Housing: a National Landlord in Default
How HUD is making a bad situation worse
Catch-22. Washington adds another layer of problems. For example, Cisneros says he would like to guarantee that apartments in properties sold by HUD are reserved for people who need them. The only thing is, HUD isn't selling many properties these days. A 1987 law requires HUD to pay rent subsidies for all apartments in any project it sells where more than half of the residents have received subsidies in the past. Theoretically, this means HUD might have to nearly double the number of subsidies it pays tenants on any building it sells. Thus, the Catch-22 of federal housing policy: Because HUD doesn't have the money to increase subsidies on apartment buildings it wants to sell, it has to hang on to most. Taxpayers foot the bill. Though many HUD apartments house people of low and moderate income, the exact number is unknown. HUD could not provide a breakdown of subsidized and unsubsidized units.
HUD buildings are not exclusively filled with low and moderate income tenants, however, since department regulations do not prohibit the agency from insuring luxury properties. In fact, the largest default on a HUD-owned project--at $20 million worth of bad debt--is a Chicago luxury building called Fountain Square. In New York City, at least a half-dozen luxury buildings received insured mortgages from HUD in the 1980s and 1990s. The Ritz Plaza, where a three-bedroom apartment rents for more than $3,000, got an $85 million insured mortgage in 1988 after the developer hired a former top New York HUD official. Today, the Ritz Plaza is in trouble. HUD began foreclosure proceedings; the owner has filed for bankruptcy protection.
The people who suffer most from HUD's mismanagement, obviously, are the tenants. At LaClede Town in St. Louis, residents watched in dismay as the complex, built in 1966, went downhill in the 1980s. Today, only 228 of LaClede Town's 1,250 units are occupied. HUD assumed the $17 million mortgage more than two years ago and will soon take ownership, but residents aren't hopeful about this. One tenant says HUD officials had no idea what was happening at LaClede Town until just recently. "They haven't given us the opportunity to live the way we want," the woman says. "We want to live decent as possible."
The housing agency's inspector general blames bad conditions like those that plague the residents of LaClede Town on lack of oversight by HUD. Cisneros conceded as much during last week's testimony on Capitol Hill: "HUD has, in many cases, exacerbated the declining quality of life in urban America."
Can America's troubled housing agency be "reinvented," as Cisneros promises? A day after Cisneros testified last week, HUD's inspector general reported on eight other big problems the agency faces. These range from millions of dollars in misdirected rent subsidies to atrocious conditions in public housing. To pull off the task he has assigned himself, Cisneros will need the help of Congress and the support of the president. Even with that kind of support, however, HUD insiders say the odds of success for Bill Clinton's new housing secretary have to be counted as long. Real long.
From sea to shining sea The 10 states with the most defaults on HUD-insured properties:
Already HUD-owned Foreclosures begun
(units) (units) 1. Texas 12,922 4,349 2. Georgia 1,123 4,150 3. Missouri 790 4,468 4. Louisiana 1,843 1,346 5. Florida 1,307 1,633 6. Tennessee 555 2,264 7. North Carolina 345 2,428 8. New Jersey 74 2,417 9. Oklahoma 1,199 1,175 10. California 1,193 1,111
USN&WR--Basic data: Senate Banking Subcommittee on Housing and Urban Affairs
advertisement
