GWorks Interviews: William C. Perkins

In GWorks Interviews: William C. Perkins, Mr Perkins discusses his work, the economic crisis and the role housing development plays in the economy.

William C. Perkins is Founder and Executive Director of the Wisconsin Partnership for Housing Development (WPHD), which he founded in 1985. WPHD is a tax-exempt corporation that “expands access to affordable housing opportunities and revitalizes neighborhoods through partnerships among the public, [tax-exempt] and private sectors.” WPHD develops housing; designs and manages financing and other housing programs; provides technical assistance and consulting services; and does policy development and advocacy.

Mr. Perkins has been involved in the development of low and moderate income housing for his entire career. Before founding WPHD, Mr. Perkins was Administrator of the Wisconsin Division of Housing (now the Division of Housing and Community Development),* which managed housing finance programs, provided technical assistance to community-based housing organizations and local public agencies, and developed state housing policy and new programs. Before moving to Wisconsin in 1976, Mr. Perkins co-founded the Community Resources Group, a consulting firm that worked in neighborhoods throughout New England on affordable housing and neighborhood revitalization.

In December 1990, President George H. W. Bush appointed Mr. Perkins to the Federal Housing Finance Board (FHFB) (now the Federal Housing Finance Agency), the federal agency created in 1989 by the Financial Institutions Reform, Recovery and Enforcement Act of 1989 to assume the Federal Home Loan Bank Board’s oversight of the 12 Federal Home Loan Banks—themselves created in 1932 to provide reliable and affordable funding for banks to make mortgage loans. Mr. Perkins served as FHFB’s first “community interest” director, a seat designated by statute to represent the interests of lower-income consumers and communities. Mr. Perkins served on FHFB until 1993.

Mr. Perkins earned a Master in City and Regional Planning with distinction from Harvard University’s Graduate School of Design.

GWorks Interviews
William C. Perkins
Part One: Housing & Advocacy

GOVERNINGWorks (GWorks)—How would you describe WPHD’s work and what you do?

William C. Perkins (WCP)—We are really in the business of creating partnerships. We are “brokers” of those relationships, and we do things that help those relationships be successful.

We provide technical assistance to other tax-exempt organizations partly to increase their capacity and partly to increase their credibility with the other sectors. We consult with local and state governments partly to increase the effectiveness of their efforts, and partly to encourage them to work with the other sectors because that’s more effective. We create and manage financing programs partly to bring kinds of financing to affordable housing and neighborhood revitalization that are not available from other sources, and partly to encourage partnerships among the three sectors. And we advocate for more resources for affordable housing—but we also advocate for smarter ways of producing housing and strengthening housing.

GWorks—Are there other organizations that do what WPHD does?

WCP—There are thousands of tax-exempt** corporations that work on affordable housing and neighborhood revitalization. Fewer of them—perhaps a couple hundred—have building partnerships at the center of their mission and play the multiple roles we play. Even fewer work on a statewide (actually multi-state) basis as we do.

GWorks—WPHD is a tax-exempt corporation. How does that status affect what WPHD does?

WCP—It’s really the other way around. We have tax-exempt status because of what we do, rather than doing what we do because of our tax-exempt status.

I don’t like to describe WPHD as a “nonprofit” corporation. I prefer the term “tax-exempt” or “social enterprise.” There’s a common misconception that “nonprofit” means not generating net income, which would be a fundamentally flawed business model. “Not-for-profit” may be a bit better name because it suggests—if you put the emphasis on the word “for”—that generating profit isn’t the principal purpose of the business. But that’s a pretty subtle distinction. Tax-exempt status really means we have to reinvest any net income in activities that are compatible with our tax-exempt purpose instead of distributing it to stockholders.

Tax-exempt housing corporations also must produce housing or engage in other activities that primarily benefit people within certain income limits. The “safe harbor” is three-quarters of the housing being affordable to people designated by the federal government as “low income.” We think that housing and neighborhoods for a broader range of incomes is healthier, but we have to jump through some hoops to be able to do that.

We are a very entrepreneurial organization and we support ourselves primarily with earned income. That can be tricky for tax-exempt corporations because the Internal Revenue Service (IRS) regulates earned income very tightly.

GWorks—How does tax-exempt status distinguish WPHD from for-profit housing developers? Could and should a for-profit housing developer do what WPHD does?

WCP—For-profit developers can and do produce housing for people with the same income limits that tax-exempt corporations are required to serve. Most of the “lower income” housing in the country—at least, within a certain range of incomes—is produced by for-profit developers. What’s different is what we do with the money we earn. I don’t expect for-profit developers to work within the same constraints on the use of earnings that we live with. We have totally different motivations.

GWorks—You have worked in housing for your entire career. With degrees from Harvard and the University of Southern Illinois, your academic background is in urban planning and design.
How and why did you come to work on housing development with a focus on low and moderate income persons?

WCP—I wish I could give you a more intellectual answer, but I chose the “housing” part of what I do simply because I thought it was more interesting than the other things people trained in city and regional planning do. It was a highly personal choice. People I know and respect work on transportation planning, economic development planning and other elements of how communities and regions work. I think that’s great, but it’s just not for me.

The “low and moderate income” part is a whole different thing. That was a social justice issue for me. When I was in planning school, the traditional—and fiercely defended—model was that planners were technicians who weren’t supposed to choose sides. That was what elected officials did, and we were supposed to make our skills available to whoever got elected. Some “radicals” looked at the results and decided they weren’t acceptable—that the conventional ways of making public policy decisions were loaded in favor of people who already had relatively more wealth and power, and that at least some planners did need to take sides on behalf of people with less wealth and power. That was called “advocacy planning.” That resonated with my own sense of how the world needed to work—or at least my part of the world—and the choice was very simple. The fact that the “advocacy planners” I knew also worked on housing made the choice even simpler.

GWorks—The United States is contending with the most serious economic crisis it has experienced since the Great Depression. And the effects are global. It is estimated that $50 trillion in wealth has vanished. With few exceptions, most people believe that the dimensions of the crisis has forced the government to become engaged in economic life in ways it has not been engaged—for years, if ever.
Housing—particularly sub-prime mortgages—has played a seminal role in the current economic crisis. Not only did banks, investment firms and others make risky loans. Financial firms then re-packaged, leveraged and bought, sold and hedged these re-packaged loans. And, as we have seen with the Securities and Exchange Commission indictment of Goldman Sachs and Fabrice Tourre, a Goldman Sachs employee, financial institutions even created financial instruments the success of which was defined by mortgage default.

But, the issues no doubt reach deeper and farther back. Home ownership is an American ideal. Political administrations have been interested in expanding homeownership to more people.

How would you describe the role housing has played in this economic crisis?

WCP—In one sense, the current economic crisis is all about housing. Speculation in housing is what caused it. In another sense, it’s all about greed and housing simply happened to be a convenient way for greedy people to make a great deal of money. Dean Baker, Co-Director of the Center for Economic and Policy Research, who I think is a particularly clear-headed observer and analyst of the “economic crisis,” argues in False Profits: Recovering from the Bubble Economy that this was not a “financial crisis” at all but rather the consequence of the housing bubble. He also argues that a substantial amount of the attention being paid to reform of the financial system is actually a deliberate attempt to distract attention from what really happened in the housing market and a way to avoid dealing with it.

Mr. Baker also does a valuable service by debunking the myth that political pressure on Fannie Mae, Freddie Mac and regulated lending institutions through the Community Reinvestment Act (CRA) created the subprime lending debacle. Subprime mortgages (i.e., financial instruments backed by them) were sold in the national and international capital markets by investment bankers competing with Fannie Mae and Freddie Mac. The two “government sponsored enterprises” got as heavily into subprime lending as they did because they were trying to protect their market share, their operating income and returns to their stockholders and not primarily because Congress made them do it. Similarly, most of the subprime lending was done by unregulated mortgage brokers not subject to CRA.

GWorks—What impact has the economic crisis had on the kind of housing development WPHD does?

WCP—One impact is to put us in a financial squeeze. We’re in the housing business and we rely primarily on earned income. One of the ways we make money is by building and selling homes (and in our case, by selling building lots in a mixed-income subdivision to other builders of somewhat more expensive homes than we build ourselves). Homes and lots are harder to sell right now. 

Homebuyers have more difficulty getting loans to buy homes. People with relatively lower incomes, who are our primary customers, have even more difficult getting financing. New homes that we built just as the housing market started going downhill are in competition with slightly older homes whose prices can be reduced and are being reduced. Homes and lots that were supposed to generate income instead are costing us money because we have to pay the “carrying costs”—interest on our construction loans, real estate taxes and maintenance. In turn, that puts a squeeze on the rest of our business because it has to generate money to support our development business.

If we didn’t rely so heavily on earned income—if fund-raising were a bigger part of our business model, as it is for many tax-exempt corporations—we would be facing the same cutbacks in philanthropic, corporate and personal grant-making that our sisters and brothers are facing. 

Foundations, businesses and people who give away money are making less of it. Very large banks are the exception, but their grant-making certainly hasn’t offset the declines in other philanthropic giving.
We are not building any new housing these days and it may be a while before we do. Our “development business” right now is using the new federal Neighborhood Stabilization Program to buy foreclosed homes, rehabilitate them and sell them to homebuyers at affordable prices.

Longer-term, I like to believe that the economic crisis will have a positive impact, even though it’s a very painful way to change habits and expectations. Many, many people have learned that they can’t use financial slight-of-hand to pretend they can afford to buy homes that are too big, that cost too much to heat and cool and maintain, on lots that are too big. I think there could be a different attitude toward “affordable” housing, and organizations like WPHD that are in the affordable housing business could be in the right place at the right time.

GWorks—What is the biggest challenge WPHD faces right now?

WCP—Surviving financially. This is a very tough time to be in the housing business, for tax-exempt and for-profit corporations.

—End of Part One—

GWorks Interviews
William C. Perkins
Part Two: A Governing Role

GWorks—You founded WPHD in 1985. You have also been on the government regulatory side, serving on the FHFB as the “community interest” director.

One debate that has emerged from this crisis concerns government regulation. What role does government play in housing development now?

WCP—Government regulation of housing is critical, whether for good or bad.
Housing development is an extensively regulated business at the “retail” level. Through zoning and other land use controls, the government—local government—basically decides how much and what kind of housing can be built. Unfortunately, those regulations more often make housing more expensive and keep it too expensive instead of encouraging more rational housing choices. As far as I’m concerned, the housing market and the housing development business started to go off the rails when housing became primarily a capital investment instead of primarily a place to live. It wasn’t always that way and it hasn’t even been that way for very long. Housing used to appreciate at about the same rate as inflation or maybe a bit more, and that was good enough for most people. When we started believing the value of housing could and should keep going up much faster than inflation, it started being very important that our neighbors live in houses as expensive as ours or even more expensive, and that we keep less expensive homes out of our neighborhoods.
At the “wholesale” level, where the cost of the money we use to build and buy housing is determined, I would argue that government regulation has been largely ineffective, at least recently. I’m not the only person who thinks so, to say the least. The housing bubble and its collapse, which has devastated our economy and the economies of other countries, were totally predictable and totally preventable by smarter regulation of the housing business at both levels.

GWorks—How has government’s role changed since you founded WPHD? And, has this change been good for housing development?

WCP—I wouldn’t say government’s role has changed all that much, although specific policies and programs change from time to time. One role of the federal government traditionally has been to provide funding for “affordable” housing, and to attach conditions to the funding that strongly influence—if not virtually determine—the kind of housing that gets produced. Another federal government role is to both insure and regulate the financial institutions that provide financing for all housing, “affordable” or not. And, of course, it’s what used to be the implicit, now explicit, federal financial guarantee that enables the “government sponsored enterprises”—Fannie Mae, Freddie Mac and the Federal Home Loan Bank System—to exist and have a profound effect on the housing market.

The role of state governments in housing has undergone the biggest change during the time I’ve been working in the field, although not during the past 25 years. With a few exceptions, state governments were not involved in housing except in a regulatory role shared with the federal government. The Nixon administration’s shift to “block grant” funding for many federal programs, including housing programs, made state governments significant players starting in the 1970s. They still are.

The role of local governments—again, with some exceptions—has primarily been regulatory (e.g., zoning and building codes).

Since there has been relatively little change in roles during the past 25 years, I can’t say whether the change has been good or bad for housing development. Some of the specific policies and funding priorities have been good and some have been bad. And the lack of change in some policies and programs—missed opportunities and slowness to respond to problems—has been bad. I think the biggest missed opportunity has been the failure to capitalize and support a strong nonprofit housing industry with a major role in providing “affordable” housing, as has been done in western Europe and Canada.

GWorks—What role(s) should government play in housing development?

WCP—I believe government’s fundamental role should be to ensure that access to safe, decent quality housing and safe, decent neighborhoods isn’t determined by income, race, age, disabilities or a list of other characteristics of households about which we have debates from time to time. Sometimes that’s described as “responding to gaps in the market.” There will always be differences in the quality of housing to which people have access by virtue of how much money they have. But there is a level of quality that should be independent of income. The government’s role is to make that happen. Yes, I’m one of those unapologetic old-fashioned liberals who believes that decent housing and neighborhoods is a right and not a privilege determined by income.

That can be done by regulation—telling providers of housing or the capital that finances housing that they can’t deny access to housing based on certain factors, and that the housing they provide has to meet certain standards of health and safety, and that they can’t commit fraud. Sometimes, the expectations government imposes on providers of housing are a function of financial assistance the government provides to them rather than to consumers of housing, such as deposit insurance or the guarantee behind GSE debt. The government’s role can also be implemented by providing money to pay for part of the cost of housing, and by deciding who gets that money, where and how the housing gets provided and who provides it.

GWorks—Will government involvement increase? Should it increase? And how?

WCP—I don’t think the government’s role in providing funding for housing will increase substantially in the near future, because of the pressure the federal budget and most state and local government budgets are under. I hope we will see some increases, but even though they may be significant compared to current funding levels, they probably won’t be terribly significant compared to the needs.

It’s important to recognize that funding for decent housing is considered as “discretionary” spending. The amounts of money the federal government is currently providing to improve the quality of housing and neighborhoods for people not served well by the market are very small compared to the amounts we’ve seen spent on bailouts of companies, wars and of course the massive Bush tax cuts. Against that backdrop, should we have spent more to make sure people have a decent place to live? Of course. But as an aide to Representative David R. Obey (D–WI7) said to me once when I was advocating for increased federal funding for housing, “The money’s all gone.”

I think—although perhaps I’m being optimistic—there will be a fairly dramatic increase in the federal government’s role in ensuring access to capital to finance housing. Part of that has already taken place. The federal government essentially owns Fannie Mae and Freddie Mac—although it’s informative that the government hasn’t had to take over the Federal Home Loan Bank System. Now that the government owns Fannie and Freddie, the government has to decide what happens to them next, and what kind of system will play the role they have played in providing capital for housing. That’s a very big change. The government was pretty passive in terms of regulating Fannie and Freddie until the collapse.

GWorks—Do tax-exempt housing developers need to change what they do? How? For example, does the kind of project a tax-exempt housing developer do need to change? Should tax-exempt housing developers be more or differently involved in affecting government regulation of housing?

WCP—Tax-exempt housing developers already do a very wide variety of kinds of projects in response to their different missions, the needs of the consumers and places on whose behalf they work, and their abilities. And they are already as heavily involved in trying to affect government regulation and funding for housing as their budgets allow—the amount of time they can afford to spend on advocacy—and as much as the legal constraints on lobbying allow.

I think the biggest change that’s needed is for tax-exempt housing developers to think of themselves as “social enterprises” and to convince others to think of them that way. We need to change the way we work—and are allowed to work—to be more entrepreneurial.

Partly that means acknowledging that housing is a business, even if it’s providing housing for people who can’t pay the whole cost of the product. The business has to managed be efficiently and responsibly. We may have to spend more time producing the housing because the kind of housing we produce is more complicated to produce. But we need to be sure that’s why we spend more time, rather than because we’re just not being disciplined enough to manage our businesses well. Funders and others sometimes describe that as emphasizing “performance” rather than just whether a “nonprofit” developer is working on behalf of a good cause.

Being entrepreneurial also means figuring out how to make our businesses financially stronger and more independent, in ways besides asking people to give us money. It may mean producing mixed-income housing, so that revenue is generated by housing for people who can pay its full cost to help produce housing for people who can’t. The barriers in the IRS code that constrain the ability of tax-exempt housing producers to earn revenue need to be reformed, and we need to stop telling tax-exempt housing producers not to compete “unfairly” with for-profit housing producers. If what are now for-profit (meaning taxable) housing developers want to provide a certain percentage of the housing they produce so that’s affordable to people with less money and reinvest all of their net income in the business, they’re welcome to the tax exemption “nonprofit” housing developers have. That kind of competition would be very productive.

I think one potential market “niche” for social enterprises in the housing business is figuring out how to produce housing that’s less expensive to build and maintain in real terms, rather than producing housing that’s too expensive and then subsidizing it to make it “affordable.” Producing less expensive housing has not been a high priority except as a way of making limited subsidy funds stretch further, which is a good objective by itself. But I think more and more people who aren’t eligible for subsidies will be looking for housing they can genuinely afford. If tax-exempt social enterprises know how to produce that kind of housing, it could be good for us, good for our customers who need and are eligible for subsidies, and good for other housing consumers.

But being able to do the R&D to produce that kind of housing, and being able to take the risk of producing a different kind of housing than the mainstream market has produced, requires a well-capitalized social enterprise. We need governments at every level, and philanthropic givers and social investors, to understand and support that model instead of thinking of us as organizations that are supposed to lose money, to which they give money to keep us from drowning—but just barely.

And I think being more “entrepreneurial” means figuring out how to produce housing at a larger scale, so that tax-exempt developers become a more significant part of the housing delivery system and have more ability to influence how the system works. We think of “entrepreneurial” businesses as growing businesses—business that grow because they do whatever they do very well. Being bigger by itself is not a sensible or socially productive goal, in my view. But providing more housing opportunities and better neighborhoods for people in need than we are now providing is essential. We need to grow our impact without losing the qualities that distinguish us from housing providers who aren’t motivated primarily by profit.

GWorks—Where do you see housing development going? Do you think this kind of financial crisis in housing could happen again?

WCP—We’re at a crossroads and I don’t know which way housing development is going. We could get smart, and produce and finance housing in better ways. Or we could wait for the crisis to pass and then go back to the old ways that didn’t work because we don’t want to make the hard choices—choices that are politically and socially difficult.

This kind of financial crisis in housing absolutely could happen again. It seems to be hard for us to learn from our mistakes and too easy to keep making them. I’m a big fan of Pogo, but I think he got it only half right. We are sometimes our own worst enemy, but there are plenty of people happy to have the opportunity to aid and abet our tendency to shoot ourselves in the foot—and to make money by convincing us we need to do it, selling us the ammunition to do it with, charging us for the bandages, and punishing us for having been stupid enough to listen to them in the first place.

GWorks—What book(s) are you reading right now and what do you like/dislike about them?

WCP—P.G. Wodehouse—Heavy Weather, Cat-Nappers, French Leave—they are thoroughly charming and just plain fun. There’s nothing I dislike about them. I have friends who don’t like the books because they are all about the idle rich and some people think they glorify that life style. I think of them more like walking through a museum and looking at the interesting specimens. I’ve read a lot of Wodehouse before and I’m working my way through the rest of them since I’ve started using the public library again, after deciding that our house just wouldn’t hold too many more books.

Phoebe Atwood Taylor—Punch with Care—a mystery published in 1946, one of a series about the “Cape Cod Sherlock” Asey Mayo. Again, a charming period piece. I’m reading all of the books she wrote, of which there are 20-some. I read a lot of mysteries, and I read only mysteries set in another country or another period. I’m just not interested in contemporary American detective fiction. I can read the newspaper for that—and I don’t read them for the mysteries but for the narrative and character development.

Re-reading S.S. Van Dine—The Benson Murder Case—published in 1926 in which the central characters are Philo Vance, a wealthy amateur detective and John F.-X. [sic] Markham, the Manhattan District Attorney. There’s nothing I don’t like about them, I’ve re-read the six or so books in the series that I’ve been able to find (they’re out of print, so I have to search for used copies) 5-10 times each.

Re-reading Alan Faust—Dark Star—part of a spy series set in Europe in the years leading up to and during WWII. Again, nothing I don’t like about them—have re-read all of them several times. Much better written, from the writing craft point of view, than Van Dine or Taylor. Much more serious. At first, it troubled me a bit that Faust’s stories have happy endings, sometimes in extremely improbably circumstances—but then I realized I would prefer that to the alternative. And sometimes, good people do triumph over evil forces (like the Third Reich) because evil people are just people, too—often bumbling, clumsy and not very bright.

Dean Baker—False Profits: Recovering from the Bubble Economy. One of the most—perhaps the only—understandable book about economics and finance that I have ever read. What do I like about it? It tells the truth, the whole truth and nothing but the truth—a rare quality.

Stieg Larsson—The Girl with the Dragon Tattoo. I finally broke down and read it because so many other people were, and so I thought it must have something. I would say it’s reasonably well written but not outstandingly so. And it’s one of the darkest, most disturbing plots I’ve read in a long time. There is apparently a lot of interest in the story of a journalist hired to investigate the disappearance of a 16-year old girl 40-some years ago who uncovers a serial killer who abused his daughter (the missing girl) and raised his son to follow in his footsteps including abusing his sister, with the journalist helped by a punker computer hacker who has been raped by her state-appointed guardian. I could have lived without it. The only reason I finished it was because I have a thing about not finishing books I’ve started reading, no matter what.

Obviously, I read a lot. I read every night before I go to sleep, so I go through a lot of books.

GWorks—What are the best books you have read? Why is each on your list? What are the best books I have ever read? 

WCP—Are you being serious? I don’t have such a list, and I’m not sure I have ever thought of the books I’ve read in terms of which are the “best.” I learn something from all of them. I think any of John Le Carre’s books are among the best written books I’ve read, simply in terms of the quality of the narrative and the character development. An author who puts into the mouth (or brings out of it) the words, “We stole some horses together,” to describe the relationship between two men is pretty smart about writing and people, in my book (of which I don’t have one). I have probably re-read the Sherlock Holmes stories more than any other books I own. The screenplay from It’s a Wonderful Life (which I own) is a “book” that means a great deal to me because I love the story. But the screenplay as a book isn’t an especially good book. Emerson’s Self-Reliance is the book that may have had the most profound impact on my personal development of any book I’ve ever read. But I don’t know that I would call it one of the “best books” I’ve ever read. But I’ve read thousands of books, and I could probably find something good to say about at least 90 percent of them.


Photo: Walker Evans. Middle class houses of the town. Birmingham, Alabama (1936). Part of the Farm Security Administration—Office of War Information Photograph Collection. Source: Wikimedia Commons: “This image is a work of an employee of the United States Farm Security Administration or Office of War Information domestic photographic units, created during the course of the person’s official duties. As a work of the U.S. federal government, the image is in the public domain.”

* The Division of Housing and Community Development is the “reincarnation” of the Division of Housing (DOH). DOH was dismantled by state law in 1985 and a new Division of Housing was created in 1989. The name was changed when the division moved from the Department of Administration to the Department of Commerce.

** Throughout our interview, Mr. Perkins was careful to use the terms “tax-exempt” and “social enterprise” to describe what are generally referred to a “nonprofit” corporations. As Mr. Perkins explained: “I have a concern about using the term “nonprofit”—although I sometime do use it—because of the implication that we are not supposed to generate net income.”