Valerie Jarrett’s Struggle

AFFORDABLE HOUSING FINANCE • November 2008

Chicago developer fights a familiar battle to realize her grandfather’s dream

BY ANDRE F. SHASHATY

CHICAGO—For Valerie Jarrett, redeveloping public housing is more than a federal mandate. It’s a personal mission to show that an idea championed by her grandfather was right after all.

You may know Jarrett in her role as a close adviser to Sen. Barack Obama, but she is also CEO of The Habitat Co. The real estate development, management, and brokerage firm was appointed by a federal court in 1987 to oversee efforts to desegregate the city’s public housing as part of the Gautreaux litigation.

Her grandfather was Robert R. Taylor, who chaired the Chicago Housing Authority (CHA) from 1943 to 1950. He advocated low-rise community development and appealing to a mixed-income tenancy. He lost that argument to those who favored high-rise developments on super blocks, according to Jarrett. He resigned, and the CHA went on to build dozens of high-rise buildings, some of which later became magnets for crime and social problems.

In an ironic twist, city leaders thought they were honoring Taylor when they named a giant housing complex after him. The Robert Taylor Homes was completed in 1962, after his death. It once housed as many as 27,000 people in 28 identical 16-story buildings.

Today, the old buildings are gone, and the site is being redeveloped as Legends South by the CHA, Brinshore Development, LLC, and Michaels Development Co. under Habitat’s direction. It is one of several major redevelopment projects in the CHA’s Plan for Transformation that will mix public housing, low-income and market-rate apartments, and for-sale condos in low-rise projects that are part of the street grid.

“The court order requires that we build sustainable communities that are economically integrated and that will lead to racial integration as well. That’s how my grandfather’s vision will be realized,” Jarrett says.

Jarrett’s job was tough enough when all she had to do was pull off multibillion-dollar projects with dozens of stakeholders despite cuts in federal housing programs and runaway construction costs. It got harder in July when a story in the Chicago Tribune asked “what went wrong” with the Plan for Transformation, revealing that the original time frame of 10 years had been extended to 15.

It reported that the strategy of building market-rate for-sale homes mixed with lowincome units had failed as a way to cross-subsidize some projects; due to a dip in home values, the market-rate homes had “in some cases become an albatross.”

Also earlier in 2008, Kimball Hill Homes, a key player in the Stateway Gardens project, filed for bankruptcy.

Jarrett, the CHA, and city leaders are fighting back, defending the Plan for Transformation and the continued viability of mixed-income redevelopment that includes market-rate ownership housing. “Progress has been dramatic and consistent,” says Jarrett. The process her firm oversees is a model for community development, in which all stakeholders have a “place at the table,” she adds.

Jarrett defends inclusion of the market- rate units, noting that foreclosure rates at redeveloped public housing sites are much lower than for other ownership housing in the city. She expresses confidence that long-term data on crime rates, income growth, school performance, and other measures of community well-being will demonstrate the value of the mixedincome model.

The Plan for Transformation is a massive undertaking launched in 2000, after the Department of Housing and Urban Development (HUD) threatened to shut down the high-rise buildings and give all the tenants vouchers.

According to the CHA, as of July 2008, more than 16,797 public housing units, or 64.7 percent of the promised restoration of 25,000 units, were already in place, having been either rehabbed or newly built. Of those, nearly 3,000 are in mixed-income developments.

Despite the overall real estate market downturn, as of July fewer than 100 of the 3,000 market-rate units in the developments remained unsold, according to Lewis A. Jordan, CEO of the CHA. “Contrary to the impression left by the Tribune story, the developments are doing exactly what they were intended to do: integrating families, improving lives, and generating renewal in the surrounding communities,” he says.

Habitat is charged with planning the projects, managing development spending, and acting as a co-grantee with the CHA, which is more focused on demolition and social services.

Lawrence Grisham, the senior vice president who handles day-to-day oversight of the redevelopments for Habitat, says the plan has been in effect for eight years, and that Habitat believes good progress is being made. He says the Bush administration’s reductions in HOPE VI funding have caused problems, and that the plan was hampered by the availability of low-income housing tax credits and soft secondary financing.

At most of the redeveloped sites where there was a strong homeownership market before the downturn, home sales are continuing to generate crosssubsidies, Grisham says. But at Legends South and others where there was no existing homeownership market, Habitat and CHA did not count on selling a substantial number of for-sale units.

At Stateway Gardens, plans called for a substantial homeownership component. Grisham says this still makes sense because of its proximity to the subway and the Dan Ryan Expressway. At press time, other participants were negotiating to buy out Kimball Hill’s interest in the venture.

Grisham says progress on redevelopment has been helped by cooperation from Chicago’s HUD office. Yet progress has been threatened by Bush administration funding cuts for the HOPE VI program, a critical part of the financing for many Chicago projects. He hopes the next president will make a commitment to consistent funding for the program.

The master redevelopment plan for Robert Taylor Homes, now known as Legends South, includes construction of 2,550 mixed-income rental and homeownership units, as well as community and management facilities, and new retail space. Approximately 851 of the planned 2,550 units will be public housing replacement units, according to CHA. Redevelopment will occur in three construction phases. Two phases will occur on the footprint of where the demolished high-rises once stood, and one construction phase will occur off-site in the surrounding neighborhood.

In keeping with the Legends South concept of naming each individual phase after a famous Chicago South Side resident, Mahalia Place, the first off-site phase, was named after gospel singer Mahalia Jackson and was completed in 2004. All 110 units of Mahalia Place are leased. Construction began recently on Hansberry Square, the first on-site phase at the northern end of Legends South. Hansberry Square is named after author Lorraine Hansberry and is a 181-unit mixed-income rental development. The city of Chicago is making improvements to the street grid and the surrounding water and sewer system.

The Plan for Transformation could not have a better champion than Jarrett. In her early 50s, Jarrett is a veteran of the administration of Mayor Richard Daley, serving as deputy chief of staff and commissioner of the Department of Planning, among other posts.

She is chair of the University of Chicago Medical Center Board and vice chair of the university’s Board of Trustees. She previously served as chair of the Chicago Transit Board and Chicago Stock Exchange.

Jarrett joined Habitat in 1995 and supervised the public housing work as executive vice president. She became president and CEO in 2007.

Jarrett has played a highly visible role in advising Sen. Obama on his quest to be elected president. At press time, she did not have a formal role in developing policy. However, she acknowledged that, if Obama won the race, and if he asked, she would be prepared to help with housing programs and policy.

The Habitat Co. was founded in 1971 and was led by Daniel E. Levin. It has created more than 17,000 apartments, condominiums, and townhomes, as well as a variety of commercial and recreational properties. It manages more than 30,000 units. Additionally, Habitat provides residential and commercial brokerage services.