Rowlett's new downtown apartment project is a HUD project. In fact, it is a HUD 221 d(4) project.
Yes, The Villages of Rowlett, the 225 unit rental project that is being relied upon to revitalize downtown Rowlett is a HUD project. The project that "officialdom" reports is going to cost Rowlett taxpayers $6 million (but by my calculations, $11 million, and counting), and counting a 15 year tax abatement, will take 65 years to recover our investment, (15 years, plus 50 years to recapture $11M divided by $220,000/year in taxes) is a HUD project. Now, if you are still reading this blog, that means you have avoided a heart attack. To aid in your recovery, I need to tell you that that information, standing alone, is no cause for alarm.
Generally speaking, when the public hears "HUD," they automatically think substandard housing, instant slums, junk cars in the parking lot, and a personal observation of mine, field dressing a deer in the parking lot. I actually witnessed the field dressing of a deer in a HUD project parking lot in Independence, Missouri. I was with the property manager of the well run project. I am happy to report that the miscreant tenant was given a short period of time to vacate his apartment. It is stories like this that create the poor public image of HUD projects. One bad project will overshadow 10 good projects.
There are many, many HUD projects around that nobody knows are HUD projects. Being a HUD project does not necessarily mean a subsidized project. I used to know more about HUD 40-45 years ago than I do now. In fact, when I first heard The Villages was a HUD project, I sent an inquiry to the mayor, city manager, and Director of Development Services, asking which HUD program was involved. I was inquiring about the accuracy of the HUD story I had heard, and explaining some differences between some programs, as I remembered them. Time and probably old age fogged some of the information I was offering. I was wrong on some of the information.......but not where it counted. However, it was time to do some research.
I don't want to get off in the weeds too far. However, there is some information you need to know before you can ask intelligent questions. Of course, if you want to ask dumb questions, you can stop reading right here. If you continue on, I will try to keep the dry as un-dry as possible.
First, you have to understand HUD. Generally, HUD doesn't make loans to anybody. HUD is an insurance company. They issue insurance policies to other people (lending institutions) who make loans. There are rules to the myriad of HUD programs. Some programs are "market rate" programs. That means there is no subsidized interest rates or tenant subsidized rents. I would guess that most of the apartments built in Dallas are built under some HUD "market rate" program. The bane of HUD are the subsidized programs. Section 8 is an example of a HUD subsidized program. There are other subsidy programs.
In some rare occasions, there are combinations of market rate and subsidized programs. In these programs, a project is usually 80% market rate, and 20% subsidized tenants.
Market Rate: When the economic environment is not so good, and there is a need for rental housing, developers have a hard time getting the financing they need to develop the projects. They can go to HUD. HUD says, "you build the project to our standards, and we will help you." The developer knows that by going to HUD, the paperwork is enormous, the costs go up, and the timeline to secure financing extends. Why do that? Because the developer gets: 1) the loan is amortized over 40 years instead of 30 and therefore reduces monthly payments, and further allows a reduction in rents; 2) the lender is insured against losses in the event of default, thus getting the lenders interested; and 3) the developer has no personal liability. That is enough to get everybody on the bandwagon. However, it is not free to the developer. He must pay a fee every month, just like FHA residential loans. This market rate operation is probably the only money making department in the entire federal government. It pays for itself. Most "market rate" projects are 221 d (4).
Subsidized projects: This one doesn't take much thought. Many of the benefits of the "market rate" projects apply here, also. These projects are the ones most people think of as "HUD Projects." If someone pays part of the rent to somebody who doesn't make much money, that project is soon occupied by people that don't make much money. That conjures up the image of people field dressing deer in the parking lot, junk cars, police kiosks, and perpetual partying. It is unfortunate, but sometimes that's true. But, the real picture is a little different. The unsavory crowd is a direct result of property management and the developer. The rowdy crowd is handled at the front door, not by income. Subsidized rents are often quite helpful to young families just getting started, or senior citizens trying to live on Social Security. These stories are never reported in the press. The projects that seem to have the most problems are the rehab projects, not the newly constructed projects. They are usually in the poorest and most crime ridden neighborhoods. However, it still remains the responsibility of the property manager to keep the riff raff out. You either don't rent them space, or you throw them out at the first infraction of the rules. What do you do with these people? I don't know. I just know I don't want them as neighbors. I want to be clear.......income has nothing to do with who I like. Character and integrity does. I will admit that its hard to keep a 100% subsidy project tidied up, but management has got to do it........not our culture. It's an over simplification, but throw the bums out.
Combination Market Rate/Subsidize: This is as the name implies. It's a combination of the two types of programs above. However, it is overwhelmingly "market rate" so the projects are usually well built and designed to appeal to the market rate renters. The HUD requirement for the 20% subsidized rentals is an attempt to keep from concentrating all low income renters into the same projects. This seems to have had some limited success. I talked to a developer who has completed 10 221 d (4) projects. I asked him how often HUD requires the 20% subsidy rule. He answered, "very rarely." Apparently, this is a condition imposed by HUD based on some underwriting conditions they use. It would appear the developer never knows when he is "tagged" with this requirement. This condition is revealed early, so that if its a deal breaker, the developer can fold his tent early.
Now, all the above sets out most of the HUD programs. The only fact we know is that The Villages is a 221 d (4). Even though we know that most 221 d (4) projects are "market rate," we also know about "Combination" projects. The first question that comes to mind is, "Does The Villages contain any subsidized units?" I don't know. I only found out by accident that The Villages was a HUD project, let alone know if it had subsidized units. The next question would be, "Why didn't Officialdom tell me it was a HUD project, then proceed to tell me which HUD program so that I didn't worry about it?"
During the extensive presentation at the council meeting whereby The Villages was approved, I never heard the word HUD used anywhere.....by the developer, .....by Rowlett's consultant.......by City Council.......by staff........no one. By the way, where did our consultant come from? He came from Denver. My granddaughter knew more about what was going on in Rowlett than he did.
The big questions is, "What else was purposely or inadvertantly held back from us?"
Most certainly the developer knew the project was a HUD project. If so, the developer knew if there was a 20% subsidized rental requirement, or less. Did the developer keep this information from the city? Did the developer even mention HUD to city authorities? If that information was withheld from the city, I would be absolutely furious. I would be looking for ways to throw them in jail. If the developer was straight with city authorities, why didn't they inform the public? That question makes me nervous. What else does "officialdom" know that they do not want the citizens to know? Was there a conspiracy between the developer and Rowlett's "officialdom" to keep the public in the dark about the project? I don't know any of these answers.
One of the purposes of this post is to explain many of the HUD programs to keep you from getting too excited about something you don't know enough about......yet. Just because The Villages is a HUD project, doesn't mean its bad. I can understand why "officialdom" kept it from the citizens, if they knew. However, I think that would be a big mistake, if that was what was decided. I think it is always better to tell the truth and the whole story. If "officialdom" explained the terms of the HUD involvement, I think the hue and cry would be minimal. Now, some schmuck (me) found out about it, and started asking questions. Now, the repairs for keeping information from the citizens might be worse than telling the truth in the first place.
What do we know? Not much. We know The Villages is a HUD 221 d (4) project. That's it. Oh, I know one other thing. If the City Council approved The Villages knowing it was to contained subsidized units, it would be the dumbest thing I have seen in 50 years in the real estate development business. They would have approved a subsidized apartment project to "anchor" downtown Rowlett. We could do well without that quality of guidance.
Do you still wonder why some people think Rowlett's "officialdom" is less than candid with the citizens? Do you ever wonder how "officialdom" got there?
Sorry for the long post. Had a lot to say.