Aim Low

The nation's biggest player in the apartment rental business has found huge profits in low-income housing

For the better part of a decade, Dorothy Peterson has been skirmishing with AIMCO, a Colorado-based real estate behemoth that bills itself as the "largest owner of apartment homes in the U.S." and boasts a portfolio of some 240,000 apartment units scattered across 47 states, the District of Columbia, and Puerto Rico.

Just last week, Peterson sat down at her iMac and tapped out a string of letters opposing a complicated and little-noticed piece of local legislation that she thinks will further enrich the firm, which owns her apartment, in one of a cluster of utilitarian two-story buildings just off Ingalls Street atop the Hunters Point hill. (The ordinance, a rewrite of some abstruse rules regarding tax-free government bonds, was passed unanimously by the San Francisco Board of Supervisors Feb. 13).

Hers is a quixotic campaign to be sure, a lopsided conflict pitting Peterson, an elderly black woman from southeast San Francisco, against a publicly traded outfit with $12 billion in assets, a stock price hovering north of $60 per share, and an absurdly wealthy, politically connected boss at the helm.

"I've been fighting them every step of the way," she says while sitting in the family room of her immaculate apartment as gospel music wafts from a radio.

While Peterson may not have a prayer of stopping AIMCO, it's worth taking a look at the company, which has largely eluded any serious media scrutiny despite its massive scale and persistent legal problems. In recent years the corporation has run afoul of three different federal agencies — the Environmental Protection Agency, the Department of Labor, and the Department of Housing and Urban Development — as well as San Francisco City Attorney Dennis Herrera, who squeezed a $3 million settlement out of AIMCO in 2004 for scores of severe housing code violations.

AIMCO Chairman and CEO Terry Considine, who took in more than $18 million in executive compensation in 2005, is an intriguing figure. He's a conservative Republican Party stalwart who raises cash for anti-tax, small-government political candidates and intellectuals while his corporation gobbles hundreds of millions of taxpayer dollars in subsidies.

Although AIMCO is a massive enterprise composed of a confusing web of inter-related companies, both nonprofit and for-profit, the basic business model is fairly simple. The company owns and manages apartment complexes, ranging from the luxurious ($3,000-per-month flats in New York City), to the cheap (government-subsidized units like Peterson's place).

Roughly 40,000 of AIMCO's units are underwritten by the federal government through an array of programs including Section 8 dollars and tax-free financing, and are reserved for poor and working-class renters. Money generated from both sides of the business is funneled toward the bottom line.

Just how AIMCO manages its money, in some cases, is murky. Tipped off by a well-placed source, SF Weekly obtained documents raising questions about the firm's financial practices — practices that are overseen by the Department of Housing and Urban Development (HUD), which funds AIMCO's San Francisco developments.

Several audits conducted by HUD during 2002 and 2003 suggest AIMCO may have misspent government funds earmarked for the corporation's Hunters Point properties.

In a July 2003 letter to an AIMCO subsidiary, HUD manager J. Patrick Goray claims HUD auditors uncovered numerous billings "that do not appear to be reasonable or necessary for the operation" of the Bayview Apartments. The charges included expenses generated by apartment complexes not in San Francisco, but in Illinois, New York, Florida, North Carolina, and Wisconsin.

When auditors looked at the apartment complex in which Peterson lives in June 2003, they also found legal expenses of $324,236 that "appear excessive," according to the audit.

Hoping to learn what happened with the money, SF Weekly, using the Freedom of Information Act, made a formal request to HUD for more documents regarding AIMCO and its auditing issues. HUD rejected our request, saying such information was a "trade secret," and as such was confidential.

"We did receive repayment of the charges we believed to be excessive," says HUD spokesman Larry Bush, noting that AIMCO blamed "an accounting error" for the misspending. Bush, however, is unclear about just how much money was in dispute.

Peterson's acrimonious entanglement with AIMCO dates back to 1990, when the company purchased about 600 aging, government-subsidized apartments stretching across the Hunters Point hill, including her place in the Shoreview development.

Built cheaply in the 1970s, the properties were deteriorating and riddled with flaws by the time AIMCO bought them. Rot permeated decks and porches, rain dripped in from leaky windows and roofs, and, most worryingly, clumps of mold, which can cause respiratory ailments and other illnesses, speckled the walls of many units. "You can't lock the windows. You can't lock the doors," Peterson complains. She added that at one point her toilet "was about to fall through the floor" because the floorboards were collapsing.

Inspections conducted by both HUD and city building inspectors backed up the complaints of Peterson and other tenants. In one inspection, HUD investigators found 43 percent of the door locks in one complex didn't work properly; another HUD inspection concluded that 71 percent of the apartments surveyed were beset with "defects." City housing inspectors were even harder on AIMCO, documenting scores of code violations throughout the properties during the early 2000s, including "rodent infestation," broken windows, busted plumbing and numerous leaks, and mold.

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