New Orleans is transforming. The city's poorly constructed levees meant that when Hurricane Katrina hit in 2005, it devastated the city, bringing in floodwaters that forced out residents and flattened neighborhoods. It also created an opportunity for developers and politicians to remake it anew. After the storm, New Orleans was often described as a "blank slate," which was problematic given hundreds of thousands of residents still lived within city limits. But for those who could afford to buy, demolish, and build, the term held some truth to it.
One of those people is Pres Kabacoff. He's one of the city's largest developers. His development company, HRI Properties, is focused on "inner-city revitalization" and he's done everything from convert loft buildings to develop entire neighborhoods from scratch in cities across the country—including St. Louis and Dallas. Kabacoff has a vision for New Orleans that has made him the center of a lot of controversy; he wants to see it "revitalized," which for many longtime residents and critics is just another term for gentrification.
But Kabacoff's kind of gotten his wish: New Orleans rental prices are increasing rapidly. In 2000, the average family spent only 13 percent of their income on rent in the city. Before Katrina that number had risen to 19 percent. And it now stands at 35 percent, according to the Greater New Orleans Fair Housing Action Center. The city also lost 7 percent of its black population between 2000 and 2010. The most gentrified neighborhood, Bywater, which Kabacoff had a huge hand in redeveloping, is much, much whiter—it lost 64 percent of its black population between the same 10-year period, and its white population increased by 23 percent.
A large part of the problem with affordable housing in the city is that New Orleans used Katrina as an opportunity to knock down nearly every single housing project. Instead of building new complexes, the city relied on Hope VI, a federal program that gives tax breaks to private developers to include affordable housing in their developments. But Kabacoff lobbied to change the definition of "affordable" so wealthier residents could also receive tax breaks. And he's now one of the main developers benefitting from the Hope VI program in New Orleans.
I sat down with Kabacoff in his ornate office in downtown New Orleans (he has rugs that are probably worth more than your car) to try to get a glimpse of what his vision is for the city.
How did you come to realize the potential for New Orleans to be "revitalized"?
I ended up puppy dogging for my father's development company in early 70s. He always had a vision of bringing the city to the river. The shipping industry from downtown no longer worked, so that presented an opportunity to clean the riverfront up, and we developed a public-private partnership for the riverfront in the 80s. We held the World's Fair there. It was meant to improve a section of the city that was emptying out. Then there was the oil shock; 50,000 jobs were lost. But we discovered when we went to convert warehouses to residential buildings, despite high vacancy rates in the city, when we opened our first conversion we were able to fill that building at higher rates than anywhere, and my partner and I looked at each other and said, "We're onto something." Now we're a developmental company doing inner-city revitalization throughout the country.
You started as a suburban developer, and now you exclusively develop in cities, why?
I'd been to Soho and Noho in New York and the North End of Boston and saw they were taking warehouse buildings and carving them into homes. I also thought it'd be good for the environment. Sprawl isn't. And there's a desire almost across the board to return to the city. We are now a mission-driven neighborhood revitalizer. We use housing, hotels, mixed-income developments as "widgets" to make revitalization happen. That grew into taking advantage of Hope VI, which was the federal program to really decapitate public housing by privatizing it and mixing incomes [Hope VI was started under the Clinton Administration. It gives cities money to give tax breaks to developers for affordable housing in mixed-use communities, as opposed to building blocks of traditional public housing]. We like it because it was a neighborhood revitalizer—it fit our mission perfectly.
How big is your footprint in New Orleans?
We've done 9,000 or 10,000 units in the center city—the warehouse district, the central business district. Those neighborhoods are the stars of inner-city revitalization, and now that's happening all over the country, but there's a long way to go.
How did Katrina remake New Orleans' housing model?
There's always a question of dollars—you get less rent, your building costs aren't different, so you need subsidy. The city got a lot from Katrina and BP. About $100 billion came through here after Katrina. That's juice that no other city really got. What we did is went to the state and federal government in concern; we knew the federal government would dump money here and without it we wouldn't be sitting here today. But we were concerned that they would just create housing projects again and concentrate the poor and we would be right back to where we were, which was a declining city. So I tried to influence the federal government to increase the tax incentive for affordable housing so it so it wasn't just for people making 60 percent of median income but 120 percent. That worked. Now, instead of making $20,000 you could make $40,000 to $50,000 in affordable housing, just to have a broader group, so when you did use subsidies you'd not only be dealing with the very poor but the working and middle classes.
How do you make money and make affordable housing at the same time?
The trick is to get market rate to come. The affordable will come. But if the market rate doesn't come, you end up with all the affordable and the issues they tried to unwind with these programs like Hope VI. On the affordable side, probably a third of those people you would love to have as your neighbor, another third—the kind of people who if their refrigerator stops working their life falls apart—if you can get them stable, you want them, and a third you just don't have the social staff to deal with the issues they're bringing to the table.
When we do developments, it's usually its one-third market, one-third workforce, and one-third former public housing—mothers with children on food stamps and all that stuff. There's a mixture of people. How do we afford to do the affordable piece? You need a lot of subsidy.
But what about that last third? The poorest. How do you house them?
If there's crime that follows, the market rate gets nervous, votes with their feet and leaves, then it doesn't work. So what do you do with the third that's too difficult? You just don't take them, or you evict them. Just get them out of there. I don't have the staff to deal with them. One of the deficiencies of the Hope VI model is how do you provide social services for those people?
What about gentrification? Are you concerned with all these new developments, even the mixed-income units, that New Orleans is becoming unaffordable?
If you're not growing, you're dying. It's certainly not a good solution to stop development to protect neighborhoods. And it's true when a neighborhood comes back many people who found it to be an affordable place are priced out. There are ways to ameliorate that like inclusionary zoning[that's what New York does—mandates new developments contain some affordable housing]. I tried to do that in this state. They weren't ready for the concept.
But the cold truth is, if you're going to revitalize a neighborhood that's in bad shape or where market rate won't go—because the amount of crime, the amount of poverty or the amount of minorities, or whatever keeps market rate uncomfortable moving there—one of the realities is that when the market rate come in, those people move to another neighborhood. It's a pain in the ass, but they move.
That's a concern for artists, too. One of the things were were able to do with Bywater [New Orleans' most gentrified neighborhood] after the storm was create an affordable housing development and preferred artists. The federal government said you can't do that because they're not a protected class like race. So we went to Congress and changed the law.
So you're saying basically that the poorest are just kind of screwed?
With all these cutbacks—we spend money on war and not on housing; the federal government doesn't spend as much—we really need to double the affordable housing incentive.
In terms of race, black people in this town have less money. When neighborhoods revitalize, I think it chases all the poor out, and in our city the poor are almost all black, so it's more a coincidence. And there is probably some racism involved in that. That's the downside of neighborhood improvement. But if the solution is don't allow people to sell or improve their houses, then you haven't done that neighborhood any good.
Do you ever worry that New Orleans will gentrify enough to create a situation like San Francisco—angered residents protesting, picketing in front of Twitter? The city is almost irreparably divided.
That may be almost a good thing. The French Revolution, they didn't have enough bread so they took down the house. You want the poor to get too poor or angry because they'll take you on, and they'll take us all to the cleaners.
But we had 650,000 people after Katrina, and then we had 390,000 and now we have 450,000. That's a dramatic difference from San Francisco or New York. All cities are not the same. We lost our middle income dramatically and it becomes a vicious cycle. The middle class don't require a lot of services, but they pay for services that are provided. When your middle class leaves and your poor get more concentrated, your service needs go up—the tax base is gone and you go into a vicious downward spiral. And you get what happened here, and in Detroit, and Newark, and Gary, Indiana.
But in San Francisco and New York it's gotten to the point where the poor can't afford to live there. I don't think that's the case in New Orleans. You might argue New Orleans could use a little gentrification. In San Francisco and New York, you reach that saturation point and once you reach that, people start to march. Am I worried about people marching in New Orleans? Not yet. We've got a ways to go. And when they're marching that means we really have an improved city—and we also have a problem.
[Image via Getty]