HUD Is Sued to Save Subsidized Housing Units

The U.S. Department of Housing and Urban Development (HUD) is the defendant of a federal class action lawsuit that the Sargent Shriver National Center on Poverty Law and the Minnesota Housing Preservation Project filed on behalf of Chicago ACORN and 1,000 residents of a federally subsidized project-based Section 8 housing called Lawndale Restoration on Chicago’s West Side. The suit, filed on May 23, alleges that HUD is violating federal law by refusing to maintain the project-based Section 8 contract for the property.

The Lawndale Restoration buildings provide the majority of affordable, subsidized housing on the West Side. In October 2004 the project’s owner, Cecil Butler, was revealed to have fallen considerably behind on payments for a $51 million mortgage from the Illinois Housing Development Authority. In spite of glowing inspection reports from HUD, the property was also discovered to have suffered from serious building and federal housing quality standard code violations, including cracked masonry, defective porches, rodent infestation, leaks, broken doors, missing locks, and standing water.

Since the fall of 2004, organizers from Chicago ACORN have been meeting with residents, raising concerns about conditions, and trying to gauge what the residents would like to happen with the property. A majority of residents, assuming the property would be repaired and under new management, would like to remain in their homes. The City of Chicago also wants to maintain the property as project-based Section 8 and allow residents to continue to live there.

Nonetheless, HUD said that it would foreclose on the property and terminate the project-based Section 8 contract. HUD would then “voucher out”—that is, provide all eligible tenants with tenant-based Housing Choice Vouchers—the property and sell the buildings either to interested private developers or to the City of Chicago if the City gives up its bid for maintenance of the project-based subsidies.

Before filing suit, Shriver Center attorneys Kate Walz and Raj Nayak and Housing Preservation Project attorney Jack Cann tried to resolve the case short of litigation, even meeting with local HUD officials in late April. No settlement discussions went forward.

A loss of a subsidized property of this size (1,240 units) is troubling in the Chicago area since over 38,000 units of subsidized housing are at risk of losing their affordability restrictions over the next five years. This potential loss of housing, coupled with the loss of public housing units through Chicago’s Plan for Transformation and the deep financial cuts in the Housing Choice Voucher program, only worsens Chicago’s affordable-housing crisis. That HUD will not consider maintaining subsidized properties at risk of foreclosure also sets a dangerous precedent nationally.

Worse still, nearly all of the Lawndale residents are African American and include many disabled residents, senior citizens, and families. If displaced with Housing Choice Vouchers, these residents would likely follow the trend of Chicago’s current voucher population—move to high-poverty, racially segregated areas of Chicago and lose all ties with their historic, gentrifying community at Lawndale.

For more information, contact Kate Walz