Nonprofit Board Responsibility

[Mike Burns]

   You may remember when as kids and something went bad (a dish broke, the dog got out, a fuse blew from a key put in an electric socket), your first response to the authorities, aka your parents, was to say "I don't understand how that happened" or "I didn't do it".

The board of the Interfaith Housing Development Corporation of Bucks County (PA) has pretty much taken the same position as it is now faced with what should be considered a tragedy around its holdings and the individuals who will be affected.  

The simple story: the nonprofit appears to have made a variety of bad management decisions. These decisions have seriously affected the value of its assets and in-turn, is threatening to radically and negatively affect its low-income tenants.  Of course, to understand every error would require a much deeper analysis but suffice it to say that the evidence points to the board's lack of understanding and responding to market changes.  

This is likely now understood by the board but, and back to my opening, the board is not quite ready to take the "blame" or "own the problem".  Instead, the problem is the "lack of a business plan" and the county not coming through for the organization. Really?  In my opinion, if this board doesn't have the connections to reach those who can offer a lifeline, maybe reaching out to other affordable housing nonprofits for a merger conversation would be more responsible.  Certainly, anything but saying it's not their fault.

Here's the Philadelphia Inquirer article.  

 

 Tenants of federal-backed Bucks nonprofit face loss of homes

        BEN FINLEY, INQUIRER STAFF WRITER

LAST UPDATED: Monday, February 23, 2015, 1:08 AM

As things stand, Melvin and Fayette Howard will lose their modest but well-kept Bristol Township rowhouse on April 10. The house will be sold at a sheriff's auction after more than a year of foreclosure proceedings.

 

It's not their fault: The blame rests with the nonprofit from which the Howards rent their home, the Interfaith Housing Development Corp. of Bucks County.

 

The private affordable-housing group, which has received millions in federal taxpayer dollars and owns nearly 80 rental properties, is teetering on the verge of financial collapse.

"They sent me a notice that I should send my rent to a bank," said Melvin Howard, 69, a disabled veteran. "And I haven't heard from anybody since."

The housing market crash that began around 2005 - Bucks County's real estate values declined about 25 percent from 2006 to 2011, based on state figures - hobbled many of the nation's affordable-housing nonprofits, experts say.

But most have endured. That may not be the case with Interfaith, one of only a few organizations in Bucks that offers housing to lower-income residents.

The 28-year-old organization said it could not operate much longer without a new business plan. The old one relied mostly on a bullish real estate market and banks that would lend to low-income home buyers.

A former Interfaith executive director said the group should have dissolved years ago. He faults poor management and the county government, which continued to approve much of Interfaith's public funding.

During the real estate boom, the group bought houses, rehabbed them, and eventually sold them to renters, many of whom secured mortgages. Home values appreciated between sales, providing Interfaith with much of its revenue.

But in the last several years, not one Interfaith renter has been able to acquire a loan, as few, if any, houses gained equity.

Three properties are now in foreclosure and set for the April sheriff's sale, imperiling renters in four houses, including the Howards.

Interfaith has been behind on other mortgages. And some of the land it bought with taxpayer money sits undeveloped.

Bucks County also has had a steep decline in the availability of housing for people with lower incomes.

Among the more than 50,000 rental units, a county study released last year found the number renting for less than $1,000 a month fell by nearly half from 2000 to 2010. Rents of $1,000 or more increased by 146 percent.

The Howards live on fixed income and pay far less than $1,000 a month.

"We don't have the kind of money where we can up and put money down on a place," Melvin Howard said.

Interfaith board members said they hoped the county would help them form a new business model. In the meantime, they're negotiating with the bank to prevent the sheriff's sale.

"Our primary concern is our residents," said Sister Rita Margraff, president of Interfaith's board. "We're making a lot of moves to keep our residents in housing."

The foreclosures stem from Interfaith's failure to develop a $1.5 million housing project in Bristol Township. The county and the township had chipped in a combined $800,000, which included money allotted from federal housing programs.

Interfaith also got a private loan. But it had trouble getting more money to build, and the project stalled.

The nonprofit defaulted on the loan last year. Tied up in the same mortgage was the Howards' home and a multi-unit property on nearby Marie Lowe Drive, leading to their foreclosure.

David Fornal, attorney for the mortgage holder, National Penn, declined to comment on the matter.

Besides the tenants, another concern is the loss of taxpayer money. If the three properties are sold to buyers who fail to meet low-income requirements, Bucks County must pay back tens of thousands of dollars to the U.S. Department of Housing and Urban Development.

But even more HUD money, about $3.5 million, is invested in nearly all of Interfaith's properties, which face an uncertain future.

Rob Loughery, chairman of the Bucks County Board of Commissioners, said the county had been working with several banks to stabilize Interfaith mortgages, not just the ones in foreclosure. The goal, he said, is to keep low-income renters in all of the homes, even if Interfaith closes.

A new housing advisory board will address the county's lack of affordable housing and Interfaith's future, Loughery said.

"I don't think anything ill of what they were doing," Loughery said of Interfaith. "They probably made some poor decisions. But who didn't [during the housing bubble]?"

Experts say most nonprofits suffered during the downturn. But few relied on a strong housing market to thrive. Liz Hersh, executive director of the Housing Alliance of Pennsylvania, said, "Off the top of my head, I am not aware of any housing nonprofits for whom [the downturn] was catastrophic. Most have adapted to the new realities."

Chris Auth, Interfaith executive director from 2009 to 2011, said it should have shut down. Before he arrived, Interfaith evicted a few tenants to sell houses for much-needed income. The staff was too large, Auth said, and mortgages went unpaid even then.

The county continued to approve funding, even when Interfaith failed to pay taxes. "Interfaith should have gotten out of business," Auth said. "It could have found a viable nonprofit to have merged with."

Meanwhile, the Howards are considering their options, which are few. The sheriff's sale is in seven weeks.

Melvin Howard said he would like to buy the property, an agreement the county will try to broker. The bank declined to comment.

"I feel hurt and that they have neglected me," Howard said of Interfaith. "It ain't like we're young and can jump up and move."

Read more at http://www.philly.com/philly/news/local/20150223_Tenants_of_federal...