When Marcus Edward signed up in May 1997 to buy a Harlem mansion through the city’s HomeWorks program, he thought he had the sort of deal that New Yorkers only fantasize about. For the price of a cramped apartment downtown, and backed by a $90,000 city subsidy, he bought an elegant Victorian shell–4,500 square feet, not including the carriage house that came with it. He was permitted to custom-design the reconstruction, so he took full advantage. Edward sat down with an architect and drew a flowing interior that looked more South of Houston Street than upper Manhattan, replete with pale maple wood and stainless steel fittings in nearly every room.
What especially appealed to Edward was the philosophy behind HomeWorks, unique among city housing programs: that blighted areas like Harlem, Bushwick and the South Bronx can be revived by selling clusters of abandoned brownstones to homeowners of diverse economic backgrounds. Unlike most subsidized-housing initiatives, HomeWorks placed no limits on income and allowed buyers to customize their homes, with the idea of luring middle-class and even affluent residents who normally would not have considered these neighborhoods.
“It seemed like a dream–a top-quality custom-built home, with lots of affordable space and the chance of revitalizing a derelict space,” says Edward. But with time, Edward’s enthusiasm withered. Foremen came and went, and confusion reigned over the work plan. Building crews departed from the blueprint; in one instance, they installed a staircase 20 feet from the right location. Workmen drove nails into pipes, chiseling leaks. They also cut support beams. The contractor-developer–which bought the shell from the city for $1 and sold the finished product to Edward for $678,000–completed the project eight months after the contractual deadline.
Edward was relieved to finally take possession of his new home in February 2000. But from the day he moved in, there were problems. The central air conditioning rained on the new wood floors. Electricity shorted in the kitchen when he plugged in a toaster. Brickwork wasn’t properly sealed. And two sump pumps couldn’t stop the basement from flooding.
For months, Edward nagged the builder, John Cross, to correct the defects. When that failed, he contacted the city’s Department of Housing Preservation and Development, the agency that runs HomeWorks. But Elaine Calos, HPD’s director of rehabilitation programs, dismissed the troubles as minor, even asserting that damp cellars were common in old Harlem homes. When Edward’s one-year warranty on work expired, he was still owed a security gate, floor repairs and a dry basement. By then, he and the developer were communicating via lawyers–and Edward had spent $10,000 of his own money for repairs and thousands more on legal fees. Litigation seemed increasingly likely.
Though his litany of shoddy workmanship was among the most extreme, Edward is not the only dissatisfied HomeWorks customer. In Harlem alone, dozens of buyers have complained of structural flaws or waits of up to three years to occupy their homes, according to sources within the program. In some cases, 19th-century fireplace mantels and stained glass vanished. Architects misplaced plans. Door frames were askew, staircases didn’t meet walls, radiators didn’t work.
“I’m completely at the developer’s mercy,” says one of several distressed buyers, who failed to get his problems addressed by either the contractor or HPD. Like most buyers City Limits interviewed, he preferred to remain anonymous, fearing that the contractor would never finish the outstanding work.
Even unhappy homeowners wouldn’t dispute that HomeWorks has helped jump-start Harlem’s revival, by putting more residents in the neighborhood and filling former crack houses with responsible owners. Since the program’s establishment in 1995, entire blocks–including parts of 142nd Street, 123rd Street, St. Nicholas Avenue–have been saved from ruin. New money is bringing stability.
But the city’s urgency to push burdensome buildings into private hands has left many a homebuyer stranded, spawning a plethora of grievances and potential lawsuits. Buyers’ biggest lament is that there was no supervision by the city after they signed contracts with developers. Unlike the New York City Housing Partnership, which often pairs up with neighborhood-based nonprofits to develop Partnership homes, HomeWorks builders dealt directly with buyers, with no third-party mediation. At the same time, buyers had no control over their builders–the developers were preselected by the city, and contracts included no penalties for late delivery.
When problems started cropping up about two years ago, many disgruntled consumers assumed HPD would weigh in. After all, the agency was spending more than $13 million on HomeWorks subsidies. But although some HPD officials tried to mediate, the department tended to wash its hands of what it deemed a private-sector operation. Some people involved in the program believe this amounted to abdicating responsibility.
“The program would have worked more effectively if HPD had maintained an overseeing role until the homes were completed and delivered to buyers,” says one individual involved in selling HomeWorks houses. “Instead, its approach was that it was a private-market deal, that it didn’t have any control once the property was transferred to the developer.”
By not addressing what were often legitimate complaints, the agency has been giving homebuyers the impression that it is siding with the developers, says Lorraine Gilbert, the marketing agent for 32 homes in the Mount Morris district of Harlem. “The city should be involved. It is paying subsidies for each house,” she observes. “These people are about to become homeowners who would contribute to the city’s tax rolls.”
HPD argues that it never promised, in marketing brochures or anywhere else, to supervise the effort from start to finish, and faults some buyers for not reading contracts thoroughly. Spokeswoman Carol Abrams says others failed to comprehend the implications of making repeated design changes, or misunderstood the difference between “under contract” and “under construction” in assessing turnaround times for their homes.
But buyers counter that HPD and marketing agents let them down by not offering homeownership workshops, such as those the Housing Partnership provides. Confusion over how to handle disputes with builders was particularly acute for first-time, lower-income buyers who lacked the financial means or savvy to seek legal advice.
Builders, buyers and even HPD agree, however, that allowing buyers to customize their homes–sometimes for a cost many times that of the city subsidy–was an invitation to chaos. For extra fees, some developers catered to clients’ every desire–wood-burning fireplaces, handmade cherry cabinets, eight-foot doors. Richer customers paid up to $200,000 for add-ons that included granite countertops, SubZero refrigerators, roof gardens and Italian marble bathrooms.
A 20 percent markup on add-ons certainly encouraged developers, at least at first. But even buyers of more modest means felt entitled to make changes mid-project, which slowed down work. One buyer lost a year of construction time while vacillating over features. Others made countless requests to move rooms or change fixtures that had already been ordered.
HomeWorks’ intent was not to offer city subsidies for luxury homes, and HPD is clearly embarrassed that some residences look more suitable for Architectural Digest than an urban housing brochure. One official tried to discourage City Limits from photographing the higher-end homes or focusing on them in this article. The department blames the program’s ills on customization, and is adamant that it will curtail the practice in the future. “There will be a programmatic change to significantly limit it,” says Abrams.
HomeWorks may be the first city program to subsidize chef’s kitchens and imported marble, but HPD has been turning abandoned buildings into private homes for nearly a decade. Since 1992, a program called CityHome has offered rehabilitated row houses for as low as $100,000 to low- to moderate-income homebuyers. In all, HPD has helped 11,000 New Yorkers become homeowners.
But when the Harlem real estate market began to perk up, and homeownership took off in striving neighborhoods filled with city-owned buildings, HPD decided it could do more while spending less. With HomeWorks, launched early in the Giuliani administration, the agency could deliver properties that sold at prices closer to market, with fewer subsidies and with the goal of bringing in middle-class people.
Without doubt, HomeWorks has relieved the city of a financial burden by putting the houses back on the tax rolls. The 336 HomeWorks buildings that have been marketed so far–107 of them in Harlem–were sold for $1 each to developers with proven track records in affordable housing. Chosen through competitive bids, the Harlem contractors tended to be well-connected with HPD, including Cross Construction Co. Inc., Novalex Contracting and Abyssinian Development Corp.
The developers rehabilitated the buildings and resold them to homebuyers chosen by lottery. The two rounds so far–the first begun in 1996–reserved 30 percent of the properties for people already living in the neighborhood. The marketing agents handling the lotteries also tended to be community-based, including Gilbert, Harlem Community Development Corp. and another local real estate agent, Willie Kathryn Suggs.
In Harlem, the average household income among buyers was about $55,000 a year, although some made well into six figures. Harlem purchase prices before add-ons ranged from $200,000 to $500,000, with most of the homes costing in the mid $300,000s. In isolated cases, purchasers paid up to $200,000 in extras. What made the houses particularly attractive was that they could accomodate two or three families, giving future homeowners the added incentive of rental income.
Brokers report the subsidies–consisting of the difference between the selling price and total development costs–averaged $25,000 to $50,000 in Harlem. (In CityHome, they’ve gone as high as $250,000.) The subsidies operate as a subordinate lien, effectively a second mortgage, for the buyer.
While construction is underway, developers can take out loans against the subsidy money. And buyers who want to sell their houses within six years of moving in have to pay back the city’s money. HomeWorks buyers put deposits into a low-interest–bearing escrow account and pay the balance to developers when construction ends. In the meantime, developers have to find their own funding for building. They–not the city–earn or lose any profit.
For many buyers, HomeWorks offered an irresistible marriage of reasonable price and tailor-made space. “I can’t believe I live here!” gushes a radiant Michael Cooper, showing visitors the limestone chef’s kitchen and loft-like entertaining area of his townhouse on St. Nicholas Avenue. The ceilings soar 12 feet, and light floods the warm oak floors. “Everything here is made to measure, just as I wanted it. From a financial standpoint, it’s completely changed my life. To become a landlord so easily, in a brand-new building, in a market which has changed–it’s phenomenal.”
Cooper didn’t encounter any problems with Cross Construction. A showroom designer for the likes of Tommy Hilfiger, he knew what he wanted from the start and stuck meticulously to his layout. He opted for minimal extras, and obtained the stone flooring and professional cooking range himself. Cross Construction installed the 40 electrical outlets, but Cooper arranged the high-speed Internet line on his own. “I work in the business. This didn’t seem to be the program for vast customization. I can add stuff later myself,” Cooper explains.
Other buyers were not so levelheaded. Delays frequently occurred when purchasers added or moved rooms during the course of construction. Still more hold-ups took place when customers ordered items that needed to be specially crafted. Projects lagged further when high-end buyers, expecting top-notch work after paying more than half a million dollars, hired their own consultants to oversee projects. This invariably created tensions with the contractors assigned by HomeWorks. One developer lost two architects, who resigned mid-project in frustration at customers.
Clearing new construction through the Department of Buildings is a lengthy procedure at the best of times. The last two years have been among the worst, as the citywide construction boom overloaded an already strained system. While CityHome can quickly churn out 20 houses with one standard design, HomeWorks contractors were grappling with 20 unique layouts that each had to be approved by the buildings department. Despite their former city-owned status, HomeWorks buildings had to wait their turn for inspections and approvals.
“HomeWorks is a great program which empowered people to own a stake in the community,” says Hector Nova, president of Novalex Contracting, which completed 20 HomeWorks brownstones near Frederick Douglass Boulevard. “But the customization was a negative. How do you tell someone who is plunking down $400,000 that they will get a cookie-cutter house? You can’t do nonstandard housing easily. One simple change like moving a bathroom can lose you months. Multiply that, then, by 20.”
This argument is supported by the fact that the loudest objections about HomeWorks occurred in Harlem, which attracted more affluent–and more picky–buyers. In the outer boroughs, where customers tended to accept original designs, building was more straightforward. Indeed, Cross’ dossier of letters from satisfied clients includes mostly those who went the simpler route. After the experience with Edward and another buyer who brought in his own project adviser, Cross Construction followed the example of other HomeWorks developers and put a $50,000 cap on additionals.
“I didn’t think people would come along and hire their own interior designers and architects and have unlimited money to spend on extras,” says Cross. “The program is aimed at homeownership for ordinary folk.”
For Dr. Arthur Spears, Cross’ decision came too late. The City University professor says completion of his limestone mansion on St. Nicholas Avenue is at least two years overdue, with no end in sight. The house was among the first to be sold under HomeWorks in 1997, and Spears is just the sort of person the program was aimed at–a long-term, African-American Harlem resident. Initially, he was thrilled at the notion of owning a five-story building on a landmarked block. But misgivings set in after Cross Construction missed deadline after deadline to complete the project.
Things really soured when Spears protested publicly to elected officials about the delays. Cross stopped work for six months and threatened to pull out of its contract, but Spears refused to accept his deposit back. Cross resumed work in the face of possible legal action, and promised in writing to complete the work last November. But the company missed that target, as well as a subsequent one set for March 1. Meanwhile, Spears watched in frustration as the contractor finished other houses that had been purchased after his.
John Cross declined to comment on the dispute, other than to insist that the March 1 deadline would be met (it wasn’t). The two men and their lawyers were due to meet on March 6 to settle the matter, but Cross postponed the conference. Spears says the legal wrangling has spoiled his joy about owning a stake of historical Harlem. “This has gone on for so long that I no longer think of it as a beautiful home that I will move into. It has become a burden,” he says.
As of late March, 170 of the first round of HomeWorks buildings were complete or near-finished. But another 57–some under construction for years–are still being rebuilt.
HPD blames the delays on customization. But that still doesn’t explain sloppy workmanship, or why some building sites remain unmanned for weeks or months. One couple said their move-in was postponed by several months after the supposedly finished house failed inspection. The problem was only resolved–and quickly–after they appealed to City Councilmember Bill Perkins. Other buyers concur that going to elected officials was the only way to pressure HPD to lean on wayward builders.
In their own defense, developers grumble about soaring costs of labor and materials, which by some estimates have risen 25 percent over the past three years. Consequently, it became harder for builders to hang on to qualified crews, which often left mid-job for more lucrative work. And because house prices were set when the contracts were signed several years back, some builders had little profit incentive to make HomeWorks a priority.
Cutting corners to save costs may have contributed to structural problems, say some sources involved in the program. “Unlike the private sector, where developers can raise prices along the way, HomeWorks developers had to stick to the initial prices,” says one person involved on the developing side. “So it’s not that financially worthwhile to fix that crack in the floor or staff sites properly.”
Ultimately, profits were lower than initially expected. Nova reports he even suffered losses on homes that involved extensive customization and says he’d have to think twice before taking on another made-to-order HomeWorks project. The tight financials have also discouraged Abyssinian from participating beyond the first of three rounds. “As a nonprofit, we can’t absorb the escalating construction costs and still do a quality job,” says Darren Walker, the group’s chief operating officer. “We don’t have the economies of scale that private developers do.”
Complaints about poor workmanship have also been leveled at CityHome, HPD’s other housing conversion program, which has employed some of the same contractors. Seven CityHome owners in Harlem’s Bradhurst section spent months trying to get their contractor and HPD to address serious water leaks stemming from poor wall-pointing. They only got a response when they banded together and confronted the developer en masse. “It was hideous,” says Derek Rock, who organized the protest. “Walls and light fixtures were soaked with water every time it rained. Some neighbors’ floors buckled. The contractor was friendly until the problem began. Then he was in no rush to finish it.” Even today, a year and a half after closing on the house deal, the seepage persists.
Although at least three HomeWorks buyers are contemplating lawsuits against Cross Construction, most purchasers program-wide say they will deal with defects themselves. They simply want to get settled and avoid costly litigation. “I’ll just live with it,” shrugs one purchaser whose house is nearing completion, two years late. What he will live with is a staircase that doesn’t properly join the wall and a bedroom that is so poorly framed he can’t fit his bed through the door.
The one silver lining for disgruntled HomeWorks buyers is that the longer construction lagged, the more their houses appreciated in value as Harlem real estate took off. Some didn’t pull out for that reason alone. Nowhere could they get a refurbished brownstone for $350,000 today; it would more likely cost double that amount.
Developers say purchasers have a good deal because they can always resell. But most HomeWorks buyers don’t want to flip their homes. They enrolled in the program because they wanted a home, not a hot investment.
It looks like buyers will again be left to fend for themselves against developers in a third round of HomeWorks. HPD expects to issue requests for proposals this year to developers interested in bidding for about 100 more buildings. Most will be in the outer boroughs–and this time, customizing will be discouraged.
That doesn’t provide much solace to Marcus Edward, who worries that his wet basement will start growing mildew or lure a migration of termites from the block next door. His plans to convert the carriage house in back of the townhouse into rental space or a studio have been shelved due to dried-up funds and a newfound aversion to hard hats. He feels so fed up he sometimes regrets ever signing the contract.
Says Edward, “If I had known how frustrating and costly the experience would be, I would have run the other way.”