>> NARRATOR: Tonight, more and
more Americans are struggling to find a place to live. >> Where do you think you're
going to go? >> I have nowhere to go.
I'm going to a hotel. >> NARRATOR: With the government
spending billions to help, why are so many left behind? >> Only one in every four in need of housing assistance
get it. >> NARRATOR:<i> Frontline</i> and NPR
reporter Laura Sullivan investigate the affordable
housing crisis. >> It took me six years to get
my voucher. >> This is really a very, very
dire emergency. >> NARRATOR: The programs... >> We have a proven track
record. It's produced good housing
that's very well run. >> NARRATOR: The problems... >> It's property they do not
want in their neighborhood. >> NARRATOR: And if all the
money is going where it should. >> What did you think when you
saw the millions of dollars in kickback money? >> It was amazing. I mean, this is a huge amount
of money. >> If you weren't following
the money, how do you know that the low-income housing
tax credit is working? >> NARRATOR: Tonight,<i> Frontline </i>
and NPR take a hard look at "Poverty, Politics
and Profit." >> LAURA SULLIVAN: I never
imagined that a story about low-income housing would
lead me here, to an upscale resort
in Costa Rica. Los Sueños is a dream world, with fancy condominiums and
private villas, a first-class hotel,
golf course, and its own private marina. I'd come here because our investigation
into the money spent to house the poor had
taken us into a hidden world of secret bank accounts
and shell companies. But I'm getting ahead of myself. To understand what brought me to
Costa Rica, I have to take you back nine months earlier,
to where our story begins. >> As our city grows, the
number of affordable homes is doing the opposite. It's shrinking. >> Some are calling it the worst
affordability crisis in U.S. history. >> SULLIVAN: Last year, we
started spending time in Dallas, in neighborhoods like this, where "making rent" has been
getting more and more difficult. >> The struggle is real
out here. I mean, you know, this is,
this is every day for me. It'll wear you down, you know, because you're seeing it
every day. >> People's rent checks have
just been going up and up and up, and I don't see
any end in sight. >> These are people who have
jobs and children. >> How y'all doing? >> They're saying that no matter
how hard they work, they still can't find
enough here to put a roof over their head. >> Well, this is the eviction. >> All right. >> SULLIVAN: There are more
than 40,000 evictions in Dallas every year. >> She's supposed to pay $400. >> SULLIVAN: An estimated 2 1/2
million across the country. >> Yeah, get, get a couple
of more people here. You can go ahead and start
moving this. >> SULLIVAN:
Over the past decade, average household incomes have
declined while rents have been rising. And that's pushing more and more
people, like Carla Powers, to the edge. So what happened to you today? >> I was at work. I work two full-time jobs. I'm trying. It's a struggle, and it's real
and it's, and it's hard. Seriously, yes. >> SULLIVAN: How hard has it
been to find housing out here that you can afford? >> Horrible, it's freaking
horrible. And that's how I ended up
in this slum. I didn't want to be here. I didn't want
to be here. I don't have horrible credit,
you know what I'm saying? But it's just hard. It's just hard. >> SULLIVAN: Like millions of
Americans, Carla and her family are caught in the long wake of
the 2008 financial crisis. >> What happened when we hit
the foreclosure crisis is that all of a sudden, millions of families lost
their homes. They became renters, competing in the same rental
housing market, and at the same time,
incomes were going down even if you could keep your job. And that led to a rental
affordability crisis in this country that's as bad as
it's ever been in our history. >> Did he come with a dolly? >> We have over 11 million
renter households that are paying more than half of their
income towards their rent each month. That means that they are, you
know, one emergency, one broken-down car,
one illness, one missed day of work away from
not being able to pay the rent. They are really at risk of
losing their homes altogether and becoming homeless. >> SULLIVAN: Every year,
the federal government spends nearly $50 billion to help the
poor with rent and get them on the road
to better lives. Over the past year,
we've been investigating the two key programs that try to
do that to see whether they're working
the way they should and why so many people are
struggling. In Dallas, and elsewhere,
we kept hearing how the largest of the programs,
Section 8 vouchers, covers just a fraction
of those in need. >> Section 8 applications. Thousands of residents have been
fighting for a chance to get public housing assistance. >> SULLIVAN: When the vouchers
are handed out, the response is overwhelming. >> Chaos this morning in the
parking lot as tempers flared over the city's plan to hand
out the Section 8 applications. >> There are some people been
here since Sunday morning, Monday morning. It's ridiculous. >> SULLIVAN: The voucher pays
the difference between the monthly rent and
what renters can afford. More than two million
households use them, but wait lists can be
years long. Well, how big a deal is it
to get a Section 8 voucher? >> Only one in every four
households that are eligible for and in need of housing
assistance get it. >> It was a dangerous scene. Thousands of people hoping
for Section 8 vouchers ran for a spot in line. >> They're hoping to win what is essentially
a housing lottery. So it's the 25% who have the
vouchers that are the lucky ones within this kind of a system. >> SULLIVAN: We wanted to see
how Section 8 would work out for three of the lucky ones in
Dallas, which, like many cities, has a tight rental market. >> They should pick up
that mess. >> SULLIVAN: Farryn Giles and
her son have been staying at her ex-husband's apartment
for the past two months. >> We got to walk kind of fast,
too, because you're not going to get to school in time
for breakfast. You got to keep up. >> SULLIVAN: She's held a
variety of jobs since moving to Dallas seven years ago. >> I've been a cashier,
I've been a stocker, I've been a caregiver,
I've been a welder, I've done clerical work,
stuff like that. Oh, Mom made cupcakes
last night. >> SULLIVAN: But even when
working, she says it's been hard to find a place she can afford. What did you think when you got
the voucher? >> I thought...
"This is freaking awesome!" I felt like it was an
opportunity for me to gain more stability. This area in general I would
like to get away from. >> SULLIVAN: What is it about
getting out of this neighborhood? >> Work. Work. I want to live near a place where there are better job
opportunities. You know, it took me six years
to get my voucher, but I got it. You can best believe I'm going
to utilize it. Yeah, hi, do you guys accept
the Section 8 vouchers? >> SULLIVAN: Linda Higgins says one unexpected event upended her
life, leaving her so distraught that keeping jobs has been
difficult. >> I was working at JC Penney,
and my son died in 2002. I started living with different
people in the family, not able to afford to pay rent. >> SULLIVAN: It sounds like
a Section 8 voucher means a lot to you. >> It does. I haven't had a place of my own
for, since 2002. >> SULLIVAN: Is it scary that it
can all fall apart? >> That's why I'm heading up
to the shelter. >> SULLIVAN:
I met C'Artis Harris in a Wal-Mart parking
lot in South Dallas. C'Artis has seven kids and was
living in a shelter, but before that, she says they
often lived here, in her van. >> SULLIVAN: You slept in here with seven kids for a couple
of months? >> It wasn't, like, all the
time, all of them, but yeah. At some point in time, we was. Like, in between, like,
trying to find a motel, or other people's houses
to sleep in. If it wasn't, like, panning out, we would, you know, go find
somewhere to park and sleep in my van. >> SULLIVAN: What do you say
to the kids? They understand? Because they know. >> Yeah. >> SULLIVAN: They know
you're trying. Do you have an area you don't
want to live in? >> The 'hood, like, "the 'hood." >> SULLIVAN: Why not? >> Why? Because I don't feel like
dealing with it. I don't want nobody breaking
into my house or, like, trying to beat up my children
or break into my car. You get into it with somebody,
you got to deal with that. >> SULLIVAN: You want out. >> Yeah. Like, I'm tired of it. Like, why wouldn't I want
better? In fact, I went from an
apartment to living in my van to living in a shelter, like... Yeah, I'm not going to go
backwards. I'd rather go forward, you know? You going to press the button,
Carla? You're going to press the button
for Mama. >> SULLIVAN: We kept in touch
with Farryn, Linda, and C'Artis as they tried to find a place
that would take their vouchers. They have up to 90 days
or they'll lose them. And what they're hoping for
is one of the main goals of the Section 8 voucher
program: the chance to move
to neighborhoods with better opportunities. >> Researchers from Harvard and
Stanford took a look at this and found conclusively,
for the younger kids, they're significantly more
likely to finish school, go to college, finish college,
get better jobs, earn more money, not have
teen pregnancies, not get involved in crime
and drugs, and the younger the kids are
when the families make the move, the bigger the impact. ZIP code is destiny. That's no joke. >> SULLIVAN: One of the hottest
ZIP codes in Dallas is the northern suburb
of McKinney. Three years ago, it was ranked
the best place to live in America by Money magazine. Today, the area is booming. New apartments are popping up
everywhere. I was meeting a developer who's
trying to bring more low-income housing
to the community. >> Hi! >> SULLIVAN: Hi, I'm Laura. >> Hi, Terri Anderson. >> SULLIVAN: Terri Anderson has
spent her career in the field of affordable housing. >> Please, if you could put
this on. >> SULLIVAN: She's building
an apartment complex here, between McKinney and the
neighboring city of Frisco. Can we see it? >> Yes, let's go. >> SULLIVAN:
All right, so tell me, what's this going to look like? >> There'll be two very large
buildings and... >> SULLIVAN: Anderson's plan is
to build 132 apartments. >> It's class-A construction and we're really
excited about it. >> SULLIVAN: Some market-rate, some at reduced or affordable
rates, and some units set aside for Section 8 vouchers. But her plan hit a roadblock
with the Frisco City Council. >> We thought we were going
to have support, and instead, the city actually called a
public hearing for our property, and about 250 angry residents
showed up. >> SULLIVAN: Some residents
voiced concerns about traffic, others about overcrowding
in their schools... >> Hi, nice to meet you. >> SULLIVAN: And some were just
opposed to having low-income housing
in their neighborhood. Well, why did you pick
this spot? Nicole Humphrey is a local
opponent of the development. What is your concern when
it comes to Section 8 and low-income? >> The lifestyle I feel, like,
that is, goes with Section 8 is usually working single, maybe
single moms or people who are struggling to keep their heads
above water. And it's not... I feel so bad saying that,
but it's not... It's just not people who are, I
guess, of the same class as us, which sounds bad, but I don't
mean that in a bad way. >> SULLIVAN: Some people would
say, you know, "Look, they maybe not, have not
had the opportunities, "their kids are not going
to have the opportunities that your kids are going to have
in this neighborhood." Can they share in that? >> The, the problem with that
is, I hear a lot of the unfair, of, "Oh, we haven't been given
this or that, or we haven't been afforded things that you might
have been afforded." I don't look at
multi-millionaires and think, "Why don't I have a yacht? Why don't I have a private jet?" It's, it's a mindset,
I feel like. >> SULLIVAN: Do you think that
you maybe are stereotyping the folks... >> Oh, I totally am, 100%. It's not... It works both ways. I, I'm definitely not a racist
and I'm not bigot, but I, I think I hold a little
bit of a stigma against people who are
different. We don't want nomads. We don't want people who don't
have roots. I just don't want that to be
what my community is about. >> SULLIVAN: A vote on whether
to help Anderson get the money she needed was brought before
the Frisco City Council in March of 2015. >> SULLIVAN: The opponents won
the day. (attendees applaud) >> SULLIVAN: But even without
local support, Anderson was able to line up loans and grants to
move forward with construction. Then, more problems. >> Our superintendent has been
threatened, issued a warning, a criminal trespass warning. The police have actually
blocked our entrance. >> SULLIVAN: Have you ever seen
anything like this in the years that you've been
developing? >> I have not. >> There's an issue with some
building on the easement and the right of way. >> SULLIVAN: Frisco city
officials say they support affordable housing and aren't
trying to stop Anderson's project. They just want her to comply
with the city's building rules. Anderson complained to the Department of Housing
and Urban Development, which is now investigating whether her project is being
discriminated against. >> It is a concerted effort
to shut down development of a property they do not want
in their neighborhood. >> Move! Move! >> SULLIVAN: Two years ago,
just miles away... >> Get on the ground. >> SULLIVAN: A confrontation
between McKinney police and black youth went viral. >> That girl right there,
running. >> SULLIVAN: The incident became
another flashpoint over policing and race. (yelling) >> SULLIVAN: But behind this
confrontation were tensions over housing. >> What was happening
at that pool party was, you had white patrons of the
pool shouting at black patrons, "Go back to your
Section 8 housing." >> Then they started verbally
abusing, telling me I need to go back to my Section 8 home
and stuff like that. >> On your face! (yelling) >> SULLIVAN: The McKinney pool
party was a reminder of how inseparable housing
and race have been, and of federal policies that
divided our cities more than 80 years ago. >> In 1933, the Public Works
Administration began to build public housing. And the important thing to
know about is that they built segregated public housing in
cities across the country that had never known segregation
before. >> SULLIVAN: Then, in the 1940s
and '50s, the government bankrolled a mass migration
to the suburbs. >> The Federal Housing
Administration subsidized single-family homes outside
central cities for white families only. >> Two-thirds of the people
in our country now live in a metropolitan area. Mostly the growth is
in the suburbs. >> At the same time,
industry left urban areas. So poverty became
even more concentrated, making low-income segregated
neighborhoods even more desperate economically than they had been previously. >> Are we going to sock it
to them now? (protesters respond) Are you ready? >> SULLIVAN: By the 1960s,
the segregation and desperation boiled over. (chanting) Race riots swept the country. (yelling, sirens blaring) >> Segregation was something
that was eating us away. Most of the focus of civil
rights work had been in the South. But by the mid -60s,
we were making that turn towards the North,
and in the North, segregation was the issue, housing segregation
in particular. >> We want a strong fair
housing bill, and that's the only thing that's going
to make this stop. (people cheering) >> And so it's no mistake that
the Fair Housing Act, which had been stalled in Congress, is passed just days after Martin
Luther King is assassinated. >> SULLIVAN: The act outlawed
all discrimination in housing and went further. >> The Fair Housing Act was
now saying, "We're going to aggressively
and affirmatively look for ways "to create opportunities
for integrated housing and to encourage local
jurisdictions to do so." >> SULLIVAN: Within years, as conditions in public housing
deteriorated, new alternatives were enacted, like Section 8
vouchers. >> So the Section 8 voucher
program was created to continue assisting low-income people with their housing cost needs,
right? So a household could take
their voucher and move to a higher-income,
higher-opportunity neighborhood. >> SULLIVAN: Vouchers would help
some of the poor pay their rent. But as old public housing
projects came down, new affordable options
were needed. And by the early 1990s,
the government had launched a new construction program,
relying on the private sector. It was called the Low-Income
Housing Tax Credit. And so the idea of the
Low-Income Housing Tax Credit emerged as a way to create a new
public-private partnership that would allow more affordable
housing to get built. >> SULLIVAN: The program would
spur billions of dollars in private investment to remake
the image of public housing. It would also open the door
to a whole new set of players and politics. So you both were interested
in the same thing. Back in Dallas, I met
developers who were among the earliest to see opportunity
in the new tax credit program. Together, Brian and Cheryl
Potashnik became some of the most successful
affordable housing developers in the country. >> I think at one time we were
ranked in the top ten and the largest in the state. >> SULLIVAN:
They got their start in the neglected neighborhoods
of South Dallas, areas where the demand for
affordable housing was greatest and the tax credit program was
set up to help. The Potashniks showed me
how the program works. The I.R.S. gives billions
in tax credits to the states. Then the states award
the credits to developers... And this is you guys. >> Yes. >> SULLIVAN: Who sell them for
cash to investors, mostly banks. The developers use the cash to
help build apartment buildings. And because taxpayer money pays
for most of it, they can charge the lower rents that are
required. >> It's like when you buy
a house, you have to put a down payment. That's your equity. That's... The tax credits give us
the equity to build the apartment complex. >> SULLIVAN: Could you build
these properties without tax credits? >> No. >> No, and it wouldn't be
possible to build the quality of housing without the tax
credits. >> Dallas mayor Laura Miller cut
the ribbon... >> SULLIVAN: By the early
2000s, the Potashniks were making millions off their
developments and looking for new opportunities beyond
the inner cities. >> You know, we didn't have
a very scientific process for how we found land. We'd get in the car
and drive around. But we started driving north
and, and west instead of south. >> SULLIVAN: And what did you
find when you got north? >> We found a good site. >> SULLIVAN: That site was in
the northern suburb of McKinney. What kind of pushback
did they get? >> Just, uh... "Hell, no, you can't come." >> SULLIVAN: Many argued that
there was already enough low-income housing
in the community. But Betsy Julian, a leading
Dallas civil rights attorney, says she heard other reasons
at a public hearing in McKinney in 2003. >> I went to the ladies' room, and if you want to hear really
ugly racial stuff, go into the ladies' room
at one of those hearings. >> SULLIVAN: What were they
saying? >> Oh, I'm not going to
repeat what they were saying, but they were talking about how
the tax credit deal would have to have Section 8. Because that's what they really
were afraid of, >> SULLIVAN: The Potashniks
tried to get around the opposition and negotiate
a political deal. >> We had hired a consultant
who was a state senator, who was also a lawyer. >> And a consultant. >> And a consultant,
and he got us an appointment with the lieutenant governor,
but then we were told that we needed to hire another
consultant, but we couldn't know who that
consultant was. >> SULLIVAN: You had to hire
somebody whose name you were not allowed to know. >> To lobby the governor. >> We would get calls
from consultants. "Look, I know the governor,
I know the senator, I know this one, and I can help
you here." I mean, it, just rampant. >> SULLIVAN: It's just, "Pay me
this amount and don't worry about how I do it." >> Right, don't ask. >> SULLIVAN: Don't ask. Their deal fell through. And their development plans to
build in other communities that didn't want low-income
housing generated broader opposition. Soon, Texas began requiring
letters of support from local and state officials
to help get tax credit deals done. What did that mean for the
projects, when you had to get a letter of support? >> It basically meant that if
the neighborhood didn't want it, that property was not going
to get built. >> SULLIVAN: The letters of
support gave politicians more power to determine the fate
of developments, so the Potashniks doubled down
to try to get the political buy-in
they needed. >> Developer Brian Potashnik
has the mayor's ear when it comes to meeting
the city's need for 30,000
affordable housing units. >> So I found myself spending
a lot of time at City Hall talking to a lot of politicians. >> It all began years ago... >> SULLIVAN: Getting those
letters of support became a high-stakes political game,
and in 2007, 14 people, including the Potashniks,
were charged in a bribery and corruption
scandal, the largest in Dallas City Hall
history. >> Experts say it suggests the
Potashniks funneled bribes through a conspiracy for
apartment construction approval. >> SULLIVAN: It was
a corruption case. You were accused of being
in a pay-to-play situation. Why did you do it? >> If you want to use that term,
then it becomes about access, and especially when the system
itself is set up so that you need those people to
approve what it is that you're doing
in order to do business. >> There was a lot of pressure
coming from a lot of different places. Certain decisions were made,
certain things happened, and... We should have walked away at
some point, from that pressure. We, and we should have
sacrificed those, those projects that were
in question and just gone in a different
direction. But, you know, we didn't. >> SULLIVAN: They pleaded guilty to conspiracy to bribe
local officials. >> Brian Potashnik dashed away
after receiving his sentence of 14 months in prison. His wife, Cheryl, was given two
years of probation as this Dallas City Hall
corruption scandal draws to a close. >> SULLIVAN: Nearly 20 states
now rely on letters of support to help decide which projects
to give tax credits to. Civil rights lawyers,
Mike Daniel and Betsy Julien, say that's a major
reason why so many projects end up in low-income
neighborhoods. Why were the tax credit
projects being put in low-income areas? >> They were being put there
because it's easier to do. There won't be any opposition
to it and you don't have everybody mad at you. You get your deals done. >> SULLIVAN: After examining
the tax credit program, they calculated that more than
90% of family developments in Dallas had been built
in high-poverty areas over a 25-year period. They filed a lawsuit against the
state that went all the way to the Supreme Court and helped
set standards for fair housing nationwide. And in 2014, they sued
the Department of Treasury, claiming the tax credit program
perpetuates racial segregation. >> Our case was about the fact
that tax credit properties were only going into low-income
minority areas in the city of Dallas. And we were looking to get
tax credit housing into some higher-opportunity
areas, as well, which were predominantly
whiter areas. >> SULLIVAN: The case is still
ongoing, but it highlights the challenges to affordable
housing around the country and raises
questions about whether the tax credit program is
working as it's supposed to. Thank you. Last November, I went to Chicago
for an annual gathering of the tax credit industry. It takes a lot of players--
bankers, brokers, law firms, consultants, developers-- to put affordable housing deals
together. Over the past 30 years,
housing tax credits have helped build more than 2 1/2 million
affordable units. The program costs about $8
billion a year, an amount that's been growing. But that hasn't kept up with
the need for affordable housing, and that lack of housing makes
for a booming market. Stacie Nekus is a vice president
for one of the largest brokers, or syndicators. >> Well, the affordable housing
market has been very robust, and so investors really like it. >> SULLIVAN: Why do the
investors like it so much? >> Well, I think you're giving
back to the community, but you're also able to get
a good after-tax yield. >> SULLIVAN: How's business
right now? >> Very strong. Yeah, demand is off the charts. >> SULLIVAN: The program is
often described as a win-win. Poor people get good quality
affordable housing and the private sector makes
money. Rick Lazio, a former
congressman, now lobbies for the industry. >> People ought not to be
getting rich off of this, but they ought to be
incentivized to put their capital at risk. And to feel as though they can
get a reasonable return. >> SULLIVAN: Is this the most
efficient program? >> This is 100% the most
efficient way to do it. It gets the most amount of units
built which is what is required. You have a lot of different eyes
on it. Because again you have the
public and private partnerships so everyone's looking at it. >> SULLIVAN: We were looking
at it too. With so many people struggling
to find housing, we wanted to see how well
the program's been working. We analyzed available data
about the primary tax credits given out
over the last 20 years. And here's what we found:
from 1997 through 2014, the number of units produced has
fallen from more than 70,000 to less than 59,000. But the program is costing
taxpayers 66% more in tax credits, that's
after adjusting for inflation. The estimated rise in
construction costs only accounts for about half of that. We asked representatives
of the tax credit industry about what we found, and reached out to more than 20
top investor and syndicator firms. None would agree
to an interview. But in written responses,
the industry said that "several factors have
affected tax credit production," such as the loss of other
federal funding, or "soft subsidies,"
and the increased costs of trying to help
the poorest renters. They also claim the business
is less profitable than it used to be. So these are just our numbers. We took our findings
to the group that represents the state housing agencies
that oversee the program. >> I think there are good
reasons that the programs produced fewer units. And some of those is that we're
trying to produce more units in areas of opportunity; areas
that are perhaps more expensive. We're also trying to do things
like ending homelessness. So the low-income housing tax
credit program has a 30-year proven track record
and it's produced good housing that's very well run. >> SULLIVAN: But not everyone
is convinced. Republican Senator Charles
Grassley is investigating the program. >> My suspicion is that there's
a lot of things wrong with the program. It may not be serving all
of the people it should serve. There may be people in
the middle getting more than they should. You would think that this
would be something the IRS would be looking into, because they
have to police to see whether the money is
serving the purpose it's supposed to serve. >> SULLIVAN: And are they
policing? >> No, they aren't. There's only been seven audits
in 29 years. Well, if you aren't following
the money, how do you know that the low-income housing
tax credit is working? >> SULLIVAN: That's what we were
doing and that took us to Miami, where we found a troubling story
about the tax credit program. This is it. This is nice. I met up with Michael Cox. He spent 15 years as an
affordable housing developer. He showed me one of his prized
projects, Labre Place. >> Hey, Mike. How are you? >> SULLIVAN: It's a $25 million
development with 90 units. Half of them for formerly
homeless, like Mike Fleunery. >> You would never know where
the people came from in this building. >> SULLIVAN: Where did
they come from? >> Well, like myself, they was
just about to be on the street. >> SULLIVAN:
South Florida is one of the tightest housing markets
in the country, and developments like Labre are
much in demand. >> It's approximately two
to three years waiting list. >> SULLIVAN: To get
into the building? >> Yes. >> SULLIVAN: It has a community
room, a small gym... This is a great room! Its own laundry. >> We leave it open 24 hours because of the residents
that work. >> Supportive housing actually
saves taxpayers money every year because it costs more
to have people on the streets using services like
emergency rooms, police. And so in the long run it
actually will save taxpayers money over the lifetime
of this project. >> SULLIVAN: But there was more
behind the story of Labre. Cox had a partner
in the project, the Carlisle Development Group. Carlisle was founded
by Lloyd Boggio, a leader in Florida's affordable
housing industry. And it was run by his partner's
son, Matt Greer. Together Carlisle and
Cox's company, Biscayne Housing, became a powerhouse. Between 2006 and 2009, the two
companies had more than a quarter billion
dollars under development. >> Biscayne Housing went
from nothing to the number 12 affordable
housing developer in the country. >> SULLIVAN: Wow. >> And, and Carlisle became the,
the number three developer in the country. >> SULLIVAN: In the country
at that time. >> And, it was exciting. >> SULLIVAN: But the
partnership had problems. Cox says he suspected Carlisle
was cooking the books. He discovered documents
about secret accounts. >> They showed about $6 million
in construction funds that had been kept secret. >> SULLIVAN: How could they have
$6 million in extra funds? >> I had no idea. >> SULLIVAN: Carlisle's secret
accounts would soon get the attention of federal
prosecutors. >> This was a Carlisle
development that involved Lloyd Boggio and Matthew Greer. >> SULLIVAN: Assistant U.S.
Attorney Michael Sherwin has spent nearly five years
investigating the tax credit industry
in South Florida. As Sherwin and his team dug into
Carlisle and Biscayne's construction contracts, they
discovered a kickback scheme. >> This is the actual contract. >> SULLIVAN: This is how it
worked on one Carlisle deal. >> Florida Housing wants to know "How much is it going to cost
you, Carlisle, to actually build this thing?" They tell Florida Housing, "We've signed this contract and
it's going to cost $14,866,000 to build." Now, there's an email between
Carlisle and the contractor and they negotiated this the day
before that we're only going to pay you, contractor,
$12,750,000 to build; we're telling the state we're
going to pay you $14,866,000. >> SULLIVAN: One day later.
>> Exactly. >> SULLIVAN: So they knew a day
before they submitted that, that the actual construction
cost was $2 million less. >> Correct. >> SULLIVAN: Carlisle used the
inflated cost estimate to win more tax credits from the
Florida Finance Agency. >> It's not a very complicated
scheme. It's a lie for money. The contract is inflated. So this lie enabled them to get
excess of $2 million just on this one deal. >> SULLIVAN: By the time
they were done, investigators discovered
the two companies stole $34 million from 14 projects. What did you think when you saw millions of dollars
in kickback money? It was amazing. This is a huge amount of money. And this is all on top of the
tens of millions that was made in legitimate fees and profits. >> This is the apartment... >> SULLIVAN: And prosecutors
discovered something else. Nearly $2 million had been
stolen from Labre, the apartments for the homeless, and Michael Cox was
a part of it. >> They were extorting me, saying we will kill these
projects unless you agree to this kickback scheme. >> Unfortunately, this is where
good people make bad decisions. Michael Cox does not go
to Florida Housing. Michael Cox does not go
to the FBI. Michael Cox says nothing
and accepts the money. >> SULLIVAN: You spent the next
several years taking the money. And a lot of people are going
to wonder why you did that. Why did you take it? >> I convinced myself that this
was okay and that I was building amazing projects
in the community. I went from fighting monsters
to becoming a monster. >> SULLIVAN: I tried to reach
the other partners in these developments. Hi, Mr. Boggio... But none would talk. I wanted to ask them about where
that $34 million went. Some of it was tracked back to
Boggio's personal accounts. One was called Caesar
and Cleopatra. >> Caesar and Cleopatra, those
are the names of his two dogs. Over $12 million flowed through
that one account. >> SULLIVAN: Through that
account that was named after his dogs. >> Correct. Correct. >> SULLIVAN: Other kickbacks
to Boggio, Greer and Cox came through a cut-out called
SSHH Construction. >> This is a fake construction
company; they set up SSHH Construction. >> SULLIVAN: It's literally SSHH
Construction-- like S-S-H-H, like "be quiet" construction. >> It was just used to hide
the money. And prosecutors traced some
of the money back to Boggio's house. >> I believe his house is valued
at $11 to $14 million-- his mansion in Coconut Grove. He liked to live a good
lifestyle. >> SULLIVAN: Ultimately, Boggio,
Greer and Cox pleaded guilty to crimes related to the
kickback scheme. A scheme that had gone unnoticed
by state housing officials for years. >> These housing agencies don't
have a lot of funding. They don't have a lot
of manpower. Looking at Florida Housing,
it's a small office with a limited staff that is
in charge of managing hundreds of millions of dollars
in state, local and federal money. >> SULLIVAN: So the IRS is
relying on the housing authorities
to ferret out problems and corruption. >> Correct. >> SULLIVAN: In Tallahassee,
I went to see the man who was running the agency that oversees
the tax credit program in Florida. What was your reaction when
you first heard about this investigation? >> Um, certainly disappointment
that anybody would, you know, would do that with programs
that, you know, are designed to serve folks in need. >> SULLIVAN: The prosecutor in the case described the agency
as a bit outmatched when it came to developers with
millions of dollars and lots of resources. Do you think that's accurate? >> Outmatched. Most of the folks that we deal
with are good folks that do good work, you know. Presumably that's similar
in all states. That's why you've got few
foreclosures and, you know, and relatively few scandalous
incidents. >> SULLIVAN: I'm trying to
figure out if there are so few scandalous incidents
because they're not happening or because they're so difficult
to catch. >> There's a lot of financial
risk to a lot of folks, you know, for playing that game. >> SULLIVAN: So you feel like
this is kind of a one-off, or a bad apple? >> Yes. Absolutely. >> SULLIVAN: Some of the
officials at Florida Housing say that this was
a one-time thing, this was an aberration. Do you think that's true? >> No, I don't think it's true. We'll see what the future holds,
but there's a lot that needs to be looked at and there's a
lot of people that need to be held accountable for
what's been going on and what's to come,
I think, in the future. >> SULLIVAN: Soon, the head
of the Florida housing agency we interviewed would resign
in scandal. And as we kept looking into
the tax credit program here, we heard about allegations involving another major
affordable housing developer. >> My name is David Deutch
and I'm one of the co-founders of Pinnacle Housing Group. >> SULLIVAN: We discovered
a company called DAXC was owned by the principals
of Pinnacle. >> And bring something new
to affordable housing. >> SULLIVAN: A source in the
development industry told us that DAXC was being used
to hide extra profits from Pinnacle projects. So one of the other ones that
we're looking at is this DAXC Company, which is,
has the same address as another really large
Florida developer, Pinnacle, down here in Florida. >> Okay. >> SULLIVAN: We've been told,
through a source, that this was a company that didn't actually
do any work. >> I can't comment on this,
I don't know. Maybe later, but not now. >> SULLIVAN: Because you know
this one. >> I can't say I know it,
but it's probably best if I don't say anything
about this. >> SULLIVAN: Turns out, Sherwin
did know about Pinnacle and DAXC. Three months after our
interview, he charged DAXC with stealing federal tax
credits. The company signed an
agreement with prosecutors, admitting it inflated costs
by more than $4 million on four projects. It returned the money
and paid a $1 million fine. Under the deal the charges
will be dropped if the company continues to
cooperate with prosecutors. But we still had questions
about DAXC. It's definitely the name
of a company, I agree. I'm just wondering if it's
possible that Daxc is a person in Costa Rica? That's the rumor. The leadership in the company
was going down there. And that's what took our
investigation to Costa Rica to see what Pinnacle
was doing there. <i> Hola.</i> <i> Como estas?</i> <i> Buscando Daxc Jimenez.</i> Later that night, just outside
the Los Sueños Resort, we found Daxc at a beachside
restaurant. <i> Gracias.</i> >> Yes, I am Daxc. >> SULLIVAN:<i> Hola.
Me llamo Laura.</i> >> Laura, nice to meet you. >> SULLIVAN: Daxc said he wasn't
a Pinnacle business partner, he said he was just a guide
and a driver, and that they named the shell
company after him. They named a company after you. >> Yes. They told me that. >> SULLIVAN: They told you? >> They told me but,
excuse me, I didn't believe. >> SULLIVAN: You didn't? >> No, I didn't. >> SULLIVAN: He said he had no
idea what the company had done. Let me show you what happened. But he did know the partners had
been coming to Los Sueños for years. One of the principal managers... >> Principal managers, right. >> SULLIVAN:
And we found out why. They have a Costa Rican company
called Casa Oasis. That company turned out to be
a property right here in the secluded area
of Los Sueños. At the top of the resort,
I found Casa Oasis. It's their multi-million dollar
private villa where they take vacations. And, we learned, have taken
bankers and syndicators. Last week, Florida's housing
agency went to court to ban Pinnacle from affordable
housing projects for two years, saying the company had used
DAXC to engage in fraud. Pinnacle declined our request
for an interview, but told us it would contest the ban and said it did not violate
any state rules. Three developers in Florida were
charged with stealing from the program. How can the housing finance
authorities make sure that that's not happening
in their backyards, in their states? >> We really encourage our
publics, people who are out in the community, people who are
working with developers, to really come to us if they see
issues that they think are not right with a project. We just encourage people that
if they see something, say something. >> SULLIVAN: Okay. >> The other things that we do-- we have architects who get
the final say when the cost certifications are
filed; to check the reasonableness
of those costs. >> There's not a lot of
documentation provided to the housing agencies
and the underwriters other than basic
building block documents. The application, contracts,
affirmation letters. So, it's really a program
of trust. >> SULLIVAN: Did you just call
an $8 billion tax program a "program of trust"? >> Yes. It is a program of trust. >> SULLIVAN: The U.S.
Attorney in Florida called this a program of trust. Do you think that's true? >> This is a program where
communities, states, developers and investors work together. And certainly, there is
an element of trust in any development project. I think the vast majority of
projects really come through pretty well. >> SULLIVAN: The tax credit
industry told us that it supports
more stringent auditing and doesn't tolerate fraud
of any kind. >> The developments are
phenomenal and people need it. There's no need to extract
extra money. It's like killing
the golden goose. That's what they're doing. >> SULLIVAN: How widespread do
you think the corruption is? >> Look, I don't have the
metrics to tell you, but I know that this fraud doesn't just
reside in South Florida. There's too much money involved
and, you know, based upon information
we've looked at, this fraud exists
in other jurisdictions. >> SULLIVAN: Sherwin says he's
now investigating other national developers, as
well as bankers and syndicators. Last December, the Carlisle
executives were sentenced-- Lloyd Boggio received nearly
five years in prison, Matt Greer three years
in prison, Michael Cox had to repay the
millions he stole and received probation
because of his work with the homeless and
cooperation with prosecutors. >> When costs are inflated, the number of housing units
actually produced decreases, and we are building less
housing. >> I get it. I'm not against you making
a profit, and this case isn't a case against capitalism
or rich people. But this is money that was going
to build low-income housing in Florida. And it didn't. The money that they took could
have built hundreds of additional extra units,
especially at this time. Look, there's a housing crisis
across the United States. >> SULLIVAN: And you were
hurting the homeless people on the street because
you were taking money that belonged to them. >> Absolutely. We ended up really, really
hurting the people we serve, and betraying their trust. >> SULLIVAN: After digging
into the tax credit program, this much is clear: there are
a number of reasons why it's producing less
affordable housing and costing more. But, without strong oversight of the billions flowing through
the private sector, it's hard to know exactly where
it's all going. >> You've got a bunch of
developers, and you've got people in between. Nobody's saying they shouldn't
benefit some, but are they doing it in
the most efficient way to provide the best housing
for low-income people? That's what we as policy makers
are trying to get out of the Government
Accountability Office. Should this program be continued
under the same circumstances, or to what extent
should it be changed? >> SULLIVAN: We wanted to ask
officials at the Treasury Department about
the tax credit program they run. They wouldn't agree
to an interview. And officials at the Department of Housing
and Urban Development, which runs the Section 8 voucher
program, also declined. >> Hi. >> SULLIVAN: We returned
to Dallas one last time. Can you spend five minutes
talking? It had been three months since
we'd met the women who had just received Section 8
vouchers. They're talking
about moving you up? Farryn Giles had started
a new job in North Dallas. >> Hearing talks about
my third promotion. >> SULLIVAN: And had hoped
to move to a neighborhood near work. But she wasn't having any luck
using her voucher anywhere. >> I've been to Oakcliff,
I've been to South Dallas, I've been to Pleasant Grove. I've been way down south. Nobody wants my voucher. >> SULLIVAN: In January, Farryn
ran out of time to use the voucher
and gave it up, but she did find a place
in Dallas Public Housing. We've been following
families down in Dallas who've really struggled
to use these vouchers. Why are they having
such a hard time? >> Well, this is a good example of why the affordability
challenges that we have are a crisis. There is some discrimination
against families who want to use these vouchers. We need to figure out ways to
make sure that those families, when they have a voucher, can be
successful in using it. But vouchers aren't
a silver bullet. We need a housing policy
that focuses on building more affordable housing. That's why the tax credit
is important. So that more housing is built
and that it's more affordable. >> Application fee is
how much, sir? >> SULLIVAN: After searching for
months, Linda Higgins was unable to find a place that would take
her voucher. She's back on the Section 8
waiting list again. Where do you think you would be if you weren't here in your
uncle's house? >> Oh gosh, probably I'd be
going from shelter to shelter, to, just, who knows. It's really not good. And I don't want to see the
voucher, Section 8, go away. You know, I know we have a new
president and I don't want to see it go away, because we'll
have more people out in the street
than we do now. >> This is really a very,
very dire emergency. For whole swaths of the
population in this country, they are lifelong renters, and
yet we don't talk about them, and we don't talk
about the challenges they face. And it almost is
behind the veil. It's just simply not part
of our national conversation. What happens to the millions of
people who need to be able to find affordable rental
housing to raise their families? >> SULLIVAN: When I caught up
with C'Artis Harris, she and her kids had gotten out
of the shelter. Hi! But they still weren't
in a place of their own. They were temporarily staying
at a friend's apartment. C'Artis had been given extra
time to use her voucher, but had given up on the prospect of moving out
of her neighborhood. >> Maybe it's meant for me
to live in the hood. >> SULLIVAN:
Why do you think that? >> But like in the hood, I guess
I'm acceptable, so like they don't, you know, they don't discriminate
basically. They're more open. >> SULLIVAN: Because everybody
else is judging you. >> Yes. >> SULLIVAN: As we were talking
there was an interruption. And life on the margins suddenly
became even more difficult for her. (engine starting) >> They just towed my car away. >> What? >> No, for real for real. >> SULLIVAN: She'd fallen behind
on payments, and her van was repossessed. >> Oh my God, yes. They was rigging my car up. My purse was in there
and everything. They were taking my car away. >> Oh my God. >> Why they tow it for? >> 'Cause I ain't paid my car
note in about two months. >> SULLIVAN: Without her van, C'Artis Harris had lost her last
safety net-- a place to sleep when she and her kids have
nowhere else to go. Like millions of Americans,
she is still trying to find a place she can afford to live. >> For more on this and other <i>
Frontline</i> programs, visit our website
at pbs.org/frontline. >><i> Frontline's</i> "Poverty,
Politics and Profit" is available on DVD. To order, visit shopPBS.org
or call 1-800-PLAY-PBS. <i> Frontline</i> is also available
for download on iTunes.
The first 26 mins features Dallas in the nearly hour long Frontline doc.
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