Ruckus in Rockford

By
10 min read

Gorman & HUD confront NIMBYism 

NIMBY – “Not In My Back Yard” – has been a real estate rallying cry for generations – whether it replied to integration, ethnicity, unwanted businesses, addiction treatment centers or even architectural diversity. Affordable housing agencies and developers have borne the brunt of citizens’ action committees and organized, often ugly protests. But in the wake of HUD’s Affirmatively Furthering Fair Housing rule (AFFH) and last year’s Supreme Court decision upholding the validity of disparate impact in fair housing claims, a dedicated affordable housing developer, along with the local housing authority, has challenged the city of Rockford, Illinois. The action has brought the case to court and wide attention.

Tom Capp is Chief Operation Officer of Gorman & Company, a Wisconsin-based company with offices in Arizona, Colorado, Florida and Illinois, and a more than 30-year track record of commitment to quality affordable housing, equal opportunity and community revitalization. The majority of Gorman’s developments are in challenged urban areas with high concentrations of poverty. They have the metrics to prove that these developments have been, in the company’s word, “catalytic” for neighborhood improvement and bringing in additional economic growth.

Gorman & Company also closely follow trends and studies to look for ways to better serve its lower-income clientele.

“A big intellectual driving force in housing policy over the last five years has been spearheaded at Harvard and Stanford by Raj Chetty,” says Capp. Chetty is a prominent, 37-year-old economist with a focus on public policy economics and equality of opportunity, who has taught at both institutions. “His research seems to show that outcomes for people in affordable housing are measurably different in neighborhoods with better metrics. Historically, most of our development has been in neighborhoods with high concentrations of poverty. But we now want to see if outcomes would be better if we allocated some of our resources to opportunity zones.”

Opportunity Zones
“Opportunity zone” is a term of art for higher-income neighborhoods, which are likely to have better schools and public facilities, and more upwardly mobile residents. As HUD states clearly in its published explanation of AFFH rules, “No child’s ZIP code should determine her opportunity to achieve.”

“A number of policymakers will say, ‘We cannot do both,’” says Capp. “But we disagree. We accept the research on social mobility as important, and it has manifested itself in a number of ways, including HUD’s support and state agencies taking these concepts into strong consideration when scoring projects in QAPs [Qualified Allocation Plans].”

Capp has viewed the affordable housing world from a variety of perspectives. Before coming to Gorman, he worked for an urban planning firm in Chicago, was mayor of Fitchburg, Wisconsin, and directed land use policy for Madison and surrounding Dane County. He currently serves on the NH&RA Board of Directors.

Fairgrounds Valley Apartments on the west side of Rockford, Illinois, was a public housing project Gorman decided to undertake as a RAD (Rental Assistance Demonstration) conversion in an $11.8 million joint venture with the Rockford Housing Authority (RHA). The project had the full support of the Illinois Housing Development Authority (IDHA).  Fairgrounds consisted of what Capp characterizes as “substandard, barracks-style houses laid out over many acres. It is in a tough, tough, primarily African American neighborhood: a classic, urban challenged neighborhood.”

The first phase called for “repositioning” 72 of the approximately 200 residential units to two- and three-bedroom apartments on a new site in east Rockford that RHA purchased and which IDHA had defined as an opportunity area. Plans for “New Towne” featured attractive row houses with different colors of siding, with front walks leading to sidewalks, all built around grassy squares with newly planted trees.

When the full project was complete, RHA wanted Fairgrounds Valley razed and rebuilt as a smaller community.

“Forever, communities have felt the right to ask whether your development is market-rate or affordable-rate, and treat you differently depending on your answer,” Capp comments. “But if you’re meeting all other guidelines and zoning, it’s no longer a legitimate question to ask.

“Now, the HUD regs are very clear: There is to be no extra layer of performance or compliance because of the socioeconomic status of who’s going to live there. ‘Socioeconomic’ is often a code word for race.”

In March 2015, Gorman applied for 9 percent Low Income Housing Tax Credits for the 72 initial units and was awarded the credits in June. Boston Capital and Citibank were the financial partners.

Rockford Mayor Lawrence “Larry” Morrissey was a strong supporter of the project. “Larry is one of the most amazing standup guys,” says Capp. “He had insisted the development be designed very well and blend into the neighborhood, and he stayed with it throughout.” One of the reasons RHA chose the particular site was that an old post office was to be converted into a new police station next to the development.

Community Reacts
The project went forward under the leadership of Andre Blakely, Gorman’s Illinois Market President. Almost immediately, the protests began. “What I’ve been really shocked at is the number of emails I’ve gotten and some of the comments from people saying, ‘You shouldn’t let those people come to the east side,’ which is a code word in my opinion,” Mayor Morrissey declared during an interview on WROK radio. He went on to acknowledge that there had been high crime around Rockford’s public housing projects in the past, “but there’s a big difference between a housing project of the 1960s and an affordable housing development we’re talking about building today.” He also cited the presence of the police station to reassure neighbors.

But it wasn’t enough. In town meetings, opponents shouted out their anger and held up petitions. Neighborhood lawns bore large signs proclaiming: RHA – NO PROJECTS inside a red circle with a red slash through it.

“It was a classic: ‘Are you kidding? You’re going to turn our neighborhood into Fairgrounds!’” says Capp. Though the LIHTC award had been for 72 units, that plan would have required a zoning variance from the city. In light of the fierce opposition, Gorman opted to go matter-of-right, which meant trimming the first phase to 49 units.

That didn’t mollify the opponents, either. Based on the media coverage, this had become a highly visible story. In November, through a letter to Morrissey, HUD notified the city it had serious civil rights concerns regarding the New Towne situation. Posters appeared with messages such as “The Federal Government Is Coming For Your Neighborhoods.”

“Lots of statements made by public officials and community members prompted HUD to commence an investigation,” Capp recalls. “And if they find there are civil rights violations, they can end all federal funding to a city or municipality.”

In December, the developer submitted plans for construction permits. Later that same month, the deeply divided Rockford City Council hired a special counsel. According to public statements, the move was to sort out the issues and insure that everything was being “done right.” Supporters strongly believed opponents on the council wanted to halt the project, as evidenced by the council not reporting out the subdivision plat within its legally mandated timeframe.

At that point, Gorman felt it had no choice.

Together with RHA, it sued the city on January 12 to let the project go forward.

“For an affordable housing developer, it’s not a good proposition to have to sue a city,” Capp comments. “We’re not a ginormous national company and it would have been a rational reaction to withdraw. But we have enough presence that we’re in this for the long game. So we told HUD that we’ll stay in this kind of development, but this is going to cause some real friction, so it’s important that our partners share the risk; that they have our back. And I have to say, throughout this process, something we really appreciated was that our financial partners—Boston Capital and Citibank—were four-square behind us and willing to move forward, even before the final court decision.”

Opposing Lawsuits
On January 19, 2016, the council relented and approved Gorman’s plat application by a 7-5 vote. The following month, east side neighbors sued the city to stop it from issuing permits and prevent construction.

NBC Television affiliate WREX reported on one resident portrayed as representative of the area, saying, “Like many residents who live around New Towne, [he] believes the units will be a target for criminal activity and bring down property values. Supporters say just the opposite and that move to South New Towne Drive can help get public housing residents out of poverty.”

“I’ve heard various concerns from our residents,” RHA CEO Ron Clewer was quoted. “But not one of them felt it was not good for them to have a new opportunity and a new place to live.”

In July, the 17th Judicial Circuit Court in Winnebago County ruled in favor of letting the permits and construction go forward. According to WREX reporter Audrey Moon, Judge Eugene Doherty said in a July 8 memo about his ruling that the plaintiffs “lack legal standing to contest the city’s approval of the plat. And with regard to the constitutionality of the claim, he said those who filed the lawsuit cited no provisions in the U.S. or Illinois constitutions that give them the rights they said they have.”

Ground was finally broken on August 30 with first-phase construction expected to be completed by next June. In the fallout from the more than yearlong controversy, Gorman, RHA and other like-minded officials changed the name from New Towne to The Grove at Keith Creek. “We thought the Grove represents new opportunities, growth and change,” said Andre Blakely, who welcomed HUD regional administrator Antonio Riley as the groundbreaking’s guest speaker.

The overall plan for Gorman’s partnership with RHA is to rehab or rebuild 1,100 public and affordable housing units for the city, with an overall budget of $84 million.

Capp sees several lessons for the industry and the nation emerging from the Rockford experience. “What we just saw in Rockford is a prototype of what we may see throughout the country in terms of socioeconomic conflicts, racial conflicts, and heated political conflicts. Those who get involved in these developments need a very thick skin, partners who are not faint of heart, and sufficient financial resources to endure the time it will all take.”

He also points out that development in opportunity zones will carry higher costs due to higher land values. “Allocating agencies are going to need to recognize that, and I think they are, because given measurably improved outcomes for residents, it will be worth it.”

When asked how Gorman will allocate its human and financial resources on future affordable housing developments—urban improvement or new opportunity zone construction—Capp replied, “We are equipped to do both. We are committed to community development, so we are absolutely committed to inner cities. But after this experience, we feel more comfortable pursuing projects in opportunity areas. And we’ve been very happy that HUD and the state housing agencies have our backs.”