Inflationary Pressuring

All but a handful of the 770 units of low-income housing lost to Hollman have not been replaced
Craig Lassig

[Editor's note: A correction ran concerning this story; see end of article.]

Here's a truism that almost every homeowner has encountered at one time or another: A remodeling job will always cost more than contractors say it will. Of course, some cost overruns are much bigger than others. Take the case of the Minneapolis Public Housing Authority. The agency figures it needs more than $36 million to make its dreams for the Hollman redevelopment come true. And, according to documents obtained by City Pages, MPHA officials are looking to the U.S. Department of Housing and Urban Development to pick up the tab.

With the help of St. Louis-based developer McCormack Baron, the city aims to build a $198 million mixed-income community made up of 900 apartments, townhouses, and single-family homes on the former site of the city's largest public-housing project. The controversial project is riddled with unresolved budget conundrums, but right now the city is pouring its energy into finding the money to comply with a court order to replace hundreds of units of affordable housing.

According to a letter prepared by MPHA attorney Jack Cann and mailed to the other parties involved in the project--the NAACP, the Legal Aid Society of Minneapolis, the City Attorney's Office, the Minneapolis Community Development Agency, the Metropolitan Council, and HUD--MPHA wants the federal housing agency to fork over the money voluntarily. If HUD refuses, the city is prepared to ask federal courts to force the agency to cough up the cash. MPHA needs the money, Cann asserts in the lengthy document, so it can fulfill its court-mandated commitment to replace the 770 units of public housing that were torn down on the site as a result of the 1992 lawsuit known as Hollman.

The only problem is, HUD has already paid the city every cent called for under the terms of the Hollman decree, the 1995 settlement of the lawsuit brought by the NAACP and Legal Aid on behalf of public housing residents, including a woman named Lucy Mae Hollman. The suit charged that federal, state, and local housing authorities had a long history of segregating the poor, many of whom were black, into 73 acres of dilapidated public housing on the city's north side.

Under the terms of the decree, HUD paid $117 million to be used by the city to house residents in affordable units spread out across the metro area in what's described as an effort to "de-concentrate poverty." A little more than $74 million of that sum was to be used to pay for the replacement of the 770 lost units, an amount MPHA officials now say was far too small to accomplish that task. (Two hundred of the replacement units are to be located in the Hollman redevelopment; city officials hope the rest will be built in the suburbs and other parts of the city.)

Just how much more money will be needed to replace the demolished housing remains unclear. But one thing's for sure, the amount just keeps getting bigger. In February the budget deficit was estimated at $11 million. By April that figure had climbed to $22 million. Now, eight months later, it has jumped another $14.4 million to a total of $36.4 million. In his letter to the other parties to the suit, Cann attributes the ever-widening gap to rising construction costs. He explains that HUD's money will stretch to pay $96,268 per unit, while most of the construction bids the city is receiving are closer to $125,000.

"The funds previously provided by HUD for development of these units is insufficient to produce all 770 units and this shortfall has created an immediate and serious impediment to the MPHA's efforts to develop the replacement units," Cann writes. "In addition, the 200 units to be developed in conjunction with the North Side redevelopment have been estimated to cost in excess of $162,000 a unit."

Critics of the redevelopment concede that housing costs are going up. But they say blaming such dramatic cost overruns on contractors' estimates alone is to tell only part of the story of how a development born out of a fight for racial justice has turned into a quest to create a gentrified subdivision. "Cann is just carrying water for [city council president] Jackie Cherryhomes, who wants an upscale development in her ward," says Kirk Hill, former director of the Minnesota Tenants Union. "We told Legal Aid and the city that the amount HUD was giving them to build the units was too low way back when the decree was signed, but they just pushed us aside. I think they thought that because the settlement was court-ordered they were in the enviable position of being able to force the federal government to pay whatever they wanted for this development....They thought they had it all sewed up. But they didn't."  

Legal Aid attorney Tim Thompson, who represents some of the plaintiffs in Hollman, explains that the city has been seeking additional HUD funds to build Hollman replacement housing since February of 1999. The requests were general at first. But since last spring, Thompson explains, the city has been pushing a more specific plan. The MPHA wants to use Minneapolis's share of what's called "Moving to Work" money, Thompson says, to bolster the redevelopment. Moving to Work is a HUD program aimed at increasing housing choices for low-income families while at the same time helping them to become economically self-sufficient. Minneapolis asked to be allowed to exchange unused Section 8 vouchers--rent subsidy certificates available to low-income families--for cash to close funding gaps in the Hollman redevelopment. HUD didn't reply.

Until the MPHA threatened to go back to court, anyhow. Cann did not return City Pages' phone calls about this story, but Thompson confirms that the MPHA's letter means Cann and the city have stopped asking nicely. "Basically what we've found with HUD is that unless they're faced with the threat of a court action they don't act," he says. "HUD has been agreeing in principle with the city's requests for months but they just didn't do anything. This seems to have forced their hand." In return, he says, HUD has told the parties that the federal agency wants the city to agree not to ask for any more money for the project in the future.

Which could become a dicey proposition if cost overruns continue. Legal Aid is prepared to support the agreement, Thompson says, but not without reservations. "How certain can we be that this Moving to Work amendment will provide all the money we need?" he asks. "If it won't cover everything, then what will we do?"

Suck it up and come back and ask for more, predicts HUD public affairs officer Patricia Mack. All that stuff about never asking again "is just talk," Mack explains. "It doesn't mean anything. I mean, they can always come back and ask for more money if they need to. We can always say no. In the end we can whine all we want, but what choice do we have? We don't want these new units to fall down. We want to build quality housing that will last."

Ron Edwards, the NAACP's representative to the city's Hollman Implementation Committee, says the civil rights organization has already notified Legal Aid and the city that it wants no part of this latest deal. "The city should have been using those Section 8 vouchers to get people into housing for the last five years," Edwards says. "Yes, the housing market has been tight, but the whole process has been tied up in bureaucracy and only a few [vouchers] have been used in the last several years. Now they want to turn the rest into money to pay for a project that doesn't benefit the people who were forced to move out of their homes in the first place. No one knows what really happened to most of those people. No one has kept track of them. They're forgotten."

Figuring out just how far behind the city is in this process--and why--is a mind-boggling exercise. In fall 1999 the judge overseeing the Hollman decree noted that the city had then replaced only eight of the 770 low-income housing units. Calling that "a sorry history," U.S. District Court Judge James Rosenbaum said he expected to see at least 80 in a year's time. At present the city claims to have accomplished that goal; never mind that the official statistics are peppered with such qualifiers as "under construction," "under contract," and "in negotiations."

"Public housing production is going too slowly," Thompson agrees. "The major problem is that the various agencies have been dancing around for years over who should play what role in managing and running the buildings, the city or the suburbs. As a result, things have gone much slower and we are clearly far behind schedule with replacing these units." All 770 units are to be completed before the end of 2001, Thompson says.

Thompson may be comfortable enough to sign off on the city's plan, but Edwards and the NAACP still have questions. "The city knew that this project was belly-up in 1999 before they'd built a single replacement unit," says Edwards. "So the question is, Why are they broke? Where did the millions intended for that housing go?"


Correction published 12/20/2000:
Owing to a reporting error, we misspelled the name of Minneapolis Public Housing Authority attorney Jack Cann. The above version of the story reflects the corrected text. City Pages regrets the error.

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