Affordable Housing Finance

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AFFORDABLE HOUSING HALL OF FAME

Retsinas Serves Up Fresh Thinking

AFFORDABLE HOUSING FINANCE • October 2008

BY BENDIX ANDERSON

CAMBRIDGE, MASS.

This July, Nicolas Retsinas stood outside a ruined highrise apartment building in Chengdu, capital of China's Sichuan province. The building had collapsed with hundreds of people inside-part of the destruction wrought by the earthquake in May.

"The damage was staggering," he said. Retsinas came to Chengdu to help prevent future catastrophes like this. His tool? Information. Chinese officials invited him and other visiting academics to offer advice on rebuilding after the quake. He advised them to create a data map of damaged buildings in Chengdu to identify weaknesses they might otherwise miss that contributed to making this earthquake so deadly.

The proposed data map is typical of Retsinas' work as director of Harvard University's Joint Center for Housing Studies, where for the last 10 years he has put facts together in new ways that often challenge how experts think about housing and housing finance. He is one of very few thinkers to fit affordable housing for low-income families into frameworks that include the broader economy and the full range of housing markets from luxury condominiums to single-family homes that are put out to rent.

"The research we have done helps shape the conversation," he said.

Retsinas and his colleagues at the Joint Center pour masses of data into their analysis of housing trends, including Census numbers, market statistics, and economic data. Under Retsinas' leadership, the annual State of the Nation's Housing Report from the Joint Center has become the "gold standard" of analysis of housing trends, according to the National Association of Home Builders (NAHB).

The National Multi Housing Council also relies on information and analysis from the Joint Center when it stresses, for example, the importance of renters to the nation's housing markets.

Also, many economists now list immigrant households as one of the first factors they look at in their analysis of housing markets, also thanks to pioneering analysis of demographic trends from the Joint Center. More recently, the Joint Center highlighted the often-overlooked importance of female homebuyers to the housing markets, pointing out that more single women buy homes than single men.

Affordable housing still matters

The Joint Center's analysis of the housing markets is more important than ever this year, as home prices plunge. It's easy in this market to forget that the falling price of a typical condominium or for-sale home does not help families who rent their apartments, said Retsinas.

"Renters deserve a better shake," he wrote in a recent op-ed in The Boston Globe. For the one-third of U.S. households that rent, the gap between median income and median rent is growing. By 2006, 17.7 million households-about 15.8 percent of all households-were spending more than half their income on housing, an increase of 3.8 million households since 2001. Most of those people are renters, and that number is likely still growing as the cost of rent is rising, not falling, in many markets.

Retsinas expects demand for rental units to rise as foreclosures push people out of their homes. At the same time, the number of rental units is shrinking because of foreclosures: 20 percent to 25 percent of foreclosed homes were rented out to tenants. People living in such homes are typically evicted in a foreclosure.

"We are gaining rental households but losing rental units," said Retsinas. Also, because many of the home loans now in default are concentrated in lowincome and minority communities, the fallout from foreclosures is hitting the same neighborhoods where many of the nation's most economically vulnerable renters live.

However, affordable housing developers can help by renovating foreclosed homes to both provide new affordable housing and give a boost to their neighborhoods. "It's an opportunity for communities and nonprofits," he said.

The Joint Center usually stops short of making policy recommendations, but Retsinas himself goes further. He believes communities that provide enough affordable housing-from supportive, public, and rental housing to for-sale homes-can also solve myriad other problems ranging from public health to job growth. He sets out his latest ideas in Our Communities, Our Homes: Pathways to Housing and Homeownership in America's Cities and States, published in 2007 with former Department of Housing and Urban Development (HUD) Secretaries Jack Kemp and Henry Cisneros, along with Kent Colton, senior scholar at the Joint Center and NAHB's former executive vice president.

A long commitment to affordable housing

Retsinas had a long history in housing before he joined the Joint Center in 1998. He earned his graduate degree in city planning from Harvard University. From 1987 to 1993, he served as executive director of the Rhode Island Housing and Mortgage Finance Corp. He later worked for HUD in its Office of Thrift Supervision.

He continues to stay closely involved with financing affordable housing. He sits on the board of ShoreBank Corp., a Chicago-based lender that describes itself as "America's first community development and environmental bank holding company." While other lenders are shying away from residential loans, ShoreBank has come up with new loan products to help homeowners refinance out of what Retsinas calls "toxic loans" with dangerously high interest rates.

Retsinas also has a seat on the board of Enterprise Community Partners, Inc., a major affordable housing investor.

However, Retsinas also recognized the limits of investor financing to solve housing problems on several trips to New Orleans after Hurricane Katrina. He remembers being shocked to still see overturned cars and homes knocked off their foundations more than a year after the disaster.

At the time, builders could not be sure of the standards for rebuilding. The uncertainty frightened many investors away from the market and stalled builders that depend on private capital.

But true to form, Retsinas looked for other solutions. At the time and until 2007 when his term expired, Retsinas was chairman of the board of Habitat for Humanity.

Habitat benefited from an outpouring of financial contributions that allowed them to start construction while private builders and public-private partnerships were still waiting to close their financing. In 2007, Habitat had more homes under construction in New Orleans than any other homebuilder. "We weren't going to wait," said Retsinas. "We just decided to start building."