WSJ Article Re Section 8 - Posted by JHyre in TexOhio

Posted by Chuck Perry - TX on July 18, 2001 at 20:54:32:

Thanks.

BTW, I have a court date regarding a related matter. I will follow up via e-mail if it warrants any comments.

Thanks,
Chuck

WSJ Article Re Section 8 - Posted by JHyre in TexOhio

Posted by JHyre in TexOhio on July 17, 2001 at 11:13:19:

The Wall Street Journal
Copyright © 2001, Dow Jones & Company, Inc.

Tuesday, July 17, 2001

Hot Property

Landlord’s Dilemma: Help Poor Tenants Or Seek More Profit?

Many in Mr. Search Term Begin Baskin’s Search Term End Shoes Are Ending Participation In Rent-Subsidy Program

Encounter at the Coffee Shop
By Jonathan Eig
Staff Reporter of The Wall Street Journal

CHICAGO – “Remember,” Sheldon Search Term Begin Baskin Search Term End told himself, “you’re the landlord. You’re the bad guy.”

So last fall, when his company sent letters to about 140 of his tenants – most of them poor and elderly – saying they might be forced out of their government-subsidized apartments, Mr. Search Term Begin Baskin Search Term End knew he would appear to be playing the part.

He sympathized with his renters, he said, but felt he was in a predicament, too. Twenty years ago, he and his partners had signed a contract with the federal government, promising to build and maintain an apartment building for low-income Chicagoans on the city’s North Side. In exchange, Mr. Search Term Begin Baskin Search Term End and his investors received a steady stream of government-guaranteed rent.

But the contract for that building, known as Rienzi Plaza, was set to expire in the fall of 2001. Then he would be free to sell the building, convert it to condominiums, or start renting to unsubsidized tenants who would pay more rent. It would be a difficult choice for a man who through the years had sought to blend profit-making and community service.

Many of his tenants were afraid and angry. “They used us for 20 years to pay for that building,” said Lucy Ramirez, 68 years old, who pays $166 a month for a small, subsidized one-bedroom apartment. “Now what am I? An old shoe?”

The implications of Mr. Search Term Begin Baskin’s Search Term End dilemma reach far beyond Rienzi Plaza. Since 1996, about 125,000 units of federally subsidized apartments – known as Search Term Begin Section 8 Search Term End units, a reference to the relevant housing law – have been lost nationwide, as landlords chose not to renew their government contracts. The nation’s Search Term Begin Section 8 Search Term End supply stands at about 1.3 million units, but nearly two- thirds of those have contracts set to expire between now and 2004.

The strong real-estate market in much of the country has created an incentive for developers to drop affordable housing and cater to more-prosperous consumers. Twenty-five years ago, the government’s offer of rent subsidies looked attractive to Mr. Search Term Begin Baskin Search Term End and other landlords like him. As they accumulated capital and experience, though, they began to eye higher-risk opportunities that offered greater potential rewards. Today, as many of these Search Term Begin Section 8 Search Term End pioneers reach retirement age, they are discovering that in the wake of the 1990s boom, their properties have become more valuable than they had imagined possible.

Meanwhile, demand for Search Term Begin Section 8 Search Term End apartments is rising, in part because big cities such as Chicago are tearing down their old public-housing projects and telling residents to find Search Term Begin Section 8 Search Term End apartments instead. Thousands of families are being forced to double up with relatives or turn to homeless shelters.

For Mr. Search Term Begin Baskin, Search Term End low-income housing hasn’t been charity work. His company, Metroplex Inc., manages about 7,000 units, most of them subsidized, and bills the federal government for about $30 million a year in Search Term Begin Section 8 Search Term End rent. Mr. Search Term Begin Baskin Search Term End owns an interest in most of the buildings, along with investors enticed by tax breaks.

He and his partners have already opted not to extend contracts for two buildings, one in Chicago and one in Green Bay, Wis. As word spread in Chicago real-estate circles that he might want to unload Rienzi, Mr. Search Term Begin Baskin Search Term End received numerous phone calls from other developers interested in buying the high-rise, free and clear of Search Term Begin Section 8 Search Term End .

Mr. Search Term Begin Baskin, Search Term End a 64-year-old native Chicagoan, seems happiest when jotting calculations on scraps of paper. He lives only a short walk from Rienzi Plaza, in a spacious contemporary house in Lincoln Park, one of Chicago’s toniest neighborhoods. His portfolio includes a resort in Honduras and a share of the Chicago White Sox baseball team.

Mr. Search Term Begin Baskin’s Search Term End father was a personal-injury lawyer who admired Saul Alinsky, a prominent postwar radical activist in Chicago.The younger Search Term Begin Baskin Search Term End attended Princeton University, Harvard Law School and the London School of Economics. He emerged thinking of himself as a socialist, albeit one interested in real estate.

After learning the ropes in that field in Boston, he moved home to Chicago in 1970 and started his own real-estate business. When the Search Term Begin Section 8 Search Term End program began over the next few years, he jumped in. With the idealistic 1960s not long over, some developers of that era were looking for ways to make money while pursuing their liberal political values. Many urban real-estate markets were distressed, making it easier for developers who lacked long experience and large resources to get started.

The Search Term Begin Section 8 Search Term End program encouraged investors to put their money in neighborhoods that, without the guarantee of federal rent subsidies, might have seemed too risky. When used correctly, said Mr. Search Term Begin Baskin, " Search Term End it was an absolutely fabulous system."

Rienzi Plaza went up in 1981, at a cost of about $15 million. Some neighbors complained that the tenants – mostly elderly and of varied ethnicities – would hurt the area’s reputation. But by most accounts, the Search Term Begin Section 8 Search Term End people, who qualified based on their low income, fit in easily. The building had 147 units of subsidized housing and 102 market-rate units. The two sets of tenants coexisted peacefully, and the area blossomed, sprouting condominiums, health clubs and fancy coffee shops.

Market-rate tenants at Rienzi today pay up to $1,644 a month for two-bedroom apartments. Search Term Begin Section 8 Search Term End tenants pay 30% of their income, with certain adjustments, and the government supplies the rest. If forced to leave the building, the Search Term Begin Section 8 Search Term End tenants would have trouble finding anything they could afford in the same neighborhood.

Mr. Search Term Begin Baskin’s Search Term End letter last fall caught a lot of tenants by surprise. “It was like the floor dropped out,” said Arthur Haupt, a 79-year-old retired waiter who lives with his black cat, Max, in a tidy 650-square-foot apartment on the fifth floor. “At this age, you figure you finally found a measure of security for your remaining years – your few remaining years.”

Mr. Haupt works 20 hours a week, shelving books at Loyola University’s law library, earning $6.95 an hour. He also gets social security and two modest pensions. His total income last year was $18,713. His monthly rent: $352.

Mr. Haupt said he realized last fall that the elderly tenants of Rienzi had little political pull, so he urged everyone he knew in the building to attend the annual meeting of the Jane Addams Senior Caucus, a local nonprofit, in October. About 50 residents showed up. That strong showing prompted the caucus, as well as another local group, the Lakeview Action Coalition, to make the fight for Rienzi a priority.

Tenants and community organizers began by writing letters to elected officials, asking them to put pressure on Mr. Search Term Begin Baskin. Search Term End They also requested a meeting with the landlord.

Mr. Search Term Begin Baskin, Search Term End who said he has never been comfortable meeting directly with tenants, initially resisted. He sent representatives of his company to answer tenants’ questions at a meeting last October.

Tenants were told that if the building were sold to condo developers, they would still be eligible for subsidized housing. But they would have to look for other landlords willing to participate in Search Term Begin Section 8 Search Term End and charging the modest rents required by the program. Few, if any, property owners in the immediate neighborhood met those conditions. (The federal government supports almost no new public-housing construction, instead providing Search Term Begin Section 8 Search Term End tenants with portable vouchers they can use to rent private-market apartments).

If the owners of Rienzi, without selling, quit the Search Term Begin Section 8 Search Term End program and started charging market-rate rents for the entire building, subsidized renters would be permitted to stay as long as they liked. Those units would convert to market rate only when vacated.

Tenants were frustrated and confused. Few understood the intricacies of Search Term Begin Section 8 Search Term End . Some took their complaints to local newspapers and television stations, which ran reports on the clash, mentioning that Mr. Search Term Begin Baskin Search Term End was refusing to meet his tenants.

At last, in April, the landlord did agree to meet with community leaders and a handful of tenants at the office of U.S. Rep. Jan Schakowski. The gathering turned out to be cordial. Tenants urged Mr. Search Term Begin Baskin Search Term End to sign a five-year contract extension. He repeated what he had said all along: He would like to keep Rienzi affordable. But he would not extend the contract if a more profitable option were available – and he was hearing from a growing list of interested potential buyers. If he compromised, he said, his investors could sue him for failing to maximize their profits.

The encounter illustrated a fundamental weakness of a program created in an era when urban real-estate markets were weaker and enthusiasm for public aid to the poor was greater. Search Term Begin Section 8 Search Term End lacks a potent constituency that can influence Congress to provide subsidies large enough to stop landlords from leaving the program.

On top of that, Search Term Begin Section 8 Search Term End over the years has become less attractive to developers because it has been tainted by scandal – especially in the 1980s, when politically connected figures collected millions in questionable consulting fees. The program also became notorious for its red tape and ossified bureaucracy, problems that Mr. Search Term Begin Baskin Search Term End said plague him.

None of this history concerned tenants at their meeting in April, though. Olga Kipnis, 74 years old, told Mr. Search Term Begin Baskin Search Term End she had already moved four years earlier because her landlord threatened to quit Search Term Begin Section 8 Search Term End . Many residents were too frail to survive a relocation, she added.

“He was very friendly, but he didn’t promise to renew the contract,” recalled Mrs. Kipnis, who taught school for many years in Russia, before immigrating to the U.S. 10 years ago with her husband, Mark, a retired architect. “We were disappointed,” she said.

The Kipnises pay $250 a month in rent for their small apartment. They each receive $398 in monthly social security payments. They buy a lot of their clothing in thrift stores.

When it appeared that attempts to sway Mr. Search Term Begin Baskin Search Term End might not succeed, the tenants and community groups began looking for a white knight – someone who would buy the building, sign a contract extension with the U.S. Department of Housing and Urban Development and preserve Rienzi’s low-income housing.

No one put a formal price tag on the building, but in casual conversation, Mr. Search Term Begin Baskin Search Term End sometimes tossed out a figure of $30 million. Two for-profit organizations that specialize in investing in “affordable” housing expressed interest in buying Rienzi, but neither made an immediate offer.

Meanwhile, Mr. Search Term Begin Baskin Search Term End asked HUD officials how much more rent they would pay if he extended his contract for five years. HUD has changed several rules in recent years in an attempt to stop the exodus of Search Term Begin Section 8 Search Term End landlords. One of those changes makes it possible for owners to receive increased rent payments on buildings in affluent neighborhoods.

HUD officials said they would have to hire an outside consultant to do a market study, a task that would take months. Federal regulations required Mr. Search Term Begin Baskin Search Term End to announce his decision no later than May 31, four months before the expiration of the Rienzi contract.

As the deadline approached, it became clear that no policy change would occur in time to rescue Rienzi Plaza. It also became clear that the community groups weren’t close to putting together a deal in which the building would be purchased by an affordable-housing group.

While Mr. Search Term Begin Baskin Search Term End said he had received offers from developers eager to buy the building, he declined to discuss the proposed amounts. He also said he hadn’t had time to consider the tax consequences of such a sale.

Throughout the process, Mr. Search Term Begin Baskin Search Term End hadn’t visited Rienzi. But one cloudy spring afternoon, alerting no one, he decided to have a look at the place.

He stepped into a vacant one-bedroom apartment and admired its splendid view of downtown Chicago. Condos in the area with less space and inferior views often fetched more than $200,000.

Later, he went downstairs to a sandwich shop and ordered a cup of coffee. An elderly man named George Sylvester overheard Mr. Search Term Begin Baskin Search Term End talking about the building and approached.

“I live upstairs,” said Mr. Sylvester, shoulders slumped, as he stood beside Mr. Search Term Begin Baskin’s Search Term End table. “I heard HUD’s going to throw us out of the building. Can they do that?” Mr. Search Term Begin Baskin Search Term End explained the possibilities and how each would affect tenants.

“What do you think they’re going to do?” Mr. Sylvester asked. Mr. Search Term Begin Baskin Search Term End said he didn’t know. As the men shook hands and parted, the tenant had no idea he had just met his landlord.

On May 31, more than 100 tenants and community activists gathered outside Rienzi Plaza on a cold, rainy day. They chanted, “Do the right thing!” and sang “We shall not be moved.”

Before the rally began, Mr. Search Term Begin Baskin Search Term End had informed the organizers of his decision: He would extend Rienzi’s Search Term Begin Section 8 Search Term End contract, but only for one year. Perhaps, he said, local or federal politicians would use the time to create incentives encouraging property owners to sell to groups determined to preserve affordable housing. If taxes on the sale were cut, he suggested, he could reduce the price, and nonprofits would be better able to compete in the bidding.

In the meantime, tenants at least had one more year. “I think Mr. Search Term Begin Baskin Search Term End has been very fair,” said Mr. Sylvester, still unaware he had met the landlord. “He’s not bad. But I think he’s tired.”

Re: He had mean parents… - Posted by Stacy (AZ)

Posted by Stacy (AZ) on July 17, 2001 at 18:13:49:

…sticking him with the name “Sheldon Search Term Begin Baskin Search Term End”. Can’t imagine the trouble he’s had all his life dealing with that.

Stacy

Re: WSJ Article Re Section 8 - Posted by Chuck Perry - TX

Posted by Chuck Perry - TX on July 17, 2001 at 17:02:03:

Hey John,

I read this article this morning. Your learned legal and invesotr oriented opinion would be greatly appreciated.

BTW, thanks for the book reference on securities.

Thanks,
Chuck

Re: WSJ Article Re Section 8 - Posted by JHyre in TexOhio

Posted by JHyre in TexOhio on July 18, 2001 at 12:28:01:

Legally there’s no legitimate issue. As for illegitimate issues, some not-for-profit bunch of do-gooder weenies could sue…they’d probably lose, but inflict some expenses in so doing. There’s a good reason (other than common decency) for owner to show some class in reletting the property…a bit of notice and consideration could help prevent lawsuits. As an investor, I’d sell or at least relet the property at market rates. It’s neither my job nor in my interests to minimize the value of the property. Instead of complaining about losing their unearned perk, the Section 8 tenants should be glad that the free/subsidized ride lasted as long as it did and continue it elsewhere. I’d not sacrifice profits for the sake of someone else’s convenience…the tenant’s should find subsidized housing elsewhere. If the program is outdated and they are unable to continue their subsidized existence as a result, then they should make more or adjust their lifestyle to suit their means. In the alternative, the governemnt could “fix” the program by increasing the subsidy…if society as a whole wishes to do that, then let society as a whole bear the cost- I certainly wouldn’t, nor would my investors. Well, at least not directly…given the “progressive” nature of our tax system, I would still bear more than my proper share.

John Hyre

PS: Before any liberal weenies answer, be sure to tell us how you’ve voluntarily given away thousands or millions of dollars of your own hard-earned money. If you haven’t done this, you have no credibility at all when it comes to telling investors to give away their money. So spare us the sanctimony.

freeloaders upset ! - Posted by roundhouse

Posted by roundhouse on July 17, 2001 at 17:24:13:

Gee big suprise, a bunch of old folks who apparantly did nothing in their younger years to prepare for retirement, then get upset when the person who prolly worked hard and did without a lot of beer and cigs, to buy real estate, wants to make the max income on HIS property.