Subsidized Housing

A terrific article on Section 8 abuse by the Tribune. We shouldn't get too proud of our city's clean-up until we end shit like this. Following this, however, is an article proving subsidized housing isn't all bad. I know the woman who runs the organization mentioned in the second article. * Landlords shrug off city fines, lawsuits By John Bebow and Antonio Olivo Tribune staff reporters Published May 23, 2005 Bruce Adelmann, whose previous work experience included supplying cocaine to college kids, was in federal prison when he got the idea for a new calling: real estate. After his release, he got a job as a janitor working for another ex-con, Joseph Zugalj. A property manager, Zugalj had been convicted for mail fraud after he and a partner botched an insurance scam to set fire to their cabin cruiser, the S.S. Minnow. By 2000, Zugalj and Adelmann were at the center of Chicago's subsidized housing program, principals in one of the city's largest "Section 8" property management firms, collecting $1 million a year in taxpayer-funded rent. Apartments they managed routinely failed housing inspections, and their company, Hyde Park Realty, racked up tens of thousands of dollars in unpaid fines. By late 2003 Hyde Park Realty was belly up, leaving a trail of unresolved lawsuits. But Zugalj and Adelmann went on to collect hefty Section 8 revenues under new corporate names, companies that continued to fail many inspections. As Chicago and other cities around the nation sought to escape decades of public housing failures, they began turning to private landlords to provide shelter for society's poorest families. But Chicago's subsidized Section 8 landlords have failed four out of every 10 inspections since 2000, according to a Tribune analysis of 230,000 records. The story of Hyde Park Realty shows that landlords have benefited from the influx of public money without being held accountable for the overall quality of their portfolios. In fact, regulators have never before checked whether landlords consistently failed inspections, or accumulated unpaid fines or paid taxes and utilities. Chicagoans using government Section 8 rent vouchers now outnumber public housing residents 3-1. The Chicago Housing Authority has spent nearly $1.2 billion on subsidized rent in the last five years. The money goes to more than 15,000 Chicago landlords, both owners and property managers, all of whom are responsible for the quality of the dwellings. But at least a dozen firms that collected more than $1 million each from 2000 to 2004 failed the majority of their housing inspections, according to data reviewed by the Tribune. Hyde Park Realty was one of them, collecting $5.6 million in government rent from 2000 to 2003. Zugalj and Adelmann had come a long way from their criminal convictions, which do not disqualify them from participating in Section 8. The story of their journey emerges through civil court records, criminal records, inspections and interviews with both men and Hyde Park Realty's lawyer. `Dirty laundry' They met in the mid-1990s. Zugalj was on probation for his 1993 federal felony conviction in the scheme to sink the 36-foot S.S. Minnow. The boat was lost in Lake Calumet. "I guess everybody has some dirty laundry in their closet," Zugalj said recently. Zugalj said he did not know about Adelmann's past when he hired the affable former Southern Illinois University student as a janitor at Hyde Park Realty. Adelmann was just out of prison then, convicted for conspiracy to deliver in excess of 5 kilograms of cocaine. From 1988 to 1990, he charged $1,000 an ounce for cocaine while serving as a middleman between a Chicago dealer and campus dealers in Champaign, according to court records. His original sentence was cut in half after his cooperation helped agents nab a higher-ranking Chicago dealer. "We were just a bunch of kids," Adelmann said. "I just got caught up in a conspiracy. The only thing I was worried about [upon getting out of prison] was `Am I going to have a job?'" After his release in 1995, Adelmann worked hard at Hyde Park Realty, and soon became a building manager. By 2000, Zugalj allowed him to buy in as vice president of the company. Like other large firms, Hyde Park Realty had a bustling business managing subsidized apartments on behalf of absentee owners and investors. But Hyde Park Realty's problems steadily mounted. From 2000 to 2003, regulators cut off the rent in individual Hyde Park Realty apartments 245 times--almost twice as many cutoffs as any other landlord in the city--because of lead paint hazards, bad plumbing, inadequate heat and other problems, according to CHA records. In 2001, the U.S. Environmental Protection Agency fined Hyde Park Realty $20,000 for failing to warn tenants of potential lead paint hazards in dozens of apartment buildings. The company paid that fine, but has not rectified more than $100,000 in other court judgments ranging from housing violations to age discrimination, according to court records. In 2003, the city's debt collection attorneys tried to settle 10 unpaid Hyde Park Realty fines for $60,839. Zugalj wrote a check for the full amount and hand-delivered it to the city's attorney, according to court records. The check bounced. The company then sought to escape some of the charges on a technicality: the city did not put "Company Inc." after "Hyde Park Realty" in the court filings. So, Hyde Park's attorney argued, the city sued the wrong company. A judge ruled in the city's favor. The fines remained unpaid this spring, according to city Law Department spokeswoman Jennifer Hoyle. "It was a very odd case for them to just stop payment after reaching a settlement," Hoyle said. "Hyde Park Realty is one of the companies we have had trouble collecting from. They are a company we see in our collections a lot." Hyde Park Realty's attorney, Ron Roman, appealed some of the unpaid fines, arguing that the city sent violation notices to the wrong addresses, leaving the company in the dark for months. Some of the fines were dismissed on appeal. Numerous others remain unpaid. What will Hyde Park Realty and its former principals do to resolve the remaining unpaid judgments? "To my knowledge, nothing," Roman said. "Whether those are valid or whether there is error in them, I don't know. Unless they ultimately direct me to contest them, we never will know." Zugalj blamed others for code violations, failed inspections and rent cutoffs. He said Hyde Park Realty retained less than 5 percent of the millions in Section 8 the company collected. Zugalj said most of the money was passed on to the building owners who mostly stay out of the daily operations of the buildings. He said he is required to get approval before spending more than $500 on any repair. Hyde Park Realty had dealt with 30 to 40 owners in the last five years, and the majority of them did not properly care for their buildings, he said. "We physically can't force an owner to do something," Zugalj said. "Last year alone we dropped a dozen owners. We don't want to deal with these bad owners anymore. It's a very tough business. ... As a management company you are always open to litigation. If there is anything we are personally liable for, we will certainly do our duty and take care of them." Officials declined to say whether they were pursuing those owners as well as Hyde Park Realty for the fines. One group of owners that once employed Hyde Park Realty has sued Zugalj and Adelmann, alleging that they disbanded to "hinder, delay, or defraud" creditors. Zugalj called that charge a "fallacy," and said their breakup was a simple matter of two businessmen deciding to go in different directions. New businesses, same woes Zugalj started Preferred Hyde Park Properties, while Adelmann is the property manager for All Properties Real Estate, Inc. Adelmann said he also co-owns buildings with other investors. Since the Hyde Park breakup, both Preferred Hyde Park and All Properties have collected more than $1 million in Section 8 rent while failing more than 40 percent of inspections through 2004. Zugalj and Adelmann's housing quality record and unresolved legal judgements are "obviously something we will follow up on," said Meghan Harte, director of resident services for the CHA, which oversees the voucher program. In March, the CHA passed new rules threatening to kick out landlords who consistently fail housing inspections or don't pay bills and fines. The purpose of the new rules is to "provide greater protection" for some 36,000 low-income families living in Section 8 apartments. "We want to make sure we're not paying the left hand while they're being delinquent on the right," Harte said. Regulators have never before asked those questions because they were preoccupied with the more basic tasks of moving thousands of families from public housing to apartments in neighborhoods, Harte said. "Had we known what we've seen today," Harte said in reaction to the Tribune's findings, "we would have definitely been looking at this earlier." At the All Properties office in Chatham, behind the thick glass of a teller window where tenants do business, Adelmann manages clerks and ringing phones. Section 8 accounts for about a third of his business, more than 200 subsidized tenants altogether. Dressed in a crisp pink dress shirt and khaki pants, Adelmann sucked on a cigarette one recent morning and interrupted an interview to take another tenant phone call. "I'm only getting $716 for your unit," Adelmann said, telling the subsidized tenant he wasn't renewing the Section 8 lease. "I can rent it on the regular market rather than what you're giving me, or what Section 8 is giving me. I don't want to deal with the headaches, with the inspections and stuff," he said. Hanging up, he shrugged. Adelmann acknowledged some inspection failures are "legitimate," but argued others are the result of fail-happy inspectors. "I wouldn't put someone somewhere where I wouldn't live myself," he said. He parks a shiny, late model white Cadillac sedan behind his office, but on a recent property tour, he left it behind in favor of an SUV. While driving through Englewood, his cell phone rang constantly--remodelers sought directions, fishing buddies relayed Lake Michigan coho tales--while Adelmann sang along to the radio's classic rock tunes: "Who are you ... who-who, who-who. ..." At 77th and Stewart, he walked through a gut-rehab on a courtyard building containing 37 one-bedroom apartments. It's one of several buildings he recently purchased with other investors. He said he paid $650,000 for it and will put in an additional half-million dollars. The units in another sprawling building a few blocks away featured new paint, refinished tile and wood floors, and a bright atmosphere that contrasted with the companies' records of failed inspections. Still, he acknowledged, the remodeling job hadn't yet been approved for a Section 8 tenant because the back porch still has flaking paint that might be a lead-poisoning hazard. "I've almost gotten shot in some of these buildings," he said, a touch of a boast in his voice. "People don't like change." His plan is to keep changing. Keep moving up in the world of real estate. Ease out of Section 8 for market-rate tenants. Watch buildings appreciate. Retire in his 50s. "I'm trying to get into commercial properties now," he said. * Building shows Section 8 doesn't have to be subpar By John Bebow and Antonio Olivo Tribune staff reporters Published May 23, 2005 At the Major Jenkins Apartments in Uptown, managers don't wait for government inspectors to tell them what's wrong. Instead, they conduct their own inspections every month. That hands-on approach helps explain why Major Jenkins is one of the cleanest and safest subsidized apartment buildings in Chicago. The 160-unit building has taken in $2.9 million in taxpayer-funded Section 8 rent in the last five years. It was inspected more than 600 times and had a pass rate of 92.5 percent. Many of the biggest landlords have failed more than half of their inspections. "We are not the absent landlord," said Lillie Cotton, the property manager at Major Jenkins. The building, a former flop house just north of Asian restaurants and herb shops along colorful Argyle Street, is one of nine operated by the non-profit agency Lakefront Supportive Housing. Named after a former tenant, the building houses many who were previously homeless, have little or no income, and have struggled with substance abuse or mental-health problems. Section 8 subsidies covers most of the rent for the tenants. Renting for $475 per month, the units at Major Jenkins are single-room occupancy, with small beds and tidy bathrooms and kitchens akin to well-kept college dorm rooms. Tile hallways are polished to a shine. The elevators are spotless. When one unit recently came vacant, maintenance workers prepped it for the next tenant by carefully painting the trim in two colors, lavender and mint green, and left not so much as a single unfilled nail hole on the walls. "A lot of people in the building are like family," said Mary Prentiss, 58, who said she lived in a shelter before moving to Major Jenkins 10 years ago. Lakefront Supportive Housing's motto is "more than a roof." With the help of government grants and charitable donations, social workers closely assist all tenants with counseling and a wide range of activities, from self-help groups to movie nights. The group budgets $250 per unit per year to cover major repairs beyond routine wear and tear. Lakefront Vice President Robert Banta acknowledges that for-profit landlords lack the social service funding and staff that help Major Jenkins run smoothly. But he argued there is still "no excuse" for any Section 8 landlord to fail housing quality inspections. "It's not a business with a lot of secrets in it," he said. "If you don't have the money to properly operate a building, maybe you should consider selling the building to somebody who can.">