Cashed out

The landlord of 4729 S. Langley Ave. collected more than $151,000 in rent subsidies during the six years before the building was boarded up. The building is one of thousands in Chicago that chronically failed inspections while occupied by voucher holders. Photo by Jonathan Gibby.

The landlord of 4729 S. Langley Ave. collected more than $151,000 in rent subsidies during the six years before the building was boarded up. The building is one of thousands in Chicago that chronically failed inspections while occupied by voucher holders. Photo by Jonathan Gibby.

LaWanda Dean had warned her landlord about her bathroom ceiling.

“It was cracked, and I said, ‘You might want to check it out,’” the 34-year-old recalled.

Then the dripping water began. It dripped for days; then for more than a week.

As the crack grew bigger and bigger, Dean thought to herself, “That’s going to come in.”

“Before you knew it—boom!” she exclaimed as her hands shot up. “It fell down.”

The bathroom ceiling wasn’t the first problem she had warned her building manager about. Dean, an energetic single mom who smiles with her eyes, had flagged mold growing up the side of the refrigerator, and complained about “gigantic holes” in her kitchen cabinets and the roof. She asked for help fixing the hallway lights that were always out and cleaning up the trash that piled up in the backyard of the three-flat, which sits on the western edge of Hyde Park. And then there was the decaying back porch.

“You couldn’t even walk down the stairs.”

Back in 2009, she moved out of the Harold Ickes Homes, a public housing development on the Near South Side, and into a first-floor, four-bedroom apartment at 4729 S. Langley Ave. Little did she know then that her new landlord was establishing a history of running troubled properties.

All the while, taxpayers footed the bills.

Welcome to Chicago’s fastest-growing stock of publicly funded housing for low-income families. In recent years, the Chicago Housing Authority has expanded the federal rent subsidy program, formerly known as Section 8. Now called the Housing Choice Voucher, the program was expanded under an overhaul that began in 2000, when the CHA decided to knock down thousands of decaying public housing units. Since then, the program has grown by more than 60 percent. As of this year, 38,585 households participate.

The program’s intent: To give families like Dean’s the option to leave traditional public housing with the help of vouchers and find market-rate rentals in safer communities with better schools, less poverty and more jobs. The reality: Thousands of families who hold vouchers are still living in substandard, privately owned buildings in Chicago’s most distressed communities, The Chicago Reporter has found.

A growing number of those buildings are struggling to pass the CHA’s own inspection standards, shows the Reporter’s analysis of the agency’s inspection records. Six out of every 10 buildings inspected by the CHA in 2012 failed inspections at least 50 percent of the time, the analysis shows. The share of these chronically failing buildings—16,759 properties in all—has nearly doubled since 2006, when 9,043 buildings, or 34 percent of those inspected, failed at least half the time.

And the number of buildings that required a 24-hour remedy—typically a sign of an emergency situation like a broken furnace or leaking roof—has grown fourfold since 2006—to 2,204, the Reporter’s analysis shows.

Families like Dean’s have lived with the consequences: mold, rodents, and broken furnaces and porches. Yet federal funds keep flowing to landlords—owners and property managers the CHA calls “vendors.”

Between 2006 and 2011, those landlords collected $337 million for renting apartments in buildings that chronically failed inspections, shows the Reporter’s analysis of CHA payment records for that period. That’s roughly $1 of every $6 spent on the program during that time.

And it doesn’t include the tenant’s portion of the rents. Tenants are required to contribute up to 30 percent of their incomes toward their rent. The CHA covers the remainder. The going rate for a three-bedroom apartment is $1,231. Voucher holders with an average annual income of $11,000 last year would pay $275 a month to cover their share of the rent.

As far as Kate Walz, an attorney at the Sargent Shriver National Center on Poverty Law, is concerned, landlords get “good rents.” Since 2006, they’ve collected nearly $2 billion. For too long, Walz said, the CHA has let too many landlords get away with renting out substandard units.

People living near chronically failing buildings complain that they are a drag on African-American neighborhoods on the city’s South and West sides, where 71 percent of these failing properties are located.

Tamiko Holt said her voice mail is constantly full of messages from people complaining about landlords. “The things that they are renting are amazing to me—no heat, no hot water, mold,” said Holt, the president of the Housing Choice Voucher Residents Advisory Board, a CHA-sponsored group that represents voucher holders.

Alderman Leslie Hairston of the 5th Ward said the CHA needs to do a better job of making sure the program isn’t subsidizing “slumlords” who are renting to vulnerable tenants.

“People should be first over landlords making money. The CHA needs to stop putting money in their pockets for renting substandard buildings,” Hairston said. “We’re talking about human life here. And we’re talking about deplorable living conditions.”

By the CHA’s count, 40 percent of the people living in subsidized units last year were children in households earning less than $16,000.

CHA officials say more buildings are failing inspections because of new local and federal guidelines that have upped inspection standards.

Are living conditions growing more grim? Ellen Sahli, the CHA’s chief housing officer, said she “can’t speculate” on that question.

In the case of the 24-hour inspections, Sahli said: “If you’re seeing an inspection the next day, we are ensuring, or trying to ensure, that landlords are addressing a problem that is considered an emergency.”

According to the CHA, 98 percent of the apartments in the program are brought into compliance within 90 days. “If they haven’t passed inspection,” Sahli added, “we can get out of the contract or end the relationship with the landlord.”

Roughly 2 percent of contracts are canceled each year because landlords don’t meet expectations, according to the CHA. More typically, the agency withholds rent reimbursements until the landlords bring the buildings up to standard.

That happens fairly regularly, the Reporter’s analysis shows. The CHA docked rents at more than 29,000 buildings between 2006 and 2011.

When rents are withheld, it’s often tenants who “are on the losing end,” Walz said.

They “are sitting in a failing unit. The CHA is not paying. Sometimes the tenant is facing eviction because the [rent] payment isn’t made,” she said.

Hairston said the CHA’s penalties against landlords have been ineffective in rooting out bad actors. “So you’re going to dock their pay for one month? That’s like getting a $2 parking ticket. You think it’s going to correct behavior?” she said. “There’s no penalty for repeat offenders.”

More than 250 of the chronically failing buildings sit in Hairston’s South Side ward, which stretches south along the lakefront from Kenwood to South Shore. Typically, Hairston said, she turns to city attorneys and Chicago Department of Buildings officials to investigate conditions that are, at times, “inhumane.”

While CHA inspections determine whether landlords will be able to collect the rent subsidies, the units are also subject to inspections by the city’s buildings department. During the past two years, nearly 1,500 buildings have faced code violations and fines—even after they passed CHA inspections, the Reporter’s analysis shows. That’s a sign that subpar units are slipping through the CHA’s inspection process, Hairston said.

It’s not a new allegation. For years, the CHA has been called out for subsidizing landlords who rent substandard units. In 2005, a Chicago Tribune investigation found that four out of every 10 units inspected in the voucher program got a failing grade. At the time, William Wilen, the former director of housing litigation for the Shriver center, told the Tribune it was “a scandal” that “you’ve got people taking money for crappy houses.”

Then, in 2009, the U.S. Department of Housing and Urban Development’s Office of the Inspector General issued a blistering audit that found the agency continued to routinely overpay landlords who rented out failing units that were “not decent, safe and sanitary.”

The CHA is engaged in a “continuous improvement process,” which involves rigorous landlord screening and tougher inspection standards, Sahli responded in an email.

Donna White, public affairs officer for the HUD, said subsidized units are held to “stringent” inspection standards. “It is not uncommon for properties to fail inspections, either as a result of landlord negligence or tenant abuse,” she said. “A high level of failures actually means the CHA contractors are doing a thorough job of inspecting units.”

The problem is not unique to Chicago, said Linda Couch, senior vice president for policy and research at the Washington, D.C.-based National Low Income Housing Coalition. “I’ve seen too many [inspector general] reports that have found that, when a unit passed inspection, it shouldn’t have.”

“With these individual properties scattered throughout the city, it’s harder to keep quality control,” said Samira Nazem, a staff attorney with the Lawyers’ Committee for Better Housing, a Chicago nonprofit that represents low-income CHA tenants. “It’s just a logistical nightmare.”

Nazem, who previously served as a contract attorney for the CHA’s Office of General Counsel, said one problem is the CHA’s lopsided approach to enforcing the program’s rules. The agency, she noted, just hired a team of new attorneys to ramp up tenant voucher terminations. “There isn’t a parallel unit to address landlords.”

Although there is no “landlord enforcement” unit, Sahli said the agency funds six positions that work on owner eligibility and compliance issues. Most of their work is on the front end, when landlords apply to get into the program.

Tenants are mostly on their own when it comes to holding their landlords accountable, Holt said. It’s a step backward because, at least when people lived in public housing, they could organize to hold property managers accountable, she said.

“I didn’t have no problem with my unit when I lived in public housing,” Holt added. “Why? Because I knew who to call: the management company. They would fix things.”

When Dean’s ceiling caved in at the Langley building, she immediately reached for the phone to call her property manager. “I said, ‘What am I supposed to do about this ceiling?’” she recalled. The maintenance man was unavailable, so she scrounged up some plastic bags, borrowed tape from a neighbor and went to work to patch up the gaping hole. She also called 311 for help from the city.

Later in the week, after the management company coordinated the repairs, city inspectors came out and told Dean it was time to start packing. “They said, ‘It’s not passing inspection. You should move,’” she recalled.

Andrew J. Williams lives next door to Dean’s old building. His three-flat, gray-stone has been in his family for three generations.

On a typical afternoon, there is a lot of activity: His niece walks her dog before heading off to work, his granddaughter comes out to play and his brother relaxes on the porch.

Williams, a tall man with a salt-and-pepper moustache who talks with his hands, describes the area around his house as the “poor side of Hyde Park.” It wasn’t always that way. “When I was growing up, this block was filled with doctors, lawyers and police officers,” the 65-year-old said.

His family’s building is in pristine condition: Stained-glass panes hang in the windows and the shrubs in the front yard are tightly manicured.

The red stone building next door is another story.

Williams has watched 4729 S. Langley Ave. fall into disrepair during the past five years or so, he said.

Routine maintenance was deferred. The porch became weaker, and a tarp was hung over a gaping hole in the roof. “Let it rain hard enough,” he said, “and you’ll hear the water.” Water damage began to erode the stone ledges around the windows, and before he knew it, the front door and first-story windows were covered over by thin sheets of plywood last year.

“How does this affect me?” Williams asked. “Value. If I tried to sell [my building] tomorrow, they’d come and look at all of the properties on this block.”

Patria Partners managed 4729 S. Langley Ave. on behalf of owner Eugene Fu, a real estate broker based in the Gold Coast. It continued to collect subsidies for the Langley units for nearly two years after a bank initiated foreclosure proceedings against Fu in 2010. The building is now vacant and up for sale.

To keep the checks coming, each of the apartments must pass annual inspections. CHA inspectors visited the property 42 times between 2006 and 2012. They failed the units 18 times. Inspection results were “inconclusive” on four other occasions.

The CHA docked rent payments to the building 16 times between 2007 and 2010. The agency withheld $8,561, compared with $151,263 in rent checks the CHA cut in exchange for renting an apartment to Dean and other tenants between 2006 and 2011, records show.

In a brief phone interview, Fu declined to answer detailed questions and referred the Reporter to Patria Partners for all questions about his subsidized properties. “At the end of the day, there’s a management company in place, and the management company is the one that manages those properties,” Fu said.

In 2005, the Tribune’s analysis of CHA records found that Patria Partners was “outpacing” most of the landlords subsidized by the CHA “in revenue and quality.” Between 2006 and 2011, the company went on to collect $8.5 million in rents for the 281 buildings it owned or managed.

The Reporter’s analysis shows that Patria Partners has managed fewer buildings each year since 2006, and the rate of failed inspections has steadily increased.

In 2006, more than a third of 133 properties the company managed that year failed the CHA inspections at least half of the time. In 2011, the rate of chronic failures grew to 77 percent among its 52 properties.

Barry Miller, Patria Partners’ managing member, declined to discuss the Langley building in detail but said that the past five years have been “a really tough time” to be in the business of managing subsidized properties.

Miller said that as interest rates on subprime loans began to kick in around 2007, he and other owners of the properties his company managed started struggling to make the mortgage payments. “Money began to be spread around by property owners” to cover other debts, Miller said. He estimates that 60 percent of the properties he managed in the early part of the past decade ultimately fell into foreclosure.

Today, he added, landlords “in the [CHA] program can barely scrape together money for the payments.”

This spring, the Reporter toured a dozen subsidized buildings that Patria Partners has managed during the past eight years. Tenants spoke only on the condition of anonymity, for fear of losing their vouchers.

They pointed to unstable windows that have been nailed shut rather than replaced, rotting cabinetry, broken porches, mold and walls that were partially painted. A handful of the buildings were boarded up, in the foreclosure process, or have been sold to new owners.

Currently, Patria Partners manages only 11 units in the program, Sahli said. “As CHA continued to rigorously enforce [Housing Quality Standards], units from the program have been removed,” she said.

Walz of the Shriver center said repeated failed inspections should raise red flags. “These [landlords] get rents above market value,” she said. “They’re getting more for their crappy unit in Englewood with a voucher than a market renter.”

Back on Langley, Williams has watched the building next door deteriorate. “Ultimately, they can’t pass CHA inspections at all,” he said. “Then it ends up boarded up.”

While Dean and her seven children ultimately moved on to a better apartment, Williams and his neighbors are stuck with the long-term consequences, he said.

Williams pointed to a subsidized building across the street and said, “Section 8 is not bad. But when [a landlord] takes everything out of it and doesn’t put anything back into the property, he’s not just ruining a building. He’s ruining a neighborhood. He’s ruining a city.”

By the City of Chicago’s standard, CHA inspectors are missing major problems. The Chicago Department of Administrative Hearings—a quasi-judicial body that oversees health and safety violations, typically involving city building code infractions—has opened about 1,500 cases against subsidized buildings during the past two years.

Those properties accounted for more than 1 in every 10 buildings that got a hearing.

Nearly half of the subsidized buildings brought before the Department of Administrative Hearings during that period had already passed the CHA inspection within six months of a hearing.

Dozens more have landed in the Circuit Court of Cook County, where city attorneys try to collect fines or enforce more serious code violations.

“The landlords, some of them, think it’s a game. They’ll go to housing court and turn the heat on the same day,” Hairston said. “There should be some violations where landlords are immediately suspended from the program.”

Sahli, the CHA’s chief housing officer, served as commissioner of the Chicago Department of Housing from 2007 to 2009. She pointed out that there are differences between how inspectors from the buildings department and the CHA evaluate properties. Porches, for example, are held to a higher standard by the buildings department as compared with the CHA, which only requires that a railing be secured if it is at least 30 inches high and that it be free of lead paint.

The CHA’s inspection standard “is not a replacement of the Chicago building code,” she said, but another way of enforcing property maintenance.

Another key difference: City inspectors show up for inspections unannounced. CHA inspectors schedule their visits roughly a month in advance.

Dean saw a lot of quick fixes at her apartment on Langley when Patria Partners got notice that a CHA inspector was coming. “They would come out the day before and fix things I’d been complaining about,” she said.

“One time they were still painting when the inspector arrived,” she recalled. When the inspector left, the maintenance guy put his roller down and quit.

“Matter of fact, he just left the paint and everything right there,” Dean said. “I asked him, ‘Aren’t you going to come back and fix it?’ He said, ‘It already failed inspection.’”

Miller of Patria Partners declined to comment on the charges about Langley. “It’s hearsay,” he said. “I’m not going to dignify it with confirming or denying it.”

Jay Toth has been a landlord for more than a decade, and most of his properties are subsidized through the voucher program. He’s one of 289 owners in the CHA’s Owner Excellence Program, which recognizes high-performing landlords.

He has seen other landlords buy buildings as investment properties and let them slide. “And they have a lot more units than I do,” he said.

Toth’s buildings have almost always passed inspections. Still, inspections don’t tell the whole story, he said. “I could have my guys there for two days and spend hundreds or thousands of dollars and I could fail [CHA inspections] because of little things.”

Sometimes inspectors are nitpicky, Toth said, and will fail a unit for a minor violation like a cracked tile.

The National Low Income Housing Coalition, along with special-interest groups representing landlords in Washington, D.C., are pushing to relax the inspection process for subsidized units. Under legislation they are currently drafting, inspections for subsidized buildings across the country would become biannual rather than annual. They also propose that local housing authorities decide for themselves whether to withhold rents in failing buildings. Couch hopes to see a bill introduced later this year.

Couch said her organization has concerns about housing quality, but the trade-off is that relaxing inspections would likely free up affordable rental housing, which is in short supply.

Those changes would be a mistake, Walz said. The inspection process “is flawed,” she said. “But, at a minimum, we have to have some quality assurance.”

In 2011, after the inspector told Dean that she ought to move, she had no time to waste. The CHA quickly issued her moving papers. She had 90 days to find a new place or, under the program rules, her voucher would expire.

Dean says she can’t afford to lose the voucher. She left her job as a warehouse clerk last year after she was diagnosed with multiple sclerosis. She’s getting by on a disability check. Her current share of the rent is $168.

“I was out [looking for an apartment] almost every day, every day,” Dean said.

She was pretty confident that Patria Partners wouldn’t be returning her $1,400 security deposit—at least not anytime soon. Without the money, she needed to find a landlord who would waive the deposit. She also worried about her son, now 19. “We have to move in areas where it’s safe,” she said.

The Langley apartment was her first home since moving out of the Harold Ickes Homes, where she’d lived for the prior decade.

Her search was a challenge. She was looking for a decent place that was close to her children’s schools and on the east side of Martin Luther King Jr. Drive, which she sees as the better side of the neighborhood. “I was down to my last month,” she added. “It was a couple weeks.”

Then she stumbled across a well-kept gray-stone in Grand Boulevard. The building’s owner was willing to waive the security deposit. She quickly packed and moved in October.

“That’s what’s good about Section 8. You can get up and move when you want to,” she said. “You don’t have to stay where you don’t want to be.”

That gives her peace, particularly because she wants to keep her eldest son as far away from violence as possible. “Over here, our boys is safe,” she said.

Her youngest daughter, now 5, is also better off. On Langley, the toddler was in and out of the hospital with asthma flare-ups. During the move, Dean realized why. She pulled a bed away from the wall and saw mold growing behind it. A week later, the substance had grown “all the way up and around the wall,” Dean recalled.

“I’m like, my kids have probably been sick all of this time because of this,” she said.

Dean eventually did get a partial refund on her deposit in July 2012.

She likes her new, five-bedroom apartment so much that she helped an old neighbor from Langley move to her building.

“I’ll tell you what,” Dean said. “With Section 8, and any landlord, you’ve got good ones and you’ve got bad ones.”

Evan Moore, James Reddick and Leah Varjacques helped research this article.

acaputo@chicagoreporter.com

Support for this article was provided by the Local Reporting Awards Initiative of the Community News Matters collaborative, which is supported by The Chicago Community Trust, the John S. and James L. Knight Foundation, the John D. and Catherine T. MacArthur Foundation, the Robert R. McCormick Foundation, the Richard H. Driehaus Foundation, and the Woods Fund of Chicago. Support for the data analysis was provided by the IRE Data Journalism Fund, sponsored by Google Ideas.

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