A few days after the Mayor announced his affordable housing plan, I posted this initial assessment. Since then, the Council’s Ad Hoc Affordable Housing Committee met with MDHA for two hours on April 15. After that long meeting, I’d like to expand on a few points from my initial post.
Timing of new funding. Matt Wiltshire from MDHA (and formerly from the Mayor’s office) confirmed that no new money will be allocated to affordable housing this year. The earliest we would see any new operating spending proposed under the Mayor’s proposed plan would be in Fiscal Year 2021. Part of me wants to more or less ignore the entire proposal until there is an effort to approve new spending. But it is worth at least noting some important points that might get lost between now and next year.
Going from cheerleader to investor. The biggest point I want to underline is that this proposal would move Metro from being a very interested cheerleader for the Envision projects to being a major investor. This shift demands that Metro learn more and be more actively involved.
Timing of building the Envision projects. Up until a few weeks ago, every public statement from MDHA about timing indicated that they would complete all six Envision projects relatively quickly. In fact, one (Cayce) is already out of the ground, and two more are well into the planning process. MDHA has always been careful to not state a specific timeline, but their public statements and the fact that they have started working on three Envision projects have suggested strongly that the Envision projects certainly would be finished in about a decade.
With the new affordable housing proposal, though, the Mayor’s office and MDHA are telling us that the reason why Metro should spend $350 million over 10 years is to hurry all of the Envision projects to completion. In this Tennessean opinion piece, MDHA’s director says: “The city’s investment in this work will enable us to add more subsidized housing than was originally projected and will also help us accelerate the timeline.” (I added the emphasis.)
There are a few other data points about timing. At the Council committee meeting on April 15, Mr. Wiltshire repeatedly told us that, without Metro spending $350 million over 10 years, the Envision projects would be “multi-generational.” Also, when asked whether the $350 million would allow all Envision projects to be completed in 10 years, Mr. Wiltshire said “no.” He was not able to guess what percentage could be completed in 10 years with $350 million from Metro, but he was sure that they would not all be completed in that time.
These timing questions are not academic. We have to explore where the truth is. Up until a few weeks ago, every indication was that everyone involved thought that all of the Envision projects could be completed by MDHA. Now, we are told it will be a multi-generational effort without Metro’s help. Separately, on one hand, the Mayor’s pitch clearly indicates that all the affordable units would be built in 10 years. On the other, MDHA has clearly told the Council that they will not be built in 10 years even with the $350 million from Metro.
My personal theory is that Mr. Wiltshire — the new guy at MDHA — is correct when he says that without Metro spending substantial money the Envision projects cannot be completed for a long time and that even $350 million over 10 years is definitely not enough to complete the projects.
What is the real cost? Up until a few weeks ago, nobody had ever suggested that Metro would use its general obligation bonding capacity to build affordable housing units for MDHA. Even when MDHA has provided a super-detailed list of potential financing strategies for Envision projects, it has never included Metro money to pay for unit construction costs. For example, check out MDHA’s 115 page Envision Napier and Sudekum Transformation Plan from June 2018, at pages 109-111. They list 10 financing strategies. Metro is only mentioned as a possible source that “may be able to include funding for…parks and infrastructure…”. Metro is never mentioned even as a potential source of building construction financing.
With the new proposal though, we hear that Metro would contribute $350 million in construction financing over 10 years, and that this won’t be enough to finish the projects. When the Council ultimately is asked to approve spending, we should ask for more information about what exactly Metro is getting for its investment.
Why does it matter? Listen, I don’t mind a developer having to look for a new partner once a project has started. Things change. Markets evolve. But, I do expect that the new partner (Metro) is entitled to a no-BS explanation about why the developer (MDHA) is looking for a new partner. To put it in terms Nashville understands, let’s imagine a downtown developer had spent five years telling the market about a full city block that he was planning, and developing, and even breaking ground on. And, then he starts shopping for a new partner. Immediately, you have questions. Why now? Did something change? What’s wrong? Did you misjudge the project? Were your public statements about the project not entirely on target? When you get asked to invest in a partially complete project, you really need to understand in detail what happened and why.
If MDHA had been saying all along that the Envision projects were going to be “multi-generational,” we might all be evaluating the proposal on its merits. Here though, we need to make sure we have a full understanding of the new facts before we evaluate whether it is a good investment of Metro’s bond spending dollars.