The Latent Corruption Among Low-Cost Housing
The Department of Housing and Urban Development has all kinds of programs and grants that provide money for building low-cost and affordable housing. But somewhere in the process the profiteers and swindlers have entered the picture.
For years I was an advocate for homeless people and affordable housing in and around Boston, Massachusetts. During that time I encountered several slum lords, many of whom deserved being labeled as some of the worst human beings in the nation. But in my experience, the worst of the worst are the professional landlords and management companies that seek every possible manner to interpret the regulations for building, maintaining and operating affordable housing, low-income housing developments, single room occupancy structures, and the like in such a manner as to circumvent the spirit of the laws, codes and regulations and operate a facility (or complex) where the barest minimum of standards are maintained... all the while patting themselves on the back for providing needed housing, making a profit, and passing along profits to the actual owners.
I have seen hotel and motel owners take advantage of McKinney Act money for emergency housing and shelter in such a way that they were essentially charging $300 per day for a hotel room for which even $35 per day would have been an overpayment. I have seen municipal governments promise to operate facilities and services for homeless and needy people in order to get control of surplus government property under the McKinney Act, only to break those promises as soon as someone was not looking. Even under the update of the McKinney Act, there have been abuses, profiteering and such.
Some years ago my wife worked for a professional property management firm that specialized in apartment complexes, with an emphasis on those properties having low-income and affordable housing provisions, and restrictions, attached. During that time we would often discuss how some of the tactics used by this firm, which operated such properties throughout New England, to skirt the regulations and hide some of their financial goofs.
Then, too, most of those actually managing these properties were ill-equipped and untrained in managing property, never mind managing affordable housing and all the forms and filings that are required. In fact, many of those positioned as property managers lacked the interpersonal skills to deal with residents. Almost none had any experience managing a maintenance team or the engineering infrastructures of these properties. The maintenance teams hired for these facilities were relatively inexperienced in management of the physical plant maintenance of large properties and learned things the hard way: trial and error.
Making things even worse, the architecture and construction of these properties is often done on the cheap, cutting corners and keeping costs at the bare minimums. The walls are usually penetrated by whispers originating from five apartments down the hall. If a flea farts on the first floor, the fifth floor residents come out to see what is going on. The runways for electrical, plumbing, low-voltage wiring and and other systems are usually not designed with a foresight for improvements, upgrades or retrofitting.
The HVAC systems are usually the least effective and efficient systems possible, often causing some sort of catastrophic breakdown within the first 5-10 years of operation of the facility or properties. The heating systems are generally forced hot air or radiator systems that do not have the capacity to heat evenly throughout every room in the apartments, reach the apartments at the furthest end of the radiator or vent systems, or are designed in such a way as to guarantee a failure due to some form of compromised delivery. In the case of forced hot air systems, the filters are not changed in a required manner and the vents themselves are seldom cleaned, leading to poor air quality and the potential for health hazards.
I can point to several of these facilities on the North Shore of Boston. In Lynn, Massachusetts, there are the twin Neptune Towers on Commercial Street. My father was one of the carpenters hired to work on these buildings in the late 1960s or early 1970s. He would come home complaining about all the short cuts that were being taken in regard to building materials, adherence to standard building codes, flooring, wallboards, plumbing, etc. Additionally, there were a lot of injuries on the job when these towers were being built because of safety issues, despite the fact that it was using union craftsmen at the time. The Neptune Towers were considered a "pit of Hell" by almost everyone in Lynn for many years until it was completely refurbished and retrofitted about 15-20 years ago.
Also in Lynn, the old Cobbett Junior High School, which was closed because the facility was a hell hole, was converted into affordable housing at a significant cost to us taxpayers. On the surface the conversion was considered a success. The apartments that resulted from the conversion were once held out to be nicely done. But over the years the reality of the cost-cutting and the corner-cutting began to expose itself to public view and many things needed to be repaired on a regular basis, over and over again, until such time it was re-done or retrofitted.
In Peabody, Massachusetts, the old A.C. Lawrence tanning factories were converted into apartments as well. Once again the politicians and press praised the construction, appearance and benefit to the community. But the maintenance staff for the building were predominantly untrained, inexperienced personnel who mostly hid out in unpopulated regions smoking pot (and one of them was a personal friend of mine) while the maintenance manager was reading his racing forms. So, the building capacity, capabilities and conditions suffered. In Lawrence and Lowell (Massachusetts), many of the textile mills and tanning factories followed suit with the A.C. Lawrence complexes. Similar problems manifested themselves.
In the old days these types of facilities were called "the projects" and were operated by a municipal agency, sometimes called the "Housing Department." In Lynn, Massachusetts, there were two such projects: Curwin Circle and American Park. American Park was originally built as a housing project for veterans, but was eventually abandoned by the feds and turned over as a housing project for the city. Curwin Circle was always a housing project for those needing affordable housing. When we look at the history of how much money was spent on maintaining these facilities, one might expect to see the Taj Mahal sitting on these lands.
In the case of Curwin Circle, from 1962 until 1996, there was no less than 190 million dollars spent on retrofitting these facilities... yet Curwin Circle remains one of the most unattractive properties in all of Massachusetts. In the case of American Park, it was sold to a developer, all of the buildings were razed, and modern bungalows and duplexes were built in place. The rents for the new "affordable housing" apartments and facilities at "Kings Lynn" were almost tripled and the quality of these facilities were at best a little better than the average housing project. Since its construction, Kings Lynn has suffered significant setbacks, and, because it is no longer a city-owned facility, it does not qualify for the kind of monies that American Park used to get from state and federal agencies.
The more modern trend--a Republican trend for certain--has been to allow private developers to build affordable housing, receive some grants, low cost loans, tax breaks, etc., under the condition that the affordable nature of the facilities remain in place for anywhere from 10 to 25 years. I live in one of those complexes. The complex has been sold three times since constructed and the maintenance staff consists of three men. These men must deal with the inspection, maintenance and preparation of about approximately 200 apartments (including a few townhouses), the laundry facilities, the grounds (except for mowing), snow removal, and all else that can go awry with an apartment complex. While they are nice enough guys, and have some diverse repair and maintenance knowledge, they are not widely known within the complex (among the residents) for being effective, timely or even motivated. So, a lot of things are overlooked, ignored, or put on a secondary list that is never really reviewed.
While many might argue that my apartment complex is anecdotal, I would point out that such is the case with a lot of facilities. The entire modern approach of using private sector resources with governmental funding is an overall failure, not because it isn't a good idea, but because it is poorly managed in the long-run. There really isn't much oversight that involves actual inspection on the grounds. Most oversight from the government comes from paperwork completed and filed by the owners and managers of these facilities, which is essentially allowing the fox to guard the chicken coop from the wolves and cougars.
Granted, operating such housing properties is wrought with difficulty. If utilities costs increase--such as is the case with heating fuels, electricity, sewer and water costs, etc.--there is little that a property owner or operator can do to deal with these sudden increased expenses. Even if there are state and federal provisions for such unexpected costs, it may take several months before the governmental agencies will cover the unexpected costs. Additionally, low-income tenants often bring with them a lot of issues that many property managers are not really equipped to handle, all the more in urban settings. Add to this the sociological, public health and legal issues of drugs, crime, violence, family dysfunction and such, and most property managers are out of their league.
So it is not surprising that we find reports from the Inspector General of Massachusetts found that an affordable housing builder concealed and under-reported almost four million bucks. I can guarantee you that this matter is not isolated to this one contractor/developer, nor to Massachusetts. My experience in housing development, advocacy for housing and the homeless, as a social worker, and in analyzing state and federal governmental activities points to this being a fairly wide-spread reality. The private sector has learned that state and federal governments do not really concern themselves with such graft and corruption (c.f. all of the stuff that occurs with the military contractors) unless, or until, there is some reason to take a peek. When an ambitious up-and-comer, like Sullivan from Massachusetts or Spitzer from New York, enters the picture and forces the system to take a real look at these issues, there is usually some outrage, a scandalous headline or two, but no real effort to genuinely address the underlying failures (referred to as "SPOFs") of the system.
I have to wonder how many of these facilities across the nation have a history of what most people would consider corruption... perhaps all of them.
For years I was an advocate for homeless people and affordable housing in and around Boston, Massachusetts. During that time I encountered several slum lords, many of whom deserved being labeled as some of the worst human beings in the nation. But in my experience, the worst of the worst are the professional landlords and management companies that seek every possible manner to interpret the regulations for building, maintaining and operating affordable housing, low-income housing developments, single room occupancy structures, and the like in such a manner as to circumvent the spirit of the laws, codes and regulations and operate a facility (or complex) where the barest minimum of standards are maintained... all the while patting themselves on the back for providing needed housing, making a profit, and passing along profits to the actual owners.
I have seen hotel and motel owners take advantage of McKinney Act money for emergency housing and shelter in such a way that they were essentially charging $300 per day for a hotel room for which even $35 per day would have been an overpayment. I have seen municipal governments promise to operate facilities and services for homeless and needy people in order to get control of surplus government property under the McKinney Act, only to break those promises as soon as someone was not looking. Even under the update of the McKinney Act, there have been abuses, profiteering and such.
Some years ago my wife worked for a professional property management firm that specialized in apartment complexes, with an emphasis on those properties having low-income and affordable housing provisions, and restrictions, attached. During that time we would often discuss how some of the tactics used by this firm, which operated such properties throughout New England, to skirt the regulations and hide some of their financial goofs.
Then, too, most of those actually managing these properties were ill-equipped and untrained in managing property, never mind managing affordable housing and all the forms and filings that are required. In fact, many of those positioned as property managers lacked the interpersonal skills to deal with residents. Almost none had any experience managing a maintenance team or the engineering infrastructures of these properties. The maintenance teams hired for these facilities were relatively inexperienced in management of the physical plant maintenance of large properties and learned things the hard way: trial and error.
Making things even worse, the architecture and construction of these properties is often done on the cheap, cutting corners and keeping costs at the bare minimums. The walls are usually penetrated by whispers originating from five apartments down the hall. If a flea farts on the first floor, the fifth floor residents come out to see what is going on. The runways for electrical, plumbing, low-voltage wiring and and other systems are usually not designed with a foresight for improvements, upgrades or retrofitting.
The HVAC systems are usually the least effective and efficient systems possible, often causing some sort of catastrophic breakdown within the first 5-10 years of operation of the facility or properties. The heating systems are generally forced hot air or radiator systems that do not have the capacity to heat evenly throughout every room in the apartments, reach the apartments at the furthest end of the radiator or vent systems, or are designed in such a way as to guarantee a failure due to some form of compromised delivery. In the case of forced hot air systems, the filters are not changed in a required manner and the vents themselves are seldom cleaned, leading to poor air quality and the potential for health hazards.
I can point to several of these facilities on the North Shore of Boston. In Lynn, Massachusetts, there are the twin Neptune Towers on Commercial Street. My father was one of the carpenters hired to work on these buildings in the late 1960s or early 1970s. He would come home complaining about all the short cuts that were being taken in regard to building materials, adherence to standard building codes, flooring, wallboards, plumbing, etc. Additionally, there were a lot of injuries on the job when these towers were being built because of safety issues, despite the fact that it was using union craftsmen at the time. The Neptune Towers were considered a "pit of Hell" by almost everyone in Lynn for many years until it was completely refurbished and retrofitted about 15-20 years ago.
Also in Lynn, the old Cobbett Junior High School, which was closed because the facility was a hell hole, was converted into affordable housing at a significant cost to us taxpayers. On the surface the conversion was considered a success. The apartments that resulted from the conversion were once held out to be nicely done. But over the years the reality of the cost-cutting and the corner-cutting began to expose itself to public view and many things needed to be repaired on a regular basis, over and over again, until such time it was re-done or retrofitted.
In Peabody, Massachusetts, the old A.C. Lawrence tanning factories were converted into apartments as well. Once again the politicians and press praised the construction, appearance and benefit to the community. But the maintenance staff for the building were predominantly untrained, inexperienced personnel who mostly hid out in unpopulated regions smoking pot (and one of them was a personal friend of mine) while the maintenance manager was reading his racing forms. So, the building capacity, capabilities and conditions suffered. In Lawrence and Lowell (Massachusetts), many of the textile mills and tanning factories followed suit with the A.C. Lawrence complexes. Similar problems manifested themselves.
In the old days these types of facilities were called "the projects" and were operated by a municipal agency, sometimes called the "Housing Department." In Lynn, Massachusetts, there were two such projects: Curwin Circle and American Park. American Park was originally built as a housing project for veterans, but was eventually abandoned by the feds and turned over as a housing project for the city. Curwin Circle was always a housing project for those needing affordable housing. When we look at the history of how much money was spent on maintaining these facilities, one might expect to see the Taj Mahal sitting on these lands.
In the case of Curwin Circle, from 1962 until 1996, there was no less than 190 million dollars spent on retrofitting these facilities... yet Curwin Circle remains one of the most unattractive properties in all of Massachusetts. In the case of American Park, it was sold to a developer, all of the buildings were razed, and modern bungalows and duplexes were built in place. The rents for the new "affordable housing" apartments and facilities at "Kings Lynn" were almost tripled and the quality of these facilities were at best a little better than the average housing project. Since its construction, Kings Lynn has suffered significant setbacks, and, because it is no longer a city-owned facility, it does not qualify for the kind of monies that American Park used to get from state and federal agencies.
The more modern trend--a Republican trend for certain--has been to allow private developers to build affordable housing, receive some grants, low cost loans, tax breaks, etc., under the condition that the affordable nature of the facilities remain in place for anywhere from 10 to 25 years. I live in one of those complexes. The complex has been sold three times since constructed and the maintenance staff consists of three men. These men must deal with the inspection, maintenance and preparation of about approximately 200 apartments (including a few townhouses), the laundry facilities, the grounds (except for mowing), snow removal, and all else that can go awry with an apartment complex. While they are nice enough guys, and have some diverse repair and maintenance knowledge, they are not widely known within the complex (among the residents) for being effective, timely or even motivated. So, a lot of things are overlooked, ignored, or put on a secondary list that is never really reviewed.
While many might argue that my apartment complex is anecdotal, I would point out that such is the case with a lot of facilities. The entire modern approach of using private sector resources with governmental funding is an overall failure, not because it isn't a good idea, but because it is poorly managed in the long-run. There really isn't much oversight that involves actual inspection on the grounds. Most oversight from the government comes from paperwork completed and filed by the owners and managers of these facilities, which is essentially allowing the fox to guard the chicken coop from the wolves and cougars.
Granted, operating such housing properties is wrought with difficulty. If utilities costs increase--such as is the case with heating fuels, electricity, sewer and water costs, etc.--there is little that a property owner or operator can do to deal with these sudden increased expenses. Even if there are state and federal provisions for such unexpected costs, it may take several months before the governmental agencies will cover the unexpected costs. Additionally, low-income tenants often bring with them a lot of issues that many property managers are not really equipped to handle, all the more in urban settings. Add to this the sociological, public health and legal issues of drugs, crime, violence, family dysfunction and such, and most property managers are out of their league.
So it is not surprising that we find reports from the Inspector General of Massachusetts found that an affordable housing builder concealed and under-reported almost four million bucks. I can guarantee you that this matter is not isolated to this one contractor/developer, nor to Massachusetts. My experience in housing development, advocacy for housing and the homeless, as a social worker, and in analyzing state and federal governmental activities points to this being a fairly wide-spread reality. The private sector has learned that state and federal governments do not really concern themselves with such graft and corruption (c.f. all of the stuff that occurs with the military contractors) unless, or until, there is some reason to take a peek. When an ambitious up-and-comer, like Sullivan from Massachusetts or Spitzer from New York, enters the picture and forces the system to take a real look at these issues, there is usually some outrage, a scandalous headline or two, but no real effort to genuinely address the underlying failures (referred to as "SPOFs") of the system.
I have to wonder how many of these facilities across the nation have a history of what most people would consider corruption... perhaps all of them.
Developers of five affordable housing projects in Massachusetts concealed nearly $4 million in profits by grossly inflating their costs and understating revenues, according to an investigation by Inspector General Gregory W. Sullivan, who is calling for money to be returned to local taxpayers.
Three of the developers, who built projects in Acton, Berkley, and Reading, each exceeded the 20 percent profit limit set in Chapter 40B, the state's controversial affordable housing law, Sullivan said in an interview.
Michael Jeanson and James Fenton, developers of the Acton project, made a profit of nearly 56 percent, Sullivan said, and reported dubious expenses, including $3,200 for carpeting that one of the partners installed in his summer home on Lake Winnipesaukee in New Hampshire.
The inspector general is midway through his review of 10 affordable housing projects he selected as representative of the hundreds built in Massachusetts this decade.
His is the first state agency to examine the housing program, which has spurred at least 400 developments and more than $1 billion in construction since 2000. Under the law, developers are exempt from local zoning requirements in exchange for agreeing to set aside some of their housing units as affordable. The developers are required to limit their profits from the projects to no more than 20 percent, and turn over any profits that exceed that to the local community.
Already, Sullivan said, a pattern is emerging: Developers use a variety of tactics to conceal their profits, including exaggerating land costs and hiring companies in which they have a financial interest as subcontractors, then paying the subcontractors excessive amounts to inflate the project's expenses. In addition, he said, some developers are "permit brokering -- buying land and securing the coveted 40B permit from the community, then selling the suddenly more valuable land and the permit to another developer at a significant profit, without reporting those profits to the state.
Sullivan said the developers of the Acton project, and those in Berkley and Reading, should repay a total of $1.6 million to the towns that released them from their local zoning rules. He has sent letters to the three communities, describing his findings and recommending they pursue reimbursement from the developers.
It is not clear what steps Sullivan, who expects to complete his investigation this spring, may take to enforce his findings. The inspector general, in cases where he believes criminal violations have occurred, may refer the matter to the state attorney general's office.
Sullivan would not comment on future plans, saying he is focused on finishing the probe. "There are good developers out there, but there are also unscrupulous developers who abuse the system," he said.
Officials in Acton said they have begun negotiations with Jeanson and Fenton as a result of Sullivan's findings. Reading officials said they are discussing the inspector general's recommendations with their town counsel. Berkley officials, who were sent the letter just last week, could not be immediately reached.
The inspector general found that developers of two other projects, in Leominster and Wareham, also concealed profits, though they did not exceed the 20 percent limit. The Leominster developers reported losses when the project made a profit of more than 14 percent, he said. The developer in Wareham claimed to make just 1 percent when the project had a 17 percent profit, he said.
posted by Jim Downey at 10:16 AM
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