Home, Sweet Home
(Or Slum, Slum, Slum?)
By Robert Bryce, Fri., Feb. 16, 1996
Austin desperately needs the product the work will provide: affordable housing. The Meadows could provide more than 200 homes to buyers who otherwise would be priced out of today's overheated real estate market. The company developing the project, Global Southwest Development, Inc., can keep prices low because it is putting the houses on small lots. And while the project has saved dozens of houses that might otherwise have ended up in the landfill, it also raises questions about the viability of the neighborhood being created.
If the project is built out under current plans, 659 homes will be located on the 239-acre site, located a few hundred yards north of FM 969 in far East Austin. At present, Global has dibs on 119 duplexes from Bergstrom, which it will cut in half and make into 238 homes. The company has been the largest single recipient of the Bergstrom duplexes: it got nearly half of the 257 units available.
The Meadows development is not a thing of beauty. Every mature tree or bush on the tract has been removed, leaving a gently rolling moonscape with nothing besides lonely concrete alleyways and dozens of houses in various states of rehabilitation. The houses are closely packed together. Some sit barely 10 feet apart.
Thomas Wakely, executive director of the Corporation for Affordable Housing (CAH), says the density at Meadows is simply too high. "They are building another slum out there," said Wakely, whose non-profit group gets its primary support from the North Central Austin Community of Churches, a coalition of 20 congregations. The CAH will receive 30 duplexes from Bergstrom. But it doesn't plan to do anything like what Global is doing. "In 10 years, that place will be in worse shape than any neighborhood in Austin," he said.
Aesthetics and cost issues are only part of the story. The owners of Global, Keith Wood and Gary Johnson, have both been involved in suspect business deals. On October 5, 1993, the Fort Worth Star-Telegram reported that Wood was fined $125,000 by the state of New Jersey for selling health insurance policies that overstated their benefits to policy holders. New Jersey also forced Wood to surrender his insurance license. A year earlier, the state of Washington took similar action against Wood, and in 1989, the Texas Department of Insurance issued an emergency cease and desist order against the American Healthcare Advisory Association, a group allegedly created by Wood for the purpose of selling group health insurance.
Wood did not return phone calls from the Chronicle seeking comment on the insurance allegations.
Johnson, too, has been scrutinized by regulators. In 1994, he paid a $20,000 fine to the Texas Attorney General for his part in removing telephone equipment from motels. In a March 5, 1994 story, the Austin American-Statesman reported that employees of Johnson's companies, Consolidated Telephone Service and Client Services, were posing as representatives from the Federal Communications Commission, AT&T, or other phone companies in order to gain access to the phone systems of various motels in the Austin area. "Once they got access, the [Consolidated Telephone Service] employees removed the existing equipment and installed machines from Osiris [a Dallas phone company]," the Statesman reported; "Osiris paid Johnson commissions on calls routed to it from each motel or business where Osiris dialers had been installed, the state said."
Johnson denied any wrongdoing. And he told the Chronicle that he paid the fine levied by the Attorney General rather than taking the case to court, which would have cost him $50,000 in legal fees. "It was just a business decision for me," Johnson said.
Neither Wood nor Johnson have experience in the development business. Johnson says that the pair got into the deal because "we think it's worthwhile and I hope we will make a profit. It feels good being able to do something like this that gives people a chance to buy a home."
Wood and Johnson are being advised by Andy Ramirez, a consultant who has a long history of dealing with the city. Ramirez has apparently helped Wood and Johnson find a way to get down payment assistance to buyers who might not otherwise be able to buy a house from Global. Youth Advocacy, a non-profit group which specializes in substance-abuse counseling, has been doling out grants to would-be homebuyers at The Meadows. According to Jesse Flores, the director of the agency, "four or five" grants have been given out. And where did the money for the grants come from? Flores couldn't remember and referred all calls to Ramirez, who said that $10,000 in grant money was given to Youth Advocacy. Who gave it to them? Ramirez couldn't remember the name of the benefactor, either. He said the money came from a "finish-out contractor," and promised to look for the check on Tuesday morning. By the time we went to press, Ramirez had not called with the name.
As for the layout of The Meadows project, Wood said the land was already subdivided and platted when Global bought it. Wood and Johnson are investing a sizable amount of capital in the project. According to a promissory note filed with the city, Wood has advanced $3 million to Global in exchange for a lien on the property. The company is also relying on $5 million in financing from First Interstate bank.
Johnson said five houses have already been sold. An additional 27 homes are scheduled to close over the next four weeks. At present, some 137 homes are in various states of repair on The Meadows tract. Johnson said the remaining houses will sell for between $69,000 and $75,000.
In fairness to Wood and Johnson, they have embarked on a risky deal, and as Johnson pointed out several times, there are no guarantees that they will get their money out of the project. However, their own figures show that their cost per finished unit is about $52,000. Others who have moved homes say that figure is too high and that the real cost of moving and refurbishing a house is about $40,000. The company is getting an extra boost now that the city is waiving the normal utilities hook-up fee, for a savings to Global of $2,300 per unit. If Global makes a profit of $20,000 per unit, the company will clear $4.8 million on the Bergstrom units alone.
Whatever the price of a home at The Meadows, Larry and LaDonna Williams are hoping to get one. Mrs. Williams said the couple, who have three children and live in a two-bedroom apartment, have been wanting to buy a house for a long time, but that Global was "the only ones that would even work with us." The Williams hope to buy a three-bedroom house with 1,638 square feet priced at $72,250. "The price could have been a little cheaper," Williams said, but "the really good thing is the park they are putting in there."
The Meadows project represents hope for the Williams family. And even the harshest critics of the project, who say Global has designed a ready-made ghetto, agree that if the project works, it will be a great benefit to the city.
"It doesn't matter how close the houses are," said Johnson. "Most of the people coming here are coming from apartments." He points out that the new homeowners will have a neighborhood association to address issues like crime and drugs. "Home ownership and pride will keep problems from occurring," he said.
But Parisrice Robinson, the chairman of the Housing Committee for the Austin branch of the NAACP, said of The Meadows, "It doesn't lend itself to a quality living environment, nor does it lend itself to progress. Since public resources are being used, the question is: Is the public being served best by this type of approach to housing? It's a relevent question that should be answered." n
Congregations for Affordable Housing will hold a conference on the affordable housing issue in Austin on Saturday, February 17 at 9am at Gethsemane Lutheran Church, 200 W. Anderson Lane. Speakers at the conference will include Parisrice Robinson of the Texas NAACP, Rev. Marvin Griffin of Ebenezer Baptist Church, and Mike Harms of the Texas Department of Housing and Community Affairs. The conference is free. Call 836-3811 for more info.
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