Lilian Fink is not one for public demonstrations. But when the landlord proposed to raise her rent by 52 percent, the 81-year-old grandmother took to the streets. On June 7, Fink and 75 other residents of the federally subsidized apartment building at 510 W. Belmont marched and chanted outside landlord Howard Fink’s near-north-side office. They argue that his proposed rent increase, which must be approved by the U.S. Department of Housing and Urban Development, would force them to move.
The 275-unit building on Belmont was built in 1970 as a model of low-income housing. The original owner financed its construction with a federally guaranteed 40-year HUD mortgage at a below-market interest rate of 3 percent. To get that low interest rate, the owner had to agree to several HUD regulations. He couldn’t raise rents without HUD’s approval, and his profit from the building was limited. However, after 20 years he could pay off the rest of his mortgage in one lump sum and raise rents as high as he wanted. Twenty years have passed. “It’s what we call a prepayment building,” says Howard Fink. “The incentive to build it in the first place was the knowledge that after 20 years–or halfway through the mortgage–you could pay off the loan and charge whatever rents the market can bear.”
Best of Chicago voting is live now. Vote for your favorites »
The tenants of Belmont have heard many prepayment horror stories. Nearly 80 percent of the tenants were forced to move from a HUD building on West Barry when its landlord prepaid his mortgage and raised rents by 230 percent. Activists say there are 14 buildings in Uptown and Lakeview with mortgages that could be prepaid in the next five years. “Some of the residents kicked out of Barry are now living in other potential prepayment buildings,” says Aarli. “I’d hate to see them displaced again.”
Fink does have some options. He can try to offset any increase in maintenance costs by raising rents or by obtaining a HUD-backed maintenance loan. He could also, of course, sell the building. Fink has opted to raise rents. “We haven’t had a rent increase here since 1985,” he says. “We need money to increase security and install storm windows. We need to make structural repairs. The side of the building is in bad shape–we could have falling concrete. Somebody has to pay for that.”
Fink peeled a few rubber rats from his door and said nothing.
“I agree–it’s a crime when older people don’t have a place to live. But you can’t expect the landlord to take care of these problems. Where is the federal government? Don’t they have a role? If they’re getting rid of prepayment, shouldn’t they provide subsidies? And where are these people’s children? Before I bought this building, I watched who came and went. On the weekends you should see how many Mercedeses and Cadillacs drive up there. If these children and grandchildren can afford such fancy cars, shouldn’t they also help out their parents? Or is everyone going to dump it on the landlord?”
