The Boston Globe today spotlighted abuses of affordable housing, hiliting the unusual access provided to a high-level City employee. The BRA official, with the approval of BRA Director Thomas O'Brien, purchased a 3-bedroom waterfront condo, subsidized as an affordable unit and sold at a fraction of its market value.
Although this article hilites a Charlestown waterfront housing debacle, it is published on the SAND website because it echoes our concern that City Hall continues to provide staggering examples of housing and commercial opportunities to meet the needs of upper-income consumers and politically connected developers, even dipping into the meager trough of "affordable" units supposedly reserved for moderate income buyers.
Little planning is occuring to actually zone for a significant mix of affordabilities, and ongoing BRA zoning plans for South Boston waterfront development are absolutely devoid of vision for lower or middle-class opportunities -- residential, recreational or otherwise. The BRA should be held accountable for providing special (possibly illegal) access to those housing units deemed "affordable" by developers at a significant public cost -- the public cost of zoning variance approvals in building heights, densities and uses negotiated by the developers in exchange for providing affordable units.
SPOTLIGHT REPORT Needy lose out at Navy Yard
High-income buyers cashing in on subsidized waterfront condos
By Stephanie Ebbert and Matt Carroll, Globe Staff, 10/07/99
The Boston Redevelopment Authority has allowed Charlestown waterfront condominiums built with government subsidies for working class families to be resold at steeply discounted prices to high-income buyers - including Matthew J. O'Neil Jr., the BRA's $91,789-a-year chief of staff.
In June, O'Neil's superiors, including BRA Director Thomas N. O'Brien, cleared O'Neil to buy a three-bedroom Navy Yard condominium with a harbor view for just $158,462 - even though a city policy adopted in 1988 stipulates that such a unit can be resold only to families that meet strict income guidelines. O'Neil is single, and his income is almost three times the allowable limit.
Comparably-sized units at Flagship Wharf, a market rate condominium building in the Navy Yard, are listed for sale between $559,000 and $849,000.
Mayor Thomas M. Menino, in an interview yesterday, expressed anger at both O'Neil and BRA Director O'Brien, saying that both men exercised poor judgment and that O'Neil appears to have taken advantage of his position.
Even though escalating housing costs have the city scrambling to produce new units of affordable housing, the Globe Spotlight Team found that the BRA has routinely allowed subsidized units at the 50-unit Charlestown Navy Yard Rowhouses to be sold without regard to the buyers' income. Many buyers, O'Neil among them, plugged into an exclusive word-of-mouth network that often produced offers within hours of a unit becoming available.
Since the complex was first occupied by legitimate income-eligible families in 1989, 20 units have been resold - with none of the buyers screened to ensure they were low or moderate income, as the city's 1988 resale policy requires.
Instead, the Globe found, BRA officials have signed off on sales to buyers who include an auto dealership executive, a part owner of a nearby waterfront restaurant, and even a retired couple who own a house with a water view in Falmouth, another Falmouth condo, and a resort condominium in Naples, Florida. Two other buyers of the subsidized condominiums apparently paid cash, according to real estate records.
Menino said he will ask O'Brien, who is in Israel until next week, ''whether Matt O'Neil should continue in that job.'' As angry as he is at O'Neil's action, Menino said, ''I have an even bigger concern about the people who approved this.''
Even if what occurred was legal, Menino added, ''their judgment screwed the people of this city.''
Menino, who said he was unaware of the sales until he learned of the Globe inquiries, agreed that the intent of city policymakers was that subsidized units be restricted to needy families. However, Menino said that he believes there was no legal barrier to the sales. But he said he has ordered an immediate review to ensure that only eligible families can purchase the units in the future.
O'Neil, who joined the BRA last year, had served as chief of staff for former US Representative Joseph P. Kennedy II. In 1996, he was the Massachusetts director for the Clinton-Gore reelection campaign.
O'Neil defended his purchase as appropriate, and suggested that a $90,000 salary is not a lot of money. But O'Brien, in an interview from Jerusalem last night, said he erred in allowing a single buyer to purchase a unit that should have been sold to a 4-person family of limited means.
An ever-growing number
The number of those families is growing rapidly: The city's Department of Neighborhood Development, which is responsible for most of the city's affordable housing, estimates that 39,000 families who pay more than half their income for rent are eligible for housing subsidies of some sort. In many neighborhoods, scores of applicants sign up for lotteries for each affordable unit that becomes available.
The Spotlight Report on the Navy Yard condos is the latest in a series of articles since April that has focused attention on allegations of wrongdoing or favoritism in the actions of municipal officials in Massachusetts.
Original Navy Yard buyers, who had to meet strict income criteria, decry the changes that have occurred, noting that the ranks of young families who were the first owners have dwindled, replaced by professionals who often drive expensive cars.
''I just went for a walk down there maybe a month ago. It was all Jaguars,'' said Ed Elwell, an electrician who sold his unit in 1992.
Many regret the loss of unique housing they believed would always be extended to families like themselves.
''For Eddie and I, we knew it was a stepping stone. We didn't plan on living there forever,'' said Patricia Elwell. ''But we thought someone else would have the same opportunity we had.''
Nearly a dozen present and former city officials who helped develop the resale policy, or who oversee it at the city's Department of Neighborhood Development, have said the city policy is clear, and also applies to the semi-autonomous BRA: All such subsidized units can be purchased only by first-time homebuyers who meet federal income guidelines - currently no more than $47,800 for a family of four. In return for the subsidies, resale prices are limited to an annual increase of just 5 percent. Resale buyers must meet the same income restrictions.
Peter Dreier, who was the BRA's Director of Housing and former Mayor Raymond L. Flynn's principal housing adviser, said the resale restrictions were adopted in 1988, in a booming housing market, ''as a way to preserve affordable housing units over the long-term for low and moderate income families.'' There could be no doubt, Dreier and others said, that affordable units had to be retained for eligible families.
At both the Department of Neighborhood Development and the BRA, the deeds for subsidized units sold to eligible families contain the resale restrictions, including language giving the city the ''right of first refusal'' to buy the unit - the legal device the BRA was supposed to use to steer resale units to low or moderate income buyers.
But a Globe review of resale deeds for the 20 units, some of which have turned over more than once, shows that BRA officials routinely waived the city's right - the legal loophole cited by Menino - thereby enabling sellers to market their units to anyone. By the accounts of several present and former city officials, the BRA had little interest in ensuring the units were conveyed to working class families.
Against that backdrop, deep-pocketed buyers, alerted by savvy realtors, have taken advantage of the resulting bargains: buying at prices that were capped with the intent that deserving families would be the resale buyers.
Even during the last housing downturn, the units went quickly.
Joseph and Patricia Kelley found a buyer in 1993, two hours after posting a ''unit for sale'' sign in the window. In 1996, Patricia Kenny had a buyer by 10 a.m. the Sunday morning her ad ran in the Globe.
The best of intentions
When the condo development was built in the late 1980s, it was constructed on a foundation of good intentions.
For $1, The BRA sold the defunct Navy property between First Avenue and Thirteenth Street to let the Bricklayers and Laborers Non-Profit Housing Co. create affordable, brick row homes, at a time when construction work was scarce. The project was bolstered by more than $1 million in city subsidies while the Massachusetts Housing Finance Agency and Shawmut Bank provided below-market-rate financing to the qualified buyers.
''Absolutely, it was for families that qualified. Not for well-to-do, not for the Yuppies, but for needy families,'' said Thomas J. McIntyre, the long-time Bricklayers leader who spearheaded the project. McIntyre said he assumed that any resale units would go to needy families as well.
Indeed, a 1989 letter to prospective owners declared: ''With this help, many families who could not afford to purchase a home in the private market will be able to own their own home. To keep these benefits for future buyers, certain conditions are placed on the use and resale of the property.''
Thanks to one of those conditions - capping the sales price - bidders cannot legally offer a seller more. They can only rely on being there first - or distinguishing themselves with their ability to close a deal quickly. Several former owners said they sold their units to friends or to friends of realtors, who came knocking first.
The most controversial up-market sale, to the BRA's O'Neil, occurred in much the same fashion. But O'Neil apparently benefited as well from his BRA position.
Olivia Chiu, whose parents moved their three children from a one-bedroom apartment in 1989 to buy a Navy Yard condo, said they had several potential buyers for the unit O'Neil bought from them on June 18. They chose O'Neil in part because he was able to close quickly.
''The realtor told me, `If you're going to sell it to this person, he has the money, he's pre-approved and he even works for the company and knows the person who writes up the approval. I don't think you'll have to wait,''' Chiu recalled.
O'Neil also had an unusual mortgage. Taking legitimate advantage of the condo's location in a lower-income census tract, O'Neil put down just $12 for the unit, securing a 100 percent mortgage through NationsBank.
Charlestown Navy Yard Rowhouse owners also get a year-by-year subsidy from the city - in the form of reduced property taxes, which are based on the artificially deflated value: Taxes for O'Neil's unit are just $728 a year.
On the advice of the BRA counsel, Kevin J. Morrison, O'Neil said he also wrote a letter of disclosure to BRA Chairman Clarence Jones explaining his intention to buy into the BRA redevelopment project.
O'Brien, reached in Israel, said O'Neil told him of the planned purchase, but O'Brien said he was unaware of the large size of the three-bedroom unit, which he called ''inappropriate.''
Asks review of sale
''If you are asking whether I would rather see a family of four living in that apartment, the answer is yes,'' said O'Brien. He also said he has asked an outside attorney to review the sale and expects to have a report by tomorrow.
O'Brien defended his chief of staff, but added, ''People do make mistakes and I will await the receipt of this report and take appropriate action.''
O'Neil, 45, said his purchase was legitimate, noting that he is a Charlestown native and insisting there was no impediment to his buying the unit.
In an interview at the BRA, O'Neil acknowledged that some people will consider his income excessive for someone getting a subsidized unit. But such a view, he said, would be subjective. ''I would assume you get people who would say otherwise,'' he said. ''I don't think $90,000 is a lot of money.''
He also noted that he has no potential to profit on the investment, since any future sale price is capped.
''As a prudent investor, my dollar is better spent elsewhere but I chose to put it here with no upside, knowing it was going to continue to be affordable,'' he said.
Menino, in an interview late yesterday, said he had little use for O'Neil's defense, even if the purchase was technically legal. The mayor, who noted that he and other top officials now meet weekly to devise plans to create more affordable housing, said he is particularly exasperated to discover that subsidized units are being sold to buyers like O'Neil.
''You work for the BRA and you cannot take advantage of your position like this, and that's what apparently happened here,'' Menino said. ''There is poor judgment all around on this one. How could he, as BRA chief of staff with his salary, gain access to a subsidized three-bedroom condo on the waterfront when he is single, and then get a 100 percent mortgage?''
Menino said he has asked Aaron Gornstein, the director of Citizens' Housing and Planning Association, a non-profit housing advocacy group, to oversee a City Hall review that ensures that no affordable units are sold again to market rate buyers.
If top city officials were unaware of the sales, potential buyers found ways to learn about the opportunities created by the lapses at the BRA.
Steven C. Bonnell, who bought his condo unit in March 1995 for $146,775, said he knew from living elsewhere in Charlestown that the development had restrictions on sales and income. However, he said the owner of Navy Yard Realty, the real estate firm that facilitates many of the sales, called him and told him a unit was available - and he was eligible.
He admitted that as a 25-year old salesman for the well-established Bonnell Motor Inc., a Ford dealership in Winchester, his annual income placed him ''somewhat above'' eligibility for the unit if the restrictions were enforced.
''I always thought there were restrictions, so I was surprised to learn that the `income-eligiblity' restriction was no longer in place,'' said Bonnell, who is now sales manager for the family-owned dealership. ''The only restriction that is in place is the 5 percent annual increase in value.''
Kathleen A. Schatz, owner of Navy Yard Realty, did not return a phone call to her Charlestown office yesterday.
Susan Baumann, who owns a medical billing company and is married to a stock broker, said she heard in 1995 about the low-cost, three-bedroom waterfront condominium from a friend, whose father-in-law was the realtor.
''When we saw it, we said let's definitely get this, this is insane it's so cheaply priced,'' she said.
By April, the Baumanns had saved enough money to buy a place in southern New Hampshire, she said. To sell, she said, she merely had to ''tell somebody you like that you're selling a place and they can get a three bedroom for $160,000 with a water view with a parking space - and people just jumped at that.''
Baumann sold her unit for $166,467 to a friend, Peter White, who is one of the owners of Tavern on the Water, a Navy Yard restaurant. White did not return phone calls.
Joseph B. McCadden also said he knew that the units were initially reserved for income-qualified people when he bought his one-bedroom condo in 1994 for $110,000. However, he said of his purchase, ''When you resell, you can sell to anyone.''
McCadden also owns a house in Falmouth assessed for $194,200. Last year, he bought two condos: in Naples, Fla., for $123,000, and in East Falmouth for $24,900.
The seeming disparity leaves some original, moderate-income buyers feeling they're the ones providing the subsidy to the wealthy.
''If they're going to sell to anybody, we should be able to get whatever we want for the property,'' said Mary Rizzo, an original Navy Yard buyer who has lived there since 1989. ''The whole concept has gone through the window, so why can't we make more money ourselves?''
Stephen Kurkjian and Walter V. Robinson of the Globe Staff contributed to this report.
HOW TO CONTACT SPOTLIGHT
The Globe Spotlight Team can be reached at 617 929-3208.
Confidential messages about municipal corruption can be left on voice mail at617 929-7483.
The e-mail address is:
The mailing address is: The Boston Globe, 135 Morrissey Blvd., Boston, MA 02125
THE GLOBE ON LINE
The Spotlight Team's series on municipal wrongdoing that was published in April, as well as follow-up articles, are available at http://www.boston.com. Keyword: Spotlight.
This story ran on page A01 of the Boston Globe on 10/07/99. © Copyright 1999 Globe Newspaper Company.
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