Editor's Note:This article first ran as part of a Web exclusive in May, shortly after former HUD Secretary Alphonso Jackson resigned. This condensed print version includes a Q&A with Jackson's former colleague, Orlando Cabrera, an assistant secretary at HUD. To read the original story, visit HERE.
It was a little war that brought down a giant. A bitter dispute between the Philadelphia Housing Authority and the U.S. Department of Housing and Urban Development over the completion of the award-winning Martin Luther King Plaza mixed-income development in South Philadelphia was arguably the final straw in the mounting political pressure that led to the April 18 resignation of former HUD Secretary Alphonso Jackson.
The clash began in 2006 when Carl R. Greene, PHA's executive director, refused to transfer valuable parcels of land at the MLK site for nominal consideration to Universal Cos. Famed songwriter and entertainer Kenny Gamble, a friend of Jackson's and a Republican Party supporter, is a principal of the Philadelphia-based developer. When Greene refused to take part in the land deal, Greene says HUD retaliated against PHA by threatening to withhold federal funds.
“Jackson lost his way and his commitment [to affordable housing],” says Greene, who worked amicably with Jackson in the late ‘80s and early ‘90s at the District of Columbia Housing Authority. “He broke every business rule to keep his allegiance of social elites happy. People are losing their houses everyday while he is riding around with a full security detail and chefs and jets, living the life of a king. Hopefully he is the last king of HUD.”
HUD spokesperson Donna White says that the agency cannot comment on the accusations “because the matter is in litigation.” As a result, Greene is the only one talking. But the story he tells—supported by a compelling paper trail and an affordable housing industry ready to voice its ire—offers a window into a federal agency riddled with accusations of cronyism and harsh criticisms for its failure to deliver affordable housing to thousands of people.
PHA's claim, amid ongoing accusations of favoritism during the last two years of Jackson's tenure, led Senators Chris Dodd (D-Conn.) and Patty Murray (D-Wash.) to call for the secretary's resignation in March. Now, the FBI and the Justice Department are investigating these claims, which extend to and impact housing agencies across the country.
A number of housing authority directors say HUD's alleged retaliation against PHA is certainly believable. “HUD likes housing authorities that kneel down and pay them homage,” says one director, who requested anonymity in fear of retribution. “To a certain extent, it's a game to them. We have peoples' lives at stake, and they are buying oil paintings.” The director is referring to a $100,000 contract awarded by HUD to an artist to complete portraits of Jackson and four former HUD secretaries.
Perhaps the most convincing evidence of HUD's alleged impropriety: In a Jan. 12, 2007, e-mail exchange, then-Assistant Secretary Orlando Cabrera asked current Assistant Secretary Kim Kendrick, “Would you like me to make his [Greene's] life less happy? If so, how?” To which Kendrick replied, “Take away all his federal dollars?” ending her message with a smiley icon. Cabrera responded, “Let me look into that possibility.” That same day, HUD sent PHA a letter stating that the authority was non-compliant with HUD Section 504 regulations, which mandate that at least 5 percent of public housing units be accessible to people with disabilities—an allegation that Greene vehemently denies. As a result of being noncompliant with this accessibility rule, HUD can revoke PHA's participation in Moving to Work (MTW), a program that gives a select number of public housing agencies and the secretary of HUD the flexibility to design and test various approaches for providing and administering housing assistance. PHA estimates that losing its MTW status would cost the authority at least $40 million in funding, adding that the MLK project would not have been possible without such flexibility.
Today, Cabrera says the timing of the e-mail and the noncompliance letter sent to PHA was purely coincidental. “It's the old adage that Freud said: ‘Sometimes a cigar is just a cigar,'” he says. “Well, sometimes a date is just a date.” Cabrera explains that Kendrick initiated the e-mail exchange out of frustration because she was having difficulty setting up a fair housing compliance audit with PHA. “Kim was looking for help because she was at her wit's end,” Cabrera recalls. “So at the end of the day, if someone is going to convict me for snarky e-mails, I am sorry. But you know what? I wrote that to a colleague who needed help. I will never regret my e-mail.” [For more of Cabrera's response to these circumstances, see “Speaking Out” on page 44.]
At a Senate committee hearing in March, Jackson also defended the e-mails by saying his staff was “frustrated.” Though Jackson stepped down from office just a few weeks later, the battle between HUD and PHA continues to this day and has created a growing acrimony symbolic of the general disdain felt for HUD by many in the affordable housing industry.
CHANGE OF PLANS Until less than a decade ago, Philadelphia's Hawthorne neighborhood included four of the country's most crime-ridden and dilapidated barracks-style public housing towers—an icon for poverty in the city of Brotherly Love. During his 11-year tenure as executive director of PHA, Greene has driven the dramatic transformation of the MLK project. The 226-unit community features Victorian-style townhomes that rival any market-rate development. Today, MLK is nearly complete, with just 19 housing units left to be constructed. It was this final stage of development that sparked the initial dispute between PHA and HUD.
In May 2006, PHA proposed an amendment to eliminate obsolete elements of the MLK revitalization plan, including the termination of the transfer of land to Universal to build the 19 market-rate units. Greene says the company didn't provide the services required to receive the land. A later letter sent by PHA's lawyer to Dominique Blom, deputy assistant secretary of HUD's Office of Public Housing Investments, states that “despite Universal's failure to perform, it has recently taken the position that it is not only entitled to act as developer of the 19 units, but that PHA must transfer a valuable public asset—the land on which the 19 units are to be constructed, recently appraised as having a fair market value of nearly $2 million—to Universal for no consideration.”
Over the course of the next year and into late 2007, Greene asserts that he received continued pressure from Jackson and other HUD officials to transfer the land to Universal. “Blom and her staffmade menacing, threatening phone calls saying they just came out of a meeting with the secretary, and he wants this project complete. What they meant was they want the land to be transferred to Gamble,” he says.
In a sworn affidavit, Greene says Jackson phoned Philadelphia's then-Mayor John Street, who was also the chairman of PHA's board, to ask him to convince Greene to convey the land to Universal. PHA alleges that when the effort failed to get the desired result, HUD retaliated by denying its request to amend the revitalization plan in December 2006.
Letters flew back and forth between the two agencies and culminated in an April 9, 2007, letter from HUD that declared PHA in default of its MLK HOPE VI implementation grant agreement. The grounds? “PHA had still not implemented three elements of the MLK RP,” the letter said. By the end of 2007, HUD and PHA eventually came to a settlement whereby HUD would cure the MLK default if PHA agreed to, among other requirements, develop the 19 market-rate homeownership units in-house and develop and maintain a community park. (PHA later decided to build the units as affordable.) Universal, which did not return phone calls from MULTIFAMILY EXECUTIVE, is no longer a participant in the revitalization plan.
A BIGGER BATTLE Even though the groups came to a resolution on the revitalization plan, PHA and HUD are still at odds over whether PHA housing meets federal Fair Housing requirements on accessibility for the disabled. On Sept. 19, 2006—one day after Jackson and Gamble toured the MLK development—HUD issued a preliminary letter of non-compliance with Section 504 accessibility guidelines. The charge threatened PHA's standing in the MTW program. On Jan. 12, 2007—the same day as the infamous e-mail exchange between Cabrera and Kendrick—HUD sent a formal letter of noncompliance with Section 504.
The questionable timing of both letters raised a major red flag. “It you want to beat a dog, you can always find a stick,” says Nicholas A. Calace, executive director of Bridgeport (Conn.) Housing Authority. “And maybe that's the stick they found to beat him with.”
In late 2007, Cabrera offered PHA a 10-year extension of its MTW contract under the terms of HUD's new standard agreement—so long as PHA agreed to sign HUD's proposed voluntary compliance agreement (VCA), which would help bring PHA into compliance with accessibility rules. In a Dec. 10, 2007, letter to Cabrera and Kendrick, PHA reiterated its counter-offer. The authority would agree to sign the VCA in exchange for a one-year extension of the MTW program under its then-flexible terms, which were set to expire March 31, 2008. Greene is adamant, however, that PHA's willingness to sign the VCA was not an admission of wrongdoing. In fact, PHA firmly believes it is in full compliance with Section 504 and has since received verification from an independent architectural/engineering audit.
HUD's new standard agreement is a sticking point in a larger feud between HUD and housing authorities across the country. The new standard imposes stricter accounting and oversight requirements, which will diminish the funding flexibility available to local administrators.
But rules are rules. And HUD has determined that all MTW agencies must enter into the new standard agreement or transition out of the MTW program when their current terms expire. As of the end of June, 16 MTW agencies have signed the new standard agreement.
HUD, which says it refuses to extend any existing MTW agreement under former terms and conditions, did not grant PHA the one-year extension. So on March 18, 2008, PHA filed a motion with the U.S. District Court for the Eastern District of Pennsylvania moving for immediate injunctive relief, arguing, among other items, that HUD's refusal to renew or extend the existing MTW agreement violates PHA's equal protection rights. In the motion, PHA accuses HUD of refusing to renew or extend the existing MTW agreement as a way of punishing PHA for refusing to transfer land to Universal. But Judge Paul S. Diamond ruled that PHA had not met its burden of proof showing “disparate treatment,” since other authorities were required to enter into the 10-year standardized agreement. The judge denied PHA's motion for a temporary restraining order and preliminary injunction, which would have prevented the MTW agreement from expiring.