NOVEMBER 1 2007
AMERICANWAY 65
percent, a growing population, and high
construction costsmake creatingaffordable
housing in the cityparticularly challenging.
In fact, Youssouf says that gettinganapart-
ment offered by one of the projects HDC
is involved with is like winning the lottery
— or at least being one of a small handful
of winners. “If we build 150 units, we’ll get
3,000applications,” she says.
While the sheer lack of housing is a big
problem, the decrepit state of many of the
current buildings that offer affordable
housing is also vexing. Vaughn saw this for
himself after Omni purchased its fir t two
buildings in theBronx in2004. “Going into
the fir t building and looking at the holes
in thewalls and looking at the horrible ap-
pliances— and the smell— just helpedme
to really understand that this was a global
need,” he says. Despite the slumlike condi-
tions, there are always longwaiting lists of
people whowant to get into the buildings;
for many people with a low income, the
choice is either a tenement-like house or
the streets.
Ironically, though, it’s thepoor condition
ofmany apartment complexes that provid-
edOmnianopportunity toenter themarket
in the fir t place. Since its inception, Omni
has focused almost exclusively on buying
what Schneur calls “distressed” properties.
Thesebuildingsareknownasproject-based
Section8housing,which is just thebureau-
cratic way to say that the tenants in them
paya low rent, thanks to subsidies from the
government. Specificall , that means that
renters shell out 30percent of their adjust-
edgross income,whatever thatmaybe, and
then the U.S. Department of Housing and
Urban Development pays the difference
so that the owner of the building receives
amarket rate. Some owners, though, have
abused the systembypocketing rentmoney
and allowing their buildings to decay. “Un-
fortunately,whenever there isaprogram in-
volved
[
likeSection8housing
]
, somepeople
try to takeadvantage,” saysHDC’sYoussouf.
“Someof theownersmilk theproperties.”
However, because the properties receive
government funding, that kind of neglect
can catch up to the owners: If they consis-
tently fail to liveup tocertain requirements,
they can be deemed to be in regulatory de-
fault. “A lotof theseownersarenot inmone-
tarydefaultbecause theirrentskeepcoming
in. They havemoney to pay,” says Schneur.
“But they’re in regulatory default because
they’re failing all their government inspec-
tions.” In such cases, Omni may swoop in,
negotiateadeal, andbuyabuilding, finan -
ing the purchase and subsequent renova-
tion with a combination of tax credits and
governmentbonds.VaughnandSchneurgo
in understanding that they are required to
keep the units affordable and that current
tenants can remain in their apartments.
OnceOmni owns a building, it launches
what can be described only as an extreme
makeover of the property, completely
renovating the exterior of the building
and, more importantly, rehabilitating the
apartments themselves with new appli-
ances, freshly painted walls, redone floors,
retrofi ted bathrooms, and whatever else
is needed. The company moves fast and
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