As Larry Schedler, a longtime New Orleans real estate broker and resident, tells it, the scene resembled something from the '60s. In December 2007, police armed with pepper spray and tasers rebuffed the protestors trying to save affordable housing units in New Orleans. “[The protestors] were breaking down the gates of city hall,” says Schedler, president of Larry G. Schedler & Associates. “It was a pretty dramatic situation.”
What prompted activists from all over the country to descend upon city hall? The Housing Authority of New Orleans' decision to spend $30 million to demolish four New Orleans housing complexes—the B.W. Cooper, C.J. Peete, Lafitte, and St. Bernard projects. With homelessness rising and rents up more than 25 percent in the city since Hurricane Katrina, protestors came out en masse to fight to save the housing.
“For a fraction of the cost, people could be living in a home right now instead of living on the street,” says Sakura Kone, special events and media coordinator for Common Ground Relief, a group working to retain affordable housing in the city. “What are these people supposed to do while they're waiting for these homes to be rebuilt?”
But there's another side to the story. Longtime New Orleans residents such as Schedler and affordable housing advocates say this housing hasn't been livable for a long time.
“There was never a debate as to whether or not that housing should come down,” says Matt Schwartz, principal of Domain Cos. in New York City, who has worked on 25 Hope VI deals. “The housing was substandard before the storm. The public housing was worse than anything I saw anywhere else.”
Apparently, a large number of the residents in those four buildings agree. A study by University of Texas at Arlington says that more than 70 percent of New Orleans' public housing residents don't want to return to the flood-soaked housing. But Kone insists that the complexes are livable. He says Lafitte had no structural damage and that the others were plagued only by water problems.
In addition, given today's current credit markets, Kone doesn't think it will be easy to build any kind of affordable housing in New Orleans. “If you're having problems building, why would you want to demolish these homes and start from scratch?” he asks.
Schedler and Schwartz agree that it has gotten much more difficult to provide new housing in New Orleans, though Schwartz says it will be easier for developers replacing the four public housing projects to cobble together financing than for those building basic tax-credit housing. Schedler says 77 tax credit properties have been earmarked in the city and 33 of those have begun construction. But he questions whether those last 44 projects will ever get off the ground.
Schwartz, who is working on three properties in New Orleans, sees the same thing. If his properties would have closed later in 2007, he would have lost $10 million of his $110 million capitalization because of the plummeting value of tax credits.
“It's not only the pricing but the fact that there are less funds available,” Schwartz says. “There are fewer investors, and underwriting standards have certainly tightened. There are a lot of other projects that are not going to happen.”