Not surprisingly, it can be extremely difficult for a company to hire and keep property management staff at such locations. “One account I manage myself because there is nobody else on staff who would even consider it,” says Loren Sanborn, a senior vice president and partner at JSCo who heads up the company’s property management work. The company has had success hiring on-site staff from the resident base. “You are getting battle-hardened, realistic people who know what’s going on out there,” says Gardner. And the company is a big proponent of promoting from within, so many of these employees have risen up the ranks to positions as high as regional managers.
HOPE FOR THE FUTURE But even the most skilled affordable housing firm can’t escape the truth: federal funding for projects is becoming scarce.
In February, the Bush administration released its fiscal year 2008 budget proposal, which slashed the HOPE VI program and, overall, reduced HUD funding for affordable programs by eight percent. But instead of just lamenting on the loss, the forward-thinking JSCo is taking action and preparing itself for a future without (or with limited) funds from programs like HOPE VI. It’s helping the city of San Francisco spearhead a new program (aptly named HOPE San Francisco) to revitalize distressed, low-density public housing in the absence of federal dollars through mixed-income development and grants and loans from the public and private sector.
The poster child for the project is Hunters View, a dilapidated 267-unit public housing complex in Southeast San Francisco. The San Francisco Housing Authority selected The John Stewart Co., along with partners Ridgepoint Non-Profit Housing Corp. and Devine & Gong, to undertake the massive redevelopment without any hope for federal funding in sight. (The city believes it was denied funding because it received five previous HOPE VI grants combined with the reduction/proposed elimination of the program.) The plan is to turn the property into a vibrant mixed-income community with one-for-one replacement of the affordable units and the development of approximately 400 additional affordable, market-rate, and for-sale units. The net proceeds from the sale of the market-rate units will serve as the financial engine of the project by cross-subsidizing the development costs of the public housing replacement units.
Plus, the development team is obtaining much of the missing funds through grants and low-interest loans from both local and national foundations. To date, the team has pieced together about $3 million, including a $2 million PRI (program-related investment) and $200,000 grant from the Ford Foundation, a $50,000 recoverable grant from the Local Initiatives Support Corp., a $50,000 grant from the Fannie Mae Foundation, a $25,000 grant from the San Francisco Foundation, and a $600,000 predevelopment loan from the Mayor’s Office of Housing.
“Localities are going to have to do things like this,” says Gardner. “HUD is not going to do it. They are cutting the operating subsidies for public housing nationwide to below what the buildings even need to operate. So now it’s the business sector, the local government, and the philanthropic sector all working together [to make these projects happen].”
JSCo’s support is instrumental in the program’s success, says Doug Shoemaker, deputy director for the Mayor’s Office of Housing in San Francisco. “They really have been responsible for the two most successful HOPE VI projects [North Beach Place and Valencia Gardens] that have happened in San Francisco,” he says. “They have really demonstrated to people what the potential out there is [for public housing redevelopments].”
Still, the Hunters View project represents a substantial financial risk for both the development team and the city. “We think we can pull Hunters View off, but it’s pretty out there,” admits Gardner. The company must have faith in its work. It already plans to apply this financial model to a project called Sierra Vista in Stockton, Calif. For this one, however, JSCo plans to sell lots to home builders (versus developing the for-sale units itself) which firm leaders say will allow the company to capture more profit. “It’s a lot of market risk, and it may not end up looking exactly as we planned, but hey, like John [Stewart] says, you just scale it up. We’re doing a 340-unit project, so why not a 660-unit rental, for-sale, mixed-income, mixed-generational revitalization?” says Gardner.
Sounds like a challenge the company just can’t pass up.