Home ownership and the “American Dream” are crushed by Real Estate Investment Trusts

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A big economic division between renters and homeowners is apparent when looking at net worth: For homeowners, the median net worth of $231,400 is about 44 times the median net worth of renters, which is $5,200.

Dr. Ken Chilton of Tennessee State University has studied the impact of Real Estate Investment Trusts on the housing market and how they are likely to rob families of the generational wealth created by home ownership. He coined the phrase “equity mining.”

For every family that rents from a REIT, $226,200 of family wealth is shifted to investors away from families. This creates a permanent underclass of poor who can become dependent upon the state to help them survive.

Across the United States, the decline of affordable housing has transformed the lives of the poor. Many poor families who are renting today receive no housing assistance and reside in the private rental market, where over half spend at least 50% of their income on housing costs and a quarter spend over 70% on them.

Increasing rent burden among low-income families directly contributes to their economic hardship and is a source of residential insecurity and homelessness.  But sociologists have yet to identify the basic sources of the affordable housing crisis or to fully articulate the inner workings of rental markets. Conspicuously absent from most accounts of neighborhood dynamics or inequality are landlords and increasingly corporate interests via REITs, who play a vitally important role in the lives of low-income families.

In Rutherford County in central Tennessee, nearly 10% of all residential units are owned by REITs.

Tenant exploitation (overcharging renters relative to the market value of their home) and landlord profit margins vary. However, their impact on the housing market is very real. Because the acquisition of property by REITs in low-income neighborhoods is relatively affordable, the renters in those neighborhoods easily become “exploited consumers.”

Landlords operating in those neighborhoods also enjoy higher profits, owing to significantly lower mortgage and tax burdens but not significantly lower rents. This demonstrates how the market strategies and profit motivation of REITs contribute to high rent burdens in low-income neighborhoods.

The drive to maximize profits also contributes to a lack of inventory for families who may wish to own their home rather than rent. The lack of inventory causes a scarcity which drives up prices making it problematic to enter the home buying market.

We are witnessing a type of “social engineering.” Many politicians may view this as an opportunity to continue to remain in power. Regardless of their words and how much they lament the situations we must judge our elected leaders by their deeds or lack thereof to address this growing issue. Homeownership leads to prosperity and creates the generational wealth necessary for future generations to realize the American dream.

Rob Mitchell serves as property assessor for Rutherford County, Tennessee and is an occasional contributor to the Tennessee Lookout, which first published this commentary.

Plagued by construction delays, ReBuild NC has spent $10.6 million to house Hurricane Matthew survivors in motels, rent storage units

A house in Wayne County whose homeowner has been displaced by Hurricane Matthew since the storm hit in 2016. (Photo: Lisa Sorg)

This story has been corrected to reflect the first TRA payment was in August 2019, not January 2020.

ReBuild NC has spent $10.64 million on motels, moving and storage unit expenses in three years for displaced Hurricane Matthew survivors, as construction and administrative delays have kept people from returning to their homes.

The figures were included in Temporary Relocation Assistance (TRA) data provided by ReBuild NC, also known as the NC Office of Recovery and Resiliency. The data also includes expenses for apartment leases and stipends for friends and family of Hurricane Matthew survivors who privately house them.

As part of an ongoing investigative series, Policy Watch reported earlier this month that ReBuild NC had been unable to provide detailed expenditure documents as requested under public records law. The agency then agreed to send totals, but without supporting documentation.

In providing the new information, a ReBuild NC spokesperson noted that TRA funds come from the U.S. Department of Housing and Urban Development, although this type of assistance is not a HUD requirement. “It is an additional benefit that NCORR decided to provide to make the recovery process easier, especially for those applicants who have no other housing options during the construction process. Without this benefit, many of our applicants would not be able to participate in the program,” the spokesperson wrote in an email.

Under the TRA program, once construction begins on a home, ReBuild NC pays to move and house low-income hurricane survivors, as well as covering the cost of renting mobile storage units.

ReBuild NC incurred its first TRA expenses in August 2019. Since then, ReBuild NC has paid $6.5 million in motel bills, $1.7 million to PODS Enterprises, and $70,000 to 1-800-PACK-RAT for mobile storage units, as well as other expenses.

The relocation is supposed to be temporary — usually up to six months — but because of ReBuild NC’s mismanagement of the program, some hurricane survivors have lived in motels for more than two years. This includes the Williams family, who have been stuck in one room without a kitchen for 862 days.

Another homeowner, who asked not to be named for fear that work on their home would be delayed, told Policy Watch they have been in a motel since early 2020. However, the motel does not have a kitchen and the person receives food stamps, which don’t cover restaurant meals. As a result, it has been difficult for them to afford food, they said.

Construction delays have long plagued the program. Although some lag time can be attributed to the pandemic and supply chain issues, that does not explain all of the inefficiencies. In other instances, homeowners have been moved from livable, if damaged houses with the expectation construction would begin immediately. Instead, months, even years pass.

Several contractors have told Policy Watch that they have completed the work but have not been paid by ReBuild NC. Multiple contractors told Policy Watch that it can take months to get approval for change orders; these occur when contractors uncover additional work that needs done and that was beyond the estimate cost of repairs, such as lead paint or asbestos abatement.

According to state data that had been sent by ReBuild NC to the governor’s office and obtained by Policy Watch, 740 homes are listed as complete as of July 11. In early May that figure was 717.

The average cost per house — including new construction and rehabs — is $136,882, according to state cost estimate and invoicing data obtained by Policy Watch. Depending on the type of home, the cost of a motel stay could exceed that of new construction or repairs.

The recent TRA figures don’t capture the full extent of displaced homeowners. Hurricane survivors whose income is too high must pay for their own relocation expenses. However, several homeowners, such as the Dillahunt family, have told Policy Watch their income was miscalculated and they were in effect, homeless. The Zerby family didn’t qualify for TRA and lived in a travel trailer in a church parking lot for more than a year.

ReBuild NC operates its homeowner disaster recovery program using an eight-step process. In the first five steps, the process is primarily administrative: determining an applicant’s eligibility and benefit amounts, as well as inspecting the home.

In Step 6, ReBuild NC puts a project out for bid, and an eligible household can then move using TRA assistance. (If repairs are minor, a homeowner can remain in the house.) There are 819 households in Step 6, according to an eight-step status report dated July 11.

Construction begins in Step 7, the current status for 173 households. Another 740 are in Step 8.

Hurricane Matthew devastated eastern North Carolina in October 2016. HUD subsequently allotted North Carolina a $236 million grant for a disaster relief homeowner recovery program related to the storm. However, the recovery program, initially run by the state Department of Public Safety and the Department of Commerce was slow to launch, and cited by HUD as a “slow spender,” jeopardizing the grant.

The state legislature created the NC Office of Recovery and Resiliency in late 2018; Gov. Roy Cooper appointed Laura Hogshead as ReBuild NC’s director; she has been in charge since early 2019. Ivan Duncan is the chief program delivery officer, responsible for dealing with contractors.

Last week, state House and Senate leadership announced the formation of a 12-member oversight committee to investigate the delays and problems with the program. the first meeting has not been scheduled.

 

From Ivan Duncan’s LinkedIn page: Duncan is the chief program delivery officer at ReBuild NC. He was commenting on a United Nations post to LinkedIn about disaster relief. Multiple contractors and homeowners have complained that he is responsible for many of ReBuild’s problems. The agency has declined to make Duncan available to Policy Watch for an interview.

“No one tells me what to do”: Meeting notes reveal favored contractors, animosity toward others in Hurricane Matthew recovery

The Zerbys’ home in Craven County, damaged during Hurricane Matthew. It was scheduled to be finished April 29. This photo was taken on April 28. (Photo: Lisa Sorg)

In response to a Policy Watch investigation published last week, the North Carolina Office of Recovery and Resiliency (NCORR) denied that Rescue Construction Solutions (Rescue) received favorable treatment over other general contractors in bidding and scoring related to Hurricane Matthew disaster recovery work.

Hundreds of households — equivalent to thousands of people — remain displaced from Hurricane Matthew, which occurred in October 2016. These North Carolinians are still living in motels, travel trailers, with relatives, or even in their original damaged homes.

However, notes taken by someone who attended weekly meetings about NCORR’s RebuildNC program show that Ivan Duncan, NCORR chief program delivery officer, did give Rescue leeway not afforded to other contractors. The person provided the notes to Policy Watch on the condition they would not be named, because they were afraid of retaliation by the state. Excerpts appear below; Policy Watch deleted some entries because they were very technical and weren’t relevant to the issue.

Among the revelations:

  • Duncan reportedly told inspectors in May 2021, not to visit homes Rescue had built. This allowed Rescue to sidestep oversight.
  • Duncan also allegedly allowed Rescue to delay starting some of its construction projects, according to notes taken in May 2020. That’s important because contractors’ performance and eligibility to bid on future contracts is based in part on their completion rate.
  • Other examples of alleged preferential treatment include Duncan’s edict to pay Rescue to move a household for the second time; other general contractors were not given the same consideration, the notes say.
  • Last year, the notes indicate Duncan also looked favorably upon RHD, another contractor. However, the notes show that RHD hesitated to accept Duncan’s offers.

The meetings were not recorded because Duncan required attendees to turn off their phones and place them in a bucket. In a previous Policy Watch story, NCORR Director and Chief Operating Officer Laura Hogshead said that practice no longer occurs. The notes indicate that Duncan reportedly said he “works in gray areas,” and asked contractors not to put anything in writing or emails. Such correspondence would be public under state open records law.

Rescue has not responded to written questions about its performance. Instead, the company hired a crisis communications firm, which issued a statement last week saying the company had bid properly, but it did not address the questions.

Policy Watch shared these notes with NCORR. A spokesperson for the agency released the following statement Tuesday morning:

NCORR remains committed to helping hurricane survivors rebuild their homes and communities as evidenced by the more than 700 houses already repaired or replaced in eastern North Carolina. We take the Policy Watch allegations very seriously and will thoroughly investigate to determine their validity and whether corrective action is needed. Many of the allegations thus far have been based on unconfirmed or inaccurate documentation, misinterpretation of program policy, or hearsay from unknown sources. For example, it is misleading to say that only certain general contractors had projects inspected. In fact, all projects had recurring inspections by county inspectors, while the lead contractor in charge of construction oversight, AECOM, was also tracking every project. Whether or not every contractors’ projects had an unannounced visit by state officials, they were all were inspected multiple times by qualified experts. This is just one example of how NCORR has been misrepresented in recent coverage. We look forward to sharing factual information to demonstrate that NCORR is not only committed to helping storm survivors recover, but also to full compliance with the law.

Names of individual contractors have been redacted and replaced with company names. Policy Watch added the annotations and highlighting to explain the significance of those passages.

Abbreviations and definitions
GC: General contractor

CRCS, Persons, Rescue, Duckey, RHD, Excel: Company names of general contractors

AECOM: Construction management company that is the liaison between NCORR and the contractors

Sprayberry: Former Director of Emergency Management Mike Sprayberry

Trace: Trace Allard, NCORR director of program delivery

Open procurement: Competitive bidding process

Ryan: Ryan Flynn, former NCORR chief of staff

O&P: Overhead and profit

ECR: Estimated cost of repairs

MHUs: Mobile home units

Jonathan Doerr: NCORR attorney

NTP: Notice to Proceed; when an NTP is issued, the clock starts on construction, which is required to be finished within a certain amount of time, depending on the complexity of the project, usually 90-135 days. Contractors can request time extensions.

CO: Change orders, adjustments to the construction costs when unforeseen issues arise, such as mold, termites, asbestos

NCORR disputes PW’s coverage of its Hurricane Matthew recovery work: their complaints, our responses

This is one of hundreds of homes damaged by Hurricane Matthew that remain unfinished. (Photo: Lisa Sorg)

The NC Office of Recovery and Resiliency is disputing a previous Policy Watch story that Rescue Construction Solutions received preferential treatment in the bidding and scoring processes. We are publishing their rebuttals and our responses in full, unedited. NCORR sent these rebuttals via email, which are public under state open records law.

=====

First NCORR rebuttal and Policy Watch responses, May 11, 2022:

Dear Laura-

We have reviewed your email and have included our responses to each item below. Let me also say that we certainly appreciate many of the difficulties your agency has encountered over the years in fulfilling its mission (most of which were referenced in our reporting).

As you will see, however, it remains our firm conviction that, except perhaps with respect to a small handful of very minor matters that do not impact its overall thrust, the story is completely accurate.

Simply put:

  • North Carolina received hundreds of millions in federal recovery dollars to distribute to help lower income families rebuild after Hurricane Matthew.
  • Five and a half years after the storm, hundreds of families remain homeless and their abodes uninhabitable.
  • Over a period of time, NCORR awarded contracts for around $80 million to Rescue Construction Solutions even though it almost certainly should have realized that the company and was in over its head, provided false information in its prequalification application, and has consistently delivered poor performance.
  • Rescue was the beneficiary of NCORR contracting decisions not accorded to other contractors.

As has always been the case, however, we stand ready and anxious to receive additional information – e.g., requested documents and other records — that would shed more light on the matter. In particular, we would very much like to conduct interviews with Ivan Duncan and Sheila Brewington – both of whom have thus far not made themselves available to discuss this important matter with which both were so intimately involved.

Our responses to each of the 20 points you raise appear below.

Sincerely,

Rob Schofield
Director
NC Policy Watch

Lisa and Rob –

NCORR requires the following corrections to sections of the May 9 story that are misleading and, in some instances, false. In addition, to ensure an accurate portrayal of the agency and program, the accompanying opinion piece should be amended to reflect the corrected information as well. Should Policy Watch decline to make any of the corrections, please provide an explanation and supporting documentation which demonstrates why inaccurate information should remain in the story. Specific corrections are shown below with direct quotes from the story in italics.

  1. “At least 1,780 houses belonged to low-and moderate-income households.” – As we discussed yesterday morning during our interview, if this is a FEMA number, it has no bearing on the number of homeowners we will be able to help. FEMA does not measure eligibility for CDBG-DR. It is misleading to use a number from another federal agency that is not associated with CDBG-DR eligibility to set a false expectation.

Response: We do not believe it is at all misleading to report FEMA’s count of the total number of homes damaged by Matthew. We find it somewhat surprising that you would need to ask us if this is a FEMA number. Read more

Here are the documents: The state’s failure, after five years, to help Hurricane Matthew survivors

Herman Jones’s house in Craven County, still unfinished after more than a year (Photo: Lisa Sorg)

I was driving around rural Wilson County searching for a specific house, whose owner — a survivor of Hurricane Matthew — I had matched to property records. “No trespassing” read one sign. “Private property” read another. But a man was fixing his truck in the driveway, so I stopped, got out of the car, and ensuring that I stayed on the public road, asked if I could speak with him.

Sam Cockrell couldn’t have been nicer. He spent more than hour showing me around his property, his damaged home where his father once lived, his belongings crammed into two PODS. I learned he’s a fan of the Washington Football Team, likes motorcycles, and loves to fish.

He’s been living in a Comfort Inn for going on a year. He’s tired of it. He wants to be back in the shade of his pine trees. He wants to move into his new home, a 1,000-square foot Carson floor plan with a both a front and back porch that will keep him cool and dry.

In Craven County Herman Jones was tinkering in his workshop where he restores old radios. “Would you like to talk about your experience with Hurricane Matthew and your home?” I asked.

“Boy, would I,” Jones replied. And for the next 60 minutes he told me of his myriad frustrations with the contractor, Rescue Construction Solutions, and their subcontractors. He gave me a tour of his home, with its sticky back door and uneven kitchen floor. The ruined pile of concrete that had work crews had left open in the rain. The air vents that had been installed upside down.

These are real people, not just figures on a spreadsheet, not just “applicants.” They have been traumatized by Hurricane Matthew — and in some cases, Florence. And they’re still living motels, with relatives, in damage houses, in travel trailers, for months, even years.

How could this happen? All these people, likely thousands considering the number of households still displaced, without a permanent home five and a half years after Hurricane Matthew.

I needed to answer the questions: Who’s accountable? How is the system broken? Who has the power to fix it? What’s at stake? Who’s winning? Who’s losing?

The NC Office of Recovery and Resiliency is in charge of the homeowner recovery program for Hurricane Matthew disaster relief. And through sources and documents, I learned about a contractor, Rescue Construction Solutions.

It’s not the only contractor in the program, but it has the lion’s share of projects.

A month after trips to courthouses, database and property records searches, dozens and dozens of phone calls and emails, plus logging 1,000 miles on my Prius, I finally could write the first story, published yesterday. Simply put, it’s about how NCORR’s lack of oversight, its management of the disaster relief program and the plodding pace of Rescue Construction Solutions in particular, is holding up progress.

At stake are the happiness and peace of people like Sam and Herman and Sheri and Bill and Denisa and Judy and James and Gloria and Patricia, and all those people — not just “applicants” — who just want to go home.

Here are the public records requests. I filed the first one on April 12, and told NCORR I could accept the documents on a rolling basis. That means they could send the records as soon as they got them, rather than wait for all the documents to come in.

I have received very few documents from NCORR not even from requests filed nearly a month ago. I filed another request on May 9 with the Division of Emergency Management and the Department of Commerce asking for documents related to background checks for contractors; these two agencies were in charge of the program in 2018 when contractors were prequalified.

On Tuesday, May 2, I interviewed NCORR Chief Operating Officer Laura Hogshead on Zoom. With her permission, the interview was recorded.

Policy Watch immediately shared the audio and video with NCORR. On Thursday, May 4, NCORR requested a followup interview, which occurred on Monday, May 9. Again, the interview was recorded.

Hogshead also corresponded with me several times by email over the weekend of May 7-8.

I emailed Sheila Brewington, president of Rescue Construction Solutions, twice. She didn’t reply, but a crisis communications firm representing Rescue called me, then issued a statement — again not answering the questions.

These are some of the documents I cobbled together to report the story:

  • Bid worksheets
  • A Wake County civil court case against Rescue that started in 2017, and should have been disclosed by the company when it applied to be prequalified, and again when it bid on projects
  • A federal court case involving work at Fort Bragg. In that litigation, Rescue sued the bonding company for the general contractor over a pay dispute. The general contractor had fired Rescue for allegedly botching a roofing job, and didn’t want to pay. The court did force the contractor to pay Rescue. However, on page 4 of the document, there is a reference to Rescue’s “unworkmanlike and untimely performance.”
  • The changes in scorecard measurements in the summer of 2021
  • Rescue’s pre-qualification application, dated June 2018
  • NCORR’s invitation to bid on the modular project dated July 16, 2021

Here are spreadsheets. All personal information has been removed.

Status of May projects.

All 1,486 complaints lodged against all contractors, not just Rescue. Rescue had 585 complaints, although that could be expected since the company had so many projects. Other companies with more than 100 complaints: Excel Contractors, 297; Persons Service 222 and Thompson Construction 172.

This story has been updated with May data. Homeowners’ names, addresses and phone numbers have been redacted.