Continued challenges for neighborhood stabilization efforts

Several weeks ago we noted that our recent experience with the Neighborhood Stabilization Program (NSP) revealed significant hurdles facing the program, and highlighted the struggle to realize on-the-ground benefits for target communities.

Unfortunately, the latest news on this front confirms our assessment.

Much of the nearly $4 billion put forward under the NSP to help the country’s most blighted communities is showing limited and inconsistent benefits.

While some cities are finding success, the combination of robust private sector purchases of foreclosed properties along with banks’ unwillingness to systematically support the NSP efforts has fostered frustration.

In what might be viewed as a last ditch effort to see the NSP succeed and overcome the significant operational challenges inherent in the acquisition, rehab and funding of foreclosed homes, a new coordinating entity has emerged as a potential solution: The National Community Stabilization Trust.

A nonprofit organization, The Stabilization Trust will aim to ‘right the ship’ by providing local agencies with services that should counteract the NSP’s underperformance, specifically:

• Streamlined, coordinated access to foreclosed properties, and
• Flexible and timely financing to renovate the properties.

To execute effectively, The Stabilization Trust has established direct partnerships with leading financial institutions, such as Bank of America, Chase, Citi, Fannie Mae, Freddie Mac, GMAC and Wells Fargo, which in theory should for allow municipalities to acquire targeted properties in bulk across specific neighborhood locations.

Bigger picture considerations…

While the success of The Stabilization Trust is still uncertain, the facts on the ground to date feed the skepticism of those who opposed the NSP from its inception. As the next steps play out, current market activity raises some important questions to consider:

• Does the success of private investors (to the detriment of contained and focused city-run rehabs) signal that markets are indeed functioning quite well, thus suggesting the need for government to move aside?

• Are banks’ fiduciary responsibilities to their shareholders the driving force that trumps larger questions of long-term community welfare? If so (and many would argue yes), where is the proper balance between commitment to shareholder wealth, and service to the communities in which a bank operates?

Have an opinion on the effectiveness of the NSP, or the broader policy implications of the program? Leave us a comment, and let us know what you think.

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You can contact us to discuss or initiate a project here.

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Sometimes you can see what we’re doing on Twitter.

Photo credit: JoLin on istockphoto.com

Markets and know-how block greening foreclosed homes

Many communities have become quite passionate about the greening of foreclosed homes as a part of revitalization.

Especially since its an area that received lots of funding attention in the American Recovery and Reinvestment Act, via Neighborhood Stabilization Programs, Weatherization and other programs.

We have been following the efforts of community groups here in the San Franciso Bay Area throughout this year, as they have been applying for ARRA funding in order to purchase and retrofit foreclosed homes to green standards. Afterwards, these homes would be sold to low-to-moderate income residents, preserving housing opportunities for residents in those income groups.

Unfortunately, my latest information is that this market niche only limps along at best, despite having access to better funding than many other types of real estate these days.

A mission-based capital source active in this sector indicates that the problems plaguing these programs are the misfires of painfully basic assumptions overlooked at all governmental levels and community groups alike, during the rush for ARRA funding:

a) Banks not motivated to deal: Most folks assumed that banks would be so injured by the credit crisis, that they would just dump foreclosed homes to community groups at very deep discounts. In reality, realtors are reporting that foreclosed homes sell pretty quickly here in the Bay Area, removing bank motivation to discount their prices. The problem with that is that many groups of homes in the hardest hit areas are actually lumped into portfolios with faster selling homes — and the banks don’t differentiate. The sad result? In some communities, foreclosed homes resell relatively quickly. In lower income, more distressed neighborhoods, the foreclosed homes sit vacant and deteriorating, since the bank does not differentiate their sales practices within pools of homes straddling multiple communities.

b) Lack of experience with scale green home retrofitting: Most groups and their municipal partners overlooked the actual operational process of purchase and green retrofitting. My investor colleagues report frustrating conversations with municipalities, community groups and their partners, as it has become evident that none of these groups have actually ever run any type of scalable existing home purchase/retrofit program — let alone incorporate green remodeling within their training and operational planning. Groups such as Build it Green offer training assistance on the remodeling of existing homes to the GreenPoint Rated standards, however there is a significant business coordination aspect of operating and incorporating these processes within the larger purchase and resale platform that just gets overlooked. Many community groups simply underestimate the level of staff training and time which needs to accompany these type of programs.

For now, the aquisition purchase problem looms (much!) larger than the operational issues for foreclosed homes. Hopefully we can learn from this and not get caught by surprise when needing to adopt scale green retrofit initiatives within our own property portfolios.

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Things you might want to know:

• Do you like this post? We’d love to hear your comments and suggestions.
• You can contact us to discuss or initiate a project here.
• You can get Our Green Journey by email or via RSS.
• Sometimes you can see what we’re doing on Twitter.
• Photo credit: Webking on istockphoto.com

$2 Million Grant for Affordable Zero Energy Housing Village

Bold stimulus and green building plans associated with AB32 are moving from the drawing board to the construction site.

West Village Community Partnership received a $2 million grant from the California Energy Commission for the study and development of advanced energy strategies for a 220-acre, 4,000 student and faculty housing development for UC Davis. The grant award came under the CEC’s Public Interest Energy Research (PIER) Program for Renewable-Based Energy Secure Communities (RESCO).

The grant essentially funds a living laboratory type of study of different energy applications to be designed for and installed in the community.

The developer and UC Davis will be studying how to put together an optimal mix of renewable technologies for the project — including creative financing structures to overcome the first-cost barrier for ultra-efficient green design as well as documenting resident behaviour; whether they actually save or waste more energy in this type of development.  Since the project will be built in several phases, the developer will have a chance to improve each new phase’s energy delivery plans, based upon what is learned by studying prior phases.

I love the intersection of the real estate story with the AB32/2030 Challenge issues– they’re already putting together a mixed use addressing pent up demand in the student and faculty housing market in that area. UC Davis ground leases the land to the developer. His focus will be on getting the project financed, built and sold (and paying ground rent of some amount, of course). The project was reportedly already sustainably designed before the grant was awarded. Now grant money will pay for the advanced energy requirements and “study” (read: actually do) the creative financing.

We also point out that one word is missing from both the story and the project website:  “LEED”. As much as the sustainability of the development is being touted, there is no mention of the design guidelines adhering to any particular third-party rating system, like LEED.

And what about the sustainability objectives?

• Housing units are to be sold at below market prices to attract top talent and students to the University.
• On-site renewable power generation.
• Strong focus on alternative transportation: bicycling and biking will be preferred mode of transport to campus for residents.
• Community layout takes advantage of sun and natural breezes.
• Landscaping is integrated with storm-water systems to cleanse run-off and create habitat areas

The energy strategies to be included are path-breaking for a development of this size. Those to be included and studied with grant funding are:

• energy-efficiency measures in building design (passive and active)
• demand response
• distributed solar photovoltaic to create electricity from the sun
• distributed solar thermal on homes to pre-heat water
• biogas coupled with fuel cell to generate electricity
• advanced energy storage using modern battery techniques
• smartgrid technology to efficiently manage energy supplies

Photo credit: Flickr / Shazari - Eggheads

Are You Funding Green Sprawl?

Today’s post is dedicated to all our euphoric green finance and investment friends who are suffering from PEWS — post-election withdrawal syndrome.

Here’s a delicate question:

>>Are you funding green sprawl?<<

Sustainable Industries recently published an article about the dilemma of having green homes and buildings built in suburban locations.

Their set-up:

While the profusion of buildings that use at least 15 percent less energy and reduce water usage as well as other non-sustainable resources is good news for a country searching for energy independence and a planet combating a variety of environmental ills, some are starting to think more needs to be done.

Top of the list: Considering whether sprawling architecture and 4,200-square-foot McMansions can truly be considered “green.”

For us here, the article highlights some challenges for those builders and investors who have business models focused on commuter-oriented suburban markets,  that now invest in green homes and buildings but ignore the overall smart growth principles that come with sustainable real estate investing.

Here’s an example from the article of a financial opportunity that is buried within implementing smart growth principles in tandem with green building:

Reducing sprawl and its attendant reliance on cars also increases the spending power of individuals, according to a study prepared by Portland-based Impresa Consulting in July 2007. According to the study, residents of Portland travel 20 percent fewer miles per day than the average American. At $3 per gallon, this equates to $1.1 billion saved or $800 million that stays in the local economy each year.

Essentially, funding green buildings in locations without smart growth principles might make a good return for the builder/owner, but it also imposes a quantifiable, lifelong tax on the residents and businesses who move in to those developments.  And as some builders and investors are finding out in these tougher economic times — people can move, the real estate can’t.

As always, we welcome your comments.

Photo credit: Alex-S / Flickr

ULI on the Financial Bailout as the Swedes Shake Their Heads Knowingly

Tired? I know, I know…

Staying on top of political theater and the daily collapse of banks can wear a body down.  Watching the never-ending series of CNN breaking news, checking your own bank’s solvency and reading the papers leaves nearly no time for work!

Well, we won’t tell you how to vote, but here’s a couple of items that might help you as you navigate the highly spun news on the financial bailout — or at least up your game at the next few cocktail parties.

And the green finance angle, you might ask? Well, because of our commitment to sustainability and responsible property investing, we monitor issues affecting the sustainability of communities, particularly their financial viability.  And with that, there are two items to help you in your thinking:

Item #1: Some nitty gritty on the bailout legislation impacting the housing market

We’ve been fans of  ULI’s blog, The Ground Floor, from the very beginning — way before they got their new cool lookin’ blog template.  John McIlwain’s post on the details of how the housing market could be assisted by the proposed bailout legislation spell out specific assistance actions that we do not normally hear about through the news media. He’s pulled out two core areas of focus, which depending on how they are implemented will determine whether we think the bailout was a good or bad idea. Those two areas are:

• program guidelines: this tells the entities getting assistance exactly when and how they should be creating programs and within what scope regarding their troubled assets. Specifically, these guidelines should contain:

(1) Mechanisms for purchasing troubled assets.
(2) Methods for pricing and valuing troubled assets.
(3) Procedures for selecting asset managers.
(4) Criteria for identifying troubled assets for purchase.

• foreclosure mitigation efforts: entities dealing in mortgages and related securities are empowered to offer assistance programs for homeowners that can help to avoid additional foreclosures.  Well, its about time! But, of course, we’ll have to see how both these issues evolve through the legislative process. It ain’t over till its over.

Item #2: Swedes Say ‘Been There, Done That’

Now for something related, but different. Take a look at this New York Times article about how the Swedes approached a similar financial crisis a few years ago. The focus: when faced with the same problems, they took a very different course of action. And the results were both positive and, more importantly, sustainable.

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