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Miami Herald - July 26, 2006

"House of Lies" (part 4)

Buyers flipping homes for profit
Homes intended for low-income buyers have instead been snapped up by investors and others who flip them for a profit

By Debbie Cenziper

In a county seized by one of the most dramatic affordable housing shortages in the nation, developers entrusted with government land and money to build homes for the poor have sold instead to real estate investors, wealthy buyers or families who turned quick profits.

Jesse Jones pocketed $21,000 after he sold his new threebedroom in less than a month to a Broward County investor.

Fredricka Trapp and her son Clifton did even better: They made $175,000 in 14 months selling nine houses built for the poor in Florida City.

Said Clifton Trapp: "I basically just spread the word . . . It's not like it was a killer deal or anything."

So far, the Miami-Dade Housing Agency hasn't tried to stop them.

The "flipping'' of homes for the poor is among a string of problems that taint an innovative program launched by county commissioners five years ago to bring new life to abandoned lots scattered across Miami-Dade County.

The idea seemed deceptively simple: giving developers government land and in some cases construction loans in exchange for houses that poor families could afford.

Since 2001, developers promised to build more than 580 houses. But only 190 homes one-third of what was promised have been delivered. And not all the homes have been sold to needy families.

Kenya Tookes just snagged a house at a reduced price of $180,000. On the sales contract, obtained by The Miami Herald, Tookes declared herself a firsttime buyer, a requirement of the program even though she owns four other houses valued at more than $700,000 in total.

"She swindled me," said developer Elena Diaz de Villegas, who said she didn't realize until after the sale that Tookes owns other homes.

Tookes' response to The Miami Herald: "Talk to my lawyer."

For years, the Housing Agency not only overlooked the flipping of properties, but also allowed widespread delays and red tape to overtake the program.

Miami's working poor paid a stiff price, shut out at a time when the county's home prices soared to some of the highest levels in the nation. At the same time, other crucial Housing Agency building projects were derailed by insider deals and chronic mismanagement.

Burned by the breakdowns: Ozie Porter, who several years ago started hunting for a house in the program but was blocked by waiting lists and developers who never built what they promised.

When she started her search, the houses were selling for just under $100,000, the maximum price allowed by the Housing Agency. Now the cap has been raised to $225,000 and Porter is no longer sure she can afford a house.

"Everything has gone up," said Porter, who managed to save $5,000 for a down payment on a cafeteria cook's salary while living in public housing for the past 16 years.

"All I want to do is get into a house. I want a green yard. I've never had that before."

Known as infill housing, Miami-Dade's land program has drawn national recognition, honored with awards and praised by politicians. But The Miami Herald's investigation found:

• Not once has the Housing Agency confiscated a lot from deadbeat developers, even though dozens of lots are still empty and the land is supposed to revert back to the county in 12 months if no construction starts.

• County inspectors in recent years have levied more than $65,000 in fines against developers for everything from illegal dumping to shoddy lot maintenance to failing to haul off industrial waste. Still, the Housing Agency didn't intervene in pushing construction forward.

• The Housing Agency gave out land but never bothered to make sure developers could build on it. When even well-intentioned developers complained they couldn't start construction because of red tape everything from old liens to zoning problems the agency largely ignored them.

• Meanwhile, the Housing Agency shrugged off the single-most-important goal of the program helping the poor by failing to ensure that the new houses were sold to low-income buyers.

Instead, officials left the oversight to developers, who stood to profit more quickly by selling to buyers with easy access to cash.

"Unacceptable," said Cynthia Curry, senior advisor to County Manager George Burgess. "It's an abused situation and it's one clearly that the county has to take control over. There was a lack of monitoring on the Housing Agency's part and that lack of oversight obviously cost us."



In at least 14 cases, The Miami Herald found, houses built for the poor were sold to real estate investors, buyers who owned more than one property or families who flipped the houses for a quick profit.

Housing Agency rules stipulate that buyers must be low-income, first-time homeowners. The guidelines also state the houses must be sold at an affordable price and remain that way for 10 years, meaning

that if a buyer sells before then to someone who is not qualified, the Housing Agency can potentially take back the property.

But the Housing Agency never bothered to ensure its guidelines were enforced, nor did it place restrictions in deeds before the developers took control of the land.

In 2002, the for-profit Citywide Development received a $1 million loan from the Housing Agency to build 70 infill houses. But Citywide sold at least 11 to real estate investors.

One was Clifton Trapp and his mother Fredricka, who bought nine of the houses and sold them to five other investors over the course of 14 months, earning a profit of $175,000. Combined, the five investors own property valued at more than $2 million.

"We didn't know anything about it being low-income," said Clifton Trapp, of Pembroke Pines, who owns at least 10 houses.

Citywide defends the sales, saying homes were sold to unqualified buyers because it already had paid back the $1 million loan to the Housing Agency.

"We were out from under the requirements," said Diaz de Villegas.

But records show many of the houses were sold weeks or even months before the loan was paid off. Either way, Housing Agency officials say, Citywide signed a contract in 2002 promising the "units approved under this agreement must be occupied by lowto moderate-income families." Citywide got the loan over other developers in a competitive process.

"That was supposed to be affordable housing period," said Housing Agency construction loan chief Tawana Thompson.

Diaz de Villegas said Citywide has built dozens of affordable homes in MiamiDade.

"This was only one of my cases," she said. "It's blood, sweat and tears building affordable housing. I've always been very careful about selling to affordablehousing people."

But records show Citywide just sold another house in the infill program to Tookes, who owns four other homes.

Tookes was not told the house was built for the poor, argued her attorney, Dacia Riley.

"It seems to me that maybe the checks and balances were not made in this case, and now that it has been determined that she was not a firsttime home buyer, people are going on the offensive," Riley said.

But Tookes signed a sales contract claiming she was a first-time buyer.

Said Riley: "The [fine print] is so small."

In some cases developers unintentionally sold to buyers who profited off the program: Youth in Action Center, a Miami nonprofit, sold a $140,000 house to Jesse and Lukesha Jones in January. The couple flipped it weeks later.

Broward County resident Julio Cortez took over their mortgage and paid the Joneses $21,000 after hiring an appraiser to access the house's market value.

Youth in Action executive director Linda Stevenson said she had no idea the buyer was going to resell the house at a profit.

"If you knew what we went through to build that house, just to sell it to them for $140,000," she said. "This makes me angry. We have honest people who need homes."

In 2005, Personal Paradise Developers sold a house to Deney and Katherine Navarro for $153,900. The couple qualified as low income and even received a second mortgage from the Housing Agency

Seven months after they bought the house, the Navarros sold for $207,000 reaping a $53,100 profit.

The new owners, Roger Perez and Maria Hernandez, earn less than $30,000 between them and said they were unaware the house had been flipped and the price hiked by 35 percent.

"It gets frustrating when you do it for affordable housing and this happens," said Personal Paradise president Octavio Castellanos when he

was told of the sale by The Miami Herald.

Curry, with the county manager's office, wants the Housing Agency to keep better track of the sales by requiring closing statements, copies of contracts and proof of income for all buyers. She recently moved the infill program out from under the Housing Agency to the county's General Services Administration.

"We have to flip this," she said. "The program lost its way."



Other problems disrupted the program: The Housing Agency gave land freely to groups with no track record or building expertise. The Miami Herald found more than 20 nonprofit and community groups benefited from the program, but never produced a single home.

But there were problems even with experienced developers.

The county set up an infill housing committee to ensure developers were given lots suitable for building. But the committee, overseen by the Housing Agency, regularly passed along lots saddled with tax liens and other problems.
Affordable house in Opa-locka. (Raul Rubiera/Miami Herald) Part 4 photos

Housing officials admit that about 70 percent of the lots weren't "clean'' or ready for building. But the committee approved them anyway. Some lots were too small for a single-family house and needed zoning exemptions, which can take months. Others needed to tap into water and sewer lines.

The lots also came with costly liens from old violations, such as illegal dumping, that developers inherited when they took control of the land. That caused problems because developers can't get banks to approve loans or the county to issue building permits until the liens are gone a snag that can all but halt construction.

The for-profit Fortex Construction was forced to pay off $80,000 in liens before the county would approve building permits, draining the company's profits on houses that already were being built for cheap.

"It's just all this existing red tape that has been there forever that is hard to fight," said Jose Perez de Corcho, a civil engineer with Fortex Construction.

Finally, the Housing Agency last year persuaded the county to change its policy and waive the liens in advance of construction.
Jerry Flick a developer for the Housing League, who is building affordable houses like the one shown in Opa-locka. (Raul Rubiera/Miami Herald) Part 4 photos

The program remain in flux, but county officials say they are trying to find ways to speed up construction.

On a quiet street just east of Interstate 95, longtime local developer Jerry Flick has been trying to build a 1,200square-foot three-bedroom.

He got the lot four years ago but couldn't build on it because of lingering liens from the city of Miami, delaying the project by a year. Then he discovered inadequate sewer lines.

Flick spent $6,500 removing a fallen Banyan tree overturned by Hurricane Wilma last fall. Every two months, he spends $200 clearing debris that's dumped onto the lot; sometimes he's too late and is slapped with a fine.

Overall, Flick has spent more than $20,000 on attorneys, fees, permitting and expenses not including the cost of building the home. The infill program should have been better planned before the land was distributed, he said.

"I think there are some people who just get so frustrated they don't know what to do and let the lot sit there," said Flick, who finally has started construction on the house. "We've got a bunch of dead lots out there. It's hurt everybody."

Miami Herald staff writers Susannah Nesmith and Jason Grotto, and Herald researcher Monika Leal contributed to this report.