That more than 50 tenants braved single-digit temperatures one December night didn't impress James Lewis. After months of knocking on doors, climbing rickety stairs and cajoling residents to fight to keep their rooms and apartments, he expects–no, demands–better attendance.
“It disappoints me,” the small, intense 45-year-old tells the gathered tenants, who have come from rundown boarding houses and apartments scattered throughout central Harlem. “It pisses me off.”
James–he insists everyone use his first name–stares intently at his audience, wanting to fill them with the same urgency that stirs him. They have to get more fired up, he tells them, or their initial success at getting their heat turned on and a few politicians on their side could soon fade.
“If someone threw you physically out on the street, what would you do?” he asks them. “You'd call the police, right? Or you'd go get a baseball bat or a gun, wouldn't you?” A few heads cautiously nod, looking alarmed as to where this might be heading. James finishes: “You have to start thinking that way now. You're trying to save your place from an intruder.”
These tenants are victims of a massive scam dating back nearly four years that swindled a federally guaranteed mortgage program called 203(k). The scheme hit 593 rundown buildings, about 175 of them in Harlem and many of the rest in Bushwick, Brooklyn. Beginning in the spring of 1999, the tenants, many living in what are known as SROs, or single room occupancy buildings, with small private rooms and shared baths, discovered that their buildings had been sold, then resold–and then abandoned.
That's what happened to James' building on 126th Street in the heart of Harlem, less than a block away from Sylvia's soul food restaurant and Bill Clinton's office. James moved into his $390-a-month room in early 1999, and though he didn't expect much was pleasantly surprised by how clean his super kept the building.
That didn't last long. On April 16, 1999, Ari Realty Corp. bought the 10-room property for $111,112. That same day, Ari turned around and “flipped” the building to St. Stephen's Community Development Corporation, a Newport Beach, California nonprofit that was implicated in dozens of such deals, selling it for $348,000.
“That's when things got terrible,” says James. His new landlord ignored even the most serious problem–a hissing gas leak. “I could have blowed myself up!” he says, laughing. As St. Stephen's walked away from its buildings–aside from an occasional heavy-handed effort to collect rent–James and his fellow tenants began to lose electricity, heat and hot water.
That loss of services prompted James to contact the West Side SRO Law Project, which was working with tenants who lived in several dozen 203(k) buildings. He soon realized he wasn't alone, and joined a growing group of angry fellow tenants focused on getting repairs. They also hoped to have some say in what would happen to their homes.
In the meantime, the federal department of Housing and Urban Development was scrambling to save face as the 203(k) story became a national scandal. At first, HUD proposed reselling the buildings at discounted prices on the private market. But tenants and local politicians strongly objected, arguing the properties needed special care if they were ever to be habitable again.
Finally, in December 2001, HUD announced a new plan: It would give $130 million to the city department of Housing Preservation and Development to put the properties through the city's established housing rehabilitation programs. More than two-thirds of the buildings are now slated to become private homes. The remaining one-third will be divided among nonprofit and for-profit developers and kept primarily as affordable rentals.
The city says it intends to make some key decisions about the properties in January, but until it does, the specifics of which group or developer will control each building–and what this will mean for the 203(k) tenants–are still up in the air. How HPD chooses to proceed this winter will show how seriously the city is taking tenants like James Lewis.
Their dreams include such unique ventures as the nation's first conversion of an SRO hotel into a tenant-owned co-op. James and the other tenants have turned their 203(k) nightmare into an opportunity to build an incipient but radical tenant organization. In less than a year, they've moved beyond their immediate needs for heat and repairs into an all-out effort to preserve Harlem as a neighborhood where poor people can find a place to live at all.
Their vision, however, is on a collision course with the city's current housing philosophy, which is rooted in a market that continues to make Harlem less and less affordable to its longtime residents. So James and other SRO residents are now working to build the kind of power and influence that government officials will have to respond to–tenant by tenant, community leader by community leader.
“Before this, I didn't care about politicians,” says James' co-organizer Letasha Waiters, a blunt 25-year-old with two young daughters. “I didn't have anything to do with organizing. Now I've decided I'll do whatever's necessary to stay.”
Without the West Side SRO Law Project, no one knows when–or even if–the 203(k) scandal would have come out in the open. Working for the sole organization advocating for boarding house tenants in west and central Harlem, the project's staff organizers were the first to notice an unusual pattern of evictions in the spring of 1999. For the next few years, as the scandal became big news, law project organizers built a list of all the occupied 203(k) buildings, slowly visiting each, helping tenants demand that repairs get done.
Once immediate needs like fixing boilers and getting electricity turned back on were mostly taken care of, says director Adam Weinstein, the group set out to find several tenants who would be willing to take on the organizing work themselves. Early last year, the law project found prospective leaders in James and Letasha, who were already hard at work organizing within their own buildings.
By May, eight or nine tenants had begun to meet regularly on their own. They soon christened their nascent efforts Harlem Operation Take Back, or Hot-B, as they like to call it, to provide themselves with a forum where they would “be stronger together and always have a channel to sit down and talk about the problems we were facing,” says Letasha. In August, Hot-B had its first big tenant meeting, and more than 100 people showed up.
With 57 occupied buildings in Harlem to organize, there's plenty of work for James and Letasha, who do most of the group's tenant outreach. Letasha visits buildings in the evenings and on weekends, while holding down a full-time job as a home health aide. James was laid off from his job last summer, so he's able to live on unemployment for now and be a full-time–and then some–unpaid organizer.
By August, James had a desk at the law project's office, a computer and phone, and allowances for carfare and printing. In James Lewis, the organization had found a tenant perfectly suited for tenant organizing. Working as a case manager for more than a decade in various nonprofit groups serving everyone from the mentally ill to people with AIDS, James had learned everything from how to communicate effectively to how to wrestle with unmoving bureaucracies. “My prior social services work has prepared me for things not going very smoothly,” says James dryly.
He may have just started, but James is endowed with skills that more experienced organizers lack. He remembers everyone's name, where they live and their building's repair history. He deftly defuses controversies when tenants bicker, suggesting compromises that avoid unnecessary confrontations. When a stranger who's not a tenant repeatedly interrupted James at a recent tenant meeting and began spouting off about the fruitlessness of lobbying elected officials while passing out copies of the sectarian Working People's Voice, James responded without rancor, neatly changed the topic and moved forward.
Though it's brand new, Hot-B, with the help of the law project staff, has already won the backing of key Harlem politicians. Their strongest ally is Bill Perkins, whose City Council district includes the majority of Harlem's 203(k) properties. Council members Phil Reed, Gale Brewer and Miguel Martinez, as well as Manhattan Borough President C. Virginia Fields, are also backing Hot-B's efforts.
Hot-B's current focus is lobbying HPD as the agency decides what to do with each building. But they also find themselves continuing to defend tenants from a range of dangers, a full three years after the scandal first broke.
Some tenants are still the targets of scams. Elizabeth Robinson, a mother of two small children who's been living at 203 West 134th for the last few years, says that her building has been plagued by a variety of con men and women who “knew about the scandal and came here and said, 'Yo, I own the building now.'” In at least one instance, such a scammer was able to swindle several months' rent from one of her neighbors.
Though most tenants don't pay rent at the moment, living in dilapidated buildings with ongoing repair needs is more than just an inconvenience. These buildings were never in great shape, but once landlords stopped making repairs in 1999 and electricity was cut off, tenants routinely faced everything from exposed wiring to broken locks to backed-up toilets.
For 43-year-old Doretha Jones, who lives in James' building, it also means her six-year-old son can't live with her. “The city don't think it's safe,” she says, pointing to her cluttered room. “One day they was here, and the lights went out. They said, 'You can't live like that.'” If she didn't find somewhere else for her son to live, the Administration for Children's Services would find one for him, in foster care.
So Jones' son has been living with a relative while she hopes that her place will soon be fixed so that he can come home for more than just the occasional visit. She would like to find a bigger and safer apartment for both of them elsewhere, but the only advice anyone has given her is to enter the homeless shelter system. “I'm not comfortable with that,” Jones says. “Not with my boy.”
On September 17, the newly organized tenants had their first serious chance to show city housing officials that they had ideas that could actually work and the will to back them up. Hot-B wasn't invited to a meeting for developers interested in applying to HPD to take on the 203(k) properties, but members showed up anyway. The tenants spoke out, asking HPD to let them work with the nonprofit of their choice, especially those that were offering tenants an opportunity to help govern their own buildings.
“The next day, HPD called,” James remembers. “It taught us that if the tenants got involved, we could have power.” HPD told Hot-B it had decided to let nonprofits that were interested in setting up tenant cooperatives or mutual housing associations turn in petitions signed by tenants expressing their wishes. If 60 percent of the tenants in a building signed up, HPD promised, it would strongly consider their petitions.
Two groups jumped at the chance to sign up tenants for their programs. The Urban Homesteading Assistance Board, or UHAB, which helps low-income tenants create cooperatives, offered the 203(k) tenants the opportunity to sign up for co-ops. (Disclosure: UHAB executive director Andrew Reicher is president of the City Limits board of directors and sublets office space to the magazine.)
Community Assisted Tenant-Controlled Housing (CATCH) put forward a mutual housing association alternative, through which tenants from multiple buildings rent their apartments but have the power to elect board members to manage their buildings. CATCH already operates one such association in central Harlem.
Hot-B was thrilled that HPD was allowing tenants to play a role in determining their future, but time was tight. HPD was only giving them until the end of October to gather petitions for the 18 occupied Harlem buildings that HPD would be awarding in this first round–much less than the two to four months the city usually gives tenants interested in turning neglected buildings into co-ops. What James and Hot-B decided to do next was surprising: Rather than just call meetings in each building and invite UHAB and CATCH staff to present each option, as those groups typically do, the tenants decided they wanted more independence.
“We didn't want there to be any pressure,” says James, who asserts that while he likes both UHAB and CATCH, he trusts no one. So he and Letasha and organizers from the law project explained the options themselves, frantically visiting each of the 18 buildings two or three times in that two-week period.
The pace was frantic, the questions nonstop, and the work draining, but James and Letasha got a fairly positive reception from tenants when they explained the choices before them. Either option would be a monumental improvement.
Both UHAB and CATCH plan full gut rehabs of the properties. Both also plan to convert the standard SROs, with private rooms that share kitchenettes and baths, to individual studio and some larger apartments with their own amenities. That will cut the number of units currently available–Harlem brownstones converted to SROs typically have 10 rooms–but by moving staircases and creatively using space, UHAB says it can create eight apartments. “We'll give them a lot more space,” says Joe Center, UHAB's associate director. “And we should lose very few units.”
Once their whirlwind organizing effort was over, seven buildings decided to sign up with UHAB and eight others with CATCH. In the other three, neither Hot-B nor the law project was able to get tenants to come to meetings, so those properties will be rehabbed through one of the city's traditional rental housing programs.
Letasha's building on West 120th Street is one that chose to become a tenant cooperative. She says the decision was easy, since she and her neighbors had already proven they could work together “paying our bills, taking the garbage out, getting our boiler fixed,” she explains. “We're up for the challenge.”
Some SRO tenants prefer the mutual housing association model even though they don't get to become owners, James says, because they just don't think they can make a co-op work. “Not every tenant feels like their fellow tenant is responsible enough,” he says.
As Letasha told the tenants gathered at that December meeting, the decision to join a co-op needed to be made carefully. “You have to be able to sit with your neighbor–and be able to stand your neighbor enough to get something done–to have a co-op. And I'm not talking about 20 percent of your neighbors; I'm talking about 100 percent of your neighbors.”
The 203(k) tenants are a diverse group. They're mostly African American, with a handful of Latino, African and Arab immigrants among them, and they range from single young adults to elderly couples. Most work. Some are professionals who have taken naturally to extended meetings and discussions on co-ops versus mutual housing associations. Others are less equipped, like 52-year-old Samuel Dollard, who lives on West 134th Street. Dollard moved into his modest room 12 years ago to help out an elderly doctor who was a friend of the family. In 1999, the doctor's health faded and he moved into a nursing home. Not long after that, the building was sold to one of the 203(k) developers and, like the rest, it was soon abandoned.
Today, Dollard is eager to see his room fixed–he and his neighbors have signed up to establish a mutual housing association–but when the other tenants prepared at a recent meeting to write letters to Mayor Bloomberg, he sat quietly. “I can't read or write,” he said, his voice so low it could barely be heard. “I want to come to the meetings and help, but I can't do everything the rest of them can.”
Ultimately, some tenants say, they're not too worried about which type of ownership or rental they have, as long as they can stay in–and afford–their modest rooms. “Places in Harlem is hard to find,” says 66-year-old Herman Smalls, who lives in Dollard's building. “Anything that will help you stay where you are–you rally behind that.”
When HPD announced its 203(k) plans in December 2001, the city agency specified that 178 vacant buildings will go into the HomeWorks program, under which the city will sell them for modest fees to private developers, who will then rehab and resell them for as much money as they can. Another 172 will go into Neighborhood Homes, which is similar to HomeWorks but also allows for nonprofit developers and provides moderate subsidies, making them affordable to middle-income families.
The remaining 164 properties will be divided among the city's main rental rehab initiatives, the Neighborhood Entrepreneurs Program for private developers and the Neighborhood Redevelopment Program for nonprofits. Of them, 39 are occupied but haven't yet had a chance to decide their destiny. So once again, James and Latasha will knock on doors, trying to convince tenants to run their own buildings. HPD has guaranteed that tenants who end up with other developers will be able to remain in their apartments, and the agency will award Section 8 vouchers if necessary to guarantee affordability.
Despite its flexibility on the question of tenant ownership and control, HPD says it is sticking with the broad strokes of its plan: to funnel a full two-thirds of the buildings through programs that will turn them into market-rate homes. So Hot-B and others in Harlem, including Councilmember Bill Perkins, are growing convinced that their fight needs to move beyond tenant petitions to convincing the city to shift much more of its resources toward creating additional units affordable to the working poor. “I support HomeWorks sometimes, but it's affordable to some, not to many,” says the council member. “I'm looking for something here that's affordable to many, not just some.”
If not, they say, the city may squander a valuable opportunity–largely paid for by the federal government, which normally puts very little money into housing–to create new affordable units in a neighborhood that is losing reasonably priced apartments every day. In central Harlem today, vacant apartments in decent condition are renting from $1,300 to $1,500 for a one-bedroom.
In that market, SROs like the ones that 203(k) tenants live in are an endangered species. SRO buildings have long served as the cheapest end of the city's rental housing market. Even today, SRO rooms can rent for only $300 or $400. But the number of SRO units in Harlem has dropped sharply. “They're completely disappearing,” says Denise Tomasini of the Columbia University Goddard Riverside Tenant Assistance Project, which offers free legal services to SRO tenants. “In 10 years, we won't have a job–SROs are on the out.”
All kinds of things are happening at once to Harlem SRO buildings. Some have been sold to professionals, often young couples, seeking to rebuild and occupy a brownstone. In others, landlords hope to convert the rooms to apartments they can rent to students. And then there are the landlords who keep their SROs more or less the same, but seek new tenants who bring in more money, like the homeless or people living with HIV and AIDS who have their rent–as much as $90 per night–paid by city agencies desperate to find rooms.
Although SROs earned a somewhat deserved reputation as havens for crime and drug problems, properly maintained buildings “serve a real function,” argues Cynthia Doty, a housing aide for retiring state Assemblymember Ed Sullivan. “A lot of people live in these buildings. Many are seniors living on very fixed incomes, who maybe have no family, but they just need a little place. Where else can they go?”
It particularly galls affordable housing advocates that the city itself is playing a major role in SRO conversions. Its HomeWorks program has no income restrictions for its buyers–or restrictions on the profits that developers can make. The city is selling the 203(k) buildings that will go into HomeWorks, many of which were once SROs, for anywhere from just $1 to $30,000.
In Harlem today, where low interest rates have kept the real estate market hot, and where even crumbling brownstones can fetch several hundred thousand dollars, why is HPD in the business of subsidizing private profits? Alex Schafran, a West Side SRO Law Project organizer, argues that the smartest fiscal thing HPD could do is to put some of the prospective HomeWorks buildings on the open market: “Why sell them for only $30,000 when you could get $200,000 today?” The prices the city fetches, Schafran argues, could then be used to create a fund to subsidize more CATCH buildings, UHAB co-ops or just plain old SROs.
But the fact is that when it comes to affordable housing, HPD is primarily in the business of preserving existing cheap apartments, through programs like the Neighborhood Redevelopment Program or third party transfer, which give nonprofits subsidies for rehabs. The agency's programs for building new housing are focused on middle-income owners on up, as evidenced by the new housing plan announced by Mayor Bloomberg in December. He seeks to build 5,400 new units a year–but only 1,700 of these will be affordable to families earning less than $37,680.
Why? Two broad reasons: money and mission. The first is obvious: It's much cheaper to build housing that a professional family can afford than it is to build an apartment affordable to one earning minimum wage. And HPD, in response to questions from City Limits, notes that the $130 million HUD is providing for 203(k) rehabs just isn't enough to turn 593 buildings into low-income rentals.
The second reason, however, is just as important. Beginning in the Giuliani administration, HPD has held that one of its roles is to show the private market that real estate investment in poor neighborhoods can be profitable. So the agency creates housing options through programs like HomeWorks and Neighborhood Homes that will be desirable to school principals and advertising account executives. When others follow and real estate prices go up, the government has succeeded in its mission.
Mayor Bloomberg himself pointed to Harlem as a shining example when he released his administration's major housing plan in December. “In the '70s, the word on Harlem was that it was a bad risk for private housing lending,” the mayor told the New York Housing Conference. “Those days are long gone. It has not only stabilized–it's soaring.”
For James Lewis and the other 203(k) tenants, any argument that his neighborhood is improving thanks to rapidly rising prices ignores one basic fact: Most of the area's residents just can't afford the new Harlem. And they look at 203(k), the millions that were siphoned off by greedy outsiders, the decay their homes were left in, and say: If this scandal wasn't enough to shame the government into committing to programs that embrace affordability and the needs of tenants, then what will be?
James doesn't know what's next. His unemployment runs out in July, so the law project is looking for grant funding to allow him to continue his work. He and Letasha have vague plans of continuing Hot-B as a tenant organization even once their 203(k) work is done. Letasha thinks central Harlem could use some full-time tenant advocates. “People don't know what's going down around here,” she says. “I just want to have some base where people can come by and get information and be empowered. So that we can let them know that it's not their problem.”
If James can stay on and keep organizing, his goals are clear. “Every single one of these buildings should be affordable,” says James. “If not, we'll move to our last option: To get nasty.”
SIDEBAR: Who Bought the Big House
In the 203(k) scam, first exposed by City Limits in an award-winning investigative series [see “The Harlem Shuffle,” November 1999; also January and February 2001], Long Island-based realtors bought ramshackle buildings on the private market. They then turned around and resold them at wildly inflated values, with the help of crooked appraisers and mortgage lenders, to nonprofit organizations that qualified for Federal Housing Administration-backed loans to buy and repair the buildings. Since the federal government guarantees FHA loans, even when the nonprofits inevitably defaulted on their incredibly high mortgage payments, the banks that held the loans were still paid back. All in all, the crooks managed to swindle several hundred million dollars.
It's been two years since the Manhattan DA and federal prosecutors first brought charges, but no one who profited from 203(k) has been punished so far. Of the 16 individuals arrested in December 2000, several face sentencing this March after pleading guilty to federal mortgage fraud.
The status of cases against some of the conspirators:
- Andrew Graynor, Mineola attorney
Alleged to have arranged “flips.”
Disbarred for “preparing and submitting false documentation to federal agency.” Currently faces no charges.
Michael Fox, VP, Mortgage Lending of America
Approved 251 of the 203(k) loans.
Scheduled to plead guilty to federal mortgage fraud. Faces sentence of up to 30 years.
Francis Boccagna, Huntingon real estate investor
Bought 162 buildings and then flipped them.
Pled guilty to mortgage fraud. Faces up to 30 years.
Edward McDonald, president, St. Stephen's Baptist Church
Church bought roughly 50 properties in Harlem;
was paid $5,000 for each.
Currently faces no charges.
Christopher Mercogliano, real estate appraiser
Appraised roughly 300 203(k) properties.
Pled guilty to federal mortgage fraud. Faces sentence of up to 30 years.
Samuel Stith, Family Preservation Center spokesperson
Church bought roughly 50 203(k) properties; alleged to have accepted $100,000 in kickbacks.
Pled guilty to federal mortgage fraud. Faces sentence of up to 30 years.
SIDEBAR: Duet With The Sopranos
This past fall, City Limits' 203(k) expos