Keeping Up with the Jonzee

Naw...you still at the right spot.

Monday, October 23, 2006

Boxed Out

I live, breath, and eat all things affordable housing. It was a somewhat circuitous path to my profession. Lets just say the future OB-GYN begat budding city planner begat affordable housing developer. I have done the do-gooder, always-in-crisis non-profit developer thing, the government thing, and the private sector. Housing is it for me. It's particularly peculiar to my family. Some of them think it's a hobby and that one day I will get a real job. Uh...I think this is, like, my real job. (My aunt recently asked me when I was going to settle on a career--and I have been doing housing stuff for more than 7 years. )

I love the finance, the project management, the combination of real estate business with social-responsibility. The fortitude these "bleeding heart" non-profits garnered by partnering with government agencies and philanthropic groups amazes me. They managed to figure out how to piece incredibly complicated financial structures together to make these developments feasible--and demonstrated to the private market that there is, indeed, a market for affordable housing. I love that many have been extremely innovative and have created products that serve the most hard to serve populations--e.g. homeless with mental illness, prisoners reentering society, etc.

But for all there wonderous foresight, lately they piss me off with there current state of inability to compete and innovate in an increasingly competitve marketplace. They seem to be facing the same issues that other non-profits face. They started off fullfilling a need in the market place but now fail to grow. They run after any stream of funding--whether it directly relates to mission or not and often end up losing money because they don't have the capacity to meet the requirements. They build assets but no cash flow. Non-profit developers add to this idiocy by continuing to build affordable housing boxes that add fuel to the fire of NIMBY'ism.(and might as well be building public housing) And in the increasingly competitive environment of real estate, they are stuck in the mud when it comes to figuring out how to compete--listening to so called private sector experts who cynically recycle the same old projects over and over.

What fueled this diatribe was the dismissive nature an extremely successful and out of the box real estate proposal received from a so-called affordable housing expert consultant. This proposal won the JP Morgan Chase Community Development Competition, is being presented at the Global Social Business Conference held by the UN and sponsored by Citibank, and is being entered into the Good Ventures competition as well. In summary, the project created a $12,000,000 endowment and cash flow for a relatively innovative nonprofit that serves prisoners reentering society. The proposal we created was within mission, it met community needs(head start day care), created some financial independence, and it was environmentally sustainable. Our financial structure was vetted by bond experts, tax-credit syndicators , and was ultimately accepted by a panel of high-level bankers who judged our final proposal. And yet this consultant's proposal dismissed our analysis, took an idea about building affordable Cooperative units (NYC's for sale apartments), and proposed some simple-ass elementary tax credit/ bond deal with uber-small units. To top it all off, the only money the non-profit would get is the savings from moving some of their offices uptown . Like for the rest of the world, cash is king--especially in cash flow slow or non-existent non-profits who seem to always have way more restricted funds than unrestricted. As a matter of fact, this so-called best-practice expert designed a proposal that looked much like one of the ones an ivy-league competitor placed in the competition--and lost with.

The funny thing is, that the non-profit developers who are most successful are the guys who are constantly looking for new ways to serve the "market. They are creating housing for extended families (grandparent housing), recycling the old flop house idea to serve the most resistant homeless folks, developing supportive housing models for kids aging out of foster care, etc. Theu get more funding and they have more cash in the bank. They innovate and use the market efficiently.They are not robbing Peter to pay Paul.

They get that all non-profit developers need to gear up to compete with each other and the greater market place for affordable housing. Even social-good organizations have to deal with the rules of capitalism in a capitalist society. Functioning with a double bottom line--social good and money making is imperative to survival in an increasing competitive market where for-profits are getting in on the non-profit game. To me, it's irresponsible for non-profits to not function in the most efficient and fiscally responsible way possible if they are to truly work at achieving their missions'.

I'm starting to think that I have got more guts to be an entreprenuer than I ever thought. Especially, if the market for affordable housing continues to be stuck in its ways. Lydon B. Johnson is dead already.

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