Month in Review, December, 2012: Part 1, Localized failures

February 7, 2013 | Bankruptcy, Boston, CalPERS, Disaster response, Economics, Euro, Global news, Month in review, New York City, Proposition 13, Real estate taxes, Relief, San Bernardino, Slums, Speculation

[Previous Months in Review available here: Nov 12, Oct 12, Sep 12, Aug 12, Jul 12, Jun 12, May 12]


By:David A. Smith


Housing issues – and this is a housing blog, remember [Who are you reminding – yourself? – Ed.] are inherently place-based, so it’s appropriate to start our review of the month of good cheer with a local story of anything but good cheer, where the City of Boston decided to indict an owner for the crime of housing people the neighbors didn’t like, as I profiled in Guilt by accommodation?:


You’re my lawyer, don’t you too look at me like I’m guilty already, okay?


Of course we are always judged by the company we keep, but can we be fined for the company we rent to – not for anything they are observed to have done or allowed to be done, but simply because we don’t like the look of the renters?


The not-quite-scarlet letters?


Boston city officials, in an unprecedented, controversial bid to dun an absentee landlord for policing costs linked to a so-called “problem property,” are demanding that a New Hampshire woman pay $23,809 for the cruiser that sat outside her Dorchester apartment complex for 45 days to shield neighbors from a plague of drug deals, overdoses, violence and burglaries.


The tab runs to about $520 per day – but on what basis can the city claim, even in equity (much less in law), that this property is responsible?


Wendy Rist, 63, of Lisbon, N.H., is due to appear today [November 19, 2012 – Ed.] before the Mayor’s Problem Properties Task Force appeals board to fight the bill, as well as the city’s designation of her two-building property on Bakersfield Street as a problem property.”


Setting aside the particulars of whether Ms. Rist might be a bad landlord, or at least a landlord less capable than our infinitely capable City of Boston would wish her to be, I found the whole story offensive to our civil liberties and rights of due process.  By using this Problem Properties designation – an administration finding, I must add, one that has no evidentiary standard whatsoever – the City is able to ask Ms. Rist, “How much justice can you afford?”


So help you court?


For convenience, let’s take as a given that the crime rate in the area dropped dramatically, and let’s further accept that the police cruiser’s presence caused the drop in crime, and it wasn’t merely a lucky accident. Does the City have any solid evidence:


1.     That crime emanated from this property, as opposed to elsewhere in the neighborhood?

2.     That any of Ms. Rist’s tenants were the source of crime?

3.     That the owner was in some way responsible (as a tacit accessory) to the crime, because somehow she failed in an essential responsibility of being a landlord?

It will take three Yes answers for the city to have a good claim – in equity if not in law. Here, according to the Problem Properties annual report covering its first year (ending 1 Sep 12), is a discussion of Ms. Rist’s principal tenant, Sober House, a substance-rehabilitation service that arranged to rent seven of her apartments.


And it’s not as though the same city government which is so quick to cite, fine, or even indict private landlords presents itself as a model of competence, and I laid out, using a series of New York Post articles, demonstrating the total scandal that is the Bloomberg Administration’s housing authority, guilty of Criminal incompetence: Part 1, NYCHA’s failures, Part 2, the City of New York’s failures, and Part 3, the community network’s success:


Before the Federal government bestows untold billions on New York City for its recovery from Sandy, should it not ask if New York City is deserving of such bounty?


Volunteers deliver food and inquire about specific needs among residents of the Red Hook Houses on November 16, nearly three weeks after the storm hit. In the first two weeks following the storm, the city relied on ragtag bands of volunteers who quickly found themselves overwhelmed by the task of reaching and caring for trapped residents.


Or should Congress not examine, even if only for a two-part blog post, the shocking neglect, complacency, hypocrisy, sloth, cluelessness, indifference, and in totality criminal incompetence displayed by New York’s largest landlord, the New York City Housing Authority (NYCHA, rhymes with bite-cha), whose management ineptitude was on full display in this withering article from the New York Times (December 10, 2012):


Housing Agency’s Flaws Revealed by Storm


A sorry record … except nobody’s very sorry


NYCHA’s failures – and, more infuriating if not worse, its officials’ complete unconcern for anything except the politics – are so manifest, so inexcusable, and by the evidence here so incurable, that the authority has no justification for existence in its current state.


Naturally, my jeremiad fell on deaf ears, as Congress did enact a gargantuan grant to the city, most of which I believe will be wasted because nothing can pass efficiently through NYCHA’s hands:


Don’t say you weren’t warned


As I said earlier in this multi-part post, any private landlord with this record of negligence, incompetence, misconduct and malfeasance would be buried under litigation, led by the city government. No less retribution should fall upon NYCHA.


John Rhea, Nycha’s chairman, talking to people in a complex in the Rockaways in Queens. Mr. Rhea said he regretted the hardship many public housing residents had suffered through — but he said [With no evidence whatsoever – Ed.] his tenants received more care and attention than those who lived in private buildings.


Fire John Rhea. Fire the whole board. None of them have shown any sense of urgency, any accountability, any innovativeness or commitment to results.


For that matter, an enterprising class-action lawyer (New York legal aid, perhaps?) should file litigation on behalf of all NYCHA public housing tenants who lost power and heat, against the authority, for gross negligence and comprehensive violations of the city’s rental housing ordinances and its building codes. Those who died in NYCHA public housing should sue the city for wrongful death.


What’s wrong with NYCHA? Here’s the answer


And finally, before the City of New York gets any Federal money for its rebuilding, put NYCHA into Federal receivership. The authority has become a travesty.


The only ray of sunshine in my whole multi-part post was discovering Nazli Parvizi, the city’s commissioner for community affairs, who demonstrated intelligence, humility, and good humor – all of which are virtually unknown in Mayor Bloomberg’s NYCHA.


Make her the boss — now


HUD, if you’re looking for a receiver, you might try Ms. Parvizi, who doesn’t know enough to know what’s impossible.


“I was asking them, ‘What do you need?’ “


What the Federal government gives to New York, New York state gives to new York City’s upper middle classes, so routinely that they come to see it as their entitlement, as I explored in a little-known huge giveaway of real estate taxes that is periodically renewed on the principle, Why be fair when you can be popular?:


When I become czar, the phrase ‘level playing field’ will be banned, and all computers will have an auto-correct that when they see the phrase ‘level the playing field’ it will be immediately and permanently replaced with ‘give a break to someone who can’t compete.’


Level playing fields? Sounds Bolshie to me.


Co-op and condo community leaders said the state Legislature left them “high and dry” last week after lawmakers adjourned the session without extending the city’s J-51 program and its tax abatement program.


To give you some idea of New York’s fiddling with its property taxes, we have a clergy exemption, a good Samaritan exemption, a senior citizen homeowners’ exemption, a green roof tax abatement, a solar electric generating systems tax abatement, of course the co-op and condo tax abatement — the one still hanging fire.


With public housing’s performance so bad, one would think New York’s courts would sympathize with New York’s private landlords who are trying to provide security within their buildings – exactly the alleged failure for which Boston is aggressively fining Ms. Rist – and one would, of course, be wrong, as we discovered in Freedom from security: Part 1, the landlords’ and tenants’ perspective, and Part 2, the legal jousting:


You think you’ve got rights?


Clearly, inviting the police onto one’s property and giving them an open-ended invitation to question people who are not residents is a step not taken in every apartment building, and one that could unsettle guests and visitors — and it could certainly be applied in a selective fashion.


I have not heard from any tenants in any of the 1,883 units — no one,” said Consolato Cicciu. In fact, Cicciu said, the only complaint he’s heard is, “Why don’t they come more often?”


Remember, these buildings aren’t public property, they’re private property, and the people whose property is at stake appear happy with the policy:


547 East 180th Street at Third Avenue, owned by BAALDC.


[Bronx District Attorney Jeannette] Rucker also acknowledged that the police department has taken steps to improve its training in regards to these types of stops. The city contends that the NYPD has put in place new training that addresses many of the concerns contained in the federal class-action lawsuit filed in March by the New York Civil Liberties Union and several other community groups and legal organizations.


If so, then the litigation will have had a salutary effect.


When is it justified?


Finally, I could not leave the Big Apple without using the tragicomic story of Alphonse ‘Buddy’ Fletcher, gay-turned-straight fund manager, who made a fortune, advertised a fortune, spent a fortune, and as far as anyone can tell lost a bigger fortune – a downfall triggered by his picking a fight with the income-verification police of his local co-op, which was the thread that when pulled, unraveled the tapestry of an assiduously cultivated of personal narrative, whose story we explored for its investment principles in The myth-maker: Part 1, the appearance of wealth, and Part 2, the disappearance of wealth:


Doubting wealth leads to disproving wealth


By now the Louisiana pension funds must have suspected that their money was long gone, spent on Mr. Fletcher’s farm, his Dakota apartments, his cars, his lifestyle, and his lawsuits charging racism. Their suspicions probably turned to certainties when this came to light:


At the same time, Fletcher’s situation with his Cayman Islands-based fund turned grim. A Feb. 27, 2012 affidavit by a Fletcher employee revealed that the FIA Leveraged Fund hadn’t filed an audited financial report since 2008, and that Fletcher’s main fund hadn’t filed audited financials since 2009.


As I’ve previously written, innumeracy precedes insolvency, and opacity is great cover for theft. Mr. Fletcher, ever inventive, then tried another gambit:


Unsound, but provocative


What’s more, Fletcher attempted to repay the Louisiana pension funds in a manner reminiscent of his Calgene maneuver with Harvard years earlier.


Instead of cash, Fletcher offered the pension funds warrants to buy shares in United Community Bank, according to court documents.


Presumably Mr. Fletcher’s fund already owned the warrants – this could have been one of the many things FAM was buying with investors’ money, when it was seeking those triple-digit returns.


239) Never be afraid to mislabel a product.

Ferengi Rules of Acquisition


Are you comparing me to Buddy Fletcher?


However, Mr. Fletcher’s manipulation of the public confidence in financial institutions is as nothing compared with the symphonies being orchestrated by European central bank president Mario Draghi:


[Continued tomorrow in Part 2.]