A house at 245 Dearborn Street in Buffalo within the city’s historic district had been an eyesore for years. Reports state that its four apartments apparently had been attracting a less-than-desirable element to the neighborhood for years — the address drew loud noise complaints on a regular basis, and drug trafficking was suspected.
When North District Councilman Joseph Golombek Jr was campaigning door-to-door in the area in 1999, a number of locals wanted to see the house demolished. Efforts to work with the homeowner failed, because he was nowhere to be found: the residents were apparently squatters.
In 2013, Wells Fargo gained possession of the house. The plan was to level the house, but historical preservationists objected.
“The Buffalo Urban Renewal Agency, a city hall office, stepped in, working with the Black Rock Riverside Neighborhood Housing Services to see if the house could be saved,” reported The Buffalo News.
“I did not want the four units put back,” Councilman Golombek said.” There would be the parking problems, and the apartments would be too small. I wanted an owner occupant.”
The house was an old construction filled with lead paint. Environmental regulations made it cost $63,000 just to prepare it for renovations, which quickly added up: $65,000 for siding, $25,000 for a new roof. By the time it was ready, the city had spent $523,600 in HUD funds.
Today, the city has the house listed for sale at $137,750.
“Since the house is in a federally designated historic district, extra money was spent on items recommended by the state Preservation office,” the News reports.
In other words, they spent money on things that weren’t required, but were recommended — things a private citizen wouldn’t have bothered with. When the money comes out of your pocket, you don’t go into a near-$400,000 hole when you know the projected value is $137K.
Here’s the kicker, though: There are as many as ten other homes for sale in Buffalo which the city renovated like this despite expecting to lose their shirts.
In one case, $560,000 was spent on a home now listed for $115,000.
The contractors who did the work claim they did not overcharge — they reportedly only made between three and five percent profit on the gigs. However, only three bids came in.
All of this is the government’s own fault:
Contractors and developers say U.S. Housing and Urban Development rules, as well as reporting requirements, likely discourage other companies from bidding to rehab the Buffalo houses, particularly if they haven’t worked on federally funded projects in the past. Others suggest contractors either aren’t interested — possibly because of concern over crime in Buffalo — or that they didn’t know about the work, given its limited and sporadic nature.
A Buffalo requirement that general contractors obtain a performance bond could also be an impediment, they say. The bonding can be a problem for smaller companies that might be interested in the work.
Not only are the taxpayers on the hook for the expense, but the government was the reason there was so little bidding competition, and the reason these projects were doomed to lose money anyway.
To err is human. But to really foul things up, you need government.