AUSTIN, TEXAS XHB — AUSTIN, Texas -- It's a tale of dreams gone awry.
When Congress created Resolution Trust Corp. in 1989 to clean up the savings and loan mess, it decided to set aside thousands of foreclosed houses and apartments as low-cost housing for low-income people.
The notion was elegant in its simplicity: housing for the needy, thanks to the savings and loan crisis. The government could provide decent shelter without spending a dime on new public housing. And the working poor, at long last, could own a home at a price they could pay.
It has not worked out like that. Virtually everyone agrees that the program has fallen short of its goals, though how far short is in dispute.
"It's an unmitigated disaster," said Richard Jordan, a former board member of the Texas Housing Authority and a real estate investor. "The government had the unprecedented opportunity to disperse people into single-family detached homes and it hasn't. Why? Because the program stinks."
Mr. Jordan is not alone in his view. Members of Congress and advocates of affordable housing say the government has failed almost completely to exploit an important and rare opportunity.
Resolution Trust acknowledges that thus far only a small portion of the houses in the program have gone to the poor. But officials insist they have labored to devise policies to tackle an extremely difficult task, and they say that such a program cannot be established overnight.
Stephen S. Allen, the corporation's head of affordable housing, said that under the circumstances "what we have accomplished has been remarkable."
At any rate, thousands of inexpensive homes that could have gone to low-income buyers under the program have, in fact, been siphoned off and bought by investors.
Middle-class buyers, who could otherwise afford housing, have been flocking to take advantage of bargain prices. And the working poor who could benefit the most from this program have been virtually shut out by, among other things, a lack of mortgages for them.
The program's critics contend that the Bush administration, which fiercely opposed the program when it was initially set up by Congress, has actively tried to scuttle it through policies that discriminate against the poor.
Among them was a program that offered bigger discounts and better financing to sophisticated investors than to low-income buyers. Some of these policies have changed, housing advocates say, but the basic problems still exist.
"This has been a tremendous lost opportunity," said Frank H. Shafroth, director of federal relations for the National League of Cities in Washington. "Something wonderful could have happened to a lot of families in America. But it didn't."
Rep. Bruce F. Vento, D-Minn., who was chairman of a special congressional task force on Resolution Trust, said he was disappointed. "The administration and the RTC had to be dragged kicking and screaming into the affordable-housing program," he said. "They have a basic reluctance to implement the law."
Mr. Allen of Resolution Trust said the expectations of the critics were unrealistic. "You can't help lower-income people buy when you have a mandate to return the maximum dollars to the government," he said, "and it's a conflict. So it's an ongoing challenge for us to reach our target market."
To carry out the program, Resolution Trust has hired an impressive array of bureaucrats with a long history of service to the poor.
But they find themselves caught between the agency's conflicting goals: Selling real estate at top dollar to reduce the cost of the savings and loan bailout for all taxpayers, and selling small houses at affordable prices. The agency is working at the juncture of social policy and quick real estate sales, and money ++ talks.
Under the program as set up by Congress, a 90-day window was created in which low-income buyers and non-profit organizations have the exclusive chance to buy Resolution Trust properties appraised at less than $67,500. If there are no takers, the houses are offered on the open market.
As of the end of April, 17,372 houses and 489 apartment complexes with 65,097 individual apartments have fallen within these guidelines.
This represents $1.6 billion in real estate, or 10 percent of Resolution Trust's entire portfolio. And more housing will be added as the agency continues to take over insolvent savings and loans.
Besides social policy, there are strong economic incentives behind the affordable housing program. The government estimates that it costs $18.25 a day, or about $6,600 a year, to carry a foreclosed house. At the same time, new public housing costs anywhere from $60,000 to $100,000 a unit.
In one fell swoop, the government could lop off hundreds of millions of dollars in real estate carrying costs and provide new public housing on the cheap. And, since the houses already exist, there are none of the "not in my back yard" problems that often arise when new public housing projects are planned.