Businessweek Archives

The Odd Couple Of Low Income Housing


Finance

THE ODD COUPLE OF LOW-INCOME HOUSING

To residents of Chicago's crumbling public high rises, Vincent Lane is a hero. Housing & Urban Development Secretary Jack F. Kemp calls him "one of the most progressive public-housing leaders in the country." A millionaire developer who in 1988 became head of the nation's third-largest housing authority, Lane took on the drug lords and gangs that had the city's projects in a stranglehold. Since then he has checked the rise of violent crime, boosted occupancy, and urged residents to take more of a stake in day-to-day management. "I've seen chairmen come and go," says Peggy Byas, a Chicago Housing Authority (CHA) resident since 1967. "He's the best." So what's a nice guy like Vince Lane doing with A. Bruce Rozet, a developer described by HUD officials as one of the nation's leading slumlords? On Oct. 10, Lane announced he would give up operating control of the CHA in November to run American Community Housing Associates, a new for-profit company. American Community plans to become one of the biggest landlords in the U. S. by acquiring 40,000 low- and moderate-income apartments spread across 26 states from Associated Financial Corp. of Pacific Palisades, Calif., whose chairman is Rozet. The properties, which Lane values at $800 million, were financed in part by HUD.

Lane describes the deal as "a leveraged buyout," with AFC providing the financing. Rozet claims that AFC is only providing working capital to Lane's new company. Whatever the case, the two will have a continuing financial relationship.

The apparent rationale behind the deal is to increase American Community's chances of securing additional HUD financing to rehabilitate the properties. Relations between HUD and Rozet are not warm. A top HUD official, Under Secretary Alfred A. DelliBovi, once called Rozet and his AFC associates "slumlords" and "sewer rats." HUD later suspended AFC from doing business with the agency for 18 months, ending last July. AFC is still under investigation and could be permanently barred from doing business with HUD. Rozet describes the charges by HUD as a Bush Administration campaign to drive him out of business.

Rozet admits his relationship with HUD is shaky. While there is no guarantee HUD will help American Community, he adds, "Vince Lane and his company may be better able to work with the government." During Lane's tenure, CHA's HUD funding has nearly quadrupled, from $30 million in 1988 to $108 million this year. "If anyone can make a buck and achieve a social goal, it's Vince," says First Boston Corp. Managing Director Ronald T. Gault.

Lane and Rozet are not only improbable partners but their relationship goes back a long way. Lane says he first worked with Rozet on a St. Louis project 17 years ago. He describes Rozet as "probably the person who pioneered the concept of syndication of low-income housing in the late 1960s." Syndication involves selling projects to a group of investors, who get tax credits they can write off against personal income.

Some of Rozet's tenants would describe him in terms less flattering than "pioneer." Rozet has been embroiled in a bitter court battle since 1987 with residents of Tyler House, a 301-unit Washington (D. C.) housing project. In an $ 11.5 million class action, the tenants complain that Rozet and his partners did nothing to remedy such conditions as urine-soaked hallways, broken fire doors, and rodent infestation. Rozet denies any wrongdoing.

GOOD FEELINGS. Rozet also denies that he is a slumlord. "Nobody could say we haven't strived to improve housing conditions around the U. S.," he says, adding that only 10% to 15% of AFC's properties are seriously run-down.

Lane is looking forward eagerly to his new job. "Sometimes, one person's problem becomes another person's opportunity," he says. After fixing up the projects, with HUD's help, he intends to sell them. He hopes at least some of the buyers will be the tenants themselves. His ambitions don't stop there either. He and Rozet are lobbying Congress and black South African leaders to approve $2 billion in federal loan guarantees to build 50,000 houses in South Africa.

Lane's good cheer doesn't fade even when asked about Rozet's dubious past. "I've had Oprah Winfrey call me a slumlord," he laughs, referring to the talk show host. "And she's right. Is there a bigger slum than the Chicago Housing Authority?" Still, even some of Lane's biggest boosters in the Chicago projects may wonder about the company he's keeping.Julia Flynn Siler in Chicago, with Kathleen Kerwin in Los Angeles and Christina Del Valle in Washington


Race, Class, and the Future of Ferguson
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus