Ever since former Housing Secretary Jack Kemp picked his way through a Washington housing project in 1989 and pronounced its conditions “scandalous,” A. Bruce Rozet has been a target of federal housing officials.
“The poster child for bad landlords” is how one housing consultant described the California financier.
A top federal housing official once said that some of Rozet’s “tenants are still required to live like rats.” And regulators have sought to cut into Rozet’s and his companies’ holdings.
Yet the charming man with the Los Angeles mansion for a home remains one of the nation’s biggest operators of low-income housing, including a handful of projects in Chicago. His partnerships or affiliates still control about 40,000 units in more than 200 properties nationwide.
Taxpayers and tenants may wonder what gives?
To hear government officials tell it, Rozet’s endurance demonstrates how bankruptcy laws and regulations delay efforts to get allegedly bad landlords out of the business of government-subsidized housing.
But his case also shows how the federal government’s own housing policies have created or worsened many of the problems that now bedevil efforts to improve living conditions for many of the nation’s poor.
The spotlight returned to Rozet earlier this year when a fire ripped through a South Side building owned by a Rozet-managed partnership, killing four people and injuring dozens more.
Rozet’s critics cited the blaze at the Lake Grove Village complex as another example of shoddy conditions connected to a financier who, they say, has made millions by providing miserable housing to the poor. Yet they also acknowledge that the federal government shares the blame.
“HUD (the U.S. Department of Housing and Urban Development) created these guys. Now they’re on their (hit) list because the properties have deteriorated so much,” said Denice Irwin, lead organizer at the Metropolitan Tenants Organization. “Whose fault is that? It’s both the owners and HUD–the owners for not taking care of the needs of the property, and HUD for not monitoring the ownership or management.”
The 67-year-old Rozet, whose friends and associates include Jesse Jackson and former Chicago Housing Authority chief Vince Lane, is by turns vilified as a slumlord and praised as a low-income housing expert who has raised millions for distressed housing.
The amiable developer says he’ll take the criticism. “I can bear the badge of being the slum landlord if it means that I can help improve living conditions in the inner city,” he said in a recent interview. “Every other group red lines it and doesn’t want to deal with it, precisely because HUD will (attack) them if they get involved.”
That self-assessment may be a bit generous. But, as Rozet points out, 90 percent of his firms’ properties “meet or exceed all HUD standards”–a point HUD officials don’t dispute.
And affordable housing advocates note that HUD, in its zeal to punish Rozet, often has worsened conditions in some developments by delaying the transfer of the properties to new owners–for fear that Rozet would somehow retain some kind of hidden interest in the property.
“HUD has been so abused by Rozet that in some respects HUD may not even understand a good deal when he’s involved, because the fear factor of being taken again is so great,” said Howard Gong, an affordable housing consultant in San Francisco who found Rozet to be “a very reputable businessman” in negotiating two deals with him.
Gong, who noted that the popular view of Rozet is that he is the “poster child for bad landlords,” said critics of Rozet must recognize that “everything he did had to be done with HUD’s concurrence.”
HUD officials say actions by Rozet’s company, Los Angeles-based Associated Financial Corp., partly reflect housing programs that for too long have given owners of affordable housing little incentive to make their buildings livable.
In nonsubsidized apartment buildings, owners lose clients when they fail to maintain the place. But owners of federally subsidized developments are insulated from tenants’ complaints.
The government pays rent subsidies to such owners regardless of the condition, said Helen Dunlap, a top HUD official in Washington. “Unless,” she added, “we get out there and enforce, which we’re trying to do.”
HUD has enforcement actions pending on 100 pieces of real estate nationwide, according to Dunlap. “We’ve forced a change of management in 500 cases around the country in the last 30 months,” she said.
Those efforts are complicated, however, by real estate and bankruptcy laws. The latter statutes are meant to protect debtors but often delay the federal government’s ability to take ownership or become a receiver of a property for as many as two years, Dunlap said.
When Kemp, President George Bush’s housing chief, went after Rozet, the developer said he was merely a convenient scapegoat of partisan politics.
President Clinton’s HUD secretary, Henry Cisneros, has continued the push to get Rozet to divest his companies from nearly a third of their properties.
Rozet says Cisneros persists in criticizing him to deflect attention from HUD’s unwillingness “to accept the responsibility for troubled inner-city housing.”
In June 1994, HUD reached an agreement with Rozet by which he promised to try to divest his companies of 65 properties with poor financial and physical conditions; about half of those have since changed ownership. In addition, Dunlap says, HUD will “screen out” any requests by Rozet’s companies to acquire new properties.
Financiers such as Rozet made their money in the early ’80s by selling tax shelters to investors that helped finance housing construction. After the 1986 Tax Reform Act ended those shelters, he and others turned to marketing low-income housing tax credits–the only tool left for developing affordable housing.
Under the tax credit program, which Congress is threatening to end, corporate investors buy the credits that, in turn, serve as seed money for affordable housing developers to obtain private bank loans.
HUD officials recognize the faults of the current system and are trying to make fundamental changes. Under the new approach, HUD offers to lower or forgive an owner’s government-backed debt, but it also ends the rent subsidies going to the property and pegs the rents to the private market.
In the complex world of housing programs, though, even that approach is problematic.
“Many of those buildings are in markets so poor and the available rents are so dismal that you cannot support the operating costs, even if it’s debt free,” explained Marilyn Katz, a Chicago consultant who assists affordable housing developers.
In making subsidized housing more livable, HUD must deal with more than just landlords like Rozet; it must revamp its own policies.
Gong, the consultant from San Francisco, argues that Rozet’s mixed record should be compared to the nation’s big public housing landlords.
“Is Bruce any worse than the Chicago Housing Authority?” Gong asked. “I don’t know.”
