Residential Real Estate Investing Gone Wrong: A Story of The Better Housing Foundation
Through the years, real estate has become heavily intertwined with the American Dream. It starts with purchasing one building, then another, then another. Before you know it, you have an empire.
But sometimes that aspirational Dream quickly fades into a nightmarish hellscape for tenants, state officials, and alas, even the property owners.
Enter The Better Housing Foundation.
Ohio-based attorney Meredith Rosenbeck joined forces with Chicago lawyer and real estate investor L. Mark DeAngelis to form the organization back in 2015. After making grand promises to the state, they received approximately $84.4 million in loans.
Although many real estate investors start out by targeting newly constructed high-rises, The Better Housing Foundation instead went the opposite route, focusing on tax-exempt, low-interest municipal bond financing via low-income areas.
This relatively young nonprofit started with the goal of forever changing how low-income housing will be provided, aiming to provide safe apartments, help tenants to gain jobs, and even guide them towards healthcare solutions. They even claimed that they wouldn’t evict their tenants “solely on the basis that the tenant is unable to pay their rent” [LSP1].
However, after bringing numerous tenants to the facility, it was quickly apparent that a major clash between expectations and reality was about to occur, most notably within the property located at 7250 South South Shore Drive.
Excessive rainwater deteriorated the roofing, leading to leakage and mold growth throughout the premises.
A faulty elevator broke down multiple times, leaving disabled tenants stranded.
The boiler stopped running, taking out the heat and hot water with it.
And these are just three instances out of 1,000+ code violations.
One tenant, Latoya Gholar, was faced with brown water leaking from her bathroom ceiling. This soon created a mold problem, causing her diagnosed asthma to further worsen. She relied on an umbrella while using the bathroom for months.
Another tenant, Marlon Anderson, who lives in a six-flat that had a porch marked as a code violation. Although the porch was knocked down, Anderson was at one point left with a one-story drop-off out of his backdoor. While the porch is now being replaced, the nonprofit is still going back and forth with him over money that he withheld because of the building’s issues.
And that’s an example of when someone willingly withholds payment.
It was later revealed that in spite of their original claim to not evict tenants due to inability to pay, the leasing agreements contained language allowing eviction loopholes, including “a requirement that tenants short on rent had to “immediately” tell the landlord, in writing, and provide documentation proving hardship. The landlord then could, but didn’t have to, waive all or a portion of the rent” [LSP1].
This tale is sprinkled with other stories (now over 100) of tenants who simply were late or couldn’t afford to pay for their housing and were handed eviction notices.
As the situation grew dire, Mark Deangelis was dropped from his role and replaced by A. David Lynd, who owns a Texas-based law firm. Lynd orchestrated a deal with another client, the Florida-based nonprofit, Invest in America’s Veterans Foundation. After the Illinois Department of Revenue removed the tax breaks from the Better Housing Foundation, the board voted to transfer all of their buildings to the America’s Veterans Foundation.
To date, it’s still unclear where the future lies for the properties at stake. While the building at 7250 South South Shore Drive was recently shut down, multiple other units remain in play. The America’s Veterans Foundations recently brought on a new board of directors (the fourth one) to oversee the operation while they continually receive more code violations and simultaneously wade through their current batch of inherited issues [LSP2].
A defendant in 68 lawsuits, The Better Housing Foundation intends to go out of business, but they face over $85 million in debt. Their first payment is due June first with expectations that they will miss it.
As a real estate law firm, Lee Scott Perres, P.C. guides others through both real estate investing ventures and landlord/tenant matters. But ethics are important to our firm.
If you have a question or even just want a second opinion, please book a consultation at LeePerres.com.
Additional Reading
LSP1: http://graphics.chicagotribune.com/chicago-charity-housing-violations/
