Dead-End Leases for Subsidized Renters

Imagine moving into a new apartment only to find out a few months later that your building is in foreclosure? Ok, now imagine it happening two you twice in less than a decade.

Johneece Cobb, a 45-year-old community college student, didn’t see it coming when she signed a lease a couple years ago. Having been through a foreclosure before, it didn’t take long for her to suspect that something was about to go wrong, again.

At first, the clues were subtle. Her landlord started ignoring her calls. And a strange guy showed up a couple of times to take pictures of the property. Then, a manila envelope from Citibank arrived in the mail. It was addressed to Cobb’s landlord so, initially, she dropped it in his mail pile.

There was something about the letter that kept nagging at Cobb. One night, she tossed and turned, unable to sleep.

“Something just kept telling me, ‘Look at that envelope. Look at that envelope,’ ” Cobb said. “I got up at 3 o’clock in the morning, walked downstairs, got that envelope and I opened it.”

She found a stack of court documents. It turned out the property had gone into foreclosure—even before Cobb signed the lease. “I had no idea,” she said.

This happens more than you might think. Thousands of unsuspecting Chicago’s renters have been caught in the middle of a foreclosure during the past five years. A joint investigation by The Chicago Reporter and WBEZ found that many of those same landlords were collecting taxpayer-funded Housing Choice Vouchers, commonly known as Section 8, for renting nearly 1,550 properties that have been named in foreclosure filings, as Cobbs’ was. And as many of those properties slid toward foreclosure, tenants’ complaints about leaky roofs, mold and other disrepair fell on deaf ears. In a growing number of buildings, conditions have grown increasingly grim that an earlier Reporter investigation found.

The Chicago Housing Authority, which cuts the rent checks, screens landlords upfront when they apply to participate in the program, said Ellen Sahli, the agency’s chief housing officer. Because the voucher program is “tenant-based,” beyond that one-time screening, it’s up to renters, not the CHA, to figure out whether properties are in foreclosure before they sign a lease, she added. If the properties are in foreclosure, it’s up to tenants to decide whether they’ll move in anyway or search for a different apartment.

That could change, Sahli said. How and when? The details are still sketchy. “I can’t at this time give a timeline on it,” Sahli said. “I think these are all issues that are important to us, and we’re working hard to figure out what the right strategy is.”

A new strategy will do little for renters who were living in the more than 2,400 buildings that we were able to identify as being already reclaimed by a bank in a foreclosure auction. Perhaps it would spare some grief for the hundreds of other families living in buildings that have been named in a foreclosure filing since the beginning of last year. Each one of these little dots–the blue dots are pending foreclosures, and the red ones are properties that have fallen back in lenders’ hands–represents someone like Cobb who is stuck in the middle.

This story is a collaborative investigation between The Chicago Reporter and WBEZ. The radio edition of this story can be found here.

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