As the Lansing Housing Commission moves forward with the sale of about 200 public housing sites, local activists and city officials are raising concerns about selling to an out-of-state real estate investment firm.
Lansing Housing Commission Executive Director Doug Fleming said the housing commission will be able to increase the amount of affordable housing across Greater Lansing by selling the properties.
But community members are skeptical of how the sale will affect residents already living in the homes.
“I see this as having a huge negative impact on generational wealth and trying to build equity, especially for Black, brown and poor people,” said Jerry Norris, CEO of The Fledge, a community outreach center in Lansing.
Why are the homes for sale?
The Housing Commission, which has been considering the sale since 2020, plans to convert the homes from a traditional public housing model to a Section 8 model, which allows private landlords to rent apartments and homes at fair market rates to qualified low-income tenants through a rental subsidy program.
Converting the units from public housing to Section 8 housing provides a more stable funding mechanism that is not based on the U.S. Department of Housing and Urban Development’s annual budget, according to the federal agency.
“Public housing is chronically underfunded, both on the operational side, and more importantly, the capital side,” Fleming said. “We don’t get enough capital dollars from HUD on an annual basis, and it’s a budgetary process. … It’s not based on your need. It’s not based on what needs to be done.”
HUD’s capital funds to LHC are expected to decrease as the commission converts more units from public housing to Section 8. They’ve converted 140 units to date.
That means less money is available to maintain the scattered sites.
“People will argue whether there’s been enough investment … but the amount is only going to go down,” Fleming said.
HUD’s Section 18 program allows housing authorities to sell public housing if they know they don’t have enough funding to continue to maintain the properties. Once the housing is no longer owned by the housing authority, it can be converted into Section 8 subsidized housing.
Profits from the sale of public housing are federally restricted and must go toward the construction, development and renovation of more affordable housing units in Lansing.
“We generate money for the Housing Commission to build new affordable units in the community,” Fleming said. “Because of the way we’re selling them … all the units that we’re selling are going to continue to be affordable housing units.”
What’s the sale price of the sites?
The price tag on the sale is expected to be somewhere between $16 million and $17 million for around 200 sites, according to Fleming.
The contract has not been finalized with the potential buyer because some residents are still interested in buying their homes.
“If a resident ultimately qualifies to buy their house before the final sale, then that house will be pulled out and then that amount of money will be pulled out of the deal,” Fleming said.
Eight residents have already made progress toward purchasing their homes, and another 40 residents have expressed interest, according to Fleming.
Shannon Norris with the Fledge Foundation, the nonprofit arm of The Fledge, said some residents have made attempts to reach the housing commission to start the process, but no one answered calls or emails.
The commission said it wants to sell those homes to residents at market rate.
Why are people concerned?
Charla Burnett, who sits on Lansing’s Human Relations Commission, has canvassed residents at some of the earmarked properties since May with Shannon Norris. They and others have visited 30 homes so far, Burnett said Tuesday.
Some residents told Norris they’ve heard nothing from the housing commission or the potential buyer on what the impact of the sale will be on them. Fleming said at a May City Council meeting that the only thing that’ll change is who renters pay.
“I’ve had people say they wish they could buy, but if they could buy, they wouldn’t be living in Section 8 or LHC housing in the first place,” Norris said.
Residents have lived in their homes from several months to 20 years, Norris said. Some have reported their homes as having black mold; lack of screens on windows and screen doors; leaking basements and ceilings; inoperative sinks and electrical plugs; and unresolved paint issues.
The Lansing Code Enforcement Office pink-tagged one LHC-owned home on Magnolia Avenue for lack of valid certificate of compliance.
A mother living at that home told Norris and Burnett during a home visit that her children had breathing problems. She said LHC covered reported mold with paint without remediating the mold issue.
Fleming said that there have only been two work orders for the home on Magnolia Avenue this year, and neither was for mold.
“Both were closed out within 30 days,” he said in an email. “One was a sink issue and the other was smoke detectors and a light. The last work order before that was over a year ago.”
City Council expressed concern over the Housing Commission’s track record of maintaining its properties during its May 9 meeting.
“I remember being on this body as we looked at page after page … of code violation problems that your properties had and the fact that they weren’t even getting inspected properly,” Council Vice President Carol Wood told Fleming. “You’re here today giving us your best interpretation of what is going to happen.”
Shannon Norris and other activists say they are skeptical of SK Investments, the potential buyer, in part because it is based in Florida.
Who is SK Investments?
SK Investments Group was founded in 2009 and is based in Sunrise, Florida, about an hour outside of Miami.
The company began with an effort to seize the market opportunity following the collapse of the housing market in 2008, and now “manages active investments in multiple portfolios with about 1,500 residential units and 3 development projects,” according to its website.
SK Investments was selected through a request for proposals (RFP) process, which was first initiated in October 2021. More than 300 organizations were contacted, the RFP was posted on the Housing Commission’s website for eight weeks and 25 organizations expressed interest.
The group was selected with the help of Chesapeake Community Advisors, a Baltimore, Maryland-based real estate broker who also consulted on other projects for the Lansing Housing Commission.
Although there were a few Michigan-based groups that filled out a confidentiality agreement, none of them ultimately placed a bid for the sites, according to Fleming.
He said that when the RFP closed, the Housing Commission had two bids. The second bidder offered about half of SK Investments’ amount and declined to increase their offer, Fleming said.
“So that’s why we ended up with SK,” Fleming said. “They gave … what was a very competitive offer in the range of what we anticipated the houses should sell for based on their fair market value.”
SK Investments has worked with the Pontiac Housing Commission and owns 250 affordable housing units in Pontiac.
“I talked to the executive director down there and (SK Investments) has been a great partner to them,” Fleming said. “They have other houses that they operate in the Detroit area, and we reached out to those folks. They all had good things to say about them.”
What’s the timeline of the sale?
Before the sale can be finalized, it has to be approved through HUD’s Section 18 process.
“There are several benchmarks,” Fleming said. “Have we met all of the requirements of the Section 18 program? There’s some environmental stuff that needed to be done. We had to do some assessments of the housing.”
The Housing Commission plans to submit its application in early July. The approval needed to move forward with the sale could take anywhere from a few weeks to several months.
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Contact reporter Krystal Nurse at (517) 267-1344 or k[email protected]. Follow her on Twitter @KrystalRNurse. Contact reporter Elena Durnbaugh at (517) 231-9501 or [email protected] Follow her on Twitter at @ElenaDurnbaugh.