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Houston's Housing

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Many housing advocates were also angry when the city's housing authority moved its centrally located offices to a building outside the Loop that's owned by a client of Duddlesten's realty management firm. They say it's difficult for the housing authority's clientele to reach the new office, which is on Fountainview between Westheimer and San Felipe.

"They moved further out to the west side of town, and now it takes a couple of bus transfers to get there," says Sissy Farenthold, a prominent housing activist in the city. "It seems like another flagrant example of not serving the needs of their people."

On March 3, 1993, Duddlesten Management Group and Duddlesten Realty Advisors Inc. contracted with the city for due diligence -- physical inspection, financial analysis and market research -- of Tara Hall, Winwood Club, Bellfort Southwest III and Bellfort Southwest IV. Austin attorney Larry Paul Manley was hired on to negotiate the purchase prices and the percentage of low-income units to be set aside.

Bingham said it was around this time that she started to hear the question, "Why was the city going into the apartment business?"

"We felt going in that the city could not only purchase the properties and put the rent restrictions on them, but rehab them if necessary," she says. "We felt that, opposed to them falling into the hands of some groups that might want to come back to us and borrow money to do it, we may as well do it ourselves."

But, Bingham says, after the city's consultants entered the negotiations, she learned that not only could the city limit its repair costs, but that serious money could be made reselling the properties.

That was a twist the RTC apparently never anticipated. When the agency caught wind of the city's plan to buy the complexes, then flip them for a hefty profit, it balked.

"We told them the intent of the program is for you to own this property, not for you to take it and resell it," said Juan Patlan, the RTC's regional director for affordable housing, at the time. "We can sell it to private investors just as well as you can."

Patlan referred the matter to Washington, but there was little the RTC could do to stop the city's profiteering. The law was clear: the city of Houston had first dibs on the properties, and the RTC could do nothing about what the city did with them, beyond requiring that the for-profit investors who bought them continue to set aside units as affordable housing.

But then the RTC added a twist of its own, prompting the city to cry foul. In a draft of the Bellfort Southwest III contract, the agency inserted a clause stating that any profits made from resale must go toward more affordable housing.

The city's lawyer, Manley, deleted the clause and sent the contract back. When the RTC persisted, Manley zipped off an irate letter, calling the reinvestment mandate "untenable" and adding that the city had never agreed to such a "restriction."

Not wanting to delay the purchases any longer, the city didn't put up much of a fight and finally agreed to the stipulation. But other evidence suggests that city officials weren't up nights thinking of ways their new apartment units could best help the working poor. Instead, they had already discovered how to play the RTC affordable housing program like a fiddle.

As the city edged closer to buying its first four complexes, Lanier wrote a letter to Louis Sims, a vice president at Pennzoil Company, telling Sims that selling Winwood Club would net a "substantial profit." He noted that 35 percent of the units would have to be set aside for low-income tenants. But, the way the mayor understood it, that meant a family of two making $27,000 a year or less.

"I am not sure of the exact percentage," the mayor wrote, "but our real-estate advisors have told me that the present composition of the Winwood apartments already exceeds this goal."

Yet across town, Lanier was whistling a different tune. About the same time that he wrote Sims, Lanier sent a letter to the Reverend Bill Lawson, pastor of Wheeler Avenue Baptist Church and a powerful figure in the black community. The correspondence followed a meeting Lanier had with Lawson to discuss how the city planned to replace the 850 public-housing units it wanted to demolish at Allen Parkway Village.

Lanier outlined how the RTC program worked and explained the set aside requirements. He said that of the RTC units the city was preparing to buy, "at least 80" would be "coordinated" with the city's housing authority. He also said the city would be buying other properties from the agency and that units from those would count toward replacement as well.

Where along the way that intention was jettisoned -- if it was ever seriously considered -- is unclear. Lanier now calls the housing authority "a separate bailiwick" of old units that can't support themselves and can't be economically repaired. With the RTC purchases, he says, the "population we're undertaking to address" are those that fall within the HUD guidelines.

"You may not agree with the federal program, I don't know," says the mayor. "Pretty much what we're trying to do is provide housing for persons who -- and you can say they're not poor if you wish -- persons who are working for a living. This was an economical way to provide those units. I regard it as a public service."

Not long after the mayor's letter to Lawson, the city closed the deals on four bargain-basement buys from the RTC:

* Tara Hall, 166 units, was purchased in November 1993 for just $215,534. Two months later, the city sold it to Houston condominium developer Charles Nickson for $750,000.

* Also in November 1993, the city paid a meager $250,000 for the 96-unit Bellfort Southwest III and $1,117,480 for the 372-unit Bellfort Southwest IV. The city owned them for 18 months -- during which time Wayne Duddlesten's Cornerstone Construction did $780,250 worth of repair work on the complexes -- before selling them last May to Joseph Guglielmo of Los Angeles for a total of $4.4 million.

* In February 1994, the city paid $1,288,348 for the 164-unit Winwood Club. Massachusetts-based Sante Fe Realty Trust bought it in May 1994 for $2,525,000. The new owners, who renamed the complex Vanderbilt Court, also agreed to spend $400,000 on repairs.

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