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The Mixed-Income Scam!
by David Stanowski
23 September 2012


There is a great deal of pressure to rebuild Public Housing north of Broadway in high-poverty neighborhoods for political and financial reasons that are at odds with the best interests of the poor people that these units are meant to serve. Building developments there that are composed of 100% Public Housing units might be too obvious of a violation of the Fair Housing Act (FHA) for some involved, so the City is being ordered to use mixed-income development, under the pretense that it will void, or at least hide, the fair-housing violations created by building in these high-poverty locations. The extra unneeded units required to build mixed-income also has the added benefit for the Poverty Industry of raising the cost.
 
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The two fundamental mandates of the FHA are that Public Housing development must de-concentrate poverty and race/ethnicity. The more recent and sophisticated rulings, like Thompson v HUD, go a step further and seek to define census tracts (the official definition of neighborhoods) by the amount of opportunity that they provide for their residents. Some fair-housing experts have even devised objective scoring and ranking systems to quantify and compare census tracts.

These experts see opportunity arising from the resources available and people residing in a neighborhood, not just the block where they live, or their apartment building or condo complex; areas that are just too small to be meaningful. Opportunity has been demonstrated to be the highest in low-poverty census tracts; those with less than 10% poverty. This is why Public Housing should be built in census tracts with less than 10% poverty.



HUD must believe that building mixed-income developments inside existing high-poverty census tracts will transform the neighborhood from high poverty to low poverty; because that is what they must do to meet the latest requirements of the FHA. If a new development is unable to transform the neighborhood, then it should be built in an existing low-poverty census tract.

For example, if a 10-unit luxury apartment complex was built next to Sandpiper Cove (in the census tract with the highest poverty in the entire County), and it contained nine millionaires and one Public Housing family, would the apartment building itself be enough to provide sufficient opportunity to the Public Housing family? Common sense would dictate that they need resources far beyond just what is contained in their own building, no matter how prosperous their neighbors may be.

Compare this example to what the City is currently being ordered to build: a 122-unit mixed-income development on the Cedar Terrace footprint; a few blocks away from Sandpiper Cove, which is also in the census tract with the highest poverty in the entire County. They must build 49 PH units, 12 LITC/PBV units, 12 LITC units, and 49 MR units. If the development works as planned 49 PH + 12 LITC/PBV = 61 units will house residents below poverty, and 61 units will house residents above poverty.

Before this is built, the poverty level in this census tract (CT 7246) is 61%. After it is built, if it works perfectly, it will only lower the poverty level of the census tract to 59%, clearly demonstrating that mixed-income development does NOT even come close to transforming this neighborhood into an acceptable low-poverty census tract. If the manager fails to fill the other 61 units with people above the poverty level, and the entire development ends up filled with people below poverty; it will INCREASE the poverty rate of the neighborhood from 61% to 67%.
(see Appendix below for details and calculations)

It is completely dishonest to claim that mixed-income development at Cedar Terrace, or in other high-poverty census tracts, can change the demographics of the census tract enough to make it an acceptable location for Public Housing. Nothing could be further from the truth!

The calculations clearly show that building mixed-income in high-poverty census tracts violates the FHA just as clearly as building 100% PH does. There is actually very little difference.

But that's not all!

The City is also currently being ordered to build: a 160-unit mixed-income development on the Magnolia footprint. They must build 64 PH units, 16 LITC/PBV units, 16 LITC units, and 64 MR units. If the development works as planned 64 PH + 16 LITC/PBV = 80 units will house residents below poverty, and 80 units will house residents above poverty.

Before this is built, the poverty level in this census tract (CT 7243) is 26%. After it is built, if it works perfectly, it will actually RAISE the poverty level of the census tract to 28% clearly demonstrating that mixed-income development cannot transform this neighborhood into an acceptable low-poverty census tract. If the manager fails to fill the other 80 units with people above the poverty level, and the entire development ends up filled with people below poverty; it will INCREASE the poverty rate of the neighborhood even further from 26% to 34%.
(see Appendix below for details and calculations)

Location Census
Tract
Poverty
Level
Before
Mixed
Income
Poverty
Level
After
Ideal
Mixed
Income
Poverty
Level
After
Failed
Mixed
Income
Cedar Terrace 7246 61% 59% 67%
Magnolia 7243 26% 28% 34%
   

Appendix:


Cedar Terrace Calculations:

Cedar Terrace is in Census Tract 7246 with a population of 1,793 and 60.96% of that population is below poverty.

1,793 X .6096 = 1,093 residents below poverty + 700 residents above poverty

PH = Public Housing
LITC/PBV = Low-Income Tax Credit Units where Project-Based Vouchers may be used
LITC = Low-Income Tax Credit Units
MR = Market Rate units

MBS will build a mix of 49 PH units, 12 LITC/PBV units, 12 LITC, and 49 MR units = 122 total.

Assumptions:

Each unit will house 2.5 residents on average.

The residents in the PH units and the LITC/PBV will be below the poverty level, the residents in the LITC and MR units will be above the poverty level. If 50% of the units are filled with residents above poverty, it would represent a complete success for the mixed-income scheme.


Therefore, (49 PH + 12 LITC/PBV) units x 2.5 residents / unit = 153 new residents in the census tract below poverty, and (12 LITC+ 49 MR) x 2.5 = 153 new residents in the census tract above poverty.

New census tract demographics:

1,093 original residents in the census tract below poverty + 153 new residents in the census tract below poverty = 1,246 total residents in the census tract below poverty

700 original residents in the census tract above poverty + 153 new residents in the census tract above poverty = 853 total residents in the census tract above poverty

1,246 + 853 = 2,099 total residents now in the census tract

1,246 / 2,099 = 59% total residents now in the census tract below poverty


If Mixed-income is completely successful, it will lower the poverty rate from 61% to 59%; hardly an acceptable low-poverty neighborhood, i.e. with less than 10% poverty!

If Mixed-Income fails, and ALL 306 new residents end up below poverty, it will RAISE the poverty rate from 61% to 67%.


Magnolia Calculations:

Magnolia is in Census Tract 7243 with a population of 3,104 and 25.69% of that population is below poverty.

3,104 X .2569 = 797 residents below poverty + 2,307 residents above poverty

PH = Public Housing
LITC/PBV = Low-Income Tax Credit Units where Project-Based Vouchers may be used
LITC = Low-Income Tax Credit Units
MR = Market Rate units

MBS will build a mix of 64 PH units, 16 LITC/PBV units, 16 LITC, and 64 MR units = 160 total.

Assumptions:

Each unit will house 2.5 residents on average.

The residents in the PH units and the LITC/PBV will be below the poverty level, the residents in the LITC and MR units will be above the poverty level. 
If 50% of the units are filled with residents above poverty, it would represent a complete success for the mixed-income scheme.


Therefore, (64 PH + 16 LITC/PBV) units x 2.5 residents / unit = 200 new residents in the census tract below poverty, and (16 LITC+ 64 MR) x 2.5 = 200 new residents in the census tract above poverty.

New census tract demographics:

797 original residents in the census tract below poverty + 200 new residents in the census tract below poverty = 997 total residents in the census tract below poverty

2,307 original residents in the census tract above poverty + 200 new residents in the census tract above poverty = 2,507 total residents in the census tract above poverty

2,507 + 997 = 3,504 total residents now in the census tract

997 / 3,504 = 28% total residents now in the census tract below poverty


If Mixed-income is completely successful, it will actually RAISE the poverty rate from 26% to 28%; hardly an acceptable low-poverty neighborhood, i.e. with less than 10% poverty!

If Mixed-Income fails, and ALL 400 new residents end up below poverty, it will RAISE the poverty rate even further from 26% to 34%.

Note: Because the lowest potential poverty rate at the Magnolia mixed-income development (50%) is higher than the existing poverty rate in the census tract (26%), the mixed-income development at Magnolia will RAISE the poverty rate in the census tract whether or not it is “successful”. 

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