New York Newsday | January 5, 1986
By Saul Friedman
The group stood rather stiffly for the picture-taking, like an old-fashioned family, in the Upper Manhattan apartment house overlooking the Cross Bronx Expressway. But there was pride in their weary eyes, for they had come in from the rain Friday, from the places for the homeless – park benches, shelters and the floors of friends’ apartments – to see their new home.
Gwenn Palmer, 34, who had worked as a secretary and a cook before she was burned out of her Bronx apartment, had been living for six months in what she called the “pure hell” of a Brookyn women’s shelter.
Noel Garcia, 21, who is trying to learn a trade and improve his reading at a job-training center, has been spending his nights “hanging out,” he said, or going from shelter to shelter.
Patricia Hargraves, 23, from suburban New Jersey, began knocking around women’s shelters six months ago when she could no longer get work as a window dresser.
And George Culcleasure, 34, who has the build of a fullback, recalled that one of the shelters he has lived in since 1983 – at Greenpoint in Brooklyn – was once the hospital where he was born.
They and their friends from the streets had come together for an unusual purpose. They are members of the Heights Tenants Association and they were making plans to move into clean, modern rooms for the homeless at 530 W. 178th St., in Washington Heights, a building they will help govern.
The old five-story tenement in the final stages of rehabilitation, which is to shelter 55 homeless men and women, was financed in large part as a tax shelter for a group of affluent investors.
It should be quickly added that the financiers of the project, which include six partners of the Wall Street banking house Goldman, Sachs & Co., and a lawyer at Sullivan & Cromwell, will receive relatively modest tax savings, based mostly on operating loses, mortgage interest and depreciation.
But the project and its investors (who are acting as individuals) demonstrate an obscure technique for attracting private funds to build housing for the homeless. And its developers hope that The Heights, as the building is called, will become a model for developers and politicians, including Mayor Edward I. Koch, who say they are searching for ways to house the poor.
John Nolan, a Tarrytown lawyer and housing specialist who developed the financing plan, explained: “This project shows what is possible. And the possibility exists that investors in housing for the poor and the homeless can get rates of return consistent with other kinds of real-estate investment.”
The purchase and rehabilitation of The Heights, an abandoned building owned by the city, is expected to cost about $1.2 million.
In addition to foundation grants for operating the building and tending to the needs of its residents, the state has granted the developers, the Committee for the Heights-Inwood Homeless, $283,000, and the city has furnished a $366,000 loan at 1 percent interest. Another loan, at 14.5 percent interest, came from the Community Preservation Corp., a consortium of banks.
Many of these grants and loans were extended because the committee for the homeless, through a limited partership it was required to set up, got $300,000 in “equity capital” from a group of investors. One woman active in projects for the homeless provided $75,000, a New Jersey businessman invested $50,000 and the partners at Goldman Sachs, recruited by Barrie Wigmore, who along with his wife, Deedee, has quietly contributed thousands to homeless projects, invested $25,000 each.
Wigmore, 44, who earns a high six-figure income as a Goldman Sachs partner, said, “I walk each morning from 76th Street to 42nd Street and I see the many homeless. I know it sounds impossible, but I really believe that many of them could be me. I have given money to help other projects, but if this is one way to build a home for the homeless, it is the least I can do.”
Section 167(K) of the Internal Revenue Code, which was intended to help build housing for the poor, Nolan said, provides that an investor in low-income housing can depreciate the value of the building over five years instead of the usual 18. Interest on loans as well as the operating costs of the shelter are also deductible.
The section is due to expire at the end of this year, but there are hopes it will be extended.
Thus, Nolan estimated that the seven partners who have invested $25,000 each to rehabilitate The Heights and who are in high tax brackets each stand to save $7,500 in taxes during each of the next five years.
Those who invested more could save even more, depending on their tax brackets. And if the building, which was purchased for only $62,000, appreciates in value, as expected, they would earn back their investment and more.
While the technique for such financing came from Nolan, who was a consultant to the now-defunct Shelter Development Project of the Community Service Society, the idea for the project itself and the energy to bring it to reality came from Ellen Baxter, a 31-year-old public-health researcher.
As far as she knows, she said, The Heights project is the first in the nation that has used tax shelters to shelter the homeless.
In 1981, Baxter was the co-author of a groundbreaking study which discovered that the men and women who lived in the streets were not merely mental patients or skid-row alcoholics, but part of an army of the “new homeless” victimized by unemployment and the disappearance of more than 110,000 units of low-income housing, chiefly SRO’s – single-room-occupancy dwellings. And she wrote that the homeless were leading “fragile” lives, vulnerable to mental and physical illness and even death as they were tossed about on the streets by wind, weather and a seemingly uncaring society, to find shelter and food where they could.
“I watched the growth in the number of homeless in my neighborhood, as they came to sleep at the Ft. Washington Armory,” she said. “I used to give them money as I passed them on the street. But there were so many, I had to stop doing that.”
At the same time, her Washington Heights neighborhood was filled with abandoned buildings. And in 1981 she set out, with others in the community, to find make a home for the homeless in one of those buildings.
Even in her area she ran into resentment and hostility towards the homeless who, she said, were seen as “drunks, addicts and psychos.”
Neighborhood residents, through the community board, turned down Baxter’s attempt to open an SRO in one building. Then she found the building on West 178th Street and, after a long and careful campaign to win over the neighborhood, she got permission.
She also pieced together the grants and the financing, with the help of community organizations and Robert Hayes, counsel for the Coalition for the Homeless, who introduced her to Wigmore.
scrounged furniture and equipment and volunteers. And she maneuvered through the snarl of federal, state, city and banking red tape.
Although The Heights, with its unique financing, is about to become reality, Baxter notes that “it has taken more than four years just to house 55 people. In that time thousands have become homeless.”
“Private efforts can do so much. Only the government can do what really needs to be done. But the city and state with their regulations, made it very difficult at times. It was like pulling teeth,” she said. “And sometimes there were spurts of malevolence.”
Just before the New Year, in time for the tax breaks for 1985, the papers were signed to close the deal. And construction on The Heights, which will include three modern bathrooms on each floor, access to kitchens and washing machines, well-insulated, well-heated rooms with oak floors, large closets and intercoms, neared completion.
While rent subsidies, grants and other funds will help pay for the operating costs of the building, Baxter has enlisted volunteers and city help in providing social services, job training and education to help resurrect the lives of the homeless.
Tenants, who will pay what rent they can from earnings, are not expected to make The Heights their permanent home. But there is no time limit on residency.
Like many of those who were selected from shelters, streets and parks to live at The Heights, Gwenn Palmer has been visiting often, watching the painfully slow construction and waiting.
“I’ve picked out my room,” she said with a long sigh. “Living in a shelter, there’s no way you can work. Now I’ll be able to work because I’ll feel like I have a home again.”