Keeping the Jobs in House
Humboldt Construction Company, a wholly owned subsidiary of a Chicago CDC, has been providing local employment and high-quality work for over 30 years.
By Bob Brehm Posted on October 2, 2014
In the 1960s, the West Town/Humboldt Park area of Chicago was suffering from arson, abandonment, redlining, and the loss of manufacturing jobs. It was also home to the Northwest Community Organization (NCO), one of several Chicago groups started by legendary community organizer Saul Alinsky and his followers. NCO had been formed to give the residents of the neighborhood a voice on concerns ranging from housing to city services, crime, and education. It had been pushing the city for years to tear down vacant decrepit housing (with some success) and to encourage the development of new affordable housing to take its place (with less success).
Frustrated by its inability to get others to develop in the neighborhood, in 1967 NCO created the Bickerdike Redevelopment Corporation, named after an 1800s developer in the area, as “The Housing Arm of NCO.” The prevailing spirit was “No one else is doing right by this community—so let’s redevelop it for ourselves!”
Bickerdike’s early work consisted of seeking out, screening, and selecting home builders to develop affordable homes for sale on the vacant lots in the area. Buoyed by its early success with infill housing, Bickerdike moved on to rehabbing vacant properties, typically one- to four-unit buildings. It purchased some for a very low cost out of foreclosure and got banks to donate others. Over a five-year period in the mid-1970s, it developed about 30 units, all of which were sold to area residents.
Bickerdike formed a small crew of local workers to do general labor and carpentry and hired subcontractors to do all of the mechanical and other specialty work. It created a revolving fund to pay for labor, subcontractors, and materials, funded through foundation grants. The size of that fund limited the group to doing no more than one or two buildings at a time. At the time, other CDCs around the country tended to rely on private contractors to do the actual work on their housing developments, but despite the challenges, Bickerdike was biased toward continuing to hire local people and do the work itself. That way it had more control over the quality, the price, and the delivery schedule. Independent contractors, it had learned from its early experiences with the 235 program, had to be watched carefully, lest they take advantage of a small community group, low-income buyers, and/or government programs.
h6. The Trouble With Local Hiring Agreements
In the early 1980s, Bickerdike continued to build housing to meet the needs of the area’s poorer residents, while at the same time joining in political/activist battles to stave off displacement, such as those aimed at preventing the conversion of affordable apartments to condos and places of employment to loft living spaces. To address the most pressing housing needs as costs went up, Bickerdike moved from a strictly single-family homeownership approach to developing affordable multifamily housing. Over the past 30 years the group has developed over 1,100 units of affordable rental housing and cooperatives. Its first rental project was 140 units of subsidized rental housing scattered in 30 buildings around the entire area. This matched Bickerdike’s entire housing production up until that point.
I became Bickerdike’s director in 1979 and I and the other leadership soon came to understand the significance of employment and poverty in the affordable housing crisis. “Anyone with a decent construction job doesn’t need a subsidized apartment,” was a saying heard frequently in meetings and strategic planning sessions at Bickerdike during that period. The larger developments presented obvious local job-creation potential. At the time, however, Bickerdike’s construction operations were too small to take on a major project. So it hired private contractors, but required them to hire a portion of their workers from the community. This was moderately successful, creating over 50 short-term construction jobs on the first large project alone.
But it was hard to do. Contractors resisted the hiring requirements and often completed jobs without adding to their crews, therefore not creating any “new” jobs that local residents could fill. Some small subcontractors were resistant to adding anyone to their crew, preferring to maintain a consistent workforce even when they got behind in their commitments. In other cases, race was apparently a factor—historically if not directly: passing by a job site on a Bickerdike development you would often see dozens of workers, and the only people of color on those crews would be the local residents referred by Bickerdike. General contractors would sometimes sign a “local employment agreement” with Bickerdike in order to get the contract, and then fail to pass that obligation on to their subcontractors, rendering the agreement almost completely unenforceable. In other cases the contractor would hire a Latino worker regardless of where the person lived, or transfer one already on their payroll to the Bickerdike job, assuming that was what Bickerdike was looking for.
In spite of these hurdles, there were projects where the contractor would screen and hire some of the unemployed local residents referred by Bickerdike. To the best of our knowledge at the time, however, only a handful were kept on by the contractor after their work on the Bickerdike project was finished.
And local employment was not the only frustration. General contractors would at times make commitments on the work schedule and then fail to meet them, tried to charge the owners for cost overruns that were not caused by changes in the scope of work, and were often slow to respond to call-backs for repairs to work that had not been done well.
h6. Becoming a Business
Bickerdike decided it could do better. As it continued to plan more large multifamily housing developments, it began expanding its own construction operations.
In 1979 Bickerdike won a two-year grant to increase the capacity and effectiveness of its construction operations from the Carter administration’s competitive Neighborhood Self-Help Development program. The expansion brought new questions with it. Should the construction operations continue as a function of Bickerdike itself, or separate into a distinct corporate entity? If it separated, should it be wholly owned and controlled by Bickerdike, or bring in other investors and broader governance? Should it be structured as for-profit or nonprofit, taxable or tax-exempt? Bickerdike sought out technical assistance from the University of Illinois Center for Urban Economic Development (UICUED), which helped Bickerdike decide on a wholly-owned subsidiary corporation that would be for-profit and taxable. There was some concern about whether or not grant funds could be used to create a for-profit subsidiary; Reagan’s election in 1980 effectively answered that concern.
Bickerdike proposed to HUD, the agency source of the initial funding, a grant amendment that would allow the second year’s budget of about $34,000 to be converted to stock in a construction subsidiary. As expected, the new administration loved the idea. When Humboldt Construction Company was incorporated in 1981, Bickerdike used the balance of the grant funds to provide the capital for all the shares. Humboldt has been in continuous operation since that time, with a crew size averaging 15 carpenters.
Bob Brehm served as director of Bickerdike Redevelopment Corporation from 1978 through 1995. Since then, he has taught practitioners in communinity and organizational development and consulted for community groups.