Battle of the do-gooders: Who'll get to buy the Carmen-Marine apartments? | Neighborhood News | Chicago Reader

Battle of the do-gooders: Who'll get to buy the Carmen-Marine apartments? 

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In a perfect world, the tenants and managers of the Carmen-Marine apartment building would have joined forces months ago. By now they'd be the model of resident-run subsidized housing.

But this is Chicago, not utopia, and both sides are still engaged in a contentious, childish spat over how the building will be run that started a year and a half ago.

"Management has been arrogant, and their plan doesn't make sense for this building," says Kathy Osberger, president of the Carmen-Marine Tenants' Association, Inc., which wants to buy the building from its owner, Peter Kollinger. "It would displace the working poor and ruin a great opportunity to make tenant management work."

Salvatore Ferrera, president of the not-for-profit Metropolitan Housing Development Company, which manages the building and wants to buy it, has a decidedly different point of view. "The tenants' group is misleading the public," says Ferrera. "Their plan will force the poorest tenants out by raising their rents and will ultimately lead to the building's demise."

At stake is a 27-story, 300-unit high rise at the intersection of Carmen Avenue (5100 north) and Marine Drive. It was built in the late 1960s with a federally guaranteed low-interest loan; in return the Department of Housing and Urban Development regulates rents and limits occupancy to low-income tenants.

There's only one hitch: after 20 years the owner, with HUD's approval, can prepay his 40-year mortgage in one lump sum and escape HUD's rental and occupancy regulations. (HUD also has to approve any sales.) In the late 1980s, many activists worried that a mass of prepayment conversions (particularly in Uptown, which has 11 such buildings) would displace thousands of poor residents. Most of those prepayments never happened.

It was right about then that Metro Management Inc., MHDC's for-profit subsidiary, started managing the Carmen-Marine complex. "Our goal was to buy it from the current owner and preserve it for the low-income," says Ferrera. "We're old-fashioned liberals; we believe that society has an obligation to house the poor."

From Ferrera's perspective, the venture had both potential and risk. The tenants were a diverse and stable group of blacks, whites, Asians, Hispanics, and recently arrived Eastern European immigrants. But the building needed many repairs.

"Repairs cost money, and to get money we had to raise the rents," says Ferrera. "There hadn't been a rent increase in eight years. By January 1990, a one-bedroom there rented for $243 a month, not a bad deal for a room which might have a splendid view of the lake."

So in early January, 1990, MHDC notified tenants of their intentions to ask HUD for permission to raise rents. "The notice came in an unsigned flier that they slipped under our doors," says Osberger. "They weren't even calling for a meeting so that we could meet them and they could explain their case."

Uncertain about their building's future, Osberger and others formed the tenants' association and immediately requested a meeting with Ferrera. Two months later he complied.

"I didn't think it my job to go around shaking hands with every tenant," says Ferrera. "In hindsight, I realize we should have shown a better sense of public relations."

The meeting took place on March 22, 1990, in the field house of a nearby park. It was then that Ferrera unveiled his plan to buy the building and operate it as part of HUD's Section 8 program. "The government guarantees that all eligible tenants pay no more than 30 percent of their income for rent," says Ferrera. "The rest of their rent is picked up by HUD."

Ferrera also announced that on March 1 he had officially asked HUD for permission to raise rents by $70. "That revelation took us by surprise," says Osberger. "HUD requires that landlords notify residents of any rent-hike proposals." But she says tenants never got a second notice.

Residents thought the rent hike was exorbitant, and they began to worry about Ferrera. He seemed patronizing, a little too old-fashioned. Apparently he didn't understand that it was a new day in low-income housing. Tenants and managers were supposed to be partners; the days of top-down ultimatums were over.

Their doubts infuriated Ferrera. Metro managed 2,000 low-income units. The company had been in the business for years. How dare they suspect him of hiding the rent notices? If they were missing, some tenant must have taken them down. Did they truly believe that one-bedroom apartments would forever rent for $243 a month?

In August HUD finally settled on a $40 rent hike. By then any chance of reconciliation was gone. Each side had made blunders: The tenants had enlisted the aid of an outside activist, whose heavy-handed organizing efforts caused needless provocation. As for Ferrera, his patience was short; he ended more than one phone conversation by slamming down the receiver. Meetings were disrupted by shouts as each side accused the other of lies and distortion. And all the time the tenants' group was devising its own buy-out plan.

The tenants' plan was based on HUD secretary Jack Kemp's proposal to give tenant groups a one-shot grant to buy, renovate, and run their own buildings. To help understand the program, the residents brought in an expert on tenant-based management, Dan Burke, vice president of the Chicago Community Development Corporation.

"We had to build support for our plan, which was not easy since we had to translate so many complicated details into so many different languages," says Osberger. "But it was very heartening to see how committed everyone was. Support was overwhelming. The tenants want the plan to work. There was a unity, a sense of purpose that defied all language barriers."

The plan proposed that rent levels be maintained while residents negotiated a sale with the owners and HUD. After that, the tenants would calculate their monthly payments based on their needs. A contingency fund would be created to meet unexpected expenditures, like a rise in insurance premiums. They would apply for a 50 percent reduction on local property taxes and install new windows to trim their heating bills. With planning, perseverance, and a little luck, they would keep expenses down.

"If you take the proper steps and plan well, you can contain expenses," says Burke. "Put it this way: there are no projected rent increases that we can objectively determine at this time. Yes, there are risks that such increases might come along. But there are risks to any venture."

At one point Ferrera distributed fliers highlighting his plan's benefits. But the tenants' group wasn't swayed. Ferrera's proposal would keep the building under federal jurisdiction, meaning tenants would pay no more than 30 percent of their income for rent. For the building's poorest residents that would mean a decrease from their current rents. But not all the residents are poor enough to qualify for the rent break; there are teachers, clerks, receptionists, and not-for-profit activists like Osberger who think of themselves as lower-middle-class, or working poor. Their salaries are low enough to get them into the building, but too high for them to benefit from the Section 8 program.

"As you make more and more money Section 8 becomes a losing proposition," says Osberger. "Sure if you make, say, $12,000 a year then your rent would go no higher than $300 a month. But what if you're supporting a couple of kids and you're making $24,000? Your rent would go up to $600. I've seen it happen before: rigid government formulas . . . drive out the working poor. We're not against low-income residents; we wouldn't live here if we were. But you don't want a huge concentration of low-income people. Diversity is the key to success."

Moreover, Burke insists that the tenants' plan would not displace any low-income renters. "The law requires that tenants have the absolute right to obtain Section 8 assistance," says Burke. "We leave it up to the tenants. If they want Section 8, fine. But the MHDC plan compels all tenants to take Section 8 whether they want it or not."

Their message struck a chord with politicians and nearby residents, many of whom back the tenants' group. Two retired developers, Howard Landau and Herbert Heyman, working in a program supported by the Jewish Council on Urban Affairs, went so far as to underwrite the tenant group's initial buy-out costs with a $250,000 loan.

They announced the loan at a press conference attended by reporters from every major newspaper and television station. But Ferrera wasn't impressed. As he saw it, the reporters were being duped, not so much by the residents as by Kemp's plan itself. The plan is based on the faulty premise that maintenance expenses in a high rise like Carmen-Marine can be met at rents low-income residents can afford.

"The beauty of Section 8 is that the government supplies a steady stream of revenue that will enable us to pay the bills," says Ferrera. "Their plan assumes that you can contain expenses. Oh sure, things might go well for a year. Then what? They say they'll apply for a tax break. Well, what if they don't get it? They say they'll install new windows. But what happens when the gas and electric companies raise the rates? I can see them going back to HUD in a few years with their pockets empty and their hands out. HUD will tell them, 'Sorry guys, it's not our problem; you bought the building.'"

To counter the publicity the tenants' plan was getting, Metro employees circulated their own flier at the press conference--a tactic that only made the tenants angrier and drew little interest from the press.

Still Ferrera persists. Under HUD guidelines, 75 percent of the residents must approve a tenant buy-out plan. The deciding issue, then, is how many tenants would benefit from a Section 8 plan like Ferrera's. Ferrera says at least 240 tenants would; the tenants' group disputes that estimate.

"We went over both plans with the tenants, and I can only surmise from their responses that a large majority would not benefit from Section 8," says Burke. "If they did we would be pursuing a Section 8 plan; we don't have any ideological biases. One way or another, the final decision will be left to the tenants."

Art accompanying story in printed newspaper (not available in this archive): photo/Charles Eshelman.

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