Valerie F.

Leonard
4111 West 21st Place
Chicago, IL 60623
Phone: 773-521-3137 Fax: 773-521-3137
E-mail: valeriefleonard@msn.com

November 20, 2008

Ms. Katie Ludwig

33 N. LaSalle, 2nd floor
Chicago, IL 60602

Re: Public Comment-Neighborhood Stabilization Program Substantial Amendment

Dear Ms. Ludwig:

It gives me great pleasure to provide public comment for the City of Chicago Neighborhood Stabilization Program
Substantial Amendment. Please find my comments below.

B. Distribution and Uses of Funds

The Amendment indicates that

…the City of Chicago intends to designate one subgrantee that will administer its NSP grant.
Responsibilities of this subgrantee will include: negotiating with banks for the discounted purchase of vacant
foreclosed properties, holding and maintaining properties, and working with a broad network of community
development partners to dispose of properties. The City of Chicago has had discussions with Mercy
Housing, Inc. about it serving in this capacity, and the subgrantee is expected to be a newly-created non-
profit organization that will be sponsored by Mercy Housing, Inc. Going forward in this document, this entity
will be referred to as the “Subgrantee.”

The City of Chicago, through its Subgrantee, will identify qualified community partners (which will be
referred to in this document as “Participating Entities”) who have capacity to undertake the rehabilitation of
acquired homes using a rolling application process. The City of Chicago and its Subgrantee will develop a
set of objective criteria that all Participating Entities must meet, and the Participating Entities’ participation in
the initiative will be commensurate with their experience in rehabilitating and redeveloping residential
property.

The Amendment also states (Section G.Information by Activity)

The Subgrantee will provide NSP funds to developers to assist in the rehabilitation of the properties, which
will be used as affordable rental properties. This activity will be used to meet the requirement that 25% of
our NSP grant be used to assist households making no more than 50% AMI

Without having any other information regarding the procurement process I am left with the impression that the City
will be issuing a no-bid contract to an entity that has not yet been created to perform functions that are currently
performed by the Department of Housing. This new entity will be developing its own infrastructure with the additional
responsibility of committing $55 million in NSP funds over the next 18 months. While I understand that it is in the
City’s interest to negotiate with as few owners/managers, as possible, it is my hope that every effort will be made to
diversify ownership of these properties among a broader base of investors.
We have seen situations in the past where ownership of a large concentration of public housing units or project
based Section 8 housing has proven to be unmanageable over time. One such example is the Chicago Housing
Authority, which had over 250,000 units of public housing at its peak. As a result of years of delayed maintenance
and high crime, the CHA decided to reinvent public housing under its Plan for Transformation. Another example is
the Lawndale Restoration project comprised of over 1,500 affordable rental units. Years of delayed maintenance,
building code violations and lack of access to capital resulted in the seizure of the properties by the federal
government. (This single action impacted 8% of North Lawndale’s housing stock, and 12% of the population.) These
units have been sold to several developers who have rehabbed them for mixed income for-sale and rental units.

Wherever possible, the City should encourage churches, local community based organizations and entrepreneurs to
purchase properties. To the extent that capacity is an issue, I recommend that NSP funds be leveraged with
programs such as HOME, and others, to build the capacity of churches and other community based entrepreneurs
and nonprofits to take advantage of the program.

I would like to see the City coordinate the services of the Department of Housing, Department of Planning and
Development, Mayor’s Office of Workforce Development, Mayor’s Office for People with Disabilities, the Department
on Aging, Police Department, and the Department of Human Services to implement this program holistically. The City
has used similar approaches to develop effective programming for youth development and domestic violence.

The Amendment indicates that one of the NSP eligible uses is to establish financing mechanisms for the purchase
and redevelopment of foreclosed upon homes and residential properties, including such mechanisms as soft-
seconds, loan loss reserves, and shared-equity loans for low- and moderate-income homeowners. However, there
are no provisions to provide counseling for new home buyers, or to work with homeowners who are in danger of
losing their homes.

If one of the criteria for targeting an area for NSP is the prevalence of subprime lending, then it makes sense to use
some of the funds to assist homeowners to refinance their homes at more favorable rates. Another option would be
to create a fund to purchase homes from persons who are in danger of foreclosure, and allowing them to rent them,
with an option to repurchase the homes at a later date. The accumulated rents could be used for a down payment.
Hopefully, this would help to stem the tide of displacement of local residents, while ensuring cash flow for the
investor.

Another stated criterion for targeting an area for NSP is high unemployment. If this is the case, then the City should
use some of the NSP funds to create employment and job training opportunities for local residents.

The proposed NSP Budget depicts expenses totaling $55,238,017. However, the data presented in section G.
Information by Activity indicates that implementation of the NSP will also require $13.5 million private financing for
rehab for rental; $33 million private financing for rehab for ownership and $12,000,000 private financing for new
construction. If these items were included in the budget summary, it seems the budget would increase from
$55,238,017 to $ 113,738,017.

It is encouraging to know that the City has been able to leverage NSP funding with private financing sources by a
ratio of more than 1:1. It would be helpful to include a description as to what the financing mechanisms will be, and
who will be providing the financing.

Community Participation

The excerpt from the Municipal Code regarding blighted areas is also applicable to TIF districts and conservation
areas. If one of the implicit uses of the NSP is to leverage TIF dollars, I recommend that, where applicable, a local
TIF oversight panel comprised of a broad cross-section of community stakeholders provide advice into the use of the
NSP funds. This body should include local residents, business leaders, community based organizations,
representatives from the public sector and philanthropic community. Ideally, there should be a clear separation of the
planning, development, investment and advisory functions, with no conflicts of interest between the members of this
body, local planners and developers.

If such bodies do not exist in the NSP target area, then the community advisory committee that provides advice into
the use of the City’s CDBG funds should perform this function. The advantage is the citywide advisory group would
not be closely tied to the politics of the local community, and can be more objective in its advice. This could also be a
weakness, as the citywide body may not be as familiar with the nuances that are specific to an individual community.

At a very minimum, the City should host public meetings periodically informing the public of the program, its goals
and objectives, and progress towards those goals.

Preservation of Affordable Housing Units

I commend the City for addressing the mortgage foreclosure crisis. I also realize that NSP is not the panacea.
Unfortunately, the implementation of this program does not necessarily produce a sufficient number of units that are
affordable to the people currently living in the impacted communities. Of 425 units to be rehabbed with NSP funds
citywide, about 150 will be available for households with incomes of 50% AMI or less. This translates into incomes of
up to $45,000 for a family of 4. The remaining units will be available for households making 51%-120% AMI. This
translates into an income range of about $46,000 to $67,500. My own community, North Lawndale, had a median
household income of $18,000 in 2000.

Marketing Considerations

I had an opportunity to attend a housing symposium sponsored by the Mayor’s Office for People with Disabilities on
November 17, 2008. One of the developers in attendance lamented that he built a development financed by New
Homes for Chicago, and complied with the requirement to make 25% of the units accessible for people with
disabilities. He has been unsuccessful in selling the units, and program guidelines won’t allow him to rent them.
Apparently there is a significant gap between the price of the homes which were reportedly selling in the $250,000
range and the ability of low income people with disabilities to purchase them.

To the best of my recollection, the moderator indicated that many people with disabilities are living below the poverty
line. Many of the housing options have issues with accessibility, affordability, and crime. These issues should be
addressed as the program is developed more fully.

Also, this program could create opportunities to address the growing need for affordable, accessible senior housing
in the City of Chicago by retrofitting units for seniors who would like to “age in place”, as opposed to moving to senior
living facilities or nursing homes.

In closing, I would like to thank you for your time and consideration of my comments. It is my sincerest hope that you
might be able to incorporate some of these ideas into the final NSP design. If you have any questions, please feel
free to call me at 773-521-3137, or e-mail me at valeriefleonard@msn.com.

Sincerely,

Valerie F. Leonard