Being a Strong Towns staffer and advocate influences almost everything about the way I interact with my city, but the corner of my life where that impact is most visible is almost certainly in my side job as a small-scale housing developer. When I started working at Strong Towns, my partner and I owned a duplex, mostly to offset the cost of our mortgage and put a house with a backyard in our favorite neighborhood within our financial reach. But after a year of me working for this organization and bringing the conversations I have here home to my partner, we’d come to see our little landlording project as less about our personal finances (and our desire for an eventual dog) and more about investing more of our money into the kind of incremental neighborhood development we believed in, rather than shoving all of it into the stock market and calling it a day. And eventually, that shift inspired our search for a second multi-family—this time, in a neighborhood that needed a lot more love.
This three-part series, which I’m humbled to say ended up among our most popular and most discussed stories of 2018, tells the story of that search—and in many ways, how we learned first hand just how expensive and sometimes downright impossible it can be to pull even a single building out of the cycle of decline, even when the neighborhood is bursting with great buildings and wonderful neighbors. Our answer (spoiler) was to invest in a slightly more established neighborhood—though not by much, and that certainly hasn’t been the easiest road, either. Look out for another series from me in 2019 on the challenges of managing quality affordable housing, long after the final renovations are done.-Kea Wilson.
"Think about that one block in your city that — if it just got a little bit of love — could turn into something really special. Maybe there are a few boarded up windows, or the streets have a few potholes that need to be filled. The houses are old, the schools nearby aren’t doing so hot, and it takes a little too long for the the fire department to show up when someone calls. Certainly your local government’s not spending a lot of money to help the residents out — either because they don’t have the budget, or because it's mostly going to your city's more affluent neighborhoods. But you recognize that in our communities, poor neighborhoods like these are often some of the most financially productive ones around — and in fact, they’re often providing the revenue that’s propping up the budget of a much nicer-looking rich neighborhood on the edge of town.
What if this walkable, pre-war block with amazing bones and even more amazing residents could be be brought back, just a little bit? What if just a handful of vacant houses could be remade into clean, affordable units for tenants who could make them their homes? And if you have a little bit of money in the bank, you might be asking yourself: what if you bought one of those empty buildings yourself?
Six months ago, that’s exactly what my partner and I decided to do in our hometown of St. Louis, MO. And the reason why it didn’t work out taught me something I never expected about why it’s so damn hard to bring a neighborhood out of decline.” Read the rest of the article.
"Let’s pause here and explain something super basic about how mortgages work, assuming you are (or, like me, until pretty recently were) someone who knows absolutely nothing about them. As a matter of policy, banks like to write loans for properties that are in good shape and in good neighborhoods, to buyers who are likely to pay them back. If the house is too damaged, you might spend a fortune on repairing it and not be able to make the mortgage, much less get someone to take it off your hands. If the house is in a bad neighborhood, you might not be able to sell it later. And if you have a demonstrated history of not paying your debts, that’s an obvious non-starter.
We were good buyers, but we knew that the B street house wasn’t an easy bet for a bank. We just didn’t know how bad it would be.
We started our search at the small community bank through which we’d purchased our duplex. They were thrilled to write us a mortgage, but they didn’t do any kind of rehabbing loans to cover the initial repairs — all of which, together, were just too much for us to spend as low-level investors who couldn’t afford not to break even in a reasonable period of time.
"Here’s the sad truth about places like B Street: unless these buildings find buyers who will view them almost purely as homes and volunteer to virtually forgo the investment potential of real estate that their neighbors on wealthier blocks are likely to enjoy, these areas will continue to decline. Unless these properties find banks or nonprofits who are willing to take huge, financially irresponsible risks in the name of community building and/or find creative ways around the appraisal gap, they will continue to decline.
Unless we somehow do both these things at a vast, frankly unimaginable scale, right now, whole regions will continue to decline. And the buildings in them will be bought by slumlords who recognize that there is no incentive for them to reverse that decline. They will be funded by banks who recognize the risks inherent in these areas and, rightly, decide not to gamble with their institution’s financial health. Things will keep going south, and the people who will pay for it are the ones who can’t afford to live anywhere else.
You may be a professional developer who’s reading this right now and shouting the name of a grant or a tax credit or a lenient bank or some other creative funding solution we missed at the screen. A few of you have already left these ideas in the comments, and while I appreciate your insight, I want you to take a step back, and recognize that your impulse to do this proves a point I believe is essential.
Our cities need non-professional, small-scale, skin-in-the-game developers in order to thrive—as many of them as possible, at a far greater scale than we have now. And if non-professional, small-scale developers can’t easily navigate how to finance a declining building without professional knowledge, we have a huge problem in this country.” Read the rest of the article.