Building From The Bottom Up

By Jennifer Hull

Had anyone told Cornelia Jones that she would one day own a house, let alone on Junius Street in Brooklyn's notorious Brownsville district, she would have laughed. The average price for decent housing in adjoining neighborhoods is $80,000, far above what her husband Melvin, a package loader with United Parcel Service, could swing on a salary of just under $30,000. Moreover, Junius Street was a wasteland of vandalized buildings and rubble-strewn vacant lots, not even a place "that I wanted my car to break down in," says Jones, 48. Yet in August 1984 the Joneses and their two children moved from a nearby public-housing project into a spanking-new two-bedroom house, complete with front and back yards. The house, part of a new development of more than 1,000 two-story residences, "is all I want in a home," says Cornelia Jones. Its address: 500 Junius Street. Its cost to the Joneses: just $39,000.

The Joneses' entree into home ownership and the rebirth of Junius Street are the work of the Nehemiah Project, the largest of the community-based private housing groups that are springing up around the country to answer the enormous need for low-cost shelter. From Boston and Chicago to San Francisco, nonprofit development corporations, civic-minded church groups, foundations and companies have stepped into the vacuum left by the Federal Government's withdrawal from large-scale public housing construction.

Washington was spending nearly $30 billion a year on public housing when Ronald Reagan arrived in office in 1981. Convinced that such outlays are wasteful, the President has slashed housing aid and abruptly halted new construction, promoting instead a market-driven approach to the problem. Community groups are quick to note that they cannot solve the housing shortage without renewed help from the Federal Government. Yet by developing more efficient construction techniques and innovative financing, the smaller builders hope to pioneer new solutions that draw on both public and private resources. As these groups demonstrate "more frugal ways, more effective ways to house the poor," observes Developer James Rouse, "we can emerge with federal programs that will make much more sense and will encourage enterprise and resourcefulness."

The key to the private groups' success is getting local communities involved, which clears away expensive and time-consuming political obstacles to projects. In Brooklyn a coalition of powerful East Brooklyn churches launched the Nehemiah plan seven years ago, taking the project's name from the Old Testament figure who revived Jerusalem after the city was destroyed by the Babylonians. "Nehemiah went to the people and said we have to rebuild," says Mike Gecan, an initiative organizer. "That is what this effort is all about."

After raising some $8 million and mapping out a detailed plan for low-cost construction, Nehemiah's sponsors went looking for additional help from city hall. When New York Mayor Ed Koch pleaded poverty, the group won the day by pointing to the support that the project had already garnered. Recalls Roman Catholic Bishop Francis Mugavero: "I said to the mayor, 'I would suggest that you steal the money, and I will absolve you.' " Laughing, Koch finally responded, "You've got it."

New York City gave Nehemiah 30 blocks of vacant land to build on. Equally % important, the city agreed to provide each home buyer with a $10,000 interest- free second mortgage, repayable only when the house is resold. A vital ingredient in many private housing initiatives, the second mortgage can bridge the gap between the price of a home and the amount of a first mortgage that a low-income family can afford. For the Joneses, this interest-free loan, coupled with a below-market- rate first mortgage from New York State, reduced the monthly cost of their house to just $350; they had been paying $375 for a two-bedroom public-housing apartment.

Cutting costs and obtaining "layered financing" from different sources are fundamental techniques for keeping down the price of new construction. In South Boston a bricklayers union reduced its overhead on 18 units of moderate- income housing by obtaining a $1.5 million construction loan from a local bank at below prime rate. The reason for the discount: the union agreed to invest $1.5 million of its pension fund in the bank's certificates of deposit. In nearby Somerville, Mass., the nonprofit Somerville Corp. used $484,000 from a 1984 federal Urban Development Action grant to attract more than $2 million in other funding. The money enabled Somerville Corp. to build 32 red cedar town houses for local residents on the site of a former school. The houses sold for $34,500 to $86,000.

In San Francisco a nonprofit housing initiative called the Bay Area Residential Investment and Development Group (BRIDGE) has helped finance construction of more than 2,400 units of multifamily housing, in part by securing city approval to waive zoning restrictions on the number of dwellings in a project. By building extra units, BRIDGE is able to boost the development's total value. It then sells some of the units at below-market rates.

In Chicago the South Shore Bank, which has helped rehabilitate the city's South Shore area by providing reconstruction loans, has expanded into Austin, a blighted neighborhood of 150,000 residents on the city's West Side. The bank has made $500,000 in loans in Austin since last summer, and a bank affiliate is helping renovate two buildings in the area. In December, Chicago's John D. and Catherine T. MacArthur Foundation announced it would donate $3 million to the project.

Other foundations are showing interest in the housing problem. A New York- based nonprofit organization called Local Initiatives Support Corp. has loaned some $50 million to more than 400 community programs across the country since 1980. The group, which was launched with the help of the Ford Foundation, last month announced it would provide $16 million to help create 1,000 low-income apartments in a partnership with New York City. Much of the investment will come from private corporations in exchange for a federal tax credit, one of the few credits included in last year's tax-reform bill.

In similar fashion, James Rouse's Enterprise Foundation is providing funding to almost 70 nonprofit housing groups around the country. Rouse, known nationally for his role in revitalizing downtown Boston and the Baltimore Harbor, envisions a national network of neighborhood housing initiatives supported by entities like Enterprise but also backed by federal funding. "The initiative would come from us, but the Government would make available the funds that are so desperately needed," says Rouse. Groups like Enterprise particularly want Congress to approve a $150 million second- mortgage fund similar to the one used in the Nehemiah program.

Certainly, some additional support for low-cost housing is necessary. In East Brooklyn a handwritten sign on the door of Nehemiah's offices sums up the dilemma faced by private housing groups across the country. PLEASE DO NOT KNOCK! reads the placard. WE ARE SOLD OUT. Those on the list for Nehemiah housing face a wait of more than two years.

With reporting by Melissa Ludtke/New York, with other bureaus