Kush­ner Com­pa­nies’ Real-es­tate Prac­tices Un­der New Fed­eral Scru­tiny

Trillions - - In This Issue -

Jared Kush­ner’s real-es­tate com­pany (Kush­ner Com­pa­nies) is the sub­ject of a new in­ves­ti­ga­tion just launched by Mary­land’s two U.S. se­na­tors and four of its U.S. rep­re­sen­ta­tives.

Kush­ner Com­pa­nies had al­ready been un­der fire in the press for its ruth­less treat­ment of its ten­ants. Most no­to­ri­ous of those claims in­volved how the com­pany ag­gres­sively went after ten­ants who owed back rent or left their leases early, some­times even when the debts went back years be­fore Kush­ner’s com­pany even owned the prop­er­ties and some­times even when the in­di­vid­u­als were in full com­pli­ance with their leases.

The son-in-law of Pres­i­dent Don­ald Trump, Jared Kush­ner ini­tially made a name for him­self in high-pro­file glam­orous real-es­tate in­vest­ments in Man­hat­tan and Brook­lyn and then on the in­ter­na­tional stage. That was suc­cess­ful up to a point, even though in­for­ma­tion that came to light this year sug­gests that Kush­ner had been strug­gling more than had met the pub­lic eye be­fore his no­to­ri­ous fa­ther-in-law be­came pres­i­dent.

As Tril­lions re­ported in an ar­ti­cle ear­lier this year, en­ti­tled “What We Need to Know about Jared Kush­ner,” in 2011, Kush­ner’s en­ter­prise be­gan ex­pand­ing into lower qual­ity but still prof­itable in­vest­ments in an ef­fort to cap­i­tal­ize on de­pressed prices after the re­cent re­ces­sion that had be­gun back in 2008. These started with a ma­jor pur­chase in 2011 of 4,681 units of what are called “dis­tress-rid­den, Class B” apart­ment com­plexes. The com­pany bought another 1,700 multi-fam­ily units un­der sim­i­lar dis­tressed cir­cum­stances later that year.

Then, in Au­gust 2012, the com­pany swal­lowed up 5,500 multi-fam­ily units in and around Bal­ti­more, fol­lowed by the pur­chase of three more such rental com­plexes two years later.

Buy­ing the prop­er­ties and man­ag­ing them ef­fec­tively was not enough for the com­pany, how­ever. After ac­quir­ing them, Kush­ner Com­pa­nies sys­tem­at­i­cally went “back through the records, look­ing for any former ten­ants that they could pos­si­bly go after for more money – any­one who had bro­ken a lease or owed back rent when they left, even if it was two or three years ear­lier.” The com­pany ended up sad­dling those in­volved with the back rent, court fees, le­gal charges and back in­ter­est on the pre­vi­ous debts, all of which added up to a ma­jor bur­den for these mostly-low-in­come ten­ants.

In a pub­lic in­ter­view about these ac­qui­si­tions, Kush­ner openly pat­ted him­self on the back for the wis­dom of mak­ing these pur­chases. He spoke of this cat­e­gory of in­vest­ment as be­ing “the most re­silient in­vest­ment class” and said that al­though “it has a lot of con­struc­tion and a lot of evic­tions,” in the end, the in­vest­ment’s out­come has been “phe­nom­e­nal.”

Kush­ner Com­pa­nies did all this not just by in­tim­i­da­tion or or­di­nary le­gal threats. A re­cent anal­y­sis of how the en­ter­prise man­aged its shake­downs shows that Kush­ner’s team made use of a highly con­tro­ver­sial ap­proach to get peo­ple to pay up. They con­vinced judges to or­der the ar­rest of peo­ple who owed the com­pany money.

Ac­cord­ing to a re­port from The Bal­ti­more Sun, the com­pany went after over 105 former ten­ants, who were of­ten very poor and in very dif­fi­cult con­di­tions, with re­quests for their civil ar­rest for hav­ing not paid their past debts. The news­pa­per’s re­port showed that as many as 20 of these had been de­tained in the process of the com­pany go­ing after them.

The le­gal process in­volved was the court pre­par­ing an or­der known as a “writ of body at­tach­ment.” It is com­monly used to bring in some­one who was held in con­tempt of court or who has not paid past debts.

While ef­fec­tive in get­ting peo­ple to come for­ward, the process as it was used by Kush­ner Com­pa­nies amounted to, for many, a dis­crim­i­na­tory tac­tic with far more harm­ful con­se­quences on the work­ing poor than on oth­ers. For the poor, be­ing ar­rested in this way will at the very least re­sult in a dis­rup­tion of crit­i­cal in­come that they may need to help sup­port them­selves and their fam­i­lies. At worst, it could re­sult in their be­ing fired after their em­ploy­ers re­al­ize the in­di­vid­u­als in­volved have been ar­rested.

All this even hap­pened in three of Kush­ner Com­pa­nies’ com­plexes where the com­pany had re­ceived $6.1 mil­lion in fed­eral rent sub­si­dies since the be­gin­ning of 2015.

The cur­rent re­quest for in­ves­ti­ga­tion of Kush­ner’s or­ga­ni­za­tion comes from Mary­land se­na­tors Chris Van Hollen and Ben Cardin, plus four mem­bers of Mary­land’s U.S. con­gres­sional del­e­ga­tion. Those in­clude Eli­jah Cum­mings (the rank­ing mem­ber on the Com­mit­tee on Over­sight & Gov­ern­ment Re­form), Dutch Rup­pers­berger, John Sar­banes and An­thony Brown.

The let­ter they pre­pared de­mand­ing in­for­ma­tion from Kush­ner Com­pa­nies notes that be­cause the owner en­ter­prise re­lies on sub­si­dies from the Hous­ing Choice pro­gram, Sec­tion 8, it has the obli­ga­tion to fol­low Depart­ment of Hous­ing and Ur­ban De­vel­op­ment (HUD) rules. In the case of Hous­ing Choice, each “dwelling unit must pass the pro­gram’s hous­ing qual­ity stan­dards and be main­tained up to those stan­dards as long as the owner re­ceives hous­ing as­sis­tance pay­ments.” The rules go on to say that ev­ery “dwelling unit and its equip­ment must be in san­i­tary con­di­tion” and “must be free of ver­min and ro­dent in­fes­ta­tion.” As the let­ter con­tin­ues, “If [the news re­ports] are ac­cu­rate, they raise very se­ri­ous and trou­bling concerns about whether Kush­ner Com­pa­nies and its sub­sidiaries are com­ply­ing with HUD’S hous­ing qual­ity stan­dards to en­sure the safety and health of their own ten­ants.” The let­ter also noted that some com­plexes were re­quir­ing ten­ants who wanted to pay by money or­der to get those or­ders from Wal­mart or ACE Cash Ex­press, which in­volves an ad­di­tional charge.

In the let­ter, the se­na­tors and con­gress­men de­manded that the Kush­ner Com­pa­nies turn over the fol­low­ing:

• Copies of all the hous­ing as­sis­tance con­tracts it has with HUD

• Copies of the standard lease agree­ments for all of its com­plexes in Mary­land

• All no­ti­fi­ca­tions re­ceived ei­ther from HUD, in­spec­tion com­pa­nies, pub­lic hous­ing au­thor­i­ties or lo­cal ju­ris­dic­tions iden­ti­fy­ing de­fects in the com­plexes that arose dur­ing the past three years

• All com­plaints from res­i­dents about main­te­nance and re­pairs dur­ing the past three years

• Any no­ti­fi­ca­tions about el­e­vated blood lev­els of lead af­fect­ing the ten­ants

• Any ar­range­ments the com­plexes may have had with com­pa­nies in­volved in pro­vid­ing the money or­ders ten­ants would be al­lowed to use to pay their rent

The let­ter also de­manded spe­cific in­for­ma­tion re­gard­ing how Jared Kush­ner him­self has been in­volved with the man­age­ment of the com­plexes. In ad­di­tion, the let­ter de­manded copies of all com­mu­ni­ca­tions be­tween the com­pany and the White House, “in­clud­ing but not lim­ited to com­mu­ni­ca­tions re­gard­ing the man­age­ment and res­o­lu­tion of Jared Kush­ner’s con­flicts of in­ter­est.”

After all the bad press and now the in­ves­ti­ga­tions that are long over­due against Kush­ner and his en­ter­prises in Mary­land, it is not sur­pris­ing that the com­pany’s gen­eral coun­sel, Emily Wolf, has stepped up to de­fend its ac­tions. As she said in a re­cent state­ment, “We are in com­pli­ance with the re­quire­ments of the Fed­eral Hous­ing Choice Pro­gram. We ex­er­cise our le­gal rights un­der the rel­e­vant pro­vi­sions of Mary­land law only as a last re­sort after all other rea­son­able at­tempts to col­lect rent pay­ments are un­suc­cess­ful.”

The in­ves­ti­ga­tions are only just start­ing. Based on what has al­ready been un­cov­ered, one can ex­pect this is yet another area where Don­ald Trump’s son-in-law is go­ing to need to “lawyer up” to deal with the in­creas­ing out­cry against his com­pany’s ab­hor­rent treat­ment of its ten­ants.

Photo by Conecta Abo­ga­dos, CC

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