Sweetheart Deal

How does Virginia McGuire make a profit in the nonprofit business of creating affordable housing? Simple. She pays her husband.

Williams Run was supposed to be a sterling example of the latest thinking in affordable housing when Virginia McGuire convinced state officials to approve her plans to buy and rehabilitate the place in December 2000.

Unlike public housing, where the poor are concentrated in problem-ridden complexes, Williams Run was going to be an idyllic community. People from all walks of life would live together, there beneath the canopy of live oaks that shade the 252-unit complex near White Rock Lake. Single moms and minimum-wage laborers could live alongside students, government workers, accountants and other working professionals.

To keep the tricky population mix in balance, McGuire and her newly created nonprofit organization, Green Bridge Development Corp., promised to provide an array of social service programs not typically found at apartment complexes owned by profit-driven landlords. There were to be after-school programs for the kids, a new computer lab and English classes for adults.

Virginia McGuire, whose tiny nonprofit is using government money to buy apartment complexes, says she can provide affordable housing and pay her husband's company hundreds of thousands of dollars, too.
Mark Graham
Virginia McGuire, whose tiny nonprofit is using government money to buy apartment complexes, says she can provide affordable housing and pay her husband's company hundreds of thousands of dollars, too.
Former tenants Hal Barker, left, and Ted Barker, standing outside the Williams Run apartments, say they felt compelled to dig into the details of the complex's sale. "They destroyed a marvelous community," Ted says.
Mark Graham
Former tenants Hal Barker, left, and Ted Barker, standing outside the Williams Run apartments, say they felt compelled to dig into the details of the complex's sale. "They destroyed a marvelous community," Ted says.

Williams Run, located along the northern edge of Tenison Park golf course, was perfect for such an experiment. A product of the 1980s building boom, the complex was beginning to show its age, and the cost of constant repairs had prompted its owner to sell.

McGuire seemed like an ideal buyer. An expert in government housing policy whose political ties date back to the days when her father, Jim Wright, was Speaker of the U.S. House, McGuire knew how to tap into tax breaks and government-subsidized financing, the key tools the government provides for creating low- and moderate-income housing. Today, 16 months after buying the complex, McGuire is marketing Williams Run as a place "where dreams come true."

If that's the case, Lisa Hyland wishes her landlord would wake up.

"When they sold it, it just really went downhill," says Hyland, who moved to the complex in late 1999. "I had lots of friends here, but they all got disgusted and left."

Hyland says all you need to do is take a look around to see why. Wood balconies are rotting. The security gate seldom works. On one building, a gutter has pulled away from the roof and now hangs ominously over a resident's back porch. Inside Hyland's apartment, the washing machine leaks, but she says the management refuses to fix it.

Since the complex changed hands, the vacancy rate has climbed to 25 percent. McGuire confirms that middle-income residents have fled and are being replaced by low-income families, including some who rely on government assistance. These are the tenants who might benefit from the social services McGuire promised the state two years ago that she would create. But so far, none have been provided.

To some housing advocates and a couple of former tenants who have dug into the financial details of the property's sale, Williams Run is a case study in how state and federal housing programs can be exploited for profit.

Instead of being used to renovate, repair and maintain affordable complexes, the government incentives provide a layer of cream that savvy developers and their nonprofit partners can skim as up-front profits. By far the richest of those is a 4-year-old Texas program waiving all property taxes--city, county and school--for nonprofit organizations that claim they are providing affordable housing.

McGuire insists that she is running one of these "mission-driven" organizations. She calls her work in creating and maintaining affordable housing a "noble" cause.

But when Williams Run changed hands, McGuire and her husband, former state housing official Scott McGuire, were the first ones to benefit. At the closing, before a single low-income person was housed, a for-profit company run by Scott McGuire pocketed a $400,000 fee. Virginia McGuire's nonprofit was paid $100,000, money she used to pay herself.

While the deal was going through a state review, former tenants say the McGuires carried out a strategy of deception that kept them in the dark. The information blackout ensured that no opposition arose before the deal was sealed. The McGuires were so wary of criticism that they sued two tenants, brothers Hal and Ted Barker, for libel after they started to complain about the couple's business practices.

The lawsuit sparked a nasty feud between the Barkers and the McGuires that continues to this day.

"These people have no intention whatsoever to help poor people," Ted Barker says of the McGuires. "These people are sharpies. They know where the loopholes are. They know them by heart."

But the loudest critics of these types of deals are the McGuires' colleagues in Texas' affordable housing sector, who say the state's property-tax-break program has spawned a new breed of developer that cares very little about helping the poor.

"In many cases what is going on is properties are being transferred without any physical improvements and without significant rent reduction," says John Henneberger, co-director of the Austin-based Texas Low-Income Housing Information Service. "Community organizations concerned about providing housing see the abuses, and it makes them personally nauseated."

The critics, who say millions of dollars are being siphoned away from cities and school districts in exchange for few social benefits, have been pushing for reform before tax-break scandals become front-page news. This spring, Texas legislators and state housing officials have begun studying ways to rein in a program that is galloping out of control.

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