DC Group Could Redevelop City Homes

A Washington D.C.-based non-profit hopes to successfully purchase and redevelop city-owned homes acquired through property tax foreclosure.

Home Preservation Exchange, led by former DC Mayor Sharon Pratt, is pivoting its model from buying and reconfiguring distressed mortgages to partnering with local non-profits and for-profit investors to redevelop homes.

“Our thought is to do a proof of concept,” Pratt told Urban Milwaukee in an interview. “We just want to try to see if it can work.”

The organization would partner with a Milwaukee non-profit, potentially Southside Organizing Committee or Journey House, a for-profit investor and a construction firm to redevelop homes. Pratt said the organization hopes to redevelop two city-owned homes and find owner-occupant buyers or place the home into rent-to-own contracts.

The investor is someone of a high net worth with a social mission, said Pratt. “They’re not looking for hedge fund returns,” she said. But the investor, Pratt estimated, would still like to see a return of approximately eight percent.

Doing that work without a subsidy has long been a challenge. Milwaukee officials celebrated the completion of a 104-home public-private partnership known as MERI, the Milwaukee Employment/Renovation Initiative, in July, but that effort required the investment of $1 million in state funds and additional low-income housing tax credits.

HPE’s proposal would require the organization and its partners, which would include Chicago-based Fay Construction, to be selective as to which homes it takes and how much the city charges for them. Pratt said they wouldn’t rely on low-income housing tax credits or other standard subsidies.

“We have to see if Milwaukee likes how we approach it and if we like the players,” said Pratt.

Why Milwaukee? “We thought we should explore Milwaukee first because Silvia has a relationship with the city,” said Pratt of the organization’s chief administrative officer, former Milwaukee resident Silvia Rathell.

But Rathell’s comments Monday almost derailed the whole thing.

Bizarre First Meeting

Speaking before the Joint Committee on the Redevelopment of Abandoned and Foreclosed Homes Monday morning, Rathell told the committee that city officials had been uncooperative with HPE’s efforts. She detailed a long list of accomplishments, almost all of which Pratt later said were inaccurate.

“I have grown to be so frustrated,” said Rathell. “The lack of response we have received has been horrendous.” She said she has been trying to get Milwaukee engaged for two years and more than two investors have walked away with a combined $50 million ready for investment.

“This is really, honestly, my last attempt to try to work in Milwaukee,” said the HPE representative. “It’s much easier to go to Baltimore city which is literally 40 minutes from where I work. It’s much easier to go to St. Louis, Detroit.”

She said “elected officials” have been unresponsive to HPE’s attempts to reach out. But committee chair Alderman Robert Bauman said he had never heard from the group, nor had committee member Ald. Khalif Rainey. Rathell said Ald. Jose G. Perez, who presented the group to the committee, had been the only responsive official.

Bauman asked for background on the group and Rathell said the group had completed redevelopment of 4,000 to 5,000 homes in St. Louis in addition to projects in New Jersey, Detroit and Houston.

“You’ve rehabbed 5,000 properties in St. Louis that are now owner occupied?” asked Bauman. “Uh huh,” responded Rathell.

“We’ve done thousands and thousands of homes across the country and what we wanted to do with the city was to get maybe one or two thousand,” said Rathell.”In Milwaukee? We don’t even have 2,000,” said Bauman.

She said the group has done approximately 500 homes in Detroit.

That 5,000 number in St. Louis kept coming up over and over again, including as a joke by Rainey with a subsequent agenda item. Bauman asked Rathell multiple times to confirm the number, which she did each time.

Bauman presented Rathell with a list of the city’s 1,122 city-owned foreclosed properties. “Step one is to identify the properties. Step two is talk to the local alderperson,” said Bauman.

Pratt, in an interview Wednesday, said she wasn’t sure where Rathell’s numbers came from. The group historically would work with lenders to purchase mortgages with a focus on keeping people in their homes, but is now looking to get into doing actual rehabilitation work.

Pratt told Urban Milwaukee that Rathell isn’t in a position that requires her to know the business model and wishes she had come herself to the meeting. Rathell had told the committee her role is to work on finding the partners.

Rathell also said the group was certified by the U.S. Department of Housing and Urban Development (HUD). Pratt in a follow-up interview said that’s not the case, but that the organization has a positive relationship with HUD.

Bauman told Urban Milwaukee that he also had a follow-up call with the group and received clarity on its operations.

HPE was backed by Southside Organizing Committee executive director Tammy L. Rivera at the hearing. “I’m here because I don’t want them to walk away when we have the opportunity to be innovative and creative,” said Rivera.

Perez thanked the committee for meeting with HPE. “This conversation took a couple turns I didn’t expect,” said the alderman with a laugh.

Pratt said she hoped the pilot program could get underway in 2020.

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