Affordable housing units used by many to turn a quick profit
The Maxwell Street units were supposed to go to families. But many of them were bought up by single professionals, some of whom never lived there and some of whom rented them out. What's more, some of the buyers already owned other homes.
Mayor Daley promised that one-fifth of the homes built as part of the massive makeover of the historic Maxwell Street market would be set aside as affordable housing.
Damaris Matis, a real estate agent, got to buy one of those 187 affordable homes.
(Brian Jackson/Sun-Times)
PHOTO GALLERY
University Village Complex
Photos: Historic Maxwell Street
Matis, then 25 and single, already owned two condos and was making $43,782 a year when city housing officials deemed her eligible to buy an affordable one-bedroom condominium in the city-subsidized development, called University Village.
She even got a $20,000 taxpayer-funded subsidy when she closed on the $190,500 condo on July 2, 2007, records show.
Thirty-eight days later, Matis sold it -- at a profit of $29,500.
"I never even moved in,'' says Matis, now 28. "I just decided to sell it.''
The condo is no longer "affordable.'' Matis sold it to a suburban couple who, under the city's rules, didn't have to meet any income guidelines. Now, that couple is leasing it out.
It's one of 50 taxpayer-subsidized affordable homes at University Village that have been resold -- often within months -- for huge profits.
Those condos and town homes are no longer part of City Hall's affordable-housing stock.
Instead, they're now home to doctors and other professionals.
"That's disgraceful," says Ald. Toni Preckwinkle (4th), the City Council's leading advocate for affordable housing. "I don't know what kind of monitoring the city is doing. That certainly looks like an abuse of the program."
It isn't.
The city never took steps to stop affordable buyers from flipping their homes at University Village, the 58-acre development being built by three clout-heavy businessmen: William F. Cellini, who earlier this year was indicted on corruption charges along with former Gov. Rod Blagojevich; Michael Marchese, a friend of Mayor Daley, and Richard Stein, an ally of Illinois House Speaker Michael Madigan and other politicians.
That's just one of many loopholes with the development's affordable-housing program, a Chicago Sun-Times investigation found.
• The city required the affordable homes be set aside for families, but at least 67 percent were sold to young, single people instead. Those singles made, on average, $44,919 a year, according to records the city provided. Many of them worked for the city, state, university and other governments.
• Fifty affordable homes were resold by the original buyers for an average profit of $63,710 -- including six that resold for more than $100,000 over the original purchase price.
• Some of the affordable condos went to people who already owned homes, including Matis, the real estate agent. Another was William Kowal, a Chicago firefighter who already owned a home on the Southwest Side. Both Matis and Kowal flipped their affordable homes within months.
• One affordable condo was sold to Jeffrey Mauro, a 22-year-old whose father co-owns New West Realty, the company that was hired to sell University Village's 900 homes, including the affordable units. Mauro tried to sell his condo for a $144,000 profit but ended up leasing it out, records show. He still owns it.
• Some of the highest-income buyers of the affordable units -- including Kowal -- got taxpayer-financed subsidies, while some of the lower-income buyers got nothing.
The 187 affordable homes are among 4,354 that City Hall has subsidized since Daley took office in 1989. How many are still affordable? City officials say they don't know: They don't keep track of that.
The developers' attorney, Kathleen M. Vyborny, declined to answer questions from the Sun-Times. But in an e-mailed statement, Vyborny said Cellini, Marchese and Stein had "followed faithfully" the 9-year-old redevelopment agreement between City Hall and the University of Illinois to turn the storied Maxwell Street market into a "campus town."
City Hall mandated that 21 percent of the homes be set aside for affordable housing. That was the price for the developers getting as much as $75 million in city funds through a City of Chicago "tax-increment financing" district created to help pay for the project. The TIF money is being used to pay for streets, sewers and sidewalks, and to provide the developers with up to $2.5 million so they can subsidize some buyers of the affordable homes.
Affordable housing was one of the key points city officials used to justify razing the more-than-century-old Maxwell Street market to make way for the $750 million development that also includes new dormitories for UIC, as well as a 3,000-seat auditorium, conference facilities and stores.
But city officials acknowledge that the affordable-housing program has had problems.
"There were no restrictions on resale," says Molly Sullivan, spokeswoman for the city's Community Development Department.
In fact, in her e-mail, Vyborny says the city and the university "anticipated that buyers might resell these units. Buyers who resell their affordable housing units early -- before 10 years -- must repay cash grants they received."
Matis was among 89 people who received one of those taxpayer-funded subsidies that ranged between $10,000 and $25,000, property records show. But there are no records of anyone repaying those subsidies when they resold their homes.
Since the University Village deal was made, the city has changed its rules in an effort to preserve taxpayer-subsidized affordable housing forever.
"Today, we have in place policies that address the issue of the resale of affordable units because we recognize the value of long-term affordability," Sullivan says.
Those new rules limit, for instance, the amount of profit someone can make when selling a taxpayer-funded affordable home. Also, those homes can be sold only to buyers whose income meets city eligibility guidelines.
And city officials have decided that people who already a home cannot buy a taxpayer-subsidized affordable home.
What happened at University Village is evidence that City Hall has failed to ensure that affordable housing is available for people who need it the most, says Julie Dworkin of the Chicago Coalition for the Homeless.
"Something's going on that's not totally kosher in terms of these units getting resold right away and not remaining affordable,'' says Dworkin. "It just demonstrates that it's not benefitting people who are in great need of affordable housing."
Contributing: Art Golab
A sampling of who got to buy affordable housing at the city-subsidized University Village development:
Buyer: Johnny E. Morcos
Paid: $246,000 for a condo on Dec. 20, 2002
Sold: still owns it, though it appears to be leased
Morcos, a civil engineer with the Chicago Department of Transportation, was 24 when he qualified to buy his affordable condo in November 2001. Records show he was making $49,656 a year -- less than 100 percent of the area's median income. Morcos got a $10,000 taxpayer-backed subsidy that he will not have to repay if he sells the condo after December 2012. Three years after he bought at University Village, Morcos bought another condo on the Northwest Side, where he and his wife live. Morcos declined to comment.
Buyers: Florence Napoles and Lisa Napoles
Paid: $242,000 for a two-bedroom condo with a parking space on Jan. 29, 2003
Sold: for $272,500 on June 26, 2003
The Napoles sisters -- Lisa, then 28, and Florence, then 26 -- each made $23,040 in 2001 when the city qualified them as affordable buyers because their combined income was below 90 percent of the area's median income. They could not be reached for comment. Their mother, Phyllis Napoles, testified on behalf of her cousin, mob hit man Harry Aleman, during his historic retrial in 1997. Aleman was found guilty of killing Phyllis Napoles' ex-husband, William Logan, a Teamsters official.
Buyer: Victoria A. Fratto Czuprynski
Paid: $152,000 for a one-bedroom condo with a parking-garage space on Nov. 19, 2004
Sold: for $180,000 on Nov. 10, 2008
Czuprynski was 26, single and working for the agency that runs Navy Pier when she bought her condo. Her deed shows she was to get a taxpayer-funded subsidy, but it's unclear if she got it because parts of the deed were scratched out. The city was unable to provide records showing her income or other qualifications to buy the condo. She didn't return calls seeking comment. Czuprynski now works for the Illinois Department of Transportation. Her father, Anthony Fratto, was city comptroller under former Mayor Jane Byrne and is now an executive with the company that financed the renovation of Soldier Field. Cook County Board President Todd Stroger recently promoted her uncle, Joseph Fratto, making him the county's chief financial officer.
Buyer: Paul Glendenning
Paid: $186,500 for a condo on July 19, 2007
Sold: for $231,000 on Oct. 10, 2007
Glendenning, a former University of Illinois at Chicago tennis player and finance major, was 24 when he bought his affordable condo, with a one-year balloon mortgage, for $176,500. The city was unable to provide records showing his income or other qualifications to buy the condo. Glendenning, who declined to comment, never lived in the condo, according to the UIC doctor who bought it from him.
Buyer: Eric Brummett
Paid: $234,000 for a one-bedroom condo "with a breathtaking city view" and "huge deck" on Nov. 22, 2004
Sold: for $262,000 on March 10, 2005
Brummett, who could not be reached for comment, was 29 and single when he bought the condo. City officials were unable to provide records showing his income or other qualifications to buy the home.
Buyer: Jeffrey J. Gniadek
Paid: $231,000 for a one-bedroom condo with a parking-garage space on Nov. 1, 2004
Sold: for $259,000 on May 17, 2005
Gniadek -- then a single, 37-year-old Chicago cop who owned a home on the South Side -- made $71,032 in 2002 when the city determined he could buy an affordable condo, records show. Gniadek said he and another person would live in the condo, which allowed him to meet affordable-housing income guidelines. The developers gave Gniadek a $10,000 taxpayer-funded subsidy, which he should have had to repay. Gniadek said he couldn't recall any details about his sale of the condo. He's now on a leave of absence from the Police Department and acknowledges he is under investigation by the Drug Enforcement Administration after being arrested in Kentucky. He denies any wrongdoing.
Buyer: Yvette C. Powell
Paid: $245,500 for a two-bedroom condo on Oct. 4, 2004
Sold: for $333,000 on June 29, 2005
Then a single, 40-year-old flight attendant, Powell made $48,494 in 2001 when the city determined she could buy an affordable condo because she made less than 100 percent of the area's median income, records show.
Buyer: Jeffrey Mauro
Paid: $220,500 for a two-bedroom condo with a parking space on March 28, 2003
Sold: still owns the condo, which records show was rented as of July 2006
Mauro -- whose father, August Mauro, co-owns the real estate company that's selling the homes in University Village -- was 22 and single when he applied to buy an affordable unit in June 2001, shortly after construction began. The city determined he was eligible because he made $48,000 -- less than 100 percent of the area's median income. Mauro, who declined to comment, tried to sell the unit for $364,900 in 2006. He ended up leasing it instead. His real estate agent was Teresa Zembal, who worked for his father's real estate company. She also owned an affordable condo in University Village. She paid $191,500 for the condo in 2002, then resold it five years later for $248,000.
Buyer: William F. Kowal
Paid: $294,000 for a two-bedroom condo "with many upgrades" and a parking-garage space on Oct. 28, 2004
Sold: for $330,000 on May 23, 2005
Then a divorced, 40-year-old Chicago Fire Department lieutenant, Kowal already owned a house on the Southwest Side when he bought the affordable condo. Records show he made $63,177 in 2003 -- the year the city found him eligible to buy the condo because he made less than 120 percent of the Chicago area's median income. To help Kowal buy the condo, the developers gave him a $10,000 taxpayer-funded subsidy that he should have had to repay because he sold the condo in less than a year. "I don't know if I actually gave money back," Kowal said.
But how much of that is still affordable housing? City officials say they don't know.
They acknowledge some affordable homes have, in effect, vanished, having been resold -- with the new buyers not having to meet specific income thresholds.
Officials say they're trying to stop what's happened at University Village, where dozens of people bought affordable units, then resold them at huge profits.
Three years ago, the Daley administration helped create the not-for-profit Chicago Community Land Trust, which works to keep taxpayer-subsidized homes "permanently affordable." Buyers of affordable homes now get upfront subsidies and lower property taxes. In exchange, they sign 99-year renewable contracts in which they promise to live in those homes or sell them only to another income-qualified buyer.
If a home goes up for sale, the land trust has first crack at purchasing it. No matter who buys, there are limits on the profit the seller can make.
So far, the trust controls just 31 of the 4,354 affordable homes built citywide under Daley.
In addition to the affordable homes, the city also has seen 29,437 affordable rental apartments built since Daley became mayor.
| Year | Homes | Rental apartments |
| 1989 | 0 | 1,941 |
| 1990 | 90 | 1,361 |
| 1991 | 35 | 1,164 |
| 1992 | 52 | 1,139 |
| 1993 | 74 | 1,081 |
| 1994 | 101 | 2,199 |
| 1995 | 55 | 1,689 |
| 1996 | 121 | 1,331 |
| 1997 | 133 | 1,084 |
| 1998 | 267 | 1,154 |
| 1999 | 308 | 1,994 |
| 2000 | 84 | 1,115 |
| 2001 | 347 | 1,663 |
| 2002 | 305 | 2,388 |
| 2003 | 243 | 528 |
| 2004 | 488 | 1,360 |
| 2005 | 559 | 1,862 |
| 2006 | 504 | 1,872 |
| 2007 | 354 | 1,689 |
| 2008 | 234 | 823 |
| Total | 4,354 | 29,437 |
That's because they live in a City of Chicago "tax-increment financing" district.
Most of the property taxes they pay end up with the University of Illinois.
The university gets those taxes -- which totaled more than $4 million last year -- to pay for streets, sewers, sidewalks and other public improvements for the new development, which uprooted the historic Maxwell Street market. And every year through 2022, City Hall will continue to pass along all of that tax money to the university.
That's how TIF districts work. And University Village's Roosevelt/Union TIF district is one of the richest of the 125-plus such taxing districts that Mayor Daley has created across the city.
Under the city deal that created the tax district and put the university in charge of the development, 95 cents of every $1 in real estate taxes paid by University Village property owners goes to the Roosevelt/Union TIF. City Hall then gives 95 percent of the money back to the university to help cover its costs for developing University Village.
So far, the university has gotten more than $10 million from the Roosevelt/Union TIF district -- including $256,000 to create affordable housing in the development.
Some of the money has gone to three clout-heavy developers -- William F. Cellini, Michael Marchese and Richard Stein -- who were hired by the university to oversee the project and build the homes.
Before the Roosevelt/Union TIF District expires in 2022, city officials estimate the university will have collected between $75 million and $100 million.
TIF districts shift property taxes away from Chicago schools, parks, forest preserves and basic city services. But city officials say they also spur development that ultimately brings in more property taxes. Once the districts expire, the additional tax revenue will go toward schools and other basic government services.
In Chicago, any taxpayer-subsidized residential development has to include "affordable" homes, with the exact number of homes and the limits on buyers' income set by the city. For University Village, 21 percent of the 900 homes had to be sold to people who met these income guidelines:
* Half had to be bought by people who made no more than 100 percent of the Chicago area's median income -- which currently is $52,800 for a single person and $75,400 for a family of four.
* For the other half of the homes, the income guidelines were more generous. Buyers could make as much as 120 percent of the area's median income, which currently is $63,360 for a single person and $90,480 for a family of four.
Of the 187 buyers of affordable homes, 89 got taxpayer-funded payments of $10,000 to $25,000 to help them buy those homes, records show. That money was supposed to be repaid, on a sliding scale, if the homes were sold in under 10 years: If you sold after just one year, you'd have to pay back more than if you stayed for nine years before selling. The developers wouldn't answer questions about whether any buyers repaid that money or whether any other discounts were provided.