“Now follow this. The tenement at Eighty-four Suffolk sold for seventeen thousand dollars five years ago. Last year—the land still hasn’t been acquired by the city—it went to the Suffolk Street Land Company for sixty-six thousand dollars. The vice-president of the company that sold the building to Suffolk Street Land happens to be the wife of that previously mentioned member of Herbert Davis’ staff. They live down the block from the president of Suffolk Street Land. What they’re waiting for is the city to move to acquire the land under the provisions of a Federal Housing Act. Of course they’re going to realize a decent return on their investment. But that’s only the first part.

“Here’s where it gets difficult. The city will arrange to sell the site to the Port Smith Development Corporation for approximately half of what it will pay Suffolk Street Land. The loss represents part of the federal, state, and city stake in new housing. That’s the way the law was written. The Port Smith Development Corporation will build the project, rent the apartments at fixed rates, maintain the buildings, keep the grounds, and retain all rights of ownership. Obviously, the Port Smith Development Corporation has had to demonstrate some kind of financial responsibility. It has—and the Federal Government has agreed to extend to it very low cost, very low interest credit for construction. The president of the Port Smith Development Corporation went to Washington with a letter of recommendation from the office of Herbert Davis, signed by our staff member; and another from a banker downtown who is a member of the Port Smith Planning Board. The Port Smith Development Corporation is going into this with its own capital to the extent of a half-million dollars. Through one set of paper corporations, Rainbow acquired the site for less than two hundred and eighty thousand. The city plans to buy the site for three million. Rainbow will reinvest a sixth of the three million to get the federal credit and the title to a project valued at twenty-seven million. Using techniques developed elsewhere, the people in Rainbow will draw off another six million above and beyond the value of Suffolk Street Houses.

“On Palmer Avenue, where the housing is already completed, they had to move more quickly. The city was in a hurry, so they had to settle for a third of the land. When their construction company took over, they more than made up for what they had sacrificed. Remember that the old buildings were still occupied. Rainbow collected the rents. Demolition was delayed—stalled. Every month was a month to the good. Under normal conditions, slums return their investment every five years, but here was a windfall situation. No repairs, no maintenance. It was two years before the first building came down. For two years the construction company collected rents, and then, as it demolished buildings and tenants were shifted from one building to the next, the company raised the rents as much as the old wartime rental law allows.”