Reinventing Housing in Pittsburgh
A Former CDC Director Becomes Mayor
By John T. Metzger
Housing policy in Pittsburgh is receiving renewed attention from Mayor Tom Murphy, a Democrat elected in 1993 on a platform of revitalizing neighborhoods and strengthening government service delivery. Murphy is a former community organizer and CDC director who became a state legislator from the city's North Side in 1979 but lost his first bid for mayor in 1989. Although his administration includes several former CDC leaders in high-level positions, he has antagonized some nonprofit housing developers by reducing city spending for low- and moderate-income housing while allocating funds for new middle-class housing projects, downtown real estate development, and economic development.
After the election, Murphy named himself chairman of the Housing Authority of the City of Pittsburgh (HACP), appointed former CDC directors as HACP executive director, deputy mayor, and Urban Redevelopment Authority executive director; appointed a public housing tenant and Section 8 tenant to the HACP board, and committed to improving public housing conditions as a central priority of his administration. Working closely with HUD, Mayor Murphy has proposed to "reinvent" public housing in Pittsburgh by demolishing government-owned units concentrated in poor neighborhoods and replacing them with newly-built or rehabilitated mixed-income housing.
Only five other American cities have a greater number of conventional public housing units as a percentage of the total housing stock than Pittsburgh. Much of this public housing was built during World War II to house workers imported for wartime production in the city's then-booming steel mills (where Murphy's father once worked as a foreman). According to the 1990 census, six of the eight poorest census tracts in Pennsylvania are public housing communities in Pittsburgh.
The public housing crisis reflects an accelerating socioeconomic crisis for poor African-Americans living in the city. Among the 50 largest comparable American cities, Pittsburgh has the highest poverty rate for blacks between ages 18 and 64, the lowest labor force participation rate for black men between ages of 25 and 54, the highest percentage of female-headed black households with children, and the third highest black male teenage unemployment rate, according to an analysis of 1990 census data by the University of Pittsburgh Center for Social and Urban Research.
One year after Murphy's election, a joint city-county empowerment zone/enterprise community application to the Clinton administration pledged to "end public housing as we know it" by deconcentrating and spatially integrating government-owned and subsidized units, through "systematic replacement and redistribution." After the Murphy administration's initial plans to redevelop the Allequippa Terrace public housing complex in Pittsburgh's Hill District were greeted with opposition by tenants, Murphy - who endorsed tenant management and ownership strategies during his 1993 campaign - appointed community organizer Stanley Lowe as HACP executive director and worked with HUD and residents to design an alternative plan involving modernization (already underway), new construction, and demolition.
"We spent six months thinking through how we should relate to each other," says Lowe of the city's efforts to address the concerns of public housing tenants. HACP has signed memorandums of understanding (MOUs) with the resident councils at Allequippa Terrace and nine other public housing developments. These MOUs outline a process for resolving tenant grievances, regular meetings between HACP and tenants, and technical support available to the resident councils. At Allequippa Terrace, HACP and the tenants have reached agreement on a HOPE 6 plan and jointly chosen a private developer to manage the redevelopment.
Murphy and Lowe have secured a $7.5 million HOPE 6 demonstration grant from HUD for a comprehensive community plan in the North Side neighborhood of Manchester (where Lowe formerly headed a CDC) that will build new low- and moderate-income rental housing, remove public housing, and rehabilitate scattered-site Section 8 units. The new rental housing will be managed jointly by a for-profit company and the CDC Manchester Citizens Corporation, and designed to reflect the historic architecture in the neighborhood. In a February ceremony, Mayor Murphy operated a bulldozer to demolish low-rise public housing apartments built in Manchester during the early 1970s. The Manchester plan of 1996 promises "a house for a house and an apartment for an apartment" in the community for displaced public housing residents.
The model for the Murphy housing strategy is Crawford Square, a new neighborhood of over 300 units of mixed-income owner-occupied and rental housing built on vacant urban renewal land in the lower Hill District adjacent to the downtown "Golden Triangle." The developer of Crawford Square is McCormack Baron & Associates, a St. Louis-based builder who planned the project with a local CDC that leveraged low-income rental housing tax credits through the Pittsburgh Equity Fund and the Enterprise Social Investment Corporation. Crawford Square fulfilled a controversial redevelopment plan launched decades earlier by Mayor David Lawrence and corporate leader Richard King Mellon that displaced thousands of poor families in the 1950s.
Mayor Murphy has enjoyed support from the Pittsburgh Community Reinvestment Group (PCRG), a citywide CRA advocacy coalition organized by Stanley Lowe in 1988. The advocacy of PCRG has encouraged greater risk-taking among local lenders such as PNC Bank and Mellon Bank, and resulted in a 10-year $1.4 billion lending agreement with Integra Bank, and a community-based mortgage credit counseling program funded by 20 financial institutions and Fannie Mae. PCRG has capitalized on Pittsburgh's growing status as a banking center (the concentration of banking deposits per capita in Allegheny County, which includes Pittsburgh, is second only to Manhattan).
Since the early 1980s, the CDCs have benefited from considerable foundation and corporate philanthropy and Community Development Block Grant funds allocated through the Pittsburgh Partnership for Neighborhood Development, one of the nation's leading locally-controlled support intermediaries. Nevertheless, the Murphy administration has faulted many CDCs in Pittsburgh for insufficient production and poor project management, and is landbanking sites for larger-scale mixed-income homebuilding by for-profit developers or joint ventures involving CDCs.
David Brewton, executive director of Breachmenders, Inc., a church-based CDC in a neighborhood adjacent to Allequippa Terrace, believes that the Murphy strategy of advocating large-scale projects that rejuvenate the tax base and attract the middle class may fail to meet affordable housing needs of the poor. But Brewton notes that some CDCs support this strategy. He also partly blames low-income housing advocates themselves for the direction the Murphy administration' has taken, conceding that community-based organizations lack a unified voice on city policy. "So far," he concludes, "the CDCs have failed to collectively engage the Murphy administration in policy making."
Brewton is excited about the process that HACP has convened with public housing tenants at Allequippa Terrace, and hopes that Breachmenders - which received a Fannie Mae Foundation Maxwell Award for Excellence in 1993 for its low-income homeownership program - and other local CDCs will play a role in developing off-site replacement units for public housing apartments that are being vacated more by attrition than direct displacement. But Breachmenders has dissolved its own efforts (started in 1991) to organize public housing tenants, as the Cisneros HUD has intervened by awarding $100,000 Tenant Opportunity Program (TOP) grants to each of the 10 HACP-controlled local resident councils.
Murphy's housing and community development policies are guided by the stated goal of "making the market work" in low- and moderate-income neighborhoods that have experienced population loss, housing abandonment, and disinvestment. This emphasis on "markets" reflects the historical legacy of corporate involvement in urban renewal in Pittsburgh, where large-scale redevelopment was pioneered after World War II, as well as the growing influence of banks and corporate leaders in planning and financing community development in cities across the country.
Murphy is careful to appease conservatives who oppose the Community Reinvestment Act, by arguing that CRA programs are market-driven strategies, not credit allocation. In reality, the CRA initiatives in Pittsburgh rely upon built-in public and private subsidies. Credit-counseling is funded by bank grants and Fannie Mae. Mortgage loans in low- and moderate-income areas are priced at a discount with flexible underwriting terms, and coupled with deferred second mortgages funded by government. Closing costs are waived or subsidized. Loans are made through negotiated lending agreements, not voluntary initiative, and the banks provide additional grants to community groups to assess credit needs.
The changing political environment will also likely force Mayor Murphy to seek bipartisan approaches. Republicans from Pennsylvania won elections in 1994 for senator and governor. In the U.S. Senate race, Richard Santorum, a Newt Gingrich ally from Pittsburgh's suburbs, defeated Democratic incumbent Harris Wofford. Governor Tom Ridge has moved to eliminate the Pennsylvania Department of Community Affairs, which has provided state funding for CDCs and URA housing programs in the past. Also, in the November 1995 elections, Republicans became a majority of the Allegheny County commissioners for the first time since the New Deal.
As a state legislator and as mayor, Tom Murphy has successfully lobbied for state and county funds to finance economic development projects and support cultural and recreational facilities in Pittsburgh. Murphy and PCRG are now asking Governor Ridge and the Republican-controlled state legislature to expand a state tax credit program, known as the Philadelphia Plan, to Pittsburgh. The Philadelphia Plan awards state tax credits to corporations that "adopt" a CDC and agree to provide up to $250,000 per year in operating support for ten years.
But CDCs in neighborhoods other than Manchester lament the lack of city funds for low- and moderate-income housing. "The dollar commitment is not there," says Richard Swartz, development director of the Bloomfield-Garfield Corporation, a leading CDC. Criticizing the Manchester plan as a HUD-driven, "top-down approach," Swartz says, "The Murphy administration is not willing to devote more than what the state and federal government will provide. They are content to play the hand that's been dealt, rather than argue for more money. The intergovernmental aid will not be enough to rebuild the inner city."
John Metzger: During the 1980s, CDCs in Pittsburgh were viewed as some of the most innovative in the country, profiled on the front page of the Wall Street Journal and in David Osborne's book, Laboratories of Democracy, which discussed North Side Civic Development Council, the CDC once headed by you and Deputy Mayor Tom Cox. One of your predecessors as mayor, the late Richard Caliguiri, worked with the foundations, banks, and the CDCs themselves to create the Pittsburgh Partnership for Neighborhood Development, a local intermediary support organization. Several leading CDC professionals from that era now hold positions in your administration. How do you and your administration support the activities of the CDCs, and how do you envision their role in producing low- and moderate-income housing? Has that changed?
Tom Murphy: Where we were in the late 70s and early 80s, in regard to community-based organizations, and where we are now has changed remarkably because the level of sophistication has changed, and expectations have changed. Consequently, the funding has changed, and CDCs and their nature have changed.
We probably have a very healthy relationship with CDCs, in that we challenge each other a lot; there are essentially no secrets between us. Tom Cox and I both ran CDCs, and Stanley Lowe [Director of the Housing Authority of the City of Pittsburgh] ran a CDC, so we understand the dynamics of what it means to run CDCs. But while we're sympathetic to some of those dynamics, we also are very focused on production. The CDCs have evolved into largely community builders, with less emphasis on their traditional community advocacy roles. With the money that we put out there and we're putting several million dollars annually into the support of the city's CDC and community organization infrastructure we expect to be able to deliver a relatively clear production effort, working in conjunction with the CDCs. We've tried to work very closely with the CDCs to develop a strategic plan for the neighborhood, recognizing that it might not be the best thing to just do four or five houses. Often you have to do a critical mass of activity. We work together with the CDCs to marshal the necessary resources that will impact or reach whatever is the threshold for making the market work in those neighborhoods.
I was just in Garfield with the Bloomfield-Garfield Corporation [a local CDC], receiving an award from Fannie Mae. With it came a check to what is called the Community-Lender Credit Program, which is run though the Pittsburgh Community Reinvestment Group and supported by the city and the banks. Garfield is, by any measure, a pretty tough neighborhood of the city, and yet there are probably somewhere around two dozen houses under construction. Working very closely with the CDCs, we find that there's a market for those houses.
JM: Some of the prominent CDCs in the city have been downsized in recent years because of financially troubled projects as well as staff and board turnover. How do you and your administration assess the capacity of the CDCs?
TM: It's mixed. We're not talking about institutions here with large staffs. Largely the character of the organization is defined by whomever is the dominant person in that organization, be it the chairman of the board or, most often, the executive director. In recent years, a number of the CDCs in Pittsburgh that had traditionally been successful have not been as dynamic as they probably once were and can be. In large part, this would probably be due to the nature of the director in defining the role, or the inability of the director to produce the kind of threshold projects that are needed in the neighborhoods where these CDCs are located. That dilemma has always been a problem with community organizations: providing a consistent level of professional people for those positions.
One of the great difficulties is that running a CDC I speak from experience is a very intense job that requires a lot of effort, and people burn out. The salary's not particularly good, and it's a job that people will not stay in for the rest of their lives. You have fairly rapid turnover, and it's the same with the volunteers who form the board of directors. You have people losing interest or, for whatever reasons, leaving the board. The nature of these organizations makes it difficult for them to be consistently good producers.
JM: How are neighborhood residents involved in planning for the city? You recently received a best practices award from the U.S. Conference of Mayors for holding a series of outreach meetings in each of the city's neighborhoods upon your election. What was the purpose of the neighborhood meetings, who participated and how, and what has been the follow-up?
TM: Ever since I got involved in this business 20 years ago, I have believed that there is an ideal sense of community, and every once in a while you get a glimpse of it. The biggest value of a city is its communities. When the communities function well and the people are part of that community, out of that come things that are better than what people individually would be able to do.
When I became mayor, my interest was not to ignore the community organizations in each of the neighborhoods, but to engage them, and to go directly to residents and do two things. One was to define the short-term issues that drove people nuts, whether it was the conditions of the street, or crackhouses, or much larger issues. We brought the directors of all of the city departments out to 67 different meetings that covered 88 different neighborhoods. We held meetings over a period of about four to five months. We listened to the litany of the complaints in the neighborhoods.
The second thing we wanted to accomplish was to begin to get residents to think about things strategically. After we got the potholes fixed, and tore down the vacant houses, and cleaned up the crime, where did they want to be? What was it that made their neighborhood work? What was the aspect of their neighborhood that they could build on? Whether it was housing, whether it was constructing a new park, a senior citizen issue, the type of policing that we were doing, what were the strategic issues that we needed to face?
Out of that process came two things. First, the residents thought strategically about their neighborhoods. Second, it forced us to think about our delivery systems, how we deliver services, and what wasn't working. Building inspection was one example: we did a very inconsistent job dealing with vacant property. Communication was another issue: how we communicated to residents about what's happening in the city.
The results of those meetings were that we set up either in conjunction with a neighborhood group or in areas that had no active neighborhood group individual task forces in virtually each of the neighborhoods, with a list of short-term objectives and longer-term strategic goals that we were going to work on. We're working on that now.
Internally, those meetings had an impact on a lot of our departments, and probably a significant impact on our personnel department, in terms of how we do summer jobs, our building inspection, our police department, and the public works department. There are significant changes in how we deliver services.
Finally, of all the 67 meetings, about 15,000 people attended. Some meetings had 50 to 100 people, and some had 300 or 400.
JM: How did existing community groups appear to perceive these meetings, and what was their role and involvement?
TM: Some felt threatened by the meetings, and others saw them as an opportunity to broaden the knowledge of their organizations within the community. What we found was that few organizations in the city had a community base of support. Generally, the community organizations to their credit, largely volunteers were not widely involved in communicating with their neighbors. The people who ran the community organizations and made the decisions were a relatively small group, and the information that they developed did not get out to a lot of the other neighbors. Some neighborhoods had organizations that were really loose associations, which were very reactive in nature and responded when there was a crisis in the neighborhood, such as a proposal that generally people opposed. Initially, a lot of these organizations perceived the meetings as threats. By the end of the process, most probably saw them either as neutral or beneficial to their efforts.
JM: What steps have you taken to revitalize public housing communities in Pittsburgh?
TM: The first and probably the most public was that I appointed myself chairman of the public housing authority. I'm only one of two mayors in the country, of 3,000 public housing authorities, that have voluntarily put themselves in that position. I did that to highlight the need to change the way we thought about and what we were doing about public housing.
At the same time, HUD was beginning to undergo an enormous change under Secretary Cisneros. Their feeling of what ought to happen with public housing and I think there was a meeting of the minds on this was that it made no sense to isolate the very poorest people, those families often with both social and economic problems. We could not put many families together who are in chaos and expect that community to work. We really have concentrated poverty to an extreme level. We believed that if we were going to be successful as a city, we needed to bring public housing residents into the mainstream opportunities available in the city, and not isolate public housing communities.
In Allequippa Terrace, there had been a $31 million MROP (Major Reconstruction of Obsolete Projects) grant. It was a modernization grant given to Allequippa Terrace, which has about 75-80 three-story walkups. The proposal was simply to modernize some of those units, not many of them.
We proposed instead to build new mixed-income units, similar to a community like Crawford Square, rather than just continue to segregate low-income people; and then as we build, slowly begin to demolish Allequippa Terrace. That initially was met with a great deal of controversy, much of it coming from people outside the community. Subsequently, Allequippa Terrace has elected a new resident committee, which is now 100 percent on board and moving forward. We will probably begin new construction later this summer in Allequippa Terrace, and shortly thereafter begin demolition of the units as we replace them with a mixed-income community.
JM: How did that process work with the tenants?
TM: It's beginning to blossom. In effect, what's happening is that a year and a half ago, people were still focused on what public housing had always been, and I don't think saw what the opportunities were, and that is beginning to change. Now what we're seeing is that this process is being driven by public housing residents.
At the same time that we were changing Allequippa Terrace, we were changing the public housing authority. We were changing the board, we had fired several people who had been in senior management in the public housing authority, and we were making significant changes to the organization. I think the amount and the pace of the change creates opposition. The change created adversaries not because it was good or bad, but because it was all happening so quickly. That's the nature of what you go through when you make changes, particularly as significant as what we were doing with public housing.
We have over $100 million worth of development in Allequippa Terrace that will begin this summer. In the management of public housing, we had McKinsey & Co., a major management and consulting company, do a serious management review of the housing authority. It was probably a million dollar study that they did pro bono for us. We have recruited Herb Elish, the retired CEO of Weirton Steel, to be chairman of the public housing authority board and to move this agenda forward to deliver much higher quality services to the tenants. Some of the conditions they continue to live in is appalling, in this day and age.
JM: Are the residents supporting these changes?
TM: It took a year or so, but now what we hear from residents is they are beginning to see the opportunities.
For example, we capped the rents. This was one of the real dilemmas of public housing, and these rules are all with the best of intentions. To live in public housing, you pay 30 percent of your income. If you're on welfare and you're getting $500-$600 a month, that means you pay $150-$200 a month. If you go out and get a job, at McDonalds, for example, getting $12,000 a year, you pay $300 a month for rent. If you went out and got a more serious job, as people have, for a salary of $35,000 or $36,000, you would pay as much as $1,000 a month in rent. We went to HUD and requested that we cap the rent, so that our units could be competitive. If somebody went and got a job, we could keep them in public housing. We wouldn't price them out of it.
We're changing those kinds of rules, in effect, to change the theory of public housing. Public housing ought to look like any other neighborhood.
JM: The proposed HUD reinvention will use block grants to shift funding and possibly regulatory control of housing assistance to the state and local level. What will this mean for Pittsburgh, and how do you think it will change the way housing funds will be distributed?
TM: It's unclear, frankly. There were some initial proposals to abolish HUD completely and put both public housing and CDBG money into block grants that would go to the state. CDBG money has a broad constituency, because every municipality in the country gets it, Republican and Democrat.
We would generally agree with the consolidation of HUD programs. We have said to HUD at numerous meetings that if the department can shrink the number of programs and remove its day-to day management of our public housing, we can do better. For example, with the rent caps, or the ability to turn a unit into a police station or not, why do we need to go to HUD to get that, and then have them turn us down? That level of involvement in our day-to-day management is probably not healthy, and that is where we would like to see changes. But, by and large, we feel like we have a good partner in HUD.
JM: You've created the Pittsburgh Development Fund and the Pittsburgh Housing Development Corporation to plan and finance housing and real estate projects in the city. What is the purpose of these new entities, and who will be involved in their work?
TM: The purpose simply is to grow the city. Statistics show that the city has had a 40 year trend of losing population and businesses. Its tax structure over the last 10 years has been essentially flat, and the only way this city, or for that matter any municipality, is going to survive is to grow. We looked strategically at what is needed to make that happen in the city. One need is capital, the other is land, and the third is customers.
To address all three issues, we created a Pittsburgh Development Fund. We took seven million dollars a year out of our operating budget and committed it to a long-term financing vehicle, creating a 60 million dollar development fund. Then we went to the corporations and foundations in Pittsburgh to convince them to match this. They've agreed to do that, and they're in the process of raising $50-60 million. There is probably not a municipality in the country that has a $120 million fund to provide low-interest, flexible financing to make deals happen. We did this in part because we needed that flexibility in capital and in part because of the uncertainty of both state and federal traditional financing mechanisms that we used for real estate developments. Some of those funds were cumbersome and difficult to utilize.
The second thing we did was to recognize that we needed places in which to grow Pittsburgh. We had a legacy of old industrial property that was largely unattractive to the private market. We went out and acquired over 500 acres of property my first year as mayor, which was the largest land purchase in the city's history. We bought this property because it was not particularly attractive to anybody, it wasn't producing taxes, and we believed that we could, with aggressive management, get it back to adding value to the city.
The results are, after about a year and a half of this fund's existence and a year and a half of buying this land, that we have almost $450 million of new development in the pipeline now.
JM: Who is the target market for the housing, and who will be the developer?
TM: We probably have somewhere between 2,000 and 2,500 units of new development in the pipeline. This ranges from the houses in Washington's Landing that are fairly upscale, selling for $150-250 thousand dollars, to the housing we just broke ground for in Manchester that will be both publicly-assisted as well as more market rate, at around $175 thousand, to the units I saw in Garfield, which you could buy for $40,000 dollars with a deferred second mortgage.
The major project we have here is Crawford Square. We have successfully taken what is probably the most historically blighted area in the city and turned it into a very exciting place to live. The last house we sold there just went for $140 thousand. It's a very mixed-income development, both for the rental as well as the purchased homes there.
We have several hundred units under construction on the South Side, at 18th Street. We have budgeted several millions dollars this year to begin construction both for 130 acres on [the abandoned LTV Steel site], and also Nine Mile Run, a 250 acre site.
JM: Are these being done by for-profit builders?
TM: Some are being done by CDCs. The Garfield houses are being done by a CDC. The units in Manchester and the South Side are a combination of for-profit and nonprofit. Washington's Landing is for-profit, and Crawford Square is for-profit. The housing on the LTV site and Nine Mile Run will be built by private companies.
JM: What's the relationship of the Urban Redevelopment Authority of Pittsburgh [URA] to the Pittsburgh Housing Development Corporation and Pittsburgh Development Fund?
TM: They're created out of the URA, and the purpose was to give a more specific focus. On the larger developments such as in Manchester, as good as the Manchester Citizens Corporation is, it would really test their capacity to do 238 units. The housing development corporation will work in partnership with the CDC to do the larger scale units needed in some neighborhoods to reach that threshold or critical mass.
The goal is to get those neighborhoods healthy and have the market working. We would like to have both the CDCs and the public sector out of the business, and have healthy real estate markets in some of these neighborhoods. South Side is a neighborhood which has a relatively healthy real estate market, and we now have proposals from private developers who want to build houses there.
CDCs existed in the housing market largely because there was no private market. The Friendship area of Pittsburgh is another success story where there was a neighborhood that was not particularly healthy, and now has become very healthy and is working pretty well. There are neighborhoods that have continued to need a lot of public assistance. Manchester continues to probably be one, but it could work well on its own. We believe that the Mexican War Streets area and the entire Central North Side is an area where, with the proper mix of both private and public involvement, we could get that real estate market to work much better.
JM: The political climate at the national, state, and county level has moved to the right since your election as mayor in 1993. In addition to Republican control of Congress, Republicans hold the governor's office, and for the first time since the New Deal, constitute a majority of the Allegheny County commissioners. How can progressive urban coalitions be built to counter this trend?
TM: At the level of being Mayor, the partisanship that I lived with in the state legislature and you would see in Congress really loses its luster. If you look at Steve Goldsmith in Indianapolis, or Victor Ashe in Knoxville, or Jerry Abramson in Louisville, or other mayors around the country, you would not know our party by how we govern. [Indianapolis] is doing a major downtown development, similar to what we're proposing, but far more expensive and much richer in terms of the public involvement, and their downtown was in far worse shape than ours. If anything, [Steve Goldsmith, a Republican] looks more progressive or more Democratic than I do. In the last several years, we've reduced our city workforce by over 1,000. In the two years I've been mayor, we've reduced our budget by almost $50 million. Now, is that a Republican way of governing or a Democratic way of governing? It is a pragmatic way of governing. You have a budget, you can't raise taxes, you do what you have to do, and you try to grow your city.
What you hear coming from me is a recognition of market forces. I recognize that this city has to be competitive in a local and regional effort, and in a global effort. I work with the state and federal government to encourage them to help us be competitive, and I work with the county commissioners to be competitive. We're very market-driven, in how we've created a capital development fund, and how we've bought land. Is that Democratic or Republican? I'm not sure you can say.
John T. Metzger is on the faculty of the Graduate School of Public and International Affairs at the University of Pittsburgh, where he teaches housing and community development. He was the first coordinator of the Pittsburgh Community Reinvestment Group in 1989-1990.
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