Updated: 4:52 p.m.
Chicago Mayor Lori Lightfoot’s administration says it’s unable to pursue $88 million in building code violations racked up by a deadbeat developer that left tenants without proper heat and water.
Instead of trying to get money from the Better Housing Foundation, an Ohio-based non-profit, city lawyers say they’re working to acquire the 74 buildings BHF bought but left in uninhabitable condition.
For the last two years, City Hall has been in and out of Cook County court as it tries to seize BHF’s portfolio of multi-unit buildings, located mostly on the South Side. It’s now working with two other groups to take over those buildings to make them livable again, instead of going after the fines.
“BHF has no money,” Greg Janes, an attorney with the Law Department, told WBEZ.
A Chicago Tribune investigation earlier this year revealed BHF regularly sued to evict tenants who were behind on rent, even though the non-profit vowed not to evict solely on those grounds. The newspaper also found that some buildings were in such disrepair — with tenants complaining of mold, standing water and leaky pipes — that the Chicago Housing Authority put 64 of them on its no-rent list.
Lightfoot’s Law Department is still in the process of concluding the litigation that started under her predecessor. City Hall’s decision not to go after the money comes as the first-year mayor is trying to close an $838 million budget hole with incremental tax increases, department consolidations and help from tax-wary lawmakers in Springfield.
Despite those budget pressures, the Law Department says it’s not leaving $88 million on the table because BHF told the court it has less than $100 left in the bank.
“The default fines are a starting point, and so our goal is to stabilize the approximately 1,000 residential units in those 74 buildings,” he said. Due to hazardous and unlivable conditions, only 30% of the units in those buildings are occupied. Janes added that stabilizing neighborhoods and keeping tenants in their apartments is the ultimate goal.
Had the city demanded full payment, those tenants could have been evicted, a spokesman for the Law Department said.
WBEZ’s attempts to reach the former leaders of BHF were unsuccessful.
BHF had leveraged its non-profit status to borrow more than $84 million in tax-exempt bonds through the Illinois Finance Authority. But BHF defaulted on those loans earlier this year. Janes said BHF used some of that borrowed money to buy up its properties in 2017.
The Law Department didn’t immediately have a full accounting of how much time and resources it has spent on the litigation. When city lawyers first began sifting through tenant complaints of improper heating and water supply— then learned the properties were all managed by the same agency— they sent city inspectors to all 74 buildings, Janes said.
And due to the sheer size of the portfolio, city lawyers have had to open multiple lawsuits against BHF in order to tackle 10 to 15 buildings per court appearance, Janes said.
The two groups the city has identified to manage the buildings will be tasked with bringing them up to code. The building managers will have the ability to file reimbursement claims with the city for some of that work, but it's not yet clear how much it will ultimately cost.
Claudia Morell covers city politics for WBEZ.