At a Las Vegas public housing project in 1994, a broken pipe pumped raw sewage into a playground where children played on broken equipment. The 250 low-income tenants who lived there also put up with chronic vermin infestation and routinely waited weeks and months for essential repairs.
When reports of the filthy conditions circulated, the Department of Housing and Urban Development (HUD) stepped in and seized the property from the landlord, Bruce A. Rozet. The tenants packed up and were sent off to other federal housing projects while the government overhauled the complex.Despite such a track record, Rozet is not only still in business, he is America's largest public-housing landlord. The government has given Rozet $71 million to maintain 235 projects with about 16,000 tenants.
In the process, he has become a poster boy for the problems that exist in the Federal Housing Adminstration's multifamily mortgage program, which insures mortgages for public housing projects that wouldn't otherwise find financing.
Just how much money the FHA's multifamily program loses yearly is under debate. Congress appropriates money each year to cover any losses to the program. But HUD spokesman David Egner told our associate Kathryn Wallace that default costs are also paid for with the profits generated by other HUD programs. Nevertheless, official estimates are that the government will lose $11 billion over the next decade on $30 billion worth of outstanding loans.
At a time when only one-fourth of eligible Americans receive housing assistance due to budget constraints, every dollar misspent at HUD keeps a poor person from getting government housing.
Yet landlords with spotty records routinely gain government backing for high-risk projects. For well over a decade, Rozet applied for and received loans through the FHA - HUD's mortgage agency - to build housing projects for low-income families.
Or at least, that is what Rozet told HUD officials he was doing with the funds. Rozet is currently under federal investigation on charges that he used the FHA "like a personal ATM," in the words of one official, by inflating his costs and the value of his properties to receive bigger subsidies.
Rozet denies the allegations, but the type of abuse he stands accused of is not uncommon. He is just one of dozens of landlords charged with misusing money intended for safe and affordable housing for the poor.
Rozet's properties, as well as three-fourths of the nation's public housing projects, receive full backing from the FHA and are, in effect, subsidized twice by the gov-ern-ment. That translates into no-risk, no-accountability deals for landlords.
John Weicher, a former HUD official now at the Washington-based Hudson Institute, says the FHA's multifamily program practically invites fraud.
John Finch, a HUD official during the Carter administration, told us multifamily programs have always been the hardest to manage. "The money is big, and that always attracts the sort of people who just want to turn a quick buck."
United Feature Syndicate Inc.