Use of funds questioned as housing woes persist
The Charlotte Housing Authority and the city of Charlotte helped a nonprofit get $ 7 million to renovate an east side apartment complex for the poor. But some tenants say the apartments remain in disrepair, and a company seeking to buy the buildings now wants government help to obtain another $ 7 million.
In her five years at Heritage Park Apartments, Helen Sturdivant said her family has endured weeks during the summer heat without air conditioning, roaches and a stove that gave out while she was cooking Thanksgiving dinner and again at Christmas.
Sturdivant considers herself lucky compared with one neighbor. That woman was hurt when her ceiling col-
“I don’t go complain (to management) anymore because it doesn’t seem to be any use,” said Sturdivant, 71, a retired telephone operator who receives government assistance to pay her monthly rent of $815.
An advertisement posted for the Banyan Foundation, an Alabama-based nonprofit that owns Heritage Park, says $4.6 million has been spent on renovations since 2012. Documents provided by the city of Charlotte show the foundation paid for new roofing, a play area for children, appliances and other items.
But tenants complain about suspected mold, leaky pipes and other poor maintenance and crime. Residents and city inspectors have filed nearly 40 complaints with Charlotte’s Code Enforcement office since January 2018.
Advocates for the poor question how much was actually spent on repairs.
A review of city records, tax filings and other public documents found the Banyan Foundation has been able to collect large fees even as it faced complaints about conditions at Heritage Park and elsewhere.
Companies and nonprofits whose apartments are subsidized with taxpayer money through federal tax credits and bonds can collect payments known as developer fees. The fee represents compensation for overseeing the construction, acquisition or initial operating phase of new affordable housing or renovated older buildings.
The Banyan Foundation runs Heritage Park along with at least three other affordable housing apartment complexes in South Carolina and Florida, according to the group’s tax filing with the Internal Revenue Service. It received more than $2 million in developer and consulting fees in recent years, according to filings with the IRS.
Vitus Group, the company negotiating to buy Heritage Park, said it could receive a developer fee of $2 million if its plans work out. Vitus said it plans to seek $ 7 million in federal tax credits to cover that fee and to renovate the apartments with improvements such as new kitchens, windows, lighting and vinyl siding.
Robert Dawkins of Action NC, a local social justice group that advocates for Heritage Park tenants, said the renovations are needed to help protect residents’ health and safety.
But Dawkins questions how Heritage Park could have fallen into such disrepair if the current owners spent millions on improvements.
“How was that money used?” Dawkins asked. “It goes back to a question of oversight.”
Banyan’s president, Robert Coats, could not be reached for comment. No one returned repeated messages left at the phone number listed for the foundation in tax records.
The Charlotte Housing Authority, a seven-member board appointed by the mayor and City Council, authorized the sale of bonds used to help Banyan buy the apartments.
Housing Authority spokeswoman Cheron Porter said her agency doesn’t track how the money is spent.
By law, Heritage Park and other privately owned apartments subsidized by the federal Department of Housing and Urban Development must undergo inspections at least every three years to ensure landlords provide safe, decent and sanitary housing.
HUD gave Heritage Park passing inspection scores in 2015 and 2017.
But inspections are often so lax that buildings with dangerous conditions such as toxic mold, vermin and other problems pass, according to housing activists, federal lawmakers and others.
Last year, HUD acknowledged that its Real Estate Assessment Center inspection system is failing. The agency promised to make reforms to get more accurate information about properties’ physical condition and threats to tenants’ health from mold and lead-based paint.
Heritage Park is one of a dwindling number of lower-cost apartments in Charlotte. Rents are less than $900 a month.
The 13-acre complex between W.T. Harris and Idlewild roads is comprised of 151 apartments spread across multiple buildings built in the early 1980s.
Under a contract with HUD, about 50 of the apartments are reserved for tenants with low incomes who receive help paying for rent through a HUD program commonly known as Section 8. Tenants who get Section 8 benefits through the Charlotte Housing Authority occupy an additional 49 units.
Section 8 recipients put 30 percent of their income toward housing and taxpayers pay the remainder.
In 2011, the Charlotte Housing Authority autho- rized the sale of $6.3 million in tax-exempt bonds to investors and then loaned the money to help Banyan acquire, renovate and equip the apartments, then named Sandlewood Apartments.
In written responses to questions submitted by the Observer, the Housing Authority said it approved the deal with Banyan as part of its “mission to provide safe, decent and affordable housing.”
The agency said it did not look into how Banyan spent the money because it has no financial stake in the apartments.
The Housing Authority said it does conduct periodic inspections in the 49 units where its clients receive Section 8 benefits. The units examined at Heritage Park passed inspection, the Housing Authority said.
The Charlotte City Council in 2014 awarded Banyan $650,000 in Community Development Block Grant money that HUD distributes to local governments. In exchange, the foundation agreed to put income restrictions on apartments for 20 years.
The deal between the city and Banyan called for exterior improvements, fencing, roofing and rehabilitation work on the interior of a limited number of units, Katie Hedrick, a city spokeswoman, said in an email.
In written responses to questions from the Observer, the city said it used fiscal controls, audits and site visits to ensure the money was used properly.
“No misuse of funding was identified during any part of the contract performance period,” the statement said.
In 2015 and 2016, city records say, Banyan replaced the roof on seven buildings, installed security cameras and a splash park and rehabbed units damaged by fire. The documents include photos of new cabinets, appliances, counter tops and fencing.
“Overall, staff was pleased with results of this project,” a city official wrote in a report after a site visit in May 2016.
The city said Banyan has resolved past complaints to Charlotte’s Code Enforcement office. Heritage Park has one active case, which was filed in February, the city said.
Charlotte City Council member Matt Newton, who represents the area containing the apartments, said Banyan has addressed most of the concerns that tenants raised last year.
Newton said he spoke with Melinda Coats, one of the leaders of the Banyan Foundation and the wife of president Robert Coats.
The small nonprofit became overwhelmed by the scope of the problems at Heritage Park, Newton said.
“They say they have limited funds,” Newton said.
An independent audit submitted to the city shows Banyan lost $159,000 on the property in 2017. Heritage Park had overall liabilities of $9.1 million but assets of only $ 7.3 million.
In a July 2016 letter to the city, Melinda Coats thanked Charlotte for supporting Heritage Park.
“The investment has improved the low income housing stock within the city and more importantly, improved the lives of our residents,” she wrote.
But Mecklenburg County Commissioner Mark Jerrell said tenants had legitimate concerns about their living conditions when he met with them last year. Jerrell said the apartments show why North Carolina needs to strengthen its minimum housing standard laws to give local government more authority to force landlords to make repairs in a timely manner.
“A lot of residents are still unhappy,” Jerrell said. “They say the management is unresponsive to getting things done.”
The Banyan Foundation received more than $1 million in developer fees and consulting fees, according to a 2016 federal tax filing, the most recent available. The foundation reported income from development and consulting fees of roughly $959,000 in 2015 and $803,000 in 2014, records show.
Those records do not indicate who authorized the payments to Banyan, what work it performed or which housing projects were involved.
In Columbia, S.C., Banyan has received negative attention for conditions at North Pointe Estates, a 188-unit affordable housing complex, according to an August 2018 report in The State newspaper.
Taxpayers spent $1.2 million in 2018 to subsidize the complex, but it was plagued by defective amenities and criminal activity, the report said.
After purchasing North Pointe in 2015, the Banyan Foundation raised Robert Coats’ salary from $175,000 to $278,000, the State reported. His wife, Melinda, makes $127,000 annually for work at the foundation, according to records.
Edgar Olsen, a University of Virginia economics professor who has testified before Congress about HUD, told the Observer that the agency’s program is “inherently flawed.”
Apartment owners continue to receive subsidized rent payments from the government no matter how well they maintain the buildings, Olsen said. The arrangement allows landlords to maximize their income by skimping on repairs, he said.
“Building expensive new units, maintaining them poorly, and renovating them at great expense (is) a bad way to deliver housing assistance,” Olsen told Congress in 2016. “It is one reason for the excessive cost of subsidized housing projects.”
HOPING FOR BETTER DAYS
In the coming days, Heritage Park could change hands. Vitus Group is negotiating to buy the property from the Banyan Foundation.
With offices in New York City and Seattle, Vitus operates affordable housing developments in 22 states.
Scott Langan, the company’s development director, said Vitus was drawn to the property at least in part because Charlotte leaders appear serious about tackling the city’s lack of affordable housing.
Multiple city reports say Charlotte needs about 34,000 more units of affordable housing to meet demand.
Langan said his company is seeking about $ 7 million in federal tax credits from the North Carolina Housing Finance Agency that would help pay to renovate Heritage Park.
The company also plans to seek about $1 million from the city of Charlotte’s Housing Trust Fund, which helps finance construction and preservation of affordable housing, he said.
Langan said he doesn’t believe that past issues with the apartment complex should affect his company’s chances of receiving support from City Council.
He said he is confident Vitus can make Heritage Park better.
“We’ve done this across the country,” he said.
Helen Sturdivant, the Heritage Park tenant, said she just wants basic repairs to her three-bedroom apartment.
Sturdivant said despite assurances from management that tenants’ concerns have been addressed, her stove and dishwasher still don’t fully function properly.
“For the last year, we’ve been looking to move,” Sturdivant said. “It don’t look like things are getting better around here.”
FOR THE LAST YEAR, WE’VE BEEN LOOKING TO MOVE. IT DON’T LOOK LIKE THINGS ARE GETTING BETTER AROUND HERE.
Residents of Heritage Park Apartments, like Helen Sturdivant, above, have complained about suspected mold, crime and poor maintenance issues at the complex for years.
Helen Sturdivant, 71, moved into the Heritage Park Apartments in 2014, the same year the apartments got $650,000 to make improvements from the city of Charlotte. But five years later, Sturdivant is still facing issues with maintenance of her appliances and what appears to be a leaky roof.
Helen Sturdivant says her dishwasher doesn’t drain well and the door is broken. She also said her stove stopped working while she was cooking holiday meals.
Despite repair issues, Helen Sturdivant says she has quit complaining “because it doesn’t seem to be any use.”