HUD

'The No. 1 worst in the United States'

City officials point out—quite accurately—that it was not HUD management that caused these buildings to fall into disrepair in the first place. An HPD spokesman, Neill Coleman, says the 203(k) properties "had fallen prey to unscrupulous lenders and nonprofit organizations, leaving many of them in terrible shape." In response, Coleman added, "the city and HUD have formed an unprecedented partnership to invest nearly $168 million over five years to rehabilitate over 500 occupied and vacant multi-family properties."

It was, however, HUD's failure to monitor its own loan program that allowed crooked investors to purchase and neglect the buildings. And advocates also hold HUD accountable for what they call the appalling negligence of its first two management companies, Arco and National Housing Group, brought in after the original scandal. They also blame HUD for the current conditions in many properties, even while they give its current management firm, Prescient, better grades than its predecessors.

Glantz contends that HUD "has spent a significant sum to make repairs, replace old oil burners and water heaters, as well as pay utility costs." Yet many 203(k) properties stand out on their blocks. They are the buildings one crosses the street to avoid walking past.

Stagnant water behind 306 Troutman Street in Brooklyn, where Nicholas Diaz’s daughter 
Carmen Perez lives in a building owned by HUD
photo: Jay Bachhuber
Stagnant water behind 306 Troutman Street in Brooklyn, where Nicholas Diaz’s daughter Carmen Perez lives in a building owned by HUD

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    On Bushwick streets lined with colorful vinyl-sided apartment houses, many of HUD's buildings slump like beaten boxers, with broken-window black eyes and chipped-paint bruises. Inside, unlit hallways lie behind front doors that don't lock.

    In Harlem, they are the crumbling brownstones that stand in stark contrast to the rows of newly renovated historic homes. "My building looks abandoned. It looks like a crack house! I'm embarrassed when I walk outside," Theresa James, who lives at 514 West 149th Street, cried at a recent tenant rally.

    Carmen Perez's apartment at 306 Troutman Street in Bushwick has plastic sheeting covering holes in her bathroom ceiling, and a gaping hole in the kitchen wall exposes electrical wiring directly under a leaky pipe. Backed up sewer water pools below her back door. HUD took over her building in May 2004 but has yet to make any substantial improvements.

    What is perhaps most frustrating about this ordeal is that it could have been prevented. Had HUD listened to the warnings of its own inspector general, the buildings would have never fallen into the hands of corrupt investors. HUD's IG warned in a February 1997 report about the 203(k) program, "The program design encourages risky property deals, land sale and refinance schemes, overstated property appraisals, and phony or excessive fees."

    Despite the warning, HUD continued approving wildly inflated loans while investors defrauded HUD and abused tenants. In 1997 a New Jersey housing inspector, Jim Hawthorne, showed HUD officials a video of children in a 203(k) building playing near open sewage and electrical hazards. In a subsequent Village Voicearticle ("Seduced and Abandoned," January 23, 2001), Hawthorne claimed that the officials wept when they saw the video but did little except bar investors from directly participating in the program.

    A government audit in April 2004 claimed that HUD's first management company, Arco, tolerated unlivable conditions. Its second manager, National Housing Group, was a small Florida-based operation with limited management experience, which HUD admitted won the management contract because its bid was substantially below its competition. HUD got what it paid for, and the tenants suffered.

    "NHG wouldn't come ever," says William Mabry, a 69-year-old jazz drummer who has lived at 510 West 168th Street since the late 1970s. His downstairs neighbor Victoria Meyer moved into the building with her son just as NHG took over. "No one was taking care of the building when I moved in," she says. "Plumbing leaked, the refrigerator didn't work, and windows were broken." She withheld rent for a year, and NHG tried to evict her, but in court she convinced a judge that her actions were justified. She paid her back rent and the problems were fixed, but not until NHG had lost its contract and Prescient had taken over. Mabry and Meyer say Prescient has made recent improvements—fixing electrical problems and replacing a door.

    This summer could be a turning point in this long, sad tale of the 203(k) scandal. "Over 200 of the buildings have been sold, and the others are slated for renovation over the coming months," according to HPD's Coleman. Tenants and housing activists are fighting for development options that would give tenants some control over this new housing, such as mutual housing associations or limited-equity cooperatives. If the development process moves forward and tenant choices of new developers are respected, the years of court battles and living in hellish conditions could end with safe, affordable housing. If the plan stalls, tenants will be stuck in the miserable conditions they've faced for as long as a decade.

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