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April Eddins and her children Richard, 10, and Courtney, 8, look at a magazine in their mouse-ridden rental apartment in Overtown. She's desperate to get out, but affordable housing is scarce. (Nuri Vallbona/Miami Herald)
Published: June 3, 2007
City's affordable housing in crisis
While local leaders try to clean up Miami-Dade county's scandal-ridden housing agency, the city's program is steeped in its own crisis, with botched projects and bad deals that have stranded thousands in decrepit homes
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On a forgotten corner of Overtown, Barbara Tuitt spent months watching construction workers build the first home she would ever own: a three-bedroom large enough for her parents and disabled son.    

She saved $5,700 for a down payment, and after 15 years of living in public housing too cramped for a Christmas tree, Tuitt was planning to string holiday lights across the porch of her new home.    

But she never got the keys.

A tractor rolled down the street last year before the house was finished, and within hours, the city of Miami tore down Tuitt's new home and eight others -- risking a $1.4-million taxpayer investment and destroying a budding neighborhood in one of the poorest pockets of Miami.

It was another doomed affordable- housing project in a city scarred by a decade of failures.

As Miami underwent one of the most explosive growth periods in its history, with luxury buildings reshaping the downtown skyline, the city squandered millions of dollars on troubled housing projects and failed to collect massive overdue loans … some borrowers haven't made a single payment in years, The Miami Herald found.

Barbara Tuitt and her son live in a small apartment in this complex. She told him, 'We finally going to have a decent place to live.' (Carl Juste/Miami Herald)

Local leaders for months have worked to overhaul the county-run housing agency -- one of the nation's largest -- after a 2006 Miami Herald investigation exposed widespread waste, mismanagement and chronic construction delays.

But the city's program is steeped in its own crisis, compounding a housing shortage in one of the least affordable communities in the nation.

Miami Mayor Manny Diaz acknowledged problems in the housing program but said he inherited them and has worked to put safeguards in place, such as creating penalties for affordable-housing developers who sell city-subsidized land for profit.

"Everybody makes mistakes," he said. "But if you look at that record and if you contrast it to where the city was before I got here ... I think that's a good news story."

Yet in 2005, while thousands of families searched for a decent place to live, the city released Diaz's longtime campaign manager from a $1-million housing debt in default for more than a decade. Most of the money has not been repaid, and the only thing the city has to show for the loan is barren lots inhabited by the homeless.

In west Coconut Grove, the city has yet to collect $272,000 borrowed by a fledgling for-profit group that promised a shopping center and housing but never delivered. The loan was made 22 years ago.

In Overtown, the city paid almost $1.4‚million to a church group that proposed 40 houses for the poor, including the one for Tuitt, who hoped her 18-year-old brain-damaged son would have room for physical therapy.

Barbara Tuitt, who lives with her disabled son, Anton Prince, 18, watched as a home was being built for them in Overtown - but the unfinished house was demolished and the project was scuttled. (Carl Juste/Miami Herald)

Said Tuitt: "I told my son, 'We're finally going to have a decent place to live."'

But after years of delays, the group ran out of cash with only nine homes partially done. Habitat for Humanity stepped in, offering to finish the houses for free.

Instead, the city's housing chief last year ordered the homes torn down, at a cost of $45,000.

"It was just another taxpayer waste," said Habitat Executive Director Anne Manning.

It was one of many.

A five-month Miami Herald investigation found a series of botched projects and bad deals at the city's Department of Community Development that have trapped thousands in crowded, filthy housing.

Consider:

• Developers and investors owe $10.2 million in overdue loans, some dating back to the mid-1980s. That's 14 percent of the money in the city's loan portfolio -- enough to put 100 families into homes built by Habitat for Humanity.

Five months ago, the default rate was almost double at 27 percent, or $16 million. After The Miami Herald and the city's auditor started questioning the loans, the city granted extensions to a slew of borrowers, lowering the rate -- even though almost no money has been repaid.

• Nearly a dozen borrowers have been in default for years, including at least four who have owed for a decade or more. In some cases, housing was never built or decrepit buildings had to be torn down -- at taxpayer expense.

• Among those who haven't paid up: a federal magistrate and a prominent landlord who cleared $4 million from the sale of an Okeechobee cattle ranch two years ago but whose company has not repaid the $1.9 million it has owed the city for two decades.

• At least five times in recent years, the city shelled out millions of dollars to developers who did not produce the homes they promised. In two cases, developers never even returned the cash a $1.8‚million loss.

• The city paid hundreds of thousands of dollars to developers who submitted questionable invoices, including a nonprofit that created its own construction company -- then paid it more than $200,000 for overhead, developer's fees and other expenses before hiring an established firm to actually construct the buildings.

• Until 2005, the city paid salaries and rent for nonprofit developers with a record of poor performance. A case in point: East Little Havana Community Development Corp., which received almost $800,000 in administrative fees from 2000 to 2003 but has produced just 45 units over the past nine years.

While the cash flowed, April Eddins sat with her children in a tiny rental apartment overrun by mice, fighting the flies, hating the heat, desperate to get out.

The walls are caked with dirt, the kitchen riddled with holes. There's a plant named "Sunshine" by the front door, but the apartment is dark, the front window covered with a bedsheet.

Eddins, 34, pays $550 a month in rent -- more than half of her income -- to live in the second-floor apartment in Overtown across from a vacant lot littered with milk cartons and a shredded sofa.

"All the money in this city," she said, "and they don't build anything."

Locks attest to the status of the Ralph Plaza II unites in Allapattah in March. The project later opened after nearly a decade. (Nuri Vallbona/Miami Herald)

HOUSING NEEDS UNMET: FAILED PROJECTS AND DEFAULTED LOANS

In the past 10 years, Miami's median home value has increased almost twice as fast as the national average, shutting out thousands of would-be homeowners.

City leaders have promised to deliver $1 billion in affordable housing by 2010, and in recent years helped fund about 2,000 units.

  City housing director Barbara Gomez -- who until recently was married to Rene Rodriguez, the longtime director of the county's scandal-ridden Housing Agency -- said the city has cracked down on deadbeat developers and worked to recoup millions of dollars in outstanding loans.

In the past five years, she said, the city has funneled $43‚million into affordable-housing projects.

"Every year, we make stronger policies. Are [the loans] all current? No. .... Have we tackled every area? No," Gomez said. "...We're moving along, and hopefully we can tell you that we have more success stories as we go."

But in a city with a poverty rate more than twice the national average and 1and a half times greater than that of Miami-Dade County overall, a string of failed projects and defaulted loans still vex Gomez's agency.

The city has been warned before about failures in its affordable-housing program.

In 1998, the U.S. Department of Housing and Urban Development issued a scathing report that criticized the city for failing to collect loans and repeatedly paying troubled developers.

Federal investigators found that 36 percent of the money in the city's loan portfolio was in default, saying the city failed to "safeguard" its assets.

Local leaders promised to collect the debts and even set aside $500,000 to pursue lawsuits. But the money was gone within two years, officials said, and the city never replenished it.

As of January -- almost a decade after the HUD audit -- 27 percent of the money in the city's loan portfolio was still in default, with borrowers owing $16 million, records show. HUD cited several of those borrowers in its 1998 audit.

Gomez insists the default rate is much lower now.

In an e-mail sent to city leaders on Friday, she reported a rate of 14 percent.

But that's because the city in recent months granted a flurry of extensions and payment plans to more than a dozen developers and small businesses, which lowered the default rate with most of the loans still unpaid.

One of the loans in default was given to Miami federal magistrate Patrick White, who borrowed $200,000 from the city in 1984 -- before he was on the bench -- to remodel two apartment complexes in Overtown. The dilapidated buildings have long since been torn down at taxpayer expense, but White has yet to repay most of the money.

White disputes the debt, saying a city official who has since died allowed him to give up the properties … and the outstanding loan -- to another Overtown landlord in 1997.

"I've been out of it for years," he said.

The city, however, has no record that White was ever released from the debt. In 2001, the city filed for foreclosure against White and others.

But the case has languished for years and was further complicated in 2005 when city lawyers failed to detect that yet another investor bought the property. Late last month, the city asked a judge to force that investor to sell or be subjected to foreclosure proceedings.

When asked about the status of the loan, housing director Gomez said, "I don't have the slightest idea." She said she last spoke with White two years ago.

A bicycle lock secures one of the entrance gates at Latin Quater, an affordable-apartment complex delayed for years by funding, construction and legal problems. Some units are now occupied. (Carl Juste/Miami Herald)

DEAL IS CONTROVERSIAL: LANDLORD BORROWED BUT DIDN'T REPAY CITY

One of the largest debts is owed by a company controlled by Aristides Martinez, once one of Miami's most prominent landlords, who in 1987 received $1.9‚million to fix up five apartment buildings in Liberty City.

He was well connected at the time, with lobbyists who included a former Kentucky governor and Nixon administration Attorney General John Mitchell, who spent 19 months in federal prison for his role in the Watergate scandal before becoming a lobbyist.

Martinez's company took the city's money but was quickly criticized for its crumbling buildings. Mothers complained that children were being bitten by rats. Gaping holes covered the buildings' walls and floors.

In 2001, the city spent $100,000 to tear the buildings down. A year later, the city filed a foreclosure suit, but the case stagnated in the courts and Martinez never repaid the money.

In 2003, housing chief Gomez announced a compromise: Instead of foreclosure, Martinez would transfer ownership of the vacant lots to the city as a form of repayment.

But the city never took the land --or recouped the money -- even though property records show that Martinez bought a $1 million 900- acre cattle ranch in 1993 while his loan was in default. He sold the ranch two years ago for $6 million.

Martinez said he never signed a personal guarantee to secure the loan so the city has no way to recover the money. He said he doesn't know why the city never took the land.

"I'm just a cattle rancher," said Martinez, who still keeps 500 cows on 500 leased acres near Lake Okeechobee.

The city resurrected the foreclosure suit in April after The Miami Herald raised questions.

A CHANGE OF COURSE: DESPITE LONG DEFAULT, CITY LENDS MORE MONEY

The mayor's campaign manager, Alberto "Al" Lorenzo, and prominent developer Salomon Yuken fared even better.

Between 1988 and 1990, the city loaned Lorenzo $956,000 to fix up 61 low-income apartments in Overtown and Wynwood. Yuken was a corporate officer and investor in Lorenzo's companies and managed the properties.

But most of the buildings fell into disrepair and were eventually torn down at the city's expense. Lorenzo, who personally guaranteed the loans, failed to make a payment in more than a decade.

In 2001, the city began to foreclose on the empty lots and demanded repayment.

That changed when Gomez became director of the housing agency.

In late 2003, she started urging the city to drop the foreclosure suits. Then she cut a deal with a new company managed by Yuken.

The company assumed Lorenzo's debt, but only after Gomez slashed it by $180,000 at Yuken's urging. Then she gave the company an additional $1.2‚million, this time to build 31 houses on the same Overtownproperties.

Records show that Yuken used $194,000 from the new loan to pay part of Lorenzo's old debt and another $200,000 to cover years of unpaid property taxes on the lots. Gomez argues that Yuken will repay the rest of the old debt, which still stands at $790,000, plus the new loan after the houses are built and sold. Yuken said it's a good deal for the city.

"Another 30 low-income people are going to become homeowners," said Yuken, who has built 600 affordable rental homes in Miami-Dade.

But today, the lots remain empty because of delays.

Diaz's campaign manager, meanwhile, never repaid a dime.

Raw sewage festers near since-demolished apartments controlled by Aristides Martinez, a major Miami housing debtor, who was criticized for slum conditions. This mess, in 1999, was santizied after two weeks.

FURTHER PROBLEMS: DELAYS, SPENDING MAR RECENT PROJECTS

Even as the city failed to collect on old loans, delays and questionable spending marred more recent housing projects.

In 1998, the nonprofit Allapattah Business Development Authority promised to build 30 townhouses for the poor on a busy corner near the airport expressway.

But instead of hiring an established construction company, ABDA created its own … then funneled $200,000 in city money to the company for developer's fees, supervision, overhead and a chain-link fence years before any buildings went up.

An additionalAnother $114,000 went to pay for a water-main extension that later had to be redone.

  The construction company's project manager, Carlos Martell, took in at least $50,000 in consulting fees. Martell is a former business associate of City Commissioner Angel Gonzalez, who ran ABDA for years and had hired Martell as a consultant once before for another ABDA project. Gonzalez declined to comment.

At least once, the city's housing department questioned the payments, saying ABDA's construction company was asking for more money than it could account for. "Backup invoices do not add up," a housing administrator noted in 2003.

Martell simply sent a note, without supporting invoices, asking for $60,000 in a developer's fee and $8,000 for supervision costs.

The city paid up.

By 2004 -- four years after ABDA said the project would be done and with hundreds of thousands of city dollars invested -- the group had spent almost a third of its original budget and had yet to lay a single brick.

That year, ABDA decided to change course and hire Delant Construction to start building the condos, which were completed this year -- almost a decade after ABDA launched the project.

ABDA Chairman Rafael Cabezas said the project, Ralph Plaza II, encountered unexpected problems, such as acquiring all the funding needed to complete the job.

But the delays devastated Yemili Plasencia, a bank teller and mother of two, who for months slept on an air mattress with her children in a one-room apartment in Allapattah before construction was finally complete in March.

"My eyes get teary when I talk about it," said Plasencia, who is now in her new home.

Through it all, the city not only continued to fund the project, but paid ABDA an additional $400,000 from 2000 to 2003 for administrative fees and overhead.

Theodore Cooper fequents an empty lot controlled by developer Salomon Yuken. (Nuri Vallbona/Miami Herald)

OVERTOWN PLAN FAILS: $1.4 MILLION PAID BUT NOTHING BUILT

No project highlights the city's failures more than a widely anticipated plan to put 40 new homes in Overtown, one of Miami's most distressed neighborhoods.

Over the past decade, the city paid almost $1.4‚million to BAME Development Corp., a not-for-profit group created by the Greater Bethel A.M.E. Church of Overtown in the early 1990s. BAME promised to build Barbara Tuitt's house along with several dozen others.

But BAME missed construction deadlines and failed to secure a bank loan to complete the work. Meanwhile, among those paid for the failed project:

• BAME, which took in at least $120,000 in developer's fees.

• A security company run by an Opa-locka man arrested more than a half- dozen times between 1996 and 2006, with three convictions for trespassing and disorderly conduct. The firm was paid at least $15,000 in 2000 before the state revoked its licenses in 2001.

• Edgar Baez, a former Miami-Dade water and sewer inspector who pleaded no contest to grand theft in 2000 for accepting a $5,500 bribe. That year, he was paid an estimated $15,000 for project supervision at the BAME site.

• Mario Pons, a former Miami utility inspector accused in 1998 of ordering brick pavers in downtown Miami and then profiting from the job when his private company did the work. Pons, who was never charged criminally, resigned that year from county government. He was paid at least $11,000 in 2000 for the BAME project.

Many of the payments were made through BAME's general contractor, Cazo Construction.

"I had no idea," said BAME's former executive director, William Mauzy, who drew a $95,000 salary in 2004, up almost 50‚percent in four years.

Armando Cazo with Cazo Construction said the security firm was hired to guard heavy equipment while Pons and Baez coordinated underground work.

In December 2003, construction stopped with nine houses partially built. Cazo claimed it was owed tens of thousands of dollars. Despite the standstill, the city still contributed $338,000 more toward the project.

Finally, in February 2005, the City Commission voted to take the land back. The vote came a decade after the project was launched and with $1.4‚million in city dollars spent. To this day, BAME has not repaid the money.

Still, commissioners praised their decision-making during the meeting.

"Well, that's leadership," said commission Vice Chairman Angel Gonzalez.

Commission Chairman Joe Sanchez said, "And that's leadership." Gonzalez responded: "That's what leadership is all about."

The following year, the city tore the houses down, even though Habitat for Humanity offered to finish them for free.

Gomez first told The Miami Herald she ordered the demolition because the Overtown community wanted the homes gone, fearing only Hispanic families, not black families, would get them. She later said the homes were destroyed because the houses were creating a "quality-of-life issue, which included drugs, prostitution and nuisance."

Instead of allowing Habitat to finish the houses, the city gave the land to a partnership that includes the Gatehouse Group, which promises to put up 163 rental units but so far has not secured state funding. The partnership would repay BAME's debt if the project gets built.

The city îîreached out to us," said Gatehouse Vice President Nick Inamdar, one of Mayor Diaz's chief fundraisers in 2001. "There's really no story there." BAME's new president acknowledged the past problems but said he's forging ahead on 160 new units in Little Haiti.

Today, all that's left at the Overtown site is bare land covered with weeds and broken glass, and a spray- painted message to the city: "Hope soon."

Miami Herald staff writer Rob Barry contributed to this report.

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