Use of funds ques­tioned as hous­ing woes per­sist

The Charlotte Observer (Sunday) - - Front Page - BY FRED CLASEN-KELLY [email protected]­lot­teob­

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.”


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.”


He­len Stur­di­vant

JOHN D. SIM­MONS jsim­[email protected]­lot­teob­

Res­i­dents of Her­itage Park Apart­ments, like He­len Stur­di­vant, above, have com­plained about sus­pected mold, crime and poor main­te­nance is­sues at the com­plex for years.

PHO­TOS BY JOHN D. SIM­MONS jsim­[email protected]­lot­teob­

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.”

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