How Atlanta’s housing agency for the poor might help the well-off instead

Six years ago, as the Atlanta Housing Authority CEO was locked in a bitter political feud that would lead to her ouster, Renee Glover struck a deal with the developer who helped her transform the city’s crumbling public housing projects.

AHA gave partnerships led by Integral Group, co-founded by prominent developer Egbert Perry, seven years to decide whether to buy more than 100 parcels of the authority’s land. All of them were at or around apartment complexes he built with $65 million in taxpayer funds and other financing where the projects once stood.

Now, Perry has chosen to buy them, and the authority’s current leadership wants out. The deal does not require Integral to build affordable housing on the parcels, which comprise one-quarter of the authority’s vacant land and have a tax value of $30 million. Perry and Glover told The Atlanta Journal-Constitution that they envisioned market-rate developments, not discounted housing to draw those with lower incomes.

If completed, the agreement would put Atlanta's housing agency for the poor in the position of subsidizing homes and shopping for the well-off — at a time when the city's affordable housing is vanishing at crisis rates. Its complicated terms permit Perry to buy the land at a steep discount based on values that for some parcels are half what they might sell for on the open market today, according to an analysis performed by a real estate research firm at the request of the AJC.

Such a deal would contradict AHA's mission, said Catherine Buell, who said she first learned of the agreement as she took over the authority as CEO late last year. Mayor Kasim Reed, who pushed Glover out in 2013, made affordable housing one of the top issues of his last years in office, and key parcels in the agreement are located in Atlanta neighborhoods that need it. Two sites are blocks away from luxury construction, while a third is near the far southeastern leg of the Beltline, where values are set to skyrocket.

“Our goal is to reinvest in the city and be a part of city’s growth,” said Buell. “It is not to lose assets that are really valuable.”

Two AHA board members — including its current chairman — also charge that Glover signed the 2011 deal with Integral without informing them or holding a required board vote, which she denies. Glover said the incentives were in the works for nearly two decades as part of her plan to replace AHA’s islands of poverty with neighborhoods nice enough to convince the middle class to move in next door to the poor. Integral deserves the deal for years of working in areas that were once so desolate and crime ridden that some called them war zones, she said.

“Government partnerships with private developers don’t work unless both parties think they’re getting a good deal,” Glover said.

Perry has the most to lose if his long-awaited option-to-purchase agreement unwinds. Integral is already grappling with delays in its planned redevelopment of the massive former GM plant site in Doraville, and in contentious interviews with the AJC totalling more than two hours, he called criticism of the AHA agreement "offensive." Perry takes great pride in how his mixed-use developments transformed the city and said the authority owes him this deal and more because of the value he helped create.

“They don’t realize what’s there is because of what we did. Not what the authority did. What we did,” Perry said.

Perry also called current AHA leaders “clowns” who don’t understand that putting more affordable housing on these sites would only re-create pockets of poverty.

“They were in diapers when I was doing affordable housing,” Perry said, adding that the city’s dilapidated housing projects “were occupied by some of the most pathologically deficient people in society.” Instead of living in environments that fostered crime and were isolated, he said, the poor now live in places that are clean, safer and affordable.

But affordable housing advocates said the deal is proof of how out of touch city leaders have been with the needs of low-income and working-class residents. When Glover rebuilt the projects, she pushed poor people out, said Tim Franzen, an organizer with the Housing Justice League in Atlanta. This is just more of the same, he said.

“This is a government giveaway,” Franzen said. “This is the government giving a gift to a private developer who seeks to withdraw as much wealth as possible.”

A public-private partnership

Cities across the nation demolished public housing projects through the mid-1990s and early 2000s with funding from the federal Hope VI program, which sought to break up these areas of concentrated poverty. In Atlanta, where a greater percentage of residents lived in housing projects than in any other American city, Glover said she wanted to do more than replace them. She aimed to remake entire communities, complete with new schools, recreation centers, shops and offices.

It was a high-risk venture, but Glover, who retooled the public housing authority to act like a private developer with a public mission, used the skills she gained as a lawyer in corporate finance and real estate to get funding and win over city business leaders. Perry had built his reputation as the young president of H.J. Russell & Company and accepted the challenge as leader of the newly formed development firm Integral Group.

Their first collaboration was to tear down Techwood Homes, the nation’s first public housing project, and replace it with what is now Centennial Place. Once Integral completed the mixed-income housing required by the U.S. Department of Housing and Urban Development, it hoped to develop houses and retail space for buyers who could pay market rates.

Centennial’s retail phase never broke ground, but the development was considered to be such a success that Glover won a special HUD waiver that allowed her to choose Integral to redevelop other housing projects without putting them out to bid.

Integral continued to build apartment complexes fit for aspiring members of the middle class at the demolished Carver, Capitol, Grady and Harris homes. On a recent tour she gave a reporter, Glover showed off Harris’ replacement, Ashley Collegetown, where a promised hotel and single-family homes were never built. But the grounds are well maintained, and residents can enjoy a retention pond with a fountain.

A planned supermarket was never built at the new Villages at Carver, leaving residents to travel two miles or more. But a gleaming YMCA now stands there, and pipes and other infrastructure are already in place for houses that have yet to break ground.

“I wouldn’t have a problem living at these properties,” Glover said. “And I always say that if you wouldn’t want your family living there, or you wouldn’t live there, then somehow, we haven’t quite gotten the standards right.”

Values based on complicated equation

AHA has paid Integral many millions for its troubles. In addition to Hope VI funds, which AHA gave in the form of loans the developer did not have to repay, Integral receives annual payments from AHA to manage the apartments it built, plus millions in additional federal rent subsidies. Last year, management fees alone totalled $2.5 million for the company.

Integral and its partners’ 2011 option to purchase undeveloped land at the former Carver, Capitol, Grady and Harris sites could be worth many millions of dollars more. AHA planned that Integral would acquire the parcels at a discount because the developer needed to pass the savings on to customers, Glover said. Wealthier home buyers and big name retailers wouldn’t think of moving to the former sites of housing projects unless they got a bargain, she said.

“People really don’t understand how much work goes into aligning the interests of the public and the private sector,” she said.

The agreement gave no sale prices, deadlines, or other requirements for what would be built on the land, records show. It specified no interest rate for the 100 percent financing AHA would provide for three years, either. In their place was a pledge to let Integral wait years to decide whether to purchase the properties at prices calculated according to complex equations.

These equations priced the parcels based on their values when the first phases of redevelopment were completed on these sites some 10 to 17 years ago — not the prices they would sell for on the open market today.

No appraisals were done at the time, Buell and Perry said, but land values have climbed since the early 2000s at all of the sites involved in the options deal, according to an analysis by Colliers International for the AJC. At Grady and Capitol they have nearly doubled.

Perry said it’s fair for him to acquire the properties at a discount because he created their current value.

Integral and AHA would share ownership of a new company that would hold the land — and AHA would receive some of the profits. But with one big catch: AHA would have no control. Integral would have “full, absolute and complete power and discretion, acting alone,” records state.

That was by design, Perry said.

“The fact of the matter is, why would I give the authority control over something that we’re responsible for funding?” he said.

Glover and Perry said the agreement underwent all required vetting by HUD and AHA, although Glover told the AJC she doesn’t recall details of every authority board meeting.

“I’ll make a statement without any equivocation — whatever board approvals and whatever HUD approvals were needed are in place,” Glover said.

Eugene Geritz, a former HUD official who ran the team that managed these and other Hope VI projects, said they could not have gone through without documentation of the proper approvals.

But current AHA Chairman Daniel J. Halpern, a Reed ally who was on the board when the options deal was signed, noted Glover approved it one month before the board voted to restrict her authority over concerns she was acting without members’ consent.

“The AHA Board of Commissioners in 2011 was not informed of the options contracts or briefed on them, and as the record shows they were not discussed or authorized in our board meetings,” Halpern said in a statement to the AJC.

The AJC requested approval records from HUD, but the agency has yet to respond.

Deals were done differently elsewhere

The deal-making by Perry and Glover brought them widespread attention and new opportunities. President George W. Bush praised the new Villages at Carver on a visit there, and some called Atlanta’s approach a national model.

Backers praised Glover’s approach as “innovative,” but her penchant for operating AHA like a private developer was her undoing. She left her post after controversy over yearly compensation that reached private sector heights of $644,000.

Glover and Perry continue to work together. Perry joined the board of Fannie Mae in 2008 and become chairman six years later. Glover joined him on the board last year, earning an annual director’s fee of $160,000, according to the government-sponsored mortgage backer’s disclosure statement.

Despite their successes, much of their long-term impact remains unresolved. Whether the authority had to cede so much to private developers to revitalize its housing projects is far from clear. Geritz, who called the city’s Hope VI work a success, said other cities such as Seattle and Detroit used similar incentives for development, but acknowledged that each deal was different. The sheer complexity of agreements made under the Hope VI program make them hard to compare.

Chicago’s housing authority relied on nonprofit developers and did not offer the kinds of discounts AHA gave, said Susan Popkin, a senior fellow at the Urban Institute and an expert on Hope VI. Its authority leased out land at 99-year terms to build mixed-income housing, and developers repaid loans with income from rents and sales of market-rate units. Developers also made money with contracts to provide social services.

Experts agree that it’s time to consider whether AHA’s deal with Integral still makes sense.

“To not create any new affordable housing out of these properties seems a lost opportunity,” said Georgia Tech professor Dan Immergluck, a housing and real estate finance expert.

AHA board members have tried to block the Integral deal by voting unanimously against funding a required property appraisal, but there are no guarantees. Buell hopes to resolve the dispute without a lawsuit, but Integral has leverage through its property management contracts and role as lead developer in a signature AHA project to redevelop areas near Atlanta University Center. Perry said that he has not decided how to respond to the vote, but added that he would follow the city’s new affordable housing requirements — adopted last year — if he develops the properties.

Glover argues that private developers will no longer trust AHA if it reneges. And what a loss that would be, she said.

At Ashley Auburn Pointe, the former site of Grady Homes, the lobby of the leasing office smells of potpourri. Planned single-family homes were never built, but there’s free lemonade on a nearby counter, and a flat-screen TV that stretches nearly the length of a wall. Solar panels and green building techniques lower utility prices for residents, who pay $1,200 and up for a one-bedroom apartment at full price.

It’s one of Glover’s favorite properties because it was so well done, she said.

“If the housing authority believes they have a better mouse trap, then put it to work,” Glover said.