Obama’s Grim Record On Housing / Mortgage Crisis – Why We Need To See Obama’s Plan
Posted by: mcauleysworld on: September 23, 2008
WHY WE NEED TO SEE OBAMA’S PLAN TO FIX THE MORTGAGE / BANKING MESS
America doesn’t need a repeat of Obama’s Policies in Chicago
Grim proving ground for Obama’s housing policy
CHICAGO – The squat brick buildings of Grove Parc Plaza, in a dense neighborhood that Barack Obama represented for eight years as a state senator, hold 504 apartments subsidized by the federal government for people who can’t afford to live anywhere else.
But it’s not safe to live here.
About 99 of the units are vacant, many rendered uninhabitable by unfixed problems, such as collapsed roofs and fire damage. Mice scamper through the halls. Battered mailboxes hang open. Sewage backs up into kitchen sinks. In 2006, federal inspectors graded the condition of the complex an 11 on a 100-point scale – a score so bad the buildings now face demolition.
Grove Parc has become a symbol for some in Chicago of the broader failures of giving public subsidies to private companies to build and manage affordable housing – an approach strongly backed by Obama as the best replacement for public housing.
As a state senator, the presumptive Democratic presidential nominee coauthored an Illinois law creating a new pool of tax credits for developers. As a US senator, he pressed for increased federal subsidies. And as a presidential candidate, he has campaigned on a promise to create an Affordable Housing Trust Fund that could give developers an estimated $500 million a year.
But a Globe review found that thousands of apartments across Chicago that had been built with local, state, and federal subsidies – including several hundred in Obama’s former district – deteriorated so completely that they were no longer habitable.
Grove Parc and several other prominent failures were developed and managed by Obama’s close friends and political supporters. Those people profited from the subsidies even as many of Obama’s constituents suffered. Tenants lost their homes; surrounding neighborhoods were blighted.
Some of the residents of Grove Parc say they are angry that Obama did not notice their plight. The development straddles the boundary of Obama’s state Senate district. Many of the tenants have been his constituents for more than a decade.
“No one should have to live like this, and no one did anything about it,” said Cynthia Ashley, who has lived at Grove Parc since 1994.
The Obama campaign did not respond to questions about whether Obama was aware of the problems with buildings in his district during his time as a state senator, nor did it comment on the roles played by people connected to the Senator.
Among those tied to Obama politically, personally, or professionally are:
Valerie Jarrett, a senior adviser to Obama’s presidential campaign and a member of his finance committee. Jarrett is the chief executive of Habitat Co., which managed Grove Parc Plaza from 2001 until this winter and co-managed an even larger subsidized complex in Chicago that was seized by the federal government in 2006, after city inspectors found widespread problems.
Allison Davis, a major fund-raiser for Obama’s US Senate campaign and a former lead partner at Obama’s former law firm. Davis, a developer, was involved in the creation of Grove Parc and has used government subsidies to rehabilitate more than 1,500 units in Chicago, including a North Side building cited by city inspectors last year after chronic plumbing failures resulted in raw sewage spilling into several apartments.
Antoin “Tony” Rezko, perhaps the most important fund-raiser for Obama’s early political campaigns and a friend who helped the Obamas buy a home in 2005. Rezko’s company used subsidies to rehabilitate more than 1,000 apartments, mostly in and around Obama’s district, then refused to manage the units, leaving the buildings to decay to the point where many no longer were habitable.
Campaign finance records show that six prominent developers – including Jarrett, Davis, and Rezko – collectively contributed more than $175,000 to Obama’s campaigns over the last decade and raised hundreds of thousands more from other donors. Rezko alone raised at least $200,000, by Obama’s own accounting. (This number now exceeds $500,000).
One of those contributors, Cecil Butler, controlled Lawndale Restoration, the largest subsidized complex in Chicago, which was seized by the government in 2006 after city inspectors found more than 1,800 code violations.
In the 1990’s Chicago chose a dramatic approach to addressing the issue of Public Housing. Under Mayor Richard M. Daley, who was elected in 1989, the city launched a massive plan to let private companies tear down the public housing projects and build mixed-income communities on the same land.
Barack Obama was among those who shared Daley’s conviction that private companies would make better landlords than the Chicago Housing Authority.
Obama once told the Chicago Tribune that he had briefly considered becoming a developer of affordable housing. But after graduating from Harvard Law School in 1991, he turned down a job with Tony Rezko’s development company, Rezmar, choosing instead to work at the civil rights law firm Davis, Miner, Barnhill & Galland, then led by Allison Davis. (Attorney Davis was actually a business partner of Tony Rezko)
The firm represented a number of nonprofit companies that were partnering with private developers to build affordable housing with government subsidies.
Obama sometimes worked on their cases. In at least one instance, he represented the nonprofit company that owned Grove Parc, Woodlawn Preservation and Investment Corp., when it was sued by the city for failing to adequately heat one of its apartment complexes.
Obama translated his belief into legislative action as a state senator. In 2001, Obama sponsored a successful bill that increased state subsidies for private developers. The law let developers designated by the state raise up to $26 million a year by selling tax credits to Illinois residents. For each $1 in credits purchased, the buyer was allowed to decrease his taxable income by 50 cents.
The developers gave Obama their financial support. Jarrett, Davis, and Rezko all served on Obama’s campaign finance committee when he won a seat in the US Senate in 2004.
Obama has continued to support increased subsidies as a presidential candidate, calling for the creation of an Affordable Housing Trust Fund, which could distribute an estimated $500 million a year to developers. The money would be siphoned from the profits of two mortgage companies created and supervised by the federal government, Fannie Mae and Freddie Mac. (DOES OBAMA NOW PLAN ON FUNDING THESE ACTIVITIES THROUGH THE PROPOSED TAX PAYER BAILOUT?)
One of the earliest public-private partnerships supported by Obama took place in the Woodlawn neighborhood, a checkerboard of battered apartment buildings and vacant lots just south of the University of Chicago.
Grove Parc Plaza opened there in 1990 as a redevelopment of an older housing complex.
The owner, a local nonprofit company called Woodlawn Preservation and Investment Corp., was led by two of the neighborhood’s most powerful ministers, Arthur Brazier and Leon Finney. Obama had relationships with both men. In 1999, he donated $500 of his campaign funds to another of their community groups, The Woodlawn Organization.
Woodlawn Preservation hired a private management firm, William Moorehead and Associates, to oversee the complex. In 2001, the company lost that contract and a contract to manage several public housing projects for allegedly failing to do its job. The company’s head, William Moorehead, was subsequently convicted of embezzling almost $1 million in management fees.
Woodlawn Preservation hired a new property manager, Habitat Co. At the time, the company was headed by its founder, Daniel Levin, also a major contributor to Obama’s campaigns. Valerie Jarrett was executive vice president.
Residents say the complex deteriorated under Moorehead’s management and continued to decline after Habitat took over. A maintenance worker at the complex says money often wasn’t even available for steel wool to plug rat holes.
When inspectors returned in 2006, Grove Parc got a final warning. Three months later, inspectors found there had been insufficient improvements and moved to seize the complex from Woodlawn Preservation.
Similar problems plagued the next generation of affordable housing development in Obama’s district.
One of the largest recipients of the development subsidies was Rezmar Corp., founded in 1989 by Tony Rezko, a man who had no prior development experience.
Over the next nine years, Rezmar used more than $87 million in government grants, loans, and tax credits to renovate about 1,000 apartments in 30 Chicago buildings. Rezmar collected millions in development fees but fell behind on mortgage payments almost immediately. On its first project, the city government agreed to reduce the company’s monthly payments from almost $3,000 to less than $500.
By the time Obama entered the state Senate in 1997, the Rezmar buildings were beginning to deteriorate. In January 1997, the city sued Rezmar for failing to provide adequate heat in a South Side building in the middle of an unusually cold winter. It was one of more than two dozen housing-complaint suits filed by the city against Rezmar for violations at its properties. (OBAMA CONTINUED TO ACCEPT REZKO CASH FOR 7 YEARS AFTER – CLAIMING HE WAS UNAWARE OF REZKO’S PROBLEMS – UNAWARE OF 2 DOZEN SUITS?)
People who lived in some of the Rezmar buildings say trash was not picked up and maintenance problems were ignored. Roofs leaked, windows whistled, insects moved in.
“In the winter I can feel the cold air coming through the walls and the sockets,” said Anthony Frizzell, 57, who has lived for almost two decades in a Rezmar building on South Greenwood Avenue. “They didn’t insulate it or nothing.”
Sharee Jones, who lives in another former Rezko building one block away, said her apartment was rat-infested for years.
“You could hear them under the floor and in the walls, and they didn’t do nothing about it,” Jones said.
By the time Rezmar asked Chicago’s city government for a loan on its final subsidized development, in 1998, the city’s housing commissioner was describing the company in a memo as being in “bad shape.” The Daley administration still made the $3.1 million loan.
Shortly thereafter, Rezmar switched from subsidized housing to high-end development, fueled by the money it had made in subsidized work. Rezko’s companies also stopped managing the subsidized complexes.
After Rezko walked away the Chicago Equity Fund was obliged to maintain the buildings as affordable housing. The Fund found the buildings in terrible condition. In a 2001 plea to the state to temporarily suspend payments on its mortgages, a fund executive wrote that heating problems, lapsed maintenance, and uncollected rent made the buildings almost impossible to manage.
Most of the buildings have since been foreclosed upon, forcing the tenants to find new housing.
All the while, Tony Rezko was forging a close friendship with Barack Obama. When Obama opened his campaign for state Senate in 1995, Rezko’s companies gave Obama $2,000 on the first day of fund-raising. Save for a $500 contribution from another lawyer, Obama didn’t raise another penny for six weeks. Rezko had essentially paid for the start of Obama’s political career.
As Obama ascended, Rezko became one of his largest fund-raisers. And in 2005, Rezko and his wife helped the Obamas purchase the house where they now live.
Eleven of Rezmar’s buildings were located in the district represented by Obama, containing 258 apartments. The building without heat in January 1997, the month Obama entered the state Senate, was in his district. So was Jones’s building with rats in the walls and Frizzell’s building that lacked insulation. And a redistricting after the 2000 Census added another 350 Rezmar apartments to the area represented by Obama.
But Obama has contended that he knew nothing about any problems in Rezmar’s buildings.
After Rezko’s assistance in Obama’s home purchase became a campaign issue, at a time when the developer was awaiting trial in an unrelated bribery case, Obama told the Chicago Sun-Times that the deterioration of Rezmar’s buildings never came to his attention. He said he would have distanced himself from Rezko if he had known. (Even with 2 dozen suits Obama had no knowledge)
Other local politicians say they knew of the problems.
“I started getting complaints from police officers about particular properties that turned out to be Rezko properties,” said Toni Preckwinkle, a Chicago alderman.
Preckwinkle had previously received campaign contributions from Rezmar.
In the early 2000s, she called Rezko to ask for an explanation. Rezko told her Rezmar was “getting out of the business,” she said – walking away from its responsibility for managing the developments. (This is years before Obama’s run for the US Senate).
“I didn’t see him nor have anything to do with him after that,” she said.
Allison Davis, Obama’s former law firm boss, dabbled in development for years while he worked primarily as a lawyer. He participated in the development of Grove Parc Plaza. In 1996, Davis left his law firm to pursue a full-time career as an affordable housing developer, Davis was aided, on occasion, by Obama himself.
Over the past decade, Davis’s companies have received more than $100 million in subsidies to renovate and build more than 1,500 apartments in Chicago, according to a Chicago Sun-Times tally. In several cases, Davis partnered with Tony Rezko. In 1998 the two men created a limited partnership to build an apartment building for seniors on Chicago’s South Side. Obama wrote letters on state Senate stationery supporting city and state loans for the project. (Contrary to Obama’s Claims he did no Favors For Rezko).
In 2000 Davis asked the nonprofit Woods Fund of Chicago for a $1 million investment in a new development partnership, Neighborhood Rejuvenation Partners. Obama, a member of the board, voted in favor, helping Davis secure the investment.
Chicago’s struggles reached a new height in 2006, when the federal government foreclosed on Lawndale Restoration, the city’s largest subsidized-housing complex. City inspectors found more than 1,800 code violations, including roof leaks, exposed wiring, and pools of sewage.
Lawndale Restoration was a collection of more than 1,200 apartments in 97 buildings spread across 300 blocks of west Chicago. It was owned by a company controlled by Cecil Butler, a former civil rights activist who came to be reviled as a slumlord by a younger generation of activists.
Lawndale Restoration was created in the early 1980s. In 1995, Butler’s company got a $51 million loan from the state to fund additional renovations at Lawndale Restoration. In 2000 Butler’s company brought in Habitat Co. to help manage the complex.
The problems came to public attention in a dramatic way in 2004, after a sport utility vehicle driven by a suburban woman trying to buy drugs struck one of the buildings, causing it to collapse. City inspectors arrived in the ensuing glare, finding a long list of code violations, leading city officials to urge the federal government to seize the complex.
In the midst of the uproar, a small group of Lawndale residents gathered to rally against the Democratic candidate for the US Senate, Barack Obama.
The organizers had a simple message: Cecil Butler had donated $3,000 to Obama’s campaign. Habitat had close ties to Obama and Obama had remained silent about Lawndale’s plight.
Paul Johnson, who helped to organize the protest, said Obama must have known about the problems.
“How didn’t he know?” said Johnson. “Of course he knew. He just didn’t care.”
While Obama has belatedly distanced himself from Rezko, Obama has remained close to others in the development community. Jarrett participates in the campaign’s senior staff meetings. Obama chose another close friend, Martin Nesbitt, as his campaign treasurer. Nesbitt is chairman of the Chicago Housing Authority, one of the key overseers of the shift toward private management and development.
People in Chicago’s poorest neighborhoods are torn between a natural inclination to support Obama and a concern about his relationships with the developers they hold responsible for Chicago’s affordable housing failures. Some housing advocates worry that Obama has not learned from those failures.
“I’m not against Barack Obama,” said Willie J.R. Fleming, an organizer with the Coalition to Protect Public Housing and a former public housing resident. “What I am against is some of the people around him.”
Jamie Kalven, a longtime Chicago housing activist, put it this way: “I hope there is not much predictive value in his history and in his involvement with that community.”
Filed under: Barack Obama, Economic Recovery, Economy, Financial Crisis, Financial Services Crisis, John McCain, Sara Palin, Sarah Palin, Slum Lords, Tony Rezko Tagged: | Bailout, Barack Obama, Housing Crisis, John McCain, Mortgage Crisis, Tax Payer Rip Offs