Solutions Sidebar: How Affordable Housing & Education interconnect to build vibrant communities with Marjy Stagmeier.

Old buildings make up an increasing share of the U.S. rental stock. Experts say a healthy supply of these aging apartments help cities and neighborhoods thrive. But fixing them up takes money and political will. Atlanta Developer Marjy Stagmeier, who wrote the book Blighted, renovates rundown apartments and has an education model she says others can replicate. 

Interview guest: Atlanta developer, landlord, author and affordable housing “solutionist,” Marjy Stagmeier. 

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Transcript

Ann Thompson:

What do you do when housing falls into disrepair and creates blight for an entire neighborhood? This affordable housing Atlanta landlord was determined not to displace the hardworking families who lived there.

Marjy Stagmeier:

We could have gone in and just evicted everyone and just renovated and cleaned it up, but we didn't do that. We decided to honor the families that already lived there.

Ann Thompson:

Dubbed the compassionate capitalist. Margie Stagmeier has owned and managed over 3,500 properties using education in part to successfully turn around rundown housing. She owned in a couple of Atlanta neighborhoods. She's teaching other cities to do the same.

Marjy Stagmeier:

You can renovate 'em for less than 50 cents on the dollar if you have a cooperative city and turn it back into healthy, affordable housing.

Ann Thompson:

On this episode, we're back with a Solutions Sidebar. Brick by Brick talks to Margie Steinmeier, who has a formula to help residents thrive. My colleagues, Hernz Laguerre Jr. and Emiko Moore. Join me at the end for some takeaways. Let's get into it. This is Brick by Brick: Solutions for a thriving community.

Ame Clase:

Brick by Brick is made possible thanks to leading support from Debra and Robert Chavez, Greater Cincinnati Foundation and the George and Margaret McLane Foundation, with additional major support from The AES Ohio Foundation, Laurie Johnston and the Seasongood Good Government Foundation, Diane and Dave Moccia, The Robert and Jean Penny Endowment Fund of The Dayton Foundation, the Robert & Adelle Schiff Family Foundation, and more. Thank you.

Ann Thompson:

Welcome Atlanta Real estate investor and affordable housing solutionist, Marjy Stagmeier to Brick by Brick. The aging apartment community of Summerdale and its miraculous transformation is the subject of your book, Blighted, which you say completely changed your DNA incidentally on how you own and manage housing. Paint us a picture of where it is and what it looked like in 2017 when you were considering buying it.

Marjy Stagmeier:

Well, thank you so much first for having me on your show. I am an affordable housing landlord. I've owned and managed over 3,500 units, and I tend to favor properties that are boarded up dangerous dwellings. So when I first saw this property, which is located in southwest Atlanta, it's in one of the grittiest neighborhoods in Atlanta. It's known to be very violent. It's a very tough area to live in. So when I saw this property, I immediately fell in love with it because this is exactly what I do. I like to take the boarded up properties and convert them into safe housing communities. What was really cool about this one was it was connected to a commercial district, so I had a grocery store right behind it, which was fabulous. And then the elementary school was only two blocks away so our kids could actually walk to school. So I saw a great opportunity to improve the whole community.

Ann Thompson:

And so you toured the property as you were considering buying it, and what kinds of things did you see inside the property? What was the condition?

Marjy Stagmeier:

The condition was very poor. When we got there, there was groups of men just hanging around, which is evidence of a very active drug trade, which after we did our research, we realized we had a regional drug hub, so it was very dangerous. We saw a lot of the dealing going on. There were a lot of roaches. Probably 90% of the property had severe infestation of either rodents or roaches. Probably a third of the property was boarded up. We could tell there was a lot of vagrants living there, a lot of homeless people. So yeah, when we bought it, it was just what you would call a Class D apartment. It was just a dangerous crumbling environment.

Ann Thompson:

You ended up buying it from an overseas landlord and had to raise $12 million at a very low interest rate because your goal was not to displace anyone through rising rent. And you also, I was reading, didn't use federal rent subsidies because of the red tape. What were your priorities or goals in turning Summerdale around? What kinds of things did you want to improve?

Marjy Stagmeier:

We wanted to improve the living environment and make it safer. When we bought it, 68 children lived there and went to Cleveland Avenue Elementary School. And to me, that's heartbreaking. They're walking through drug dealers, rodents and roaches, just trying to get to school. One of the things I did as part of the book was I interviewed several of the tenants and there was one family I interviewed as a four generation family. And you could just see in that living environment that the fourth generation was going to have a life in poverty through housing we're raising the next generation of poverty. So that was my goal, was to reverse that trend, give these children equal access to resources, safe housing, educational tutoring, healthcare, so that they had a chance to thrive.

Ann Thompson:

And, as you alluded to, removing the criminal element as well.

Marjy Stagmeier:

Absolutely. And that's a tough nut to crack because that was a multimillion dollar business for someone.

Ann Thompson:

You are not new to real estate and have owned and managed thousands of units. What were the challenges here, getting rid of the drug dealers being one of them?

Marjy Stagmeier:

Well, that was one of the biggest challenges is creating a safe environment. When we got rid of the drug dealers, which going through the court system legally took about 18 months, the next wave of drug dealers came in because again, you had a very profitable territory that no one wanted to give up. So that was the challenge. The regulatory environment was a huge challenge, trying to get permitting, all the delays associated with it. And I know this is a challenge across the country. Screening the tenants was a challenge because we had roughly 200 families living there and a lot of them had never been screened. So just trying to get ahold of who was living there, who we wanted to keep, who were good tenants and who were basically the criminals contributing to the environment. So that took a couple months to just sort through everything and basically start bringing sanity to the chaos that was Summerdale apartments.

Ann Thompson:

That would seem like an overwhelming task. There were people even living there that were kind of fronts for the drug dealers, right?

Marjy Stagmeier:

Oh, absolutely. They're called phantom tenants. It's a very robust way for drug dealers to gain access to apartments, which by the way, I didn't consider some of their apartment. I considered it their office because of the 11 people that we eventually arrested, none of them lived in the area. Some of them lived as far as 30 miles away, and literally they came in every day and came to the Summerdale as their office and ran their business. So we were dealing with a different mindset here.

Ann Thompson:

You had lots of very respectable clients, and I found it interesting that you showed up in a dress hoping to remind them of their mother or grandmother. Tell me about some of the tenants. You do preview quite a few in your book, explaining a little bit about what they've gone through.

Marjy Stagmeier:

I'll start with Mrs. Humphreys, who is the longest reigning tenant at the property. She has lived at the property for 20 plus years. She was a housekeeper domestic. Her daughter who lived with her was a custodian at Fulton County Courthouse. Her granddaughter worked at Fulton County Courthouse and then her grandsons were ages six and eight when we bought the property. She was very religious, an excellent tenant, and she just wanted to live her life in a nice apartment community and raise her family. So we really tried to honor her. We were able to get her on Section Eight or subsidized housing. Her total income was $15,000 a year. If we bought went into this property and bought it and raised the rents to market, she would've been displaced. So that's an example. We had a young man living there that went to Morehouse College that worked for Delta Airlines, and he just felt like he wanted to go move into this property and work with the families and help them improve their lives. We had so many great long-term tenants living there that we felt like were worth saving. So it's a lot of work. We could have gone in and just evicted everyone and just renovated and cleaned it up. But we didn't do that. We decided to honor the families that already lived there,

Ann Thompson:

Coming back to the condition of the place. So after you bought it then, how did you know where to begin right away? Did you have to get like, all right, we're going to have to get the bugs out, renovate people's apartments, the dealers. What did you do first?

Marjy Stagmeier:

I've been doing this for a long time, and it's a finite sequence. I call it the capital sequence. You can't go do a renovation to these blighted properties until it's safe because if you let the crime stay at the property, they're just going to sabotage and tear up everything you're doing. So the very first thing you have to do is you have to create safety. And we did that. We hired off-duty police officers that were armed the first week that they were there. They basically screened everyone that came through, and that pretty much stopped a lot of the drug dealing because we had police officers on site. We fixed all the gates. We installed cameras with the Atlanta Police Foundation, and that cut about 90%. It didn't get rid of the crime because it was persistent, but that really helped. So once you've created that safe environment, then you can start renovating. And at that point, then we also started the afterschool program and the partnerships. But again, you have to start with a safe environment and then you go into the renovation simultaneously with starting your resident programs and screening tenants and just rebuilding the whole property.

Ann Thompson:

Were people glad to see you? Did they view you as some kind of a savior to them?

Marjy Stagmeier:

Not everyone, no. Obviously the illegal tenants were not happy to see us, and they threatened us, and it was dangerous there for a while for the staff. But on the other hand, so many tenants were thrilled. They treated our staff like gold. They were bringing us lunch cookies. They were just thrilled to see someone actually cared about their community.

Ann Thompson:

You realize some years before this that schools and housing are related, just a block away from Summerdale is Cleveland Avenue Elementary School. Talk about some of the problems when you first bought it that you were seeing at Cleveland Avenue Elementary School.

Marjy Stagmeier:

So at Cleveland Avenue Elementary, children who entered first grade were only 17% of them can read. By the end of the third grade, Dr. Payne, who was the principal, headed up to 78%, if I'm recalling correctly. So what you see at the school reflects the housing environment. There was a lot of traumatized children going there. A lot of 'em were in gang colors already at the age of six and seven, they were already starting to affiliate with gangs. There were a lot of guns in backpacks where the child accidentally took their dad's backpack and there was drugs and guns and cash in it, and then the father would show up wanting to retrieve his backpack. The children were just very traumatized. And what comes with that, that actually affects brain development, this kind of trauma of living in these blighted apartment communities. They were all low readers. Very few of them were passing their reading scores, their math scores. So again, what I've learned in this business is the local schools will reflect the housing environment. I have underwritten over a hundred of these blighted deals, and 100% of the time the elementary school was a low performing school.

Ann Thompson:

Another problem was the fact that a lot of these kids move away after the school year.

Marjy Stagmeier:

Exactly. So transiency is the number one thing of what causes schools to become low performers. And basically apartment rents and landlords are what controlled with transiency. So if I decided to raise my rents a hundred dollars, my average house of income was 26,000. Well, obviously the families can't afford that. So they're going to move and they're going to take their kids out of the school and it's become pandemic, especially in low income neighborhoods. We'll see schools with 40, 50 and 60% transiency rate, meaning they lose 40, 50 or 60% of their children every year because of the housing around them.

Ann Thompson:

There were also lockdowns that were happening quite a bit at this school, but you were able to solve this problem. Explain.

Marjy Stagmeier:

Isn't that amazing? So I met with Dr. Payne, my principal, and she was apologizing for the condition of her office because they had just had an active shooter lockdown the day before, and I had never heard of that before. An active shooter lockdown is when there is a shooter either on the school grounds or in the neighborhood, and the school is mandated to go into lockdown. So after talking with her, I went back and discussed this with my security and we figured out it was literally one guy that was operating his drug trade at the Exxon station across the street from the school. And so they went and arrested him and literally she did not have another active shooter lockdown for years. So literally, it shows you how one person can really impact the trajectory of a school.

Ann Thompson:

I hope you're enjoying our conversation with Marjy Stagmeier. There's still more ahead following this short break. This is Brick by brick.

Ame Clase:

Brick by Brick is made possible thanks to the generous support of so many, including Rosmary & Mark Schlachter, The Camden Foundation, Patti & Fred Heldman, DeeDee & Gary West, The Stephen H. Wilder Foundation, Judith & Thomas Thompson, a donation in memory of Frank and Margaret Linhardt, and more. Thank you. We couldn't do this work without you.

Hernz Laguerre Jr.:

Hey, it's Hernz Laguerre Jr, one of the team members behind Brick by Brick. Our new show is about solutions for our thriving community, but if you think about it, we all have a different perspective of what a thriving community should look like. That's why we need to hear from you. We want to know what a thriving community looks like to you. Maybe it's more housing, more parks or stores or even safer sidewalks. Whatever your vision, we hope you'll share with us. You can do that by heading to the Brick by Brick Show page on cetconnect.org or thinktv.org. There you'll find an audience question button, just fill out the survey, and that's it. We look forward to sharing your hopes and dreams with the rest of our neighbors in future episodes. Thank you.

Ann Thompson:

Welcome back to Brick By Brick. I'm Ann Thompson. Let's get back into our conversation with Marjy Stagmeier and Emiko, Hernz and I will be back at the end for some reflections. Working with the school, you realized again how important education is to the whole housing element, and you started Star-C, what is it and how did you get the idea for it?

Marjy Stagmeier:

So many years ago, I had a property manager who was a reverend, and she asked me could we start an afterschool program at her community, which was a very low income community, a lot of single parents making $7 an hour at the time. And I said, certainly. So we put together a budget and she started this afterschool program. It was such a triple bottom line win for me. My parents renewed their leases. They weren't worried about their kids after school. I did not have children running around the property. There were roughly 55 children in this program. And so it really stabilized the community. So going forward, whenever I buy any of these apartments, I always put in afterschool programs, senior programs, and it just morphed. And then in 2014, I was invited to speak at a regional forum and I was asked by the audience to consider turning this model into a non-for-profit. So that's how we started Star-C in 2014. And what Star-C does is we offer resident wraparound services in any low income apartment community in the city of Atlanta.

Ann Thompson:

Your transformation of Summerdale is being held up as a model. Do you have any performance metrics? It sounds like it's been very successful.

Marjy Stagmeier:

We do have performance metrics. It is always challenging to operate these properties because we are dealing with so many traumatized tenants. So it is continuing to be a work in process. We continue to have to be very vigilant about security. Luckily, we had a very good summer. This summer. We didn't have a lot of issues. Our metrics are around affordability. Our rents are affordable for families earned in between 35 to $45,000 a year, or actually $45,000 a year or less. We track our reading scores for our children and they outperform their peers at Cleveland Avenue Elementary. And we've recently partnered with Grady Hospital, and we're tracking healthcare metrics like diabetes, healthy eating, HIV, things like that. So we're basically screening all our tenants to make sure that they have a healthcare provider that they can work with, and that's been a huge success. And then one more thing is we also have Cub Scouts at this particular property, which has been a real game changer. It is really cool to see the kids trade their gang colors for a Cub Scouts uniform, and a lot of them are doing really well in school, so they're getting all the academic awards. So there's a lot of metrics that we keep. But I would say overall it is been a tremendous success. Yes,

Ann Thompson:

All of that sounds great. And you were able to keep rents averaging around $730 a month?

Marjy Stagmeier:

Well, unfortunately we've had to raise them because that was in 2018. Our insurance and our taxes have gone up, but still it's very affordable for families earning under 60% of the local area, medium income.

Ann Thompson:

In your book, blighted, you say that 60% of apartments in the US are over 30 years old, and because we aren't building enough housing, we have to deal with this aging housing. What kind of attention are you seeing other cities given to this issue?

Marjy Stagmeier:

One of the reasons I wrote Blighted was to basically show a case study to other cities and governments, and it's starting to get a lot of attention as far as the aging housing inventory crisis. Historically, a lot of cities would just try to condemn 'em, but really you can renovate 'em for less than 50 cents on the dollar if you have a cooperative city and turn it back into healthy, affordable housing. And roughly 80% of low-income families live in these older apartment communities. So it's a huge source of supply for a lot of cities around the country.

Ann Thompson:

Some people might wonder how easy is it to replicate your ED housing model in other parts of the country?

Marjy Stagmeier:

I mean, I personally think it's relatively easy, but you do have to have a cooperative municipality. You have to be able to raise the money, so you have to have banks and capital sources that are willing to work with you. But I mean, there's a lot of landlords that are doing what I do all over the country, so I think it's very easy to replicate.

Ann Thompson:

Are you able to point to cities that have been successful doing what you did?

Marjy Stagmeier:

I'm trying to think. No, honestly, I can't think of a specific city, but I know of a specific landlords that are regional and have properties all over the country that have been very successful at doing this. But you bring up a really, really good point. Cities really need to come up with an aging housing strategy to be able to attract these landlords that are willing to come in and do this work and continue the supply of housing for low-income families.

Ann Thompson:

And do you see that as more just local landlords who are doing this or landlords on a national scale that do this? In many cities,

Marjy Stagmeier:

It is mainly regional. Right now, it mixes with federal income tax credits, and it's hard. That goes state by state because every state has their own rules and laws, an amount of tax credits they're willing to give. So right now you only see regional landlords doing it, not so many national because not every state is cooperative or every municipality is cooperative.

Ann Thompson:

And along those same lines, you captured the implicit social value of a stabilized community. What is your advice for developers who want to do what you did?

Marjy Stagmeier:

Basically have a lot of meetings. So when I decided to do this as a formal model in the city of Atlanta, my partner and I decided to have a hundred meetings, and we met with everyone. We met with Fortune 500 CEOs, banks, the local government, city council, nonprofits, and everyone was positive. So we built the brand before we actually found the deal. So when we did find some rodeo, we were successful in raising the $12 million. My average cost of capital was 2.99%, which allowed me to keep my rents at $725 roughly at the time. And we had the brand. And so now we're doing deals pretty much we're doing more and more deals around the southeast.

Ann Thompson:

Are you optimistic that there will be more focus on aging apartments and helping children excel in school?

Marjy Stagmeier:

Absolutely. And that's another reason why I wrote the book, blighted, to basically show a roadmap and encourage other landlords to do the same. And there's been a real groundswell around resident services now and low income apartment communities, especially in Georgia. To be competitive, to get federal tax credits in Georgia, you have to have resident wraparound services. Now as part of their model,

Ann Thompson:

Everybody that we interview in our solutions journalism model here, we ask them, what does a thriving community look like to you? So wanted to give you a chance to answer that as well.

Marjy Stagmeier:

Kids riding their bicycles, I can go on site and when you see kids out playing on the playground, throwing the football and riding their bicycles, that really warms my heart. And we have a partnership with Kaboom Playgrounds, so we do build playgrounds at our properties, and it's a real community effort. And I just love that because when we went to Somerdale, you saw the drug dealers control the common areas. Now the kids control it.

Ann Thompson:

That's great. Margjy Stagmeier, thanks for being on Brick by Brick.

Marjy Stagmeier:

Well, thank you so much for having me. I've really enjoyed it.

Ann Thompson:

That was a lot to take in. It's time to talk about it for the takeaways and we bring to the microphone Emiko Moore.

Emiko Moore: 

Hello Ann

Ann Thompson:  

And Hernz Laguerre jr.

Hernz Laguerre Jr.:

Hello Everyone. 

Ann Thompson:

Emiko, what were your thoughts? 

Emiko Moore:

Wow. I just kept saying wow as I was listening to hear. The work she is doing is heroic. She want to go into these gritty dangerous neighborhoods and transform them. Not a lot of landlords want to do this and she does it well. She has cracked the code here. We need a thousand more Marjy Stagmeiers across the country. And it’s heartbreaking to hear about the neighborhoods like Summerdale where the children walk by drug dealers, rodent infestations and gangs at very young ages. She has so many building blocks or should we say bricks-safe housing, affordable housing, afterschool programs, senior programs. All these bricks help keep the families in the neighborhood and students in the schools which really helps stabilize neighborhoods.

Ann Thompson:

Hernz, what are your thoughts?

Emiko Moore :

Yeah, Ann, I thought it was a really awesome interview. She said so many profound statements when she did her research in certain communities in Atlanta. She saw that there were families being born into poverty, generations of families. I think she met one family that was three generations growing up in one community and she could see the fourth generation being raised up in the same environment. I think a lot of times when you have these built environments, certain attributes can be seen as who those people inherently are, as opposed to how the environment influence their circumstances and their actions and decisions. So I just wanted to point that out. And also there's a fantastic article about the meaning of blight by Brenton Mock from Bloomberg. I would love our readers to check it out. You can understand why the word blight is so charged, but I do want to focus on her programs that I think have the opportunity to break these cycles of poverty in these generations. 

 Her Star-C program, I think not only sees an area and sees the capital gain that could be derived from there, but also see the community investment at the same time and the output that would have for a community, how a community can be turned around. And I think that's a positive note. I would love to just leave on that. And then also I think her subtitle is American Housing Miracle. Yes. What she did was miraculous, but it doesn't have to be a one-on-one situation. It doesn't have to be just happening in this one area. I think what she's doing could be replicated, as she said herself. It could be replicated in different areas if people have the will to put in the work. What she said, she said a hundred meetings takes a whole bunch of meetings in order to get these things moving. And I think other areas could follow the same path. 

Ann Thompson :

We have to recognize that old buildings make up an increasing share of the US rental stock. And experts say a healthy supply of these aging apartments help cities and neighborhoods thrive, but fixing them up takes money and political will and mire urges cities to make this a priority before they're beyond repair. The Census Bureau has been keeping track of aging apartments since 1960 and it finds the number of rental units over 30 years old has grown to 66% and most of them are at least 44 years old. The Joint Center for Housing Studies of Harvard University says the Federal Reserve Bank of Philadelphia estimated it would cost 51 and a half billion to address the repair needs of the occupied rental stock. And SMI says you can renovate rundown apartments for less than 50 cents on the dollar if you have a cooperative city and turn it back into healthy, affordable housing. Thanks for your thoughts guys. 

Emiko Moore:

Thank you

Hernz Laguerre Jr.

No problem.

Ann Thompson:

Remember, if you're interested in digging deeper into our conversation with Margjy Stagmeier and want to learn more about Brick by Brick in general, there are plenty of web articles and videos. Go to  cetconnect.org and thinktv.org and we'd like to hear from you. Click on one of the big green buttons to share your feedback. That's our show. If you like what you hear, please rate and review our podcast. It helps make it easier to find. We hope you learn something. And if you did, please share it with your friends and family For Hernz Laguerre Jr.. And Emiko Moore, I'm Ann Thompson. We'll be back soon with more solutions. Take care.

Our show is produced, hosted an edited by me, Ann Thompson with reporting and story editing from Hernz Laguerre Jr. and Emiko Moore. Our Executive producer of Mark Lammers. Our show consultant is Gloria Skurski. Gabe Wimberly is our audio engineer and mixer. Zach Kramer runs the lights and cameras. Derrick Smith is our production specialist and Jason Garrison is our production manager. Kellie May heads up our marketing and promotions, along with Mike Shea and Bridgett Dillenburger. Elyssa Stefenson handles the website and Steve Wright is our designer. Bill Dean and Andres Kruza are the engineers for the show and our Chief Content Officer is Colin Scianamblo. Our music is from Universal Production Music. Brick by Brick: Solutions for a Thriving Community is a production of CET and ThinkTV, Southwest Ohio PBS member stations.