foundation and something magical would always happen. And I couldn t believe it. His heroes were the people he liked successful people but his heroes were the people doing the Peace Corps here, internally, people who were working in these neighborhoods and the residents themselves.
Rouse s motivation was clearly a religious motivation although you couldn t see it [on the surface.] He thought that there is nothing more important than being a co-creator with God of an unfinished work. He worked hard on his spirituality with a guy named Gordon Cosby in Washington who was involved with Jubilee Housing. So that is my trajectory: an unplanned detour that has kept going. He believed in was that the free enterprise system was a pretty good system of discipline. Jim was in civil rights and lots of causes when they were unpopular like World Peace. He quit the Rouse Company to go campaign for world peace during the Korean War. He was an environmentalist and a developer at the same time so there were all these contradictions. He deeply believed that we could change the conditions and that to accept them was morally reprehensible. Columbia was designed as a garden that would grow. That was the principle design. The free enterprise system was very important to him because you could profess great things but there was a discipline to it that forced you to get your product right or you would go out of business. So you had a counter weight against you. You couldn t just feel good about your purposes; you had to work toward making something work the right way.
The way he started the Rouse Company was to say that the only legitimate purpose of business was to serve the people. If you do that well and you allow people to grow and be creative the result of that is profit. That was how he set up the Rouse Company. And it is in that order. If you set up a business to make money you are mixing up the order. So those were starting points. And he thought that if you had wealth the only use for wealth is to provide opportunity for those that haven t had the same opportunities that you have. So it was a circular thing.
SDL: Does the money come from the Rouse Company?
BH: No, the money comes from all over the place. Rouse had given much of his money away. He had created a company and had $26 million of it and in the end he had given stock to everybody and to all kinds of causes.
He said that to have housing that was affordable at the going incomes you have to do one of two things. You have to increase the minimum wage and that was a political fight; or you have to lower the cost of housing. And so he created the Enterprise Social Investment Corporation. That was an entity set up to create products that finance at below market rates. When I arrived I asked what the products were and he said that they didn t have any. And I said: what the hell is this? You created this financing thing and you have no products. Jim just said that we had to invent them. So he and I went around and looked at depreciation and something in Cleveland that he was doing which was buying the depreciation 167 K [in the tax code] they would buy the corporate depreciation. This wonderful program still goes on in Cleveland Housing which is a lease purchase program for very low-income people and these beautiful old Victorian homes for people at around $10,000 of income.
So we studied that and by 1986 there was the big tax reform and Jim [Rouse] and I and others went to Senator Packwood who was the Republican head of the finance committee. And we took 167K and asked if it could be turned into a tax credit program. He said: sure. The Reagan Administration was against it but Congress, over the objections of the Reagan Administration, passed something called the Low Income Housing Tax Credit. It was an allocation and a percentage of it had to go to non-profit development. It gave a tax credit on the cost of building rental units that will serve very low-income families. They said we would have to go find a corporate market to invest in these inner city housing tax credits and have non-profits be the general partner and the eventual owner. It had to go for 15 years.
This is what we set out to sell to corporate America. And that tax credit has been the primary force [for financing low-income housing since then] and now you have for-profit competitors and everything else. We started [looking for investment money] with Fannie Mae with the first one in the country, which is in Pittsburgh. It was a YMCA. It was 220 units of housing and they were going to tear it down and make it into a YMCA health spa. But this was 220 units of last resort housing so we applied the tax credit we converted the 167K to a tax credit. At the dedication Senator Heinz, David Maxwell, who had put a million dollars in, Jim Rouse, stood in the basement in an area that used to be the swimming pool. Also there was Bill Tappits (sp?) who worked with a non-profit that served the severely mentally ill. And David [Maxwell]said: This is great but $1 million isn t a lot. I said: Ok, how about $25 million. So Fannie Mae gave us $25 million and we went to New York and used that $25 million to talk to others about the structure we had put together. We explained how it made sense. And that was really the beginning.
Jim Rouse could open all kinds of doors. We talked to Hugh McCall about the grant side of the Enterprise Foundation. He asked about the tax credit and I said yes, you can make money and serve low income people. He said: WHAT, THIS IS GREAT. And he said: Get the chief financial officer and the chief accounting officer up here. Then he said: Alright, young man, repeat this to me. And I explained it and he said: We will take a billion dollars of it. And Jim and I nearly fell off our chairs. But one of his people said: Excuse me Mr. McCall we aren t making a billion dollars in profit. And he said: Alright start with $100 million. So that is what they started with. So then people started investing and then we had for profit competitors come into the business, which is fine. I was on Senator Mitchell Danforth s Task Force to improve the Low Income Tax Credit. There were lots of holes in it because it could only last 15 years and then it was gone. We extended it out over 30 years and after 15 you look at it and see if it needs repair. There are lots of improvements. So that became the center piece and then Archer wanted to kill it along the way and every year it was supposed to sunset and we had to battle. Archer set up Nancy Johnson to investigate it. And they came back and said this thing is working better that we ever expected it to work. So, instead of killing it, she expanded it. She is a Republican. It had a complete GAO study that looked at the pricing and the pricing was probably too high to begin with and came down over time as it became more competitive
SDL: The pricing of the credits?
BH: Yes, of the credits. In the beginning you were given 50 cents for every dollar of credit and we went all the way up to 90 cents for dollar of credit because it counted for the Community Reinvestment Act and all of a sudden people said they were not going to lose money on this and it made sense. So you had a competition to put money into the system and it was expandable up to the amount allocated each year. Here the principles are very different than a usual HUD allocation because they are allocated to all 50 states and they are capped. The states decide what their critical housing needs are. There are some federal statutes: it [the tax credit funds] has to be [on creating housing] for people at 60 percent or below the Average Median Income (AMI) The states also could set up points so if you got down to taking in homeless people or disabled people or lower income people for a longer period of time, then you go different allocation points and people competed for it. And there are now three or four times the number of proposed projects for this program as there are credits in each state. So there is a competitive allocation
SDL: Is there a cap on the total amount of credits?
BH: Yes, it is a little over $3 billion about $3.7. It keeps changing every year.
SDL: If it is around $3.5 billion a year over the lifetime of this program that is serious money going into affordable housing.
BH: Yes, it is serious money. And it has got to make sense or you get recaptures so you have all these investors looking over our shoulder. They are looking to see if it is good for the people it serves and not just allocate it and forget about it. It is competitively sought. The banks can actually make money on it because they CRA [Community Reinvestment Act] departments are now largely make money on this because if you are paying 90 cents on a dollar of tax credit you are still making some small amount. In essence that works and it is an expandable system. [The question has been]: How do you get expandable systems and enough constituencies to keep something [like this] from getting killed [politically] over the long run; something that serves poor people because that is not a constituency that this country cares about.
SDL: Is this politically endangered currently?
BH: No. Everything else is. And I hate to say it as crassly as this but you have to have something that has a larger constituency that other people care about that is part of the power structure of this country is really doesn t care about fair anything: fair housing or fair anything. It does in theory and in the politics of it but certainly for this administration it is lower on the radar screen than other self-interested proposals.
SDL: So the brilliance of this is that you can do good and help low income people and make money at it.
BH: Right, there is a return. You are not losing money. You are not doing it as philanthropy.
[You have to ask:] What are the structures in this country that have the legs that they can survive not just on the goodness of people s hearts but are embedded in our system because the hothouse experiments will come and go and the forces of the market are so great.
SDL: Have you ever figured out over its lifetime how much money this tax credit has generated for affordable housing.
BH: I can get you those figures. It has been going since 1986. The Government did a smart thing. Out of the $3 billion plus [the earmarked for low-income tax credits] they figured only 20 percent would be used. Well, only 17 percent was used in the first year. It took people awhile to figure out how to use it. So it was calculated at a very low utilization rate. It is 100 percent utilized right now. And they can t kill it now. They tried and tried but they can t kill it. It has too many constituents and it is doing too many good things, the banks like it. From the National Council of State Housing Financing Agencies they have up to date statistics and they break it down by state. So it is now larger than HUD. It is the largest housing program in the country. Now, they did attack it indirectly, the Bush Administration, when Treasury got hold of this dividend tax idea. They were going to put some strictures on that would have greatly diluted the low income housing tax credit. And we went to war [in Congress] and won for other reasons than us. That went away.
SDL: In your talk at the National Building Museum s symposium on Affordable Housing you spoke about the need to recast policy and build a greater public/private partnership for the affordable housing initiative in this country. You are one of the few non-government people operating at this elevated a level on the financial side of this issue. Can you tell me a little about where we are historically in funding for affordable housing and what you feels needs to be done and could be done?
BH: This may be heresy. Let s take a Big Picture look at this for one moment. Our housing policy in this country is as much through the tax code as it is through HUD. So HUD is $30 billion and we are significantly down from the last days of the Nixon and the beginning of Carter s Section 8 development. But we have been slowly climbing because Section 8 s cost more every year so there is not more housing but the costs are going up. If you look at all of HUD s budget and then at the Mortgage Interest Deduction, which has capital gains roll over and property tax deduction with it, that is around $90 billion a year. And of it, if you look at households making more than $75,000 (and our median is in the $40,000), so they are in the privileged part, about 70 percent of the mortgage interest deduction goes to higher-income households. So we have a housing policy in this country and the great majority of the money is going to the higher-income families the same people who will complain to you about the awful mess at HUD. They are getting more than low-income people are. This is not in the HUD budget at all. It comes through less revenue to the IRS and is part of the tax side of it. So if you start at the big part of this you see that yes there is a housing policy and it is for is for middle, upper, and very rich people. And there is more money going there than there is towards the rest of it. So you have to start with the framework here. Those are political untouchables. Anyone who even murmurs about changing the mortgage interest deduction is never going to be elected to dogcatcher.
SDL: I understand that but couldn t one reasonably argue that we should spend at least as much money for renters and people who can t afford a house as we do for people making $70,000 or more and benefiting from the public tax subsidy on the home mortgage interest deduction.
BH: Absolutely.
SDL: Does our government spend as much on housing for poor people as we do subsidizing the middle class and wealthy with the home mortgage interest deduction?
BH: No, not even close. The home mortgage deduction is twice as much. So you have a basic housing policy and the largest subsidy is for middle class and higher. And so you start there. Now, of course, the middle class are at the table. It is just the lower income people who are not. But even Democrats won t mess with this because you can t get elected. The structure of this country is for middle income and wealthy people and as it accelerates it is more and more for them and they make the rules and pay for the politicians. You don t want to get me started. But there we are. So whatever you do you better understand that is the structure in which you are working. And you better find creative ways of playing off that structure unless you think it will change.
SDL: It strikes me that a compelling argument could be made that we should leave the subsidy for middle and upper income people in the form of the mortgage interest deduction but require at least an equal amount be spent on housing for the poor.
BH: We made that argument but you get laughed out of Congress on that one. When you talk to these Republicans, they say this is the given. Tax cuts should count in your budgetary calculations. Of course this is returning as much wealth as possible to the wealthy and that is the starting point. Now they are talking about this overspending and how we will balance the deficit. So you get nowhere with that argument. We have made it. And then the homebuilders beat us up and everyone comes out and it is like a passion play.
SDL: So how do you get to a public/ private partnership give these limitations?
BH: Using the low-income tax credit as an example. It is playing in the same game as the mortgage interest deduction. So we say we fought to (a) expand it, (b) for making it permanent, and (c) and indexing it all of which we have been able to do. But then we said what about other public private partnership. Why don t we do this for economic development because all these areas need jobs and services. And there has been a big case that the density of low-income areas still has a lot of buying power. So we got something called the New Markets tax credit. It is based on similar principles. It is a 30 percent present value of the investment you make. It is to make more patient money for impacted areas and for economic development. It can be for small businesses or for real estate development. So it is the companion piece to the housing side of this. The other part that Bush (the hypocrite) has spoken for but never pushed through is the homeownership program, which would be a tax credit for homeownership in these [economically depressed] areas because the cost of building these houses is greater than the income of people to be able to support it. And we believe home ownership is very important. There are lots of issues for low income people. Some of them are not ready to own a home, some of them if their furnace breaks they don t have the money to fix it, so you are going to have lots of issues. But there is a group for whom homeownership makes sense. And then there is lots of experimentation you can do. This Cleveland group, which does lease to own, can cure your credit. And you can do all sorts of things.
In never thought I would be around 15 years after this tax credit [for low-income housing] was passed. But I am around for the back end of it and we have this non-profit Cleveland Housing Network and they are taking housing for 15 years and we have special IRS letters for it and in that time they are going to the families that are in them and they basically don t have a mortgage on them, and so there is a real wealth creation that has occurred. And during the time the families have improved them and kept them up. And you can t do that in other government programs. But in this case we got exceptions so people have been working on these homes. And they can now take an equity loan on it if their kid needs it for education.
SDL: They have been leasing to own it and now they own it?
BH: Right, now they own it. And it is a valuable thing so there is real wealth creation and they have a stake in the neighborhood. These are wonderful programs but they are small scale. So you can innovate around this for particular neighborhoods to get to fair housing policies and to try to get development that makes sense.
And if you had a homeownership tax credit that Bush ran on and campaigned on but has never put his weight behind it has not been passed those are the public/private partnerships where you can really begin to do something for low-income people. These programs would have legs and a constituency. The homebuilders, of all people, the Neanderthals, are coming in for this homeownership tax credit. Also the mortgage brokers and bankers, all of them have genuflected before the Bush dividend initiative and would have let all the low-income things go (if you hears some anger there is some real anger there) they are all in favor of this.
That is what we have to do we have to have the mainstream guys who pay all these PACs and are Republican and Democrat they have to be onboard for this stuff. The advocates have these wonderful small experiments things which are great but it isn t going to move this country if that is our objective if you really want fair, equitable development in policies you better understand who runs the country and what it takes to get something with legs that will be around and how we begin to move this agenda. And all of this together, even with these tax credits, even with HUD (assuming it is not cut back and is running itself better than it does), none of this is going to make a difference to the development patterns we have in this country because the great majority of housing for low income people is in the private sector. And is going to be dictated by local and state laws and regulations. And right now in Maryland all of those policies are directed at making the city the holding pen for low-income blacks, minorities, and others. [The low-income tax credit program can be used to build affordable housing near where the jobs are being generated in the suburbs but there is a catch.] There is a county executive sign off which is not in the statutes or regulations that Maryland has put in (and it preceded Erlich so a Democratic Administration put it in.) As a result of this sign-off any family housing project in any of these rich counties gets turned down systematically so no developer ever puts in [applies] for a tax credit. They will only put it in for senior housing because that is the only thing that will get approved. And that is just one of many policies that are around. There is also land use, zoning
SDL: Exclusionary and fiscal zoning
BH: Yeah. And you don t have the tools for developers to actually site housing where it would make a difference and where kids would go to better schools and everything else because there are a whole set of these obstacles. Now, they are not evil. They are not in and of themselves evil but in totality they are very evil.
In Baltimore, Schaffer said that we have enough low-income housing. He said that Baltimore was the only jurisdiction that took money for projects that house the homeless so why the hell didn t the other counties. So we called around to see what the policies were and in three of the counties the policies were that they will give you they give the homeless money for the day and a ticket into Baltimore. Schaffer pointed out that there is a cost to that for the city. The counties are being smart, he said, because I get the long term costs. This is being played out in city after city.
SDL: Are there legal approaches to this problem?
BH: We talked to the ACLU. The legal tools are very blunt. You can hold up projects like they did with the HOPE VI Project that was held up for a year. They stopped every single city development project for a year. There are all kinds of repercussions to how business is done when you go the legal route. I m not saying they shouldn t have brought the suit. The city wasn t wrong. And their only bargaining tool was to hold up every development that was going on. But it affected all the partners of the city.
SDL: You make it sound hopeless to do anything, politically, about exclusionary zoning.
BH: My point is that you are not necessarily going to be able to buy your way out of this into good policies. You do the best with the system that you have but the system that you have is broken. So what you need is new systems. What you hope is that in the market there are enough far-sighted people who see that there is a better way to do development and if you do it in a better way you can actually come out ahead. That goes back to the public/private theory that you can do well and do good.
Montgomery County, which is the one everyone points to, had a pretty visionary way of looking at the issues. At first, when inclusionary zoning started, the county was 98 percent white and now it is 60 percent white. And it is still wealthy and has good schools. All the immigrants go there now. It is like what Jim [Rouse] did here in Columbia when he said we want all races and all classes and he designed it well. But after 30 years if you design that well the values all go sky high.
SDL: I understand that Montgomery County is pretty well built out now so that the 50- units-or-more rule means that not a lot of mixed-income housing gets built.
BH: Right. You have to constantly change what you are doing. But the inclusionary zoning is the only way for smarter zoning laws to change the political jurisdictions of the country. I think it is the only way you are going to address this. David Rusk has crunched all the numbers so he comes to a regional approach.
We worked on a regional approach here and we had all the leaders from all the counties together and they couldn t agree to anything so we had to start over and say, well what do you like and change the language of it. And they said they liked the Chesapeake Bay. They liked the Arts in the inner city. It is a long tough road. County executives that planned rationally got kicked out of office because there is such a negative feeling toward the city and toward race. We did this thing in Rochester where the Mayor, Bill Johnson we were right up there in the middle of it and he got crushed. We were looking around in upstate New York and there were bankruptcies everywhere and Rochester is struggling and so to have all these local jurisdictions is inefficient. We ought to be sharing police functions and fire functions across boundaries between the counties and the cities. We make the argument that these places are going to die. California is going to die because of its set of policies which make it impossible to get workers in Orange County.
SDL: California has more inclusionary zoning going on than other states.
BH: Yeah. A little late in the game. But it has started and people are beginning to understand this issue so I would say. In Colorado they have everything backward any money that comes in goes back in tax cuts. You have to pay as you go. The only thing we could get people to agree on in Colorado. But what they love about it is the Rockies. We are now getting together another campaign to see if we can t get some density increases. That would allow them to manage the growth and preserve what they love about Colorado and do affordable housing. It is the stuff that is happening in a haphazard way that needs to happen in a logical way. The horror of California is the only uniting force.
SDL: I wrote a monograph for the Trust for Public Land which was an economic argument for the preservation of open space. It was a conservative argument which reasoned that it would save tax dollars to do growth sensibly. I wonder if there is not a similar opportunity here. One could argue that if you keep building out into the greenfields and rural areas the infrastructure costs are high and taxes will rise. And if you concentrate poor people in the inner city the social and financial costs will be high because it will mean that people are isolated and cut off from jobs and a good education and that will lead to a variety of pathologies where you get high crime rates, negative health impacts, and lower educational achievement. And all that will cost money to manage and more tax dollars. This unfair pattern of development will mean more police, more prisons, more people on welfare, and less revenue coming into the tax coffers. Ultimately the city, state, and federal government will have to pay for dysfunctional development and that will come out of the tax payers pocket one way or another. So is there not a Republican argument for being smarter about metro-regional cooperation. This might involve providing some affordable housing for the working poor in areas where jobs are becoming available.
BH: Yes there is. You should talk to Stacey Stewart over at the Fannie Mae Foundation. Fannie Mae is doing a national initiative to look at the $20,000 to $40,000 income range. In Maryland we organized a group of homebuilder, realtors, mortgage bankers, environmentalists and they came together to petition Governor Erlich and others to make pledges about what they would do about affordable housing. And they have honored it so far. You have to organize campaigns.
My sister runs the eastern Trust for Public Lands. And the environmental groups and the community development groups really do have common cause in smart growth activities. Now, to translate that politically is very hard; and financially it is even harder. But even if you make that case you still have to overcome the person that
SDL: doesn t want to live next to poor people or minorities.
BH: Yeah. Or is worried about their property values.
SDL: But isn t there good data that this can be done in a way that will not hurt property values?
BH: Absolutely. Yes, there are lots of studies out but no one believes them. Your case sounds wonderful. But when it comes down to local decisions that is where you need stronger state law to over-ride local law. Rochester had 60 different jurisdictions. And thy all have a fire department and they all know it is a waste but no one wants to give up what they have. So you need some over-riding state laws.
SDL: Didn t former Gov. Glendening say that we will not put you at the top of the infrastructure priority list unless you do some sensible planning. Couldn t we do that everywhere?
BH: Yes. But that will only take you so far. If you look at [former Maryland Governor] Glendening s record it was in the exception and not in the rule. So, you are right: there are about eight or ten things that we ought to be doing. There have been some very successful stories. [Governor] Jesse Ventura housing in Minnesota was of the most segregated in the country. There were no nurses in some areas because they can t afford to live here. The traffic congestion was bad. And it puts it into a light where people can see that it is stupid.
SDL: I talked with Myron Orfield in Minneapolis. Isn t there a punitive approach that could be adopted? It would say that if you are in a wealthy community and you want to keep it that way and don t want to live near poor people or minorities and if you don t want inclusionary zoning, then you have to pay for your own infrastructure. Why should the state pay for you when you are being exclusionary?
BH: Some of these [wealthy] places already have their infrastructure. What you ought to say is that your mortgage interest deduction is going to go away. If it gets bad enough there are ways of saying to those who are very happy where they are
SDL: But there are always some infrastructure needs.
BH: But there will always be a local politician who will get it for them. The states are where the levers of power are on this. Look at the Mt. Laurel decision in New Jersey.
SDL: I hear that hasn t worked out very well.
BH: It hasn t but it has been the strongest state intervention in local housing so your precedent is there. But whether you can get it to work or not They made a critical mistake: they allowed an opt-out provision
SDL: That is where one jurisdiction pays another to do their share of affordable housing?
BH: Right. So it [affordable housing construction] all happens over there. It is better than nothing because you get funding for doing it. But it means a re-concentration of affordable housing [and by extension low-income populations]. Massachusetts is another state where you ought to look.
SDL: The anti-snob legislation.
BH: Yes, but it has been fought there. It will get eventually thrown out. They have been very enlightened over time and have thought hard about the kind of interventions the state can do. And [Governor] Mit Romney, a Republican, has probably the most progressive look at it of any Republican. He has this guy Doug Foy who has put together put together environmentalists and the community development groups and he has a super commissioner who is looking at how the state money is spent and it better be smart as to what you are doing. He is trying see that whatever money the state does spend is done in a way that doesn t hurt but helps it doesn t hurt it makes it better. So there are places And California is trying to get it right on this.
SDL: You were on the Millennium Housing Commission. Tell me how that worked out.
BH: The housing commission was bipartisan with appointees by Democrats and Republicans and it was a look at housing for the next millennium, which we are in. And it had a report that came back and the most important part said that housing is more than just a production program. Housing creates a context that is critically important be it in terms of schools or work or the environment. Housing is part of what makes up the community. It makes a huge difference where you site it and how you do housing. So the statements are the most important part of the report. Then the proposals, which were meant to be implementable strategic thrusts that addressed questions such as what should be done about homelessness or what should be done around rental housing and home ownership housing. It was totally ignored by Congress. However, we had a meeting of the Big Eight: the home builders, mortgage bankers, the realtors, Freddie Mac, the Enterprise Foundation, LISC under the National Housing Conference and we agreed upon a set of priorities. Then the dividend tax thing came and I was outspoken about it.
SDL: Were you then marginalized?
BH: Yes.
SDL: So was this a useful exercise?
BH: I think poor people are better off in elastic cities than in inelastic cities. But changing the boundaries in inelastic cities is very difficult because people are self-selected out of cities for a reason. So politicians never lead on this. To change it people have to believe that their way of life is endangered.
SDL: Are we headed towards an economically racially segregated society in terms of our residential land use pattern?
BH: Yes, we are. We are right now. Just look at it.
SDL: That we seem to be anti-American.
BH: One side of America, the side you are seeing today, the individualistic side, says that people should be able to decide where they live and who they want to live with, how they want to live. It is their choice and if they have the money to do it they have the right to do it.
SDL: OK but that is basically an apartheid version of America.
BH: Yeah. I think there is also a side of us that has always said: there will be winners and losers in our society. And the winners get whatever they get. So until you stay there is not fairness in the allocation of resources .
SDL: Well, there isn t.
BH: You have to prove that. There is a disproportionate amount of the tax wealth from hard working people in this country that is being transferred to support the welfare queen, the criminal etc. This is the basic thesis that Rush Limbaugh and everyone else and it is believed even among very educated people who think that they have worked hard for their money and they made it and they won and they have a right to chose where they live and how they want to live. They paid their property taxes
SDL: And they don t want to live next to a school teacher.
BH: They would say they would be happy to live next to one, they just don t want poor people in here. You should go into suburbia and talk to a bunch of people. They are not dumb people and they have a construct. How the hell did this gang [the Bush Administration] get elected that is running the country? They were elected on what I think are anti-American principles but they do not think so.
SDL: Do you think this is an education problem?
BH: I think there is a level of self-interested denial. I don t know what the answer is. Most people don t think twice about the mortgage interest deduction. They don t think it is a government subsidy. They just think that HUD is so screwed up and wasted this money and that money. They read the papers about the terrible things that HUD does. I think everyone is so specialized in what they do that there is some denial and some self- interested denial or lack of focusing on this.
SDL: It does seem that we have permitted the decision-making on this to be made at the very local level. It sounds good that local people should be able to make decisions about what happens in terms of development in their community. But there is the issue of the common good as well.
BH: Right, the states have to over-ride local decisions. There has to be a longer term understanding of the implications of our policies towards communities as a whole. This is the self interest argument: the metropolitan area -- the core city -- was not growing. Those metropolitan areas did not have the same wealth and job growth that other areas did. And so why should people in the wealthy suburbs care? If they hear that their life and that of the metropolitan city is going to be chocked off because you are dealing with a cancer at the center then that is the beginning of self interest where suburban residents can say: I better do something about this because it affects me.
SDL: I have heard the argument that metro regions are competing against each other so if yours is inefficient your metro region will lose business to another. If your urban area scares off business
BH: then your wealth is going to decrease and it is going to affect you. Economics is the number one self interest of anyone. Well, number one is security. Then economics is second in our system. People will trade freedom for security all day long.
SDL: Can you think of a couple of other people I should be talking to?
BH: For innovative development talk to Chris Lineberger in Albuquerque about smart growth. He is trying to bring back downtown Albuquerque without gentrifying it. So he spends money keeping low cost arts organizations and affordable housing downtown and he takes a holistic look at development. It resonates for people who are already there. There should be a whole new way to redevelop based on understanding the history of a place and its significance and bring people together into a diverse atmosphere, while preserving the affordability. And you take that into account as you gentrify.
SDL: Gentrification without displacement.
BH: Yeah and how you do that through the real estate process. He would say here is a whole different way to do financing and development.
You ought to talk to Bruce Katz on regionalism. You should talk to some environmentalists. Jonathan Rose is another person, a visionary developer out of New York who is knee-deep in developing sustainable developments that are fair and have low-income people in them and yet do not harm the environment. He is at the center of how you bring together environmentalists and community development people in a sensible way within the world we work in and have things that will financially work. He, aloge with Lineberger, are true visionaries and are widely respected in the green movement and in community development.
You ought to get to a Republican. Feather Houston would be a good person. She was on the [Millennial] commission, is Republican, and has strong views on how New Jersey s law does not work right and about what ought to be done. She worked at Bridge, HUD, and HHS. Now she head up an HMO. She and I were co chairs on the Millennial Housing Commission looking at how do you do fair, place-based housing. So she will give you the practical information on what doesn t work about New Jersey laws and what might work at the state level.
You should talk to Doug Foy about what he is doing in Massachusetts; and also David Rusk. You should go somewhere where inclusionary housing has and has not worked.