Deconcentrating Poverty and Other Scams

Julie and Bruce Khalilzadegan bought Phalen Place in 1989. The string of eight three-story walkups sat among dozens of similar structures on a "superblock" on St. Paul's East Side. Buildings there typically face parking lots instead of streets, and most are occupied by poor families, many of them immigrants. The Khalilzadegans renovated Phalen Place with a loan from the city of St. Paul.

A few years later, the Khalilzadegans went back to government officials, this time seeking a rehab loan from the Minnesota Housing Finance Agency for a couple buying another of their buildings. The process dragged on until they arranged a meeting with the agency's top underwriter, Jack Jenkins. He told them that the MHFA was no longer interested in investing in the superblock; the agency already had too many "problem properties" on the East Side.

Jenkins, since promoted to managing director of multifamily housing, confirms that the agency has put a temporary hold on projects in the area. The Khalilzadegans found financing in the private market and filed a discrimination complaint with the federal Department of Housing and Urban Development. They haven't heard a decision.

Despite the toll that negligent and absentee landlords have admittedly taken on the area, Julie Khalilzadegan maintains that most of the area's rental housing stock is structurally sound and could be rehabbed. But she doesn't believe officials are interested in that anymore. "I can't read people's minds," she says cautiously, "but from their actions I can't help feeling that they want to get rid of these low-income tenants."

She's not alone in that suspicion. The area surrounding the superblock is slated for a serious makeover in the years to come; plans include a new lake, a new road, a cozy little shopping center, and demolition of some current housing stock. Details are sketchy at present, but word is that in the long run, up to 25 percent of the superblock's rental housing units could be torn down.

It's part of a new consensus that seems to be emerging quietly among local policymakers. State Sen. Randy Kelly (DFL-St. Paul) generated some heat for himself this spring when a housing bill he introduced spelled out that new consensus in its preamble: "The Legislature finds that... the concentration of low-income rental housing in a few neighborhoods in the city has led to deteriorating property values and increased crime in those neighborhoods, to the detriment of their residents."

The language, as critics noted, doesn't refer to run-down problem properties, but low-income rental housing, period. By way of remedying this new form of blight, the bill would have all but prohibited new low-income housing construction in "concentrated" areas like the superblock. It also slated $5 million in state money for "acquiring, demolishing, and removing multiple-unit residential rental property."

Kelly didn't return phone calls for this story; the bill's author in the House, state Rep. Andy Dawkins (DFL-St. Paul), says Kelly told him he wrote the bill because, after years of watching the neighborhood try to "refortify, or regentrify, or whatever you want to call it," he found out that a complex for low-income elderly Native Americans was set to be built right across the street from the superblock. "He blew up at that point in time," Dawkins says. The preamble language was eventually deleted in committee, along with most of the bill's other provisions.

The general principle, though, is alive and well. Policy types call it "deconcentration of poverty," and its flagship is the Hollman decree--the 1995 discrimination lawsuit settlement that will remove at least 330 public-housing units from north Minneapolis. And other examples are popping up with increasing frequency. There's Concord Square Apartments, a 138-unit complex inhabited mostly by Hispanic families on St. Paul's West Side. HUD, which ended up owning the building after a mortgage default, is offering to sell it to the city of St. Paul, which presumably would recruit a private developer. Both the neighborhood group and the city have indicated that one, and perhaps two, of the complex's five buildings should be torn down under any rehab plan. At the other end of the Twin Cities, Brooklyn Park this spring won tax-increment financing authority from the Legislature for an ambitious project that could include removal of up to 500 low-income apartments--most of them worn at the edges but structurally sound.

Besides their implications for low-income tenants, the four projects have a few hallmarks in common. All of them proclaim lofty goals--rebuilding neighborhoods, creating green space, and fostering "diversity in housing types and housing ownership options." There's talk of turning small apartments into larger ones, and of creating jobs and shopping centers. Dotted with phrases like "defensible space," "neighborhood signature amenities," and "urban villages," all the plans bear the imprint of the so-called "New Urbanism" movement.  

None of the four plans, however, contains convincing mechanisms to assure that the low-income housing that's torn down will ever be replaced--and this in a metro area where, according to HUD data, poor people are already shut out of the housing market at strikingly high rates. Only Hollman features any discussion of replacement, but under its terms new units don't have to be developed until 2001, and some "replacement housing" will likely consist of rental vouchers that area landlords are not obliged to accept.

Until recently none of this would have been possible. For years, Minneapolis and St. Paul were required to provide one new low-income housing unit for each one they demolished, a provision enacted after the development boom took out huge numbers of cheap apartments in both downtowns. Neither city ever fully complied, and the requirement was repealed in 1994. That repeal, say tenant advocates, seems to have sparked a new demolition frenzy, this time dressed up with a more elaborate and civically responsible rationale.

Caty Royce, an organizer with the tenant-advocacy group Community Stabilization Project (CSP), says there was a telling moment when legislators debated Kelly's bill in committee. Someone asked, she recalls, where tenants displaced from the buildings he was offering $5 million to demolish should go instead. "And then someone else said, 'Don't you remember, we passed a law that's building housing for them in the suburbs?' And that was the end of it."

That was a reference to the Metropolitan Livable Communities Act, legislation that grew out of research by state Rep. Myron Orfield (DFL-Mpls.) into how some parts of the metro area were getting government subsidies, new jobs, and high-priced housing while others were left in the dust. Orfield's pitch revolved around getting wealthy suburbs to "do their share" by taking down barriers to low-income housing and passing on some of their property tax dollars to the rest of the metro. His legislation never made it. But another bill--an all-carrot, no-stick version of the same principle--eventually passed in 1994. It contained no mandates about low-income suburban housing, but held out the prospect of Met Council grants to suburbs who agreed to build some.

Land prices, tax structures, and public sentiment all militate against serious efforts to build affordable housing in the suburbs--unless the definition of "affordable" is reworked. According to current Met Council guidelines, an affordable house can cost up to $115,000; apartments qualify if the rent is no more than $682. Suburbs can create housing for people making up to $43,000 (for homeowners) or $27,000 (for renters), and still be counted as making a good-faith effort under the Livable Communities Act. If developments stay near the upper end of that range, as first indications suggest, suburban housing will be easier to find for folks at the unstable margins of the middle class--recent college grads, divorcees, the downsized--but remain out of reach for the sort of people displaced from neighborhoods like Phalen.

Which is, suspects Ed McDonald, exactly what lawmakers had in mind. "If they're tearing [housing] down over here, and not rebuilding it over there, where are people supposed to end up? In temporary shelters? Leaving the metro area? If that's what they want, maybe they should come right out and say that."

McDonald is among a growing number of advocates who have begun discussing deconcentration as the potential target of an anti-discrimination campaign. Already there are organizations agitating against particular projects: In Phalen, the CSP demands that the neighborhood's entire plan be put on hold. But that, says Paul Gilliland, is unlikely. The co-chair of the task force that came up with the plan, he says CSP came to the process late and its rigid stance against demolition is unrealistic. "When people go, heck, your neighborhood is going to have all the below-the-wind, bottom-of-the-line housing, and it's going to stay there--well, we don't agree with that. The community has nothing against low-income housing, but we want it to be decent. We want to make it a better place for low-income people."

Maisie Johnson says she's heard that talk too many times. A board member at CSP, she lived in the Summit-University neighborhood in the 1970s, when it was undergoing the last great wave of "revitalization." The program involved city-sponsored rehab, demolition, and new construction; in the long run many people couldn't afford the refurbished apartments and homes, and others were squeezed out as values rose and property taxes increased. "We had a meeting with [then-mayor] George Latimer," Johnson remembers. "We said, 'You know, maybe you're just trying to get the people of color out of here.' He said--and I guess I had to give him credit for honesty--he said: 'It has nothing to do with color. It has to do with money. And it just so happens that people of color don't have enough of it.' We didn't have no comeback for that." CP

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