SRO Limbo

After Arrests in the HUD Scandal, Will Its Victims Lose Their Homes?

Sekou Traore thinks his bad luck started in 1996, when he returned home to Mali for a visit. In the year he ended up staying there, he lost his passport and tore up his leg in a motorcycle accident. When he returned to Harlem, where he has lived for 17 years, he found out his wife had left him. Soon after, he lost his apartment. He found a new home in the summer of 1997, in a single-room-occupancy building at 74 West 131st Street, sharing a room with his cousin, Zibo Bedia, a bike messenger. He thought his luck had finally changed.

Over the years, Traore has worked as a florist and as a salesman, a far cry from his teenage years running a 40-ton drill for a French oil company. He is barely employed, in poor health, and eking out a living translating for immigrants. As luck would have it, his current residence has been caught up in one of the most staggering federal housing frauds in recent memory.

The scam has ravaged about 470 buildings across Harlem and Brooklyn and 30 in the Bronx and Queens since 1998, and hasn't received anywhere near its due public outcry. Taxpayers are currently bailing out the more than $70 million in government-backed loans that lined the pockets of the real estate speculators, mortgage lenders, appraisers, lawyers, and nonprofits, an extraordinary number of them from Long Island, who perpetrated it.

Sekou Traore in his Harlem SRO home
photo: Bryce Lankard
Sekou Traore in his Harlem SRO home

Generally, the scam worked like this: Speculators bought distressed buildings, many filled with poor and working-class tenants. Then the speculators recruited churches and nonprofits with no experience in developing housing and showed them how to secure 203(k) mortgage loans backed by the U.S. Department of Housing and Urban Development to buy these buildings at hugely inflated prices. The loans are meant to provide money for ordinary people to purchase and rehab vacant buildings for affordable housing. Only the catatonic state of Andrew Cuomo's HUD administration can account for why the unqualified nonprofits obtained the loans.

The tenants who were left suffering in the dark and cold in deteriorating housing are a snapshot of New York's poor and working class—MTA workers and bike messengers, peddlers and ragpickers, nurses and moving men.

Appraisers in on the deal signed off on the bloated prices for knowing mortgage companies who loaned the money and then dumped the mortgages on the open market. The cash disappeared, and the nonprofits defaulted. Law enforcement officials say the nonprofits often got kickbacks of $5000 a building, and closed the loans with funds from the crooked developers, violating HUD rules.

So far, 33 people have been arrested in the case and 19 have pleaded guilty. In December, six defendants connected with the Helpline Soul Rescue Ministry in Brooklyn negotiated a settlement with Attorney General Eliot Spitzer's office to pay $226,500 into a restitution fund for tenants. The lawsuit charged that Helpline had acted as a front in the purchase of 65 buildings in Brooklyn and helped skim more than $2 million in loan money.

But the complexities of the scam make it easy to lose sight of the fact that these rogues left 1500 families marooned in more than 250 buildings. Once the suburbanites had the buildings in their clutches, they just walked away. The tenants who were left suffering in the dark and cold in deteriorating housing are a snapshot of New York's poor and working class—MTA workers and bike messengers, peddlers and ragpickers, nurses and moving men. For more than a year, all across upper Manhattan, central Brooklyn, Queens, and the Bronx, they seem to have been completely forgotten. In order to get by, they developed their own strong associational networks and went to work.

"That year was terrible," Traore says. "We had to do everything ourselves."

At a brownstone at 3 West 119th Street, 62-year-old Tony Hobson led a fight to clear his building of the lead-pipe-wielding troublemakers who were using it as a crack house and crash pad. Tenants pooled their money to pay off a $5000 Con Ed bill to keep the lights on. They bought supplies that handyman resident Lawrence Jones, 59, used to install toilets, light fixtures, and bulbs. He paneled the walls himself, fixed the pipes, and painted the place a bright yellow. "We spent money here," Hobson says, "in order to survive."

"We want to own this building," says Traore, back in 74 West 131. " We have to seek some advice first to see how we can borrow money to takeover the building and self-manage it so everybody can stay in their rooms."

Ironically, though, tenants have commonly been the last to know their fates. When the scandal broke, Hobson heard it on the streets. Now that the authorities are starting to retake the buildings—HUD holds about 200 so far, and is foreclosing on the rest—the situation is just as frustrating. After all the value they put into these buildings in money and sweat, residents have understandably balked at the demands of court-appointed administrators demanding rent without making real repairs and saying that any repairs must come out of the rent roll. Out-of-town HUD managers have also rankled tenants with leases they have presented for signing.

As Hobson puts it, "How are you going to send us letters for rent when no one's been in here to interview the tenants or fix anything? We don't mind paying the damn rent if they get something going on over here."

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