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 18th 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 development firm. When Greene refused to participate 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. He had a total collapse of his sense of morality and judgment. 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."
Carl Greene, executive director of the Philadelphia Housing Authority, surveys a parcel of land that sparked a dispute between PHA and HUD.
Credit: Courtesy Philadelphia Housing Authority
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 decent, 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. In a March 31, 2008, statement, Dodd questioned the former Secretary's ability to effectively run HUD "while under the cloud of various investigations into alleged impropriety." Jackson announced his resignation that same day. 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. "They like people who play their game the way they want to play it. 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 noncompliant 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. Specifically, MTW gives housing authorities such as PHA considerable flexibility in determining how to use federal funds. 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 the financial flexibility the program provides.
At a Senate committee hearing (audio / video) in March, Jackson defended the e-mails by saying his staff was "frustrated" with the situation. 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. "[Universal] was supposed to provide community outreach with the neighbors, assistance with the zoning and permitting process, and assistance with sales," he says. 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."
Then: PHA demolished the Martin Luther King public housing towers in 1999.
Credit: Courtesy Philadelphia Housing Authority
Over the course of the next year and into late 2007, Greene asserts that he received continued pressure from Jackson and other top HUD officials to transfer the land to Universal. "I say no [to giving the land to Gamble], and then all of a sudden, we start getting calls from HUD staff," Greene says. "Blom and her staff made 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."
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, including the expansion of the existing community center, the construction of a community park, and the construction of Phase IIC, consisting of 19 off-site market rate homeownership units," the letter said. Indeed, PHA had not yet delivered these outdated components of the plan, which Greene says is subject to change because Hope VI grants allow for such development flexibility. What's more, Greene contends that these infractions are not ordinarily grounds for default.
Now: The redeveloped Martin Luther King community has dramatically invigorated the neighborhood.
Credit: Courtesy Philadelphia Housing Authority
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 noncompliance 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 counteroffer. 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 conducted by Morristown, N.J.-based Louis Berger Group and its affiliate Parsippany, N.J.-based RBA Group, that more than 7 percent of the MLK units are accessible, exceeding the 5 percent minimum requirement.
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. "We have been very concerned about the efforts that HUD has undertaken to standardize the [MTW] agreement, and we are very concerned that it undermines the flexibility, the creativity, and the innovation that is needed in local cities," says Sunia Zaterman, executive director of the Washington, D.C.-based Council of Large Public Housing Authorities, which represents about 60 of the country's largest housing authorities.
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. The standardization, which HUD began to formulate in 2006, sought to "simplify administration of the program, require public housing agencies to identify the objectives of their housing programs with greater specificity, and to provide comprehensive reports that would allow public housing agencies, HUD, and Congress to assess the success of those programs," says HUD spokesperson White. "The department developed this agreement in consultation with all the existing Moving to Work agencies, holding teleconferences and soliciting comments. The MTW agencies responded with numerous suggestions, and the department incorporated many of these suggestions into this final 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. Court documents cite the Minneapolis Housing Authority as one such example. The judge denied PHA's motion for a temporary restraining order and preliminary injunction, which would have prevented the MTW agreement from expiring.
And expire it did, as scheduled, on March 31. A week later, HUD sent PHA a letter detailing a plan to transition the authority out of the MTW program, stating that "PHA will not retain all of its MTW flexibilities during the transition period, nor will it be considered an MTW agency during this time." The impact of this blow could be devastating, Greene says.
Ongoing Turmoil
Jackson's departure appears to be the beginning of what could turn into a drawn-out lawsuit between HUD and PHA. And the government agency will face continued scrutiny as it addresses similar problems with other housing authorities across the country.
PHA, for one, plans to take additional legal action later this year, contending that it is still being treated unfairly by HUD. Greene argues that, despite the Minneapolis agreement cited in court, no MTW agencies with full and broad agreements such as that of PHA's have signed the standard agreement. "We asked them for a one-year extension, and they refused," says Kirk Dorn, PHA's general manager of communications. "They gave us various reasons for refusing but the reality is, if we had given the land over as requested we believe we would have been extended. It's as simple as that."
Not surprisingly, the authority has the backing of the state's U.S. senators, Sen. Bob Casey (D-Penn.) and Sen. Arlen Specter (R-Penn). "The more than 80,000 low-income Philadelphians who are clients of the Philadelphia Housing Authority deserve answers and they deserve to have faith in their government," Casey said in a March statement. "My main concern is the extension of Philadelphia's successful Moving-to-Work Program. I also have serious concerns about how HUD is operating and how they make decisions that have a profound impact on Philadelphia." Senators Casey and Specter continue to work with members on both sides of the aisle to ensure that the 84,000 residents in the Philadelphia area are not penalized because of bureaucratic infighting, says Casey's press secretary, Kendra Barkoff.
Unfortunately, PHA is not alone in its plight with HUD. The accusations against HUD under Jackson's leadership include steering lucrative contracts to business associates for deals with the Housing Authority of New Orleans and the Virgin Islands Housing Authority.
Though neither authority returned phone calls requesting comment, various news reports point to similar instances of cronyism as in the case of PHA. The Dallas Morning News reported that Jackson helped a friend in New Orleans land $485,000 in work over 18 months as a construction manager, adding that questions still surround a $127 million project awarded to a development team that "includes an Atlanta company for which Jackson used to work and which still owes him money."
Indeed, a continued investigation of wrongdoings at HUD is critical, says Jon Gutzmann, executive director of the St. Paul (Minn.) Public Housing Agency. "If HUD retaliated against the Philadelphia Housing Authority, as the e-mail exchange and 'coincidental' timing of the funding cut to PHA seemed to suggest, then other public officials who speak out against alleged HUD cronyism and corruption are also 'at risk,' "Gutzmann says." It is important that the numerous federal investigations into the alleged contracting activities of former Secretary Jackson continue so taxpayers can ultimately find out if their money was spent in the public's interest or if it was misused."
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