Funding, bureaucracy threaten Mercedes low-income community

MERCEDES — The small television, the pink bedroom décor, the family photos that fill every inch of wall space and counter surface — these are the things that make Elida Garcia’s apartment a home.

The 73-year-old has lived in the same one-bedroom unit at Mercedes Palms Apartments — a government-subsidized, low-income housing complex — for more than a quarter of her life. And over time, the space has collected enough knickknacks, assorted curios and other bits of life detritus to make the apartment more than just a place to live.

Her onetime neighbor Velma Cano found similar security in the closeness of good schools for her children. For Maria Espinosa, it was the complex’s community of good neighbors and friends.

But it’s easy to take these comforts of home for granted. One month, children are playing in the yard with chatting parents looking on. The next, it’s too dangerous for them to go out at night, and an eviction notice could be in the next day’s mail.

For the last two years, the tenants of Mercedes Palms have lived on the edge of uncertainty. A bureaucratic hiccup within the U.S. Department of Housing and Urban Development forced the complex’s owners into foreclosure, forced dozens out of their units, and jeopardized the ability of those who stayed to continue to afford their rents.

Now, at a time when housing options are becoming harder and harder to find for low-income Rio Grande Valley renters, no one can say for sure how much longer the complex can remain a viable subsidized rent community — the type of place with which Garcia, Cano and Espinosa fell in love.

“It started with a relatively small problem and just grew and grew and grew,” said Jack Cann, an attorney with the Minnesota-based Housing Preservation Project who has taken an interest in the case. “At every step, HUD just took the wrong action. In a lot of ways, this really is one of the most outrageous cases I have ever seen.”

A NEW START

On any given day the residents of Mercedes Palms — located at 685 Chapman St., near the intersection of Business 83 and Farm-to-Market Road 491 — can be seen outside their apartments watering plants, unloading groceries or shuttling children to school.

They are a mix of mostly Hispanic, elderly, disabled or single-parent households. The majority pay heavily subsidized rents at a government-set rate of no more than one-third of their income.

As early as 1985, tax records show, Mercedes Palms was operating under a HUD initiative called the Housing Assistance Payments Program, developed at the time as the department was shifting away from its old model of government-run housing projects for the poor.

HUD had successfully enticed private management companies across the country to lease whole complexes to low-income renters through contracts that ensured the government would make up the difference between what tenants could pay and fair-market rents.

In 2006, Houston-based W&K Properties of Texas became one of 18,000 companies nationwide involved in the HAP program. It bought Mercedes Palms that year, contractually agreed to renovate its apartments and signed a use agreement that stipulated the complex would remain low-income housing for the next two decades.

HUD, in turn, agreed to start sending rent subsidy checks to W&K once it verified that at least a portion of the community’s 48-units had been brought up to government standards.

By March 2007, the company had rehabilitated half of the apartments, making it possible for families like the Espinosas to move in to the place. The unit they lived in could never have been described as luxurious. But it was more than adequate and offered a standard of living a far cry from the sacrifices they would have to make if they were forced to pay the area’s $610 fair-market rent.

Several other families moved in around them, paying rents as low as $200 a month.

“The schools were very good and close by. The complex was close to our workplaces,” Maria Espinosa said. “We built many good relationships.”

But the government money that supported their affordable housing never made it to W&K. A funding shortfall in 2007 delayed payments to hundreds of companies in the HAP program.

And without those subsidies, the company’s renovation of Mercedes Palms came to a halt. It started falling behind on water bills and missing mortgage payments.

A year after the company promised to bring a new start to the property, the complex was facing foreclosure.

FUNDING CRISIS

Funding for affordable housing has always been seen as somewhat of a luxury in the halls of Congress. Unlike other federal entitlement programs like food stamps or Medicare, the government is under no obligation to provide housing assistance to all who qualify. According to HUD estimates, only one in four eligible households receives it.
So as legislators continually slashed the department’s budgets in the early 2000s, HUD began to have trouble meeting its obligations under its HAP contracts, John W. Cox, the department’s chief financial officer at the time, told a congressional subcommittee in 2007.

A 2008 study by the U.S. Government Accountability Office — a nonpartisan congressional watchdog — found property management companies with which HUD contracted were struggling to stay afloat.

“Project owners have expressed concern that HUD has chronically made late housing assistance payments in recent years, potentially compromising their ability to pay operating expenses, make mortgage payments or set aside funds for repair,” it states.

Cann, with the Housing Preservation Project, saw similar situations pop up in HAP communities across the country.
“I don’t know how many projects we’ve encountered like this in the past years — Florida, Las Vegas, Pittsburgh, St. Louis,” he said. “The general pattern was just to let things slide until they got really bad. Then, HUD just terminates the contract, tells the tenants to take Section 8 vouchers and leave.”

The federal Section 8 Rental Voucher Program increases affordable housing choices for very low-income households by allowing families to choose privately owned rental housing and subsidizing their rents.

For the tenants of Mercedes Palms, the marching orders came two months before Christmas.

In October 2007, HUD had cancelled its contract with W&K, citing the company’s failure to finish its rehabilitation of the complex — a project the company had intended to fund with its government subsidy money.

The decision, though, was just a formality. The company had been out of the picture since July, when its mortgage lender foreclosed on the property.

But despite the funding crisis in Washington and W&K’s financial problems at home, Mercedes Palms’ tenants were shielded from most of the effects.

That is, until they were told to get out. On Oct. 19, each was handed a Section 8 voucher, told they could continue their rent subsidy somewhere else and ordered to leave the property by the end of the year.

For single mother Velma Cano and her three preteen boys, the timing couldn’t have been worse.

“The thought of not having Christmas for my sons to try to save money to move was very sad,” she said. “I was unemployed and had very little income. I couldn’t afford to move or pay new deposits.”

PROBLEMS MOUNT

A move two months before Christmas would pose a logistical challenge for anyone. But for many of Mercedes Palms’ tenants, the prospect of finding a new place to live raised other problems.

Elida Garcia, a 73-year-old asthmatic with fresh scars from a recent open-heart surgery, couldn’t easily bear the physical exertions of moving.

Rosa Rivas was single and pregnant at the time.

“I had no money for deposits or moving costs,” she said. “There was no one to help me move.”

Several of the tenants, including Garcia and Rivas, filed a lawsuit against HUD days before their removal date in hopes of blocking their evictions. Since HUD had approved half of the complex’s units as up to standards under its contract with W&K, they saw no reason they couldn’t use the Section 8 vouchers at Mercedes Palms.

Others, fearing they would lose their government assistance, moved out despite the burden.

But for those who stayed, problems continued to mount through 2008.

A management company hadn’t paid the $25,000 water bill that had accrued over a period of months, and residents lived under constant fear that their utilities would be shut off.

Lydia Benavides, the property manager, continued to look after the residents as best she could even after the company folded — a noble effort that became more burdensome once the city of Mercedes cut off power and air conditioning to the apartment offices.

And then there were the vandals. With the majority of the units vacated, Mercedes Palms became an easy target for petty criminals. Residents like 75-year-old Osvaldo Loera lived in constant fear that thieves intent on breaking in to steal appliances or copper wiring out of the walls could mistake an occupied apartment for an empty one.

“They would call me crying,” said Linley Boone, an attorney with Texas RioGrande Legal Aid who is representing the tenants in their suit. “HUD was just not realizing what was happening to real people here.”

FRESH START OR FINAL ACT?

Today, Mercedes Palms has come a long way from the nights Velma Cano and her sons put dressers in front of their windows and slept together in one room for safety.

Four months after telling the residents that they needed to leave, HUD reversed itself and agreed that those who wanted to stay could do so.

A new company — Pharr Plantation Inc. — bought the property in May 2008, tightened security, rehabilitated many of the damaged apartments, and attracted many new residents.

However, questions linger as to how long its low-income renters can stay there.

HUD rejected Pharr Plantation’s attempts to sign a HAP contract with the agency that would provide the subsidies needed to keep Mercedes Palms a viable business. The department is ending the program and is no longer taking new applicants, government attorney David Louis Guerra said at a recent court hearing.

But the original W&K use agreement tied to the land requires any new owner to maintain the complex as affordable housing until 2026, and HUD has appeared disinclined to let the company out of that stipulation.

For now, Pharr Plantation has allowed its low-income residents to remain in their apartments at government-subsidized rent levels partly out of generosity and partly out of obligation. But it’s unclear how long this situation can hold.

“They’re damned if they do and damned if they don’t,” said Jim Grissom, an attorney for the property management company. “They can’t get assistance from HUD. And if they raise the rent to median income, they violate the use agreement and would be subject to penalties.

“So they’re just treading water.”

Elida Garcia knows this situation can’t last forever.

Because she lives on government assistance, she realizes she can’t be too choosy if Pharr Plantation eventually raises her rent and prices her out of her apartment. But for now, the 73-year-old has no choice but to enjoy her small TV, her girlishly pink bedroom and the family photos on her walls for as long as she can.

“I wouldn’t want to trade it for any other place,” she said. “It’s my home.”

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Jeremy Roebuck covers courts and general assignments for The Monitor. You can reach him at (956) 683-4437.