Three-decker Windfalls Cause Worry

Would you pay $355,000 for one floor of the three-decker shown to the right, at 310 Fuller St in Dorchester? That’s how much two buyers paid this year, one in May and the other in July. Even if it turns out the buys are phantom acquisitions, the mortgages for each newly converted unit are real. The documents at the Suffolk County Registry of Deeds leave no doubt there was financing--$337,250 for each unit, from Wells Fargo and Homecomings Financial. Just as real would be any of that money passing on to the owner who sold the units, at least what remains after the cost of repairs and acquiring the whole house. In this case, the entire house was purchased from a previous owner for $585,000. There may have been some renovation before the condos were sold, but there appears to have been a need for a good deal more—at least to attract the buyers who would meet the sale price and lenders who would feel the property had value.

So, what about the value of the units? Mortgage payments, property taxes, water and sewer bills, and a condo reserve fund would easily make for monthly payments greater than $2,200. Unless a condo buyer simply wanted to live in the building, and wasn’t concerned about the fall-off in values (which began well before the units were sold), the purchase might make sense. But, for an absentee owner, the only way to have a chance of breaking even would be to use the unit as a one-floor rooming house.

Despite the credit crisis that took hold after the transactions on Fuller St, three- and six-family conversions in Dorchester have continued, with unit sales continuing into October (though with some fall-off in prices). Some of the buildings look much better than the one on Fuller St, and there are reasons to believe these conversions were preceded by upgrades. But even in converted buildings with upgrades over the past three years, some units have entered the foreclosure pipeline. Some of those have been resold at lower prices. And one was even bought by a developer who played a role in converting the same building less than 15 months earlier. After his foreclosure purchase, he sold the unit again, less than two weeks later, with a mark-up of $110,000.

If the investors doing conversions can make money even from distress, they must be getting help from appraisals. And, during the housing boom into 2005, many parts of Dorchester and Roxbury that suffered the most in past housing slumps were seeing noticeable improvements. But prices for some converted units in those neighborhoods—in one building as high as $375,000 for units purchased in April 2006 (with 100% financing, adjustable interest and a balloon rider) look scary.

If unit loans go bad, that’s certainly a problem for lenders, though not necessarily the ones originating the loans. Among two dozen condo unit loan defaults tracked in Dorchester over the past couple of years, nearly all the foreclosure filings were not by the originator, but by another company holding or servicing the loan. So there’s little wonder that the original lender had little reason to care about the unit-buyer’s ability to repay. And, if it mattered little that the buyer was a hapless would-be owner-occupant with good intentions, it might also matter little if the buyer were a transactional avatar, partly vouched for by a creative appraisal and, in some cases, represented by a proxy granted power of attorney. In other words, instead of targeting real buyers who might be more vulnerable, lenders could, in some cases, be leveraging a trade in the real estate market’s equivalent of “dead souls.”

When loans go bad, there are other repercussions. The fire sale prices for units foreclosed in one building can depress the values next door. As bad loans transmigrate through financial markets, more investors are spooked. And, as lenders get spooked by capital markets, they tighten the reins even on legitimate loans. That leads to a sharp drop in the pool of qualified buyers, which depresses property values even more. While some areas or parts of the housing market won’t feel much of that pain, others will be hit hard.

Housing markets have been through slumps before, only to bounce back. But what has changed since the last cycle is the shift of home mortgage lending from banks and credit unions—regulated by the Federal Reserve Bank and other federal and state agencies—to the much more loosely regulated mortgage companies. During a hearing earlier this week at the Reggie Lewis Center in Roxbury, the chair of the US House Committee on Financial Services, US Rep. Barney Frank, noted the effect of the lending shift away from banks and credit unions.


“If they were the only originators of mortgages,” said Frank, “we would not have this crisis.”

That’s why Frank envisions a new law that, as he put it, “will cover all mortgage origination with the same set of rules.” That would even include the requirements that currently apply to banks under the Community Reinvestment Act. But, even at this week’s hearing, fellow Democrats on the Frank’s committee (US Rep. Stephen Lynch and US Rep. Michael Capuano) acknowledged there could be difficulty getting the regulatory upgrade approved by the Senate and President Bush.

Even if there were new laws to make home mortgage lending less predatory and less volatile, some things cannot by undone by the next upswing in the market. As one housing investor in Dorchester pointed out, conversions of three-deckers weaken the pervasive (if less than universal) element of owner-occupancy that provides stability in hard times. It also appears developers doing the conversions bought some of these buildings from populations that put down roots and added social capital to the community—whether Irish-American, African-American, Cape Verdean, Haitian-American, or Asian-American. It could turn out that unit buyers—if they’re real people to begin with—might engage with their community in comparable fashion. But, for now, there’s reason to wonder.

See also story in the Dorchester Reporter for October 18.

New Superintendent Confronts Old Problem

In her appearance Saturday at Freedom House, Boston School Superintendent Carol R. Johnson was expecting questions from the audience, but it was Ian Powell who made her stop and think.

“What motivates you in what you do?” asked the 21 year-old student of Boston Arts Academy from Dorchester.

“That’s a very good question,” said Johnson.

Powell explained his idea of motivation was “something that gets you started every day.”

“For me,” he told the superintendent, “it’s like my music.”

After taking more time to think, the superintendent began by recalling her childhood in Tennessee, when her grandmother and other African-Americans were overcoming fear to exercise their right to vote.

“I was born at a time when everything was segregated. I actually remember the first time my grandmother voted. I always get emotional about that. She was 60 years old,” said Johnson.

“I think my passion about the work,” she said, “is to make sure the sacrifices they made were not in vain.”

What began with a prolonged silence ended with a prolonged applause. But, for much of the five hours at a conference on education, the talk was about other kinds of barriers that have recently kept 40% of Boston students from finishing high school in four years. The conference took place three days after release of a report on Boston’s persistent dropout problem, done for the School Dept. by the Parthenon Group.

The report linked the dropout problem to indicators going back at least as early as middle school. Among the students with a high dropout rate were 9th graders who failed at least one subject, and 8th graders who missed school one day a week. There were also high dropout rates for students—many of them immigrants—who enter the system after grade 8, and students with learning disabilities. And dropout figures were higher for black and Latino students than for white and Asian students.

“Kids have been dropping out for many years before they hit the streets,” said the executive director of the Boston Private Industry Council, Neil Sullivan.

“We have the potential to set up an early indicator system based on this research,” he said, “the challenge now is to set up a response that is effective at all these points.”

One response suggested by Johnson was to give failing 9th graders a chance to recover credits and graduate with their age group. According to Johnson, there’s also a national trend of black male students being over-referred to special education.

The coordinator for the Latino Education Action Network at Mass. Advocates for children, Samuel Hurtado, blamed the dropout problem on “a culture of cover-up” in the School Dept. Even Johnson spoke of a need to look at “the structural issues that are working against high expectations for all.”

“Kids are very sensitive to being respected or not respected,” said Johnson. “Without even verbalizing it, we convey our expectations.”

Students and recent graduates at the conference described their own struggles to overcome discouragement.

Cindy Printemps considered dropping out after her brother died from a shooting and two close friends were arrested. “At that moment,” she said, “I didn’t want to care.”

An intern with Freedom House, Printemps credited a teacher with talking her out of giving up. She went on to finish high school and currently attends Bunker Hill Community College.

According to a survey by the Boston Student Advisory Council, dropouts often report the lack of a “strong relationship” with teachers.

“As long as there’s a strong relationship, you probably will be in school,” said Moriah Smith, the student representative on the Boston School Committee.

Students and graduates at the conference also talked about how they were perceived by adults, and how those perceptions could be discouraging. A street research and referral special with the Private Industry Council, Emmanuel Allen left Jeremiah Burke High School, but eventually returned and went on to graduate from a four-year college. Even while in college, he wore clothing and jewelry that made a professor ask him if he was a drug-dealer. “Because where I’m from, everybody’s broke,” Allen said he told the professor. “And I don’t want to look like I’m broke.”

The District City Councilor from Roxbury, Chuck Turner, noted there were students coming back to school from lock-up facilities who lacked mentoring.

“We need as volunteers from the community,” said Turner, “to join hands with the School Department to do something about this problem.”

A deputy superintendent for schools in Dorchester, Roxbury, Jamaica Plain and West Roxbury, Janet Williams, said students need to feel there’s an adult who believes it’s important for them to be in school. She said she tried to do this by visiting families at home or checking up on a high school student who was at the Holland School in Dorchester when Williams was the principal.

“It's that will in here," said Williams, "to establish a relationship with parents, so they know how important it is for their children to get an aeducation."

One former dropout who asked the superintendent a question was 19 year-old Ana Maria Rivera, a student at Boston Adult Technical Academy. Serving students ages 18-22, the academy is housed in the Madison Park High School Complex in Roxbury.

Rivera says she likes being able to work mornings before starting school in the afternoon, and she likes the smaller class sizes.

“The teachers give us more one-on-one time,” she said. “We get treated as adults.”

On Saturday Rivera stepped to the front of the hall to ask Dr. Johnson for the academy to have a school building of its own, where students could come in earlier and use computers. The academy’s headmaster, Sheila Azores, said the students were like guests in someone else’s school.

“These are the success stories,” said Azores. “They have dropped in.”

September 25 in Boston: Election Day Lite

In some parts of Boston, Tuesday, September 25, is election day.
In East Boston, there's a primary in the special election for a new state representative.
There are four Democrats on the ballot: Carlo Basile, Mary Berninger, Jeff Drago, and Gloribell Mota.
Also being decided tomorrow are the finalists for two district seats on the City Council.
To fill the seat being vacated in Allston-Brighton's District Nine, there will be six names on the ballot. The active candidates are Mark Ciommo, Gregory Glennon, Rosy Hanlon, Alex Selvig, and Tim Schofield.
And three candidates are on the ballot in Roxbury's District Seven: Althea Garrison, Carlos Henriquez, and the incumbent, Chuck Turner.
The polls are open from 7 a.m. to 8 p.m. There will be some changes this year in polling places, especially in District Seven. To get more information about where to vote, you can go online to the Boston Election Dept. or call 617 635-3767.

Local Politics Meets Global Finance

Standing on the podium in the hall at First Church in Roxbury, Maria Myers introduced herself as a “proud foster mother” and said her home in Dorchester was going into foreclosure.

“I take care of teenage boys,” she explained. “If I lose my home, I will be unable to do this work any more.”

When John Patterson took the podium, he said he was afraid of losing his apartment in Roxbury, due to foreclosure on the property owner by Deutsche Bank. Other speakers at last Wednesday's meeting talked about wages below Boston’s high cost of living, street violence, and how hard it was for people with criminal records to get or keep a job. Like traders watching turmoil in financial markets, the people in Roxbury had anxieties. In the middle of economic anxiety around the world, they were looking for a better deal from Boston’s largest property owners, including one reporting “fantastic” earnings growth for the 2nd quarter of this year, The Blackstone Group.

Local advocacy groups organized the meeting so that a Blackstone Group representative would appear and answer demands, or at least make a non-appearance. Either way, the organizers would make a point. After decades of losses in manufacturing jobs (many of them unionized), more of Boston’s wealth is being generated—directly or indirectly—by corporate administrations and other service sector jobs based in commercial property. One of the largest owners of that property is The Blackstone Group. With more wealth concentrated at the top income levels, while people at the bottom lose ground, organizers argue, Blackstone should narrow the gap.

A few hours before Wednesday’s town meeting, The Blackstone Group took a step in that direction by endorsing goals of the union representing Boston janitors, SEIU, Local 615. There was support for giving janitors more full-time jobs that would include access to health insurance. There was also a condition—for the new union contracts with cleaning companies to give managers more flexibility. The current contracts expire at the end of this month.

But a number of groups working together through Community Labor United have even more demands for the Blackstone Group to help, with either money or corporate leadership. The demands cover everything from help for job-seekers with criminal records to a fund for homeowners facing foreclosure. The tenant organizing coordinator with the housing advocacy group City Life/Vida Urbana, Steve Meacham, called for a new form of “linkage” payments, a contribution of $1.00 per square foot, what he described as a “drop in the bucket compared to what they make.”

“We’re not stealing from the rich,” Meacham reasoned. “We’re getting back what was stolen from us.”

Between that statement and the income gap in Boston’s “hourglass economy” were some unconnected dots. At least during the meeting, there was no explicit connection made between the Blackstone Group’s profits and the chain of predatory lending that begins with homebuyers and mortgage brokers. And that would be one reason for the Blackstone Group to avoid discussing demands presented by groups at the meeting in Roxbury. The day after the meeting, Blackstone’s senior vice president for Global Corporate Communication, John Ford, said, “I think they’ve got the wrong idea of what we do for a living here.”

But the chain of global finance makes it more difficult to distinguish victims from exploiters, who are sometimes one and the same. Some of the difficulty lies in the virtual outsourcing of home mortgage lending from more tightly regulated banks to the more elusive—or slippery—transactions of mortgage companies. And the original loans are reconfigured in the world of asset management as securities, which provide money for more loans, good or bad. Even if none of the bad loans were enabled by Blackstone’s asset management, they could have been recycled by other companies making a living in some of the same ways. And nervous financial markets have more trouble distinguishing between bad debt and good debt that no one wants to buy.

“You got to wonder why things got so messed up,” said State Senator Dianne Wilkerson, “and they are pretty messed up right now.”

That comment in the church hall was about the not-so-effective attempt to curb predatory lending at the state level. Wilkerson argued that attempt might have been more successful had there been more attention to the heavy concentration (or, as some call it, the targeting) of sub-prime loans among people of color. In other words, the best way to close the racial gap was to put it in the spotlight and mobilize a push for change.

“If you lift the boats for black and brown people,” said Wilkerson, “the boats get lifted for everybody.”

City Councilor Sam Yoon drew on his experience of trying to get the most community benefit from development in Chinatown. And he recalled the challenge from Wilkerson to get as much of the community unified as possible.

“We have to talk about race,” Yoon said, “and how all of us unite.”

In his advice to groups in the hall, US Rep. Michael Capuano concentrated on numbers—as in voters and money.

“The people you’re talking about tonight—they’re not looking for a fight,” said Capuano. His advice: build pressure through voter turnout, and elected officials will be more likely to lean on commercial property owners at pressure points such as zoning appeals. And Capuano said what a corporate player lacked in political goodwill might be offset by concern for money.

“If you want to do business,” he said, “and if the only way to make a buck is to share a dime, you’ll do it.”

But, if politics is local, the business of asset management is global. The business can mean investing in commercial property in downtown Boston, or acquiring a company with an eye on growing demand for hotels in India. The gains from those investments can be mapped for Boston or India, but the trickle-down can be spread more widely to pension funds or individual investors. From that perspective, it becomes more difficult for even a politician to distinguish between one dot representing the global investor and another representing the woman from Dorchester who invests in the well-being of foster children.

From a global perspective, the whole meeting hall in Roxbury was just another dot on a map. Outside the hall, the grounds of First Church looked very much the way they might have appeared more than 200 years earlier. On a warm, early evening in August, the glow of sunset deepened behind the outlines of church spires and a minaret. Surrounding the dot, as far as the ear could follow, were the sounds of crickets. Instead of a perch for viewing Boston’s downtown skyline (which it is), Eliot Square seemed more like the center of a small village, and the white clapboard of Boston’s oldest frame church looked as carefully preserved as a photograph from another time.

Hart to Stick with State Senate

State Senator Jack Hart (D-South Boston/Dorchester) has decided to pass up on a chance to lead the Mass. Biotechnology Council. In a statement issued this afternoon, he said: “I no longer wish to be considered for the position of President & CEO of the Massachusetts Bio-Technology Council. Although the MBC does important work and I am grateful for their interest in me, I have decided to remain in the Massachusetts Senate serving the wonderful people of the 1st Suffolk District. As Senator, I cherish the extraordinary honor and responsibility to positively affect the lives of the citizens of the Commonwealth of Massachusetts.”

Unconnected Dots to the Biolab

The road to the biocontainment lab planned by Boston University passes through a tangle of forethought and conjecture. On one side are the multiple layers of official reassurance. On the other side are the alarming, though not totally implausible what-ifs of grassroots opponents. Between those sides at a hearing Monday, July 30, were members of the City Council Public Safety Committee. One member, Roxbury Councilor Chuck Turner, reaffirmed his opposition to using the lab near Boston Medical Center for “level 4” research involving the deadliest pathogens. But even his colleagues, Councilors Steve Murphy and Mike Ross, had their moments of disquiet.

The hearing was supposed to provide information about how biological agents would be delivered to the lab. But there was no representative from Boston University, which Murphy said would have plans ready for presentation later this year. The Council has practically no say over the lab, though a committee hearing does provide some leverage for inquiry. By the time BU’s plans are discussed before the Council, even that leverage could be diminished if an upcoming federal court decision gives the lab full approval.

The Council did hear testimony from city officials in charge of public safety and public health. The executive director of the Boston Public Health Commission, Bárbara Ferrer, said she expected dangerous pathogens would be shipped to the lab only 4 or 5 times a year. “I would say we’re talking about a very limited number of pathogens coming into the lab,” she told the committee, “and a very limited number of experiments that involve using the pathogens.”

Regulations for shipment would have to be cleared with the Boston Police Dept. Superintendent in Chief Robert Dunford said there would be “point-to-point tracking” of shipments, which would have to comply with regulations for packing and security. This would include security clearance for carriers.

Councilors were told shipments would probably have to avoid “areas of high concern” such as tunnels. In the event of an accident, would all first responders know they were rushing to a level 4 bio-hazard? Not necessarily. Instead, councilors were told, responders would take an “all-hazard approach,” exercising “universal precautions.”

Turner even wondered if information about the arrival of level 4 shipment might circulate too widely. He said he was afraid the number of people being alerted would be “large enough to raise concerns on the security of the information.”

Dunford said responders would try to avoid that danger by having information “compartmentalized.” For example, he said, firefighters would not be notified about a level 4 shipment unless there were “an exceptional event.”

Earlier this year, at BU’s less hazardous level 3 lab, the notification traveled the other way, when medical waste caught fire in a sterilizing machine and the lab building had to be evacuated. The Fire Dept. responded immediately but, according to the Boston Globe, the Boston Public Health Commission was notified three hours later. There have been no reports of any infection from the fire, and it might be argued the incident wasn’t serious enough to trigger the regulatory requirement for notifying the commission immediately. But incidents in the level 3 lab were used by opponents to argue that even the best regulations and protocols won’t always be observed.

An opponent of the level 4 lab from Hyde Park, Mary Lee Marra, said hoping all biological agents would be safely contained at all times was a “Hail Mary pass.”

“Once they get out,” she said, “you can’t get them back in the bottle, even if you have the best cardboard box in the world.”

When Dunford said the city would be “in the driving seat” for security requirements, Councilor Mike Ross raised the possibility that local officials might have to yield to another authority. Ross was also less than fully persuaded about the dependability of the company that would be making shipments to the lab.

“I’m just not that comfortable with FedEx,” he said, “even if it’s FedEx Plus.”

Turner said the information at the hearing only reinforced his opposition.

“It should convince those of us who are not convinced that we should ban Bio-4 labs in Boston,” he said.

For Public Safety Committee chair Steve Murphy, the case was still incomplete.

“Legitimate transportation questions have not been answered,” he said, “and BU owes it to the public to answer those questions.”

Six for City Council in Allston-Brighton

When the six candidates running for City Council in Allston-Brighton’s District 9 gathered for their first pre-election forum, there wasn’t even a hint about naming a bridge or a library for their future predecessor, Jerry McDermott. After serving less than three terms, McDermott is on the way out at age 39. Not only is he forgoing a run for re-election, but he’s moving out of Boston, most likely before the end of his term. Though McDermott inspired only one negative comment during the forum, his exit looms over the new campaign trail like an evacuation sign—saying more about trouble in the city than where to find a safe haven.

The forum was held at the Oak Square YMCA, and it can be said the surrounding neighborhood is less of a haven than before. Just a few blocks from the border of Newton, Oak Square is about as far as the candidates can get from expanding colleges without leaving the district. But the neighborhood is one of two in District 9 where a Catholic school has recently closed. In Oak Square, community activists are raising money to convert the former Our Lady of the Presentation School into a community center. That would be one more reason for families with children to stay, but McDermott has already mentioned the closing as one reason for moving out.

“People are leaving the city. Property values are going up. Water rates are going up. Homeowner’s insurance is getting more expensive,” said candidate Gregory Glennon. An assistant district attorney in Suffolk County, Glennon narrowly missed getting elected state representative from Allston-Brighton in 2005. His example of flight from the neighborhood was a family whose child was assigned to a public school in East Boston.

“I hear over and over again that people are leaving because of the schools,” said Tim Schofield. An attorney with an office in Brighton, Schofield also ran for representative in 2005.

The youngest candidate, 26 year-old James Jenner, said Allston-Brighton was becoming another Amherst, Massachusetts—a college town with very few families.

To varying degrees, census figures analyzed by the Boston Redevelopment Authority show this is happening in several neighborhoods, including South Boston, the South End, Jamaica Plain, the Fenway, and even West Roxbury. According to the same figures, the number of family households in Allston-Brighton declined from 1990 to 2000 by 6.5%. The BRA also reports that, over the same period, the number of housing units in Allston-Brighton has grown, but so has the percentage that is absentee-owned.

And, while some residents in a park near the YMCA were letting their dogs frolic off-leash, the candidates inside were putting even more blame for the flight of families on expanding colleges, with their rippling of disruptive students into the off-campus housing market. One of the candidates talking about the students was Alessandro “Alex” Selvig, a Lake Street resident who wants to keep Boston College from building a baseball stadium on conservation land acquired recently from the Archdiocese of Boston.

“This is the biggest issue facing in Allston-Brighton: the party houses, the kids. They’re driving us crazy,” he said.

To crack down on party houses, Selvig and candidate Mark Ciommo favored increasing the staff in the city’s Inspectional Services Dept. Schofield wants to add any unpaid fines for code violations to property tax bills. “We can increase enforcement,” he said, “but if we don’t increase the pain, it’s not going to do much good.”

There was also a question about a proposal to give tenants in large buildings the right to negotiate collectively over their rent. The candidates who took the question, Ciommo and Selvig, were both opposed. “It only scares investors away,” said Ciommo, adding, “We need more development of affordable units, not less.”

Taking even more heat than landlords were colleges and universities.

“There’s a lot of anxiety out there,” said Glennon. “There’s this sense the institutions will do whatever they want to do.”

Glennon said he would oppose new housing for undergraduates on the land in Brighton that Boston College recently acquired from the Archdiocese of Boston. Jenner called for more give-backs to the community, including revenue based on the income generated by expansion. He’s also opposed to Harvard’s attempts to relocate residents of Charlesview Apartments complex near Western Avenue and North Harvard Street.

The executive director of the Veronica Smith Senior Center, Ciommo called for Harvard University to allow new businesses on property where it has no short-term plan for development. Schofield said long-range plans for university expansion should also include open space set aside for the community.

Another candidate, the executive director of the Brighton Main Streets program, Rosie Hanlon, has been a member of the advisory task force on expansion by Boston College.
“I worked to get the students back on campus where they belong,” she said.

But Selvig said there should have been more notification of task force meetings among the college’s neighbors.

“The process has to be changed,” he said. “We have to know what’s going on right across the street from us.”

Selvig sat through the forum with a pair of blue-and-white boxing gloves. He said they was supposed to show that he would fight for the district, but he also boasted a diplomat’s skills in negotiating and an entrepreneur’s skills in making a deal.

A mother of five, Hanlon described herself as having “a very maternal, pit-bullish approach to getting things done.” She also took credit for getting the local New Balance Factory Store to donate sneakers to a walking club. “I have the experience,” she said. “I have the commitment. I get results.”

Glennon spoke about delivering constituent services while he was working as an aide to former Allston-Brighton State Representative Brian Golden. Glennon also said he would “absolutely oppose” Mayor Menino’s attempt to raise city revenue by increasing the meals tax.

A fourth-generation member of his family in Allston-Brighton, Ciommo spoke of his work in social services and being active in the community on parks, public safety, and as a parent representative at the Gardner Elementary School.

On his law firm website, Schofield cites experience in litigating “complex business and partnership disputes,” along with cases over zoning and land use. A US Army veteran and former congressional aide, he said he’d be “an effective advocate” who would know when it’s time to bang fists and when to negotiate.

Jenner has lived all his life a few blocks from Oak Square, on Kenrick Street. His most recent jobs were driving for UPS and making deliveries for Papa Gino’s. He said he’ll devote 20% of his salary as a City Councilor to a fund for the community, and he described himself as “somebody who is not prone to the old way of politics—money politics.”