Archive » August 17, 2006
The Private Property Report
By Kim Seefeld
THROUGH THE LOOKING GLASS
Attending the County Board of Supervisors meeting on July 25 was like being Alice in Wonderland falling down the rabbit burrow – around and around, up is down, where do we land?
Item 8 on the agenda asked the board to consider recommendations regarding the “Affordable Housing Compliance Project.” The board was asked to consider revisions to the lottery, monitoring and enforcement processes. It directed staff to return with findings and a recommendation on October 24.
These requests are puzzling since the full audit of the affordable housing program is not yet complete. Given that the preliminary audit shows violation rates of as much as 25% of all owners, it is safe to say the complete audit will be even more illuminating.
Given this fact, it would seem elemental that without knowing the full extent and types of fraud in the affordable housing program, the board cannot and should not be assessing the need to revise and reform the concept and structure of the program or mechanisms for monitoring and enforcement remedies in the program at this point.
For more than four hours the board discussed the fine points of parallel versus diagonal parking on the streets of Orcutt, effective rodent control and whether to increase the temperature in County buildings. Board chair Joni Gray had been flexible throughout the day in allowing public speakers to exceed their three-minute limit. However, when it came to the subject of affordable housing, the only two persons who spoke to the issue were cut off in mid-sentence. This leaves the public with the distinct impression that supervisors do not want any further damaging public disclosures regarding fraud in the affordable housing program. Not to mention additional talk about the board’s failure to respond to repeated public calls for an investigation of fraud in the program over the last three years. Putting the cart before the horse, the board then, rather perfunctorily, approved all requests.
With its approvals, the board did not even address some of the more egregious types of fraud in the County’s “for-sale” affordable housing program. There are instances where affordable unit owners who paid less than $100,000 for the property (which cannot be sold at market rates for 30 to 45 years) have borrowed hundreds of thousands of dollars against the property, transferred title to third parties and bought other market rate properties or moved away and rented out the affordable unit at market rates. In doing so, the “affordable housing” owners have defrauded the County, which has an equity interest in the property. Such owners take the money and, if caught, have a great incentive to walk away. When they do, the lender forecloses and the property can then be sold at full market rates, taking it out of the affordable housing stock. The property owner who originally developed the property, and who could have made much more money building and selling at market rates, is also defrauded by this practice. This says nothing of the taxpaying citizens who subsidize this debacle.
Quite surprisingly, the supervisors seem unaware that this type of illegal conduct is going on despite the fact that I have, over the last three years, provided them with substantial information on the types of fraud taking place and specific examples.
That this sort of conduct is taking place right under the County’s nose, without its knowledge, without notice from title companies, lenders, and most importantly the fraudulent owner, is obviously a major defect in the County’s affordable housing program. It warrants a full title search on all 408 currently known properties in the program before any further decisions are made.
Such a defect must also give our supervisors pause to rethink whether a “for-sale” affordable housing program is even viable or worth it given the resources, time and effort needed to properly structure and monitor this kind of program. It also highlights why the board should await the full audit and that it should first address the concept and structure of the program before it can even think about what monitoring and enforcement is necessary. To do otherwise is like trying to apply Band-Aids to a spreading cancer.
Once the issue was raised by public comment, County auditor and controller Bob Geis addressed the illegal borrowings and confirmed that there are at least nine subsidized units that have so far been lost to foreclosure. His announcement convinced supervisors such as Brooks Firestone to suggest terminating the “for sale” affordable housing program. Responding to Supervisor Firestone Deputy County Counsel Mary McMaster said changes could be done by amending the recently certified County Housing Element.
The problem is, the board could have done that months ago when I urged supervisors to first audit and reform the affordable housing program before certifying the County’s Housing Element for 2003 to 2008, which calls for land to be set aside to build more than 6,000 more affordable units in the unincorporated areas of the County during that period. The audit results thus far validate the concerns expressed and further demonstrate that the Board of Supervisors is going about this backwards.
It’s time to get out of Wonderland and come back to a world where up is up and down is down. The board needs to await the final audit, study the findings carefully, listen to the public’s concerns and reform this program – and this starts with abolishing “for-sale” units. Just think of all the time that could have been spent creating good affordable housing solutions had the board been responsive to public concern and taken action when questions about the fraudulent program were first presented in 2003.
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