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Rents Doubled After Project Got Big Subsidy : Despite $31 Million in Federal Aid, Housing Said to Look Like Slum

October 03, 1989|WILLIAM J. EATON | Times Staff Writer

WASHINGTON — A low-income housing project that got $31-million worth of federal rehabilitation subsidies through the political influence of a prominent Republican consultant has more than doubled its rents but still resembles a slum, congressional investigators said Monday.

Federal funds for the Seabrook, N. J., development were supposed to be used to modernize and improve 57 structures originally built during World War II as temporary housing for farm workers.

Today, however, almost two years after rehabilitation work began, the 326 units provide no refrigerators for tenants, the buildings lack rain gutters or downspouts and the nearest laundry facilities are more than a half mile away over a dirt road.

'Cinder-Block Barracks'

Investigators who visited the site found "row upon row of cinder-block barracks . . . water damage resulting from roof leakage, exposed electrical wiring and shoddy construction," according to Rep. Tom Lantos (D-San Mateo), chairman of the House Government Operations subcommittee on housing and employment, which is examining political favoritism at HUD.

The vacancy rate in the costly project is 20%, Lantos added.

Paul J. Manafort, a former campaign adviser to President Bush who is now a partner in a high-powered lobbying firm, acknowledged in testimony Monday that he has never visited the development, which earned his company a fee of $326,000 for getting Department of Housing and Urban Development approval of the subsidies in 1987.

Manafort, who is also a 20% owner of the development company for the Seabrook units, said that federal tax credits from the project, which constitute an additional form of subsidy, already have been sold to investors for $3.3 million.

Yet the promised rehabilitation is still not finished, and the project still does not have a single permanent occupancy permit from municipal authorities, Manafort and his partner, Victor Cruse, acknowledged.

Under HUD's moderate rehabilitation program, rent subsidies totaling $31 million will continue for 15 years.

"We played by the rules," Manafort said in defense of himself and his consulting firm, Black, Manafort, Stone & Kelly, and the way it obtained funding for the Seabrook development with the aid of Deborah Gore Dean, once a top assistant to former HUD Secretary Samuel R. Pierce Jr.

However, Lantos challenged Manafort's insistence that the $4.4 million put into the Seabrook development by the investors represented a sizable risk.

"There was a sweetheart deal with Debbie Dean that was implemented and stands implemented," Lantos contended. "Nothing could be less risky than this."

Rents Up Sharply

Under questioning by Rep. Matthew G. Martinez (D-Monterey Park), Cruse said that rents at the development ranged from $250 to $300 a month before rehabilitation began in December, 1987, but since have been raised, ranging from $552 for a one-bedroom unit to $756 for a three-bedroom apartment.

The bulk of these increases would be paid by tax dollars. Federal law provides that tenants who meet the low-income requirements established by HUD have to pay only one-third of their income for rent, and the U.S. government picks up the remainder as part of the subsidy.

Cruse, former deputy housing commissioner of Connecticut who became a partner of Manafort on the Seabrook development, said that the municipal government of Upper Deerfield, N. J., made its building codes more demanding during the rehabilitation work.

When asked why the buildings did not have gutters and downspouts, which city officials insist be installed, Cruse replied: "We are presently putting them on . . . . The buildings survived 40 years without them."

He acknowledged that the developers were under pressure to provide laundry facilities and improve the landscaping before the city would grant permanent occupancy permits. At present, he said, 182 of the 326 units have temporary permits, but he estimated that the rest would be ready for rental by the end of the year.

Rep. Ted Weiss (D-N. Y.) said that low-income tenants could have had much better housing for the $31 million committed by HUD for the Seabrook development.

"We find an extremely alarming situation," Weiss said. "The biggest profits go to consultants and developers and, when they get through--it (the housing) is scandalous."

Admits Using Clout

Manafort, who acknowledged that the political clout of his firm had helped get the HUD money for the project that he later joined others in buying, dissented when Weiss termed his operations influence-peddling.

"You might call it influence-peddling. I call it lobbying," he said. "That's a definitional debate."

Rep. Christopher Shays (R-Conn.) asserted: "Seabrook was a bum deal . . . . Probably most of what happened at HUD is probably not illegal, but something about it just smells."

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