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Little House on the CDBG
March 19, 2006: Steve and Sharon Wolff were excited when they found a house in Rio Dell, a small town (pop. 3,157) in Humboldt County in northern California. The Wolffs and their 5 children had moved from Oregon and were looking to settle down in their first home. The one they found in Rio Dell was roughly 90 years old, and built from old growth redwood, with a form of siding called "shiplap". A regional feature found on older buildings in the area. The house sat on a third of an acre, a big plus since it would give the Wolffs' children plenty of room to play.

Humboldt County is heavily forested and the Rio Dell area is known for its spectacular Coastal Redwoods. Lumber has been a major part of the local economy for well over a century, but no longer provides the employment it once did. Nothing else has sufficiently filled the gap. Though only a few hundred miles above San Francisco, Rio Dell is a world away economically. As of 2000 (the most recent census data) median household income in Rio Dell was $29,254. Median home value, $95,800.

In Humboldt County overall, the median is higher. Lately it's risen by leaps and bounds. In 1990 the median was $45,500. By 2000, $133,500. In their "Housing Element Update" of 2003/2004, Humboldt County officials questioned what was fueling the rise. Among the suggested answers were low interest rates, regulations that increase building costs, and shortage of developable land. Not included as possible factors were speculative investment, property flipping of the fraudulent variety, and the sloppy appraisal and lending practices that have helped inflate the much larger housing bubble in more affluent parts of California.

Steve and Sharon Wolff weren't speculators or flippers. Nor were they particularly affluent. So the house they chose in 2003 was a fixer upper, purchased with assistance from the U.S. Department of Housing and Urban Development (HUD). Via the First Time Home Buyers/Rehabilitation program delivered by HUD's Community Development Block Grant (CDBG) program. The First Time Home Buyer program in Rio Dell is administered by municipal officials and the Redwood Community Action Agency (RCAA). The RCAA is a corporate, non-profit entity paid to administer numerous federal and state funded programs in all of Humboldt County. Including affordable housing and real estate development programs. Among the RCAA's CDBG duties are grant development and administration, and loan portfolio management for Small Cities.

The house the Wolffs bought, and which the RCAA qualified for the CDBG First Time Home Buyers/Rehabilitation program, had originally been part of a logging camp and was moved by barge across the Eel River to Rio Dell some 70 years ago. Because of historic and architectural features, the RCAA was required to inform the California Office of Historic Preservation (a division of the Department of Parks and Recreation) early in the sales process about what the proposed rehab on the house would entail.

Over the years, the Wolffs' future home had changed hands several times. It spent decades as a low income rental property. In 2001 it was sold for $60,000. Two years later, when the Wolffs bought the house via the CDBG program, it was appraised at $140,000. The Wolffs paid $130,000. The CDBG loan package also included $14,000 for rehab work. According to Sharon Wolff, the value of the house was determined by an appraiser who did a "drive by inspection". He declared the house to be in "average condition". His appraisal "satisfied the mortgage people and everyone was happy". Including the Wolffs. They figured that though the numbers were high and the house was a fixer-upper, they were getting a "real bargain" considering the price of real estate in California.

The Wolffs weren't local officials, real estate professionals, or corporate non-profit purveyors of government assisted, affordable housing. So it's understandable they might think the median value for the entire state of California an accurate gauge for Rio Dell. But according to the economic profile of Rio Dell at city-data.com, the median value of Rio Dell is well below the state average. Using Humboldt County as measuring stick would also be inaccurate, since the county overall has a higher median than Rio Dell. But even if Humboldt County housing values are an allowable standard for taxpayer backed home lending in the depressed town of Rio Dell, the house the Wolffs bought was a low income rental property for years and had been moved from another location. And as the Wolffs discovered later, had suffered earthquake damage in the early 90's.

Though Steve and Sharon Wolff may not have had an accurate idea of local housing values, and were unaware of certain facts regarding their future home, they did know it had termites. The legally required, pre-purchase termite inspection was done in late July, 2003. The resulting report noted termite and dry rot damage and recommended extensive repairs. The RCAA also received a copy of the report. But the agency's representative, a Housing Programs manager who'd handled other CDBG sales and rehab projects in Rio Dell (though never in combination) didn't include a copy in the rehabilitation write-up he sent to the state Office of Historic Preservation. However, according to a Humboldt County Grand Jury report (#2005-CD-01) the RCAA request for rehab (which was filed the day before the real estate closing) did include an account of cosmetic issues in need of address. Such as work on the siding, paint and floors. The RCAA request also mentioned-- for the first time on record-- that a heating system needed to be installed.

Allegedly, the RCAA representative presented a more serious picture of the condition of the house earlier in the Summer, when he spoke with the Wolffs' initial mortgage lender. Who for some reason dropped the deal. Luckily, their mortgage broker found them another lender. Albeit one with a higher interest rate. The Wolffs were still happy to get the loan. Because they knew their realtor had to work really hard to keep the seller from taking one of the "multiple back up offers for more money."

At no time during the entire sales process, which occurred under the aegis of Rio Dell city officials and the RCAA, and which involved HUD based loan assistance, was an overall structural inspection performed on the house Steve and Sharon Wolff bought.

In late October, 2003, the Wolffs closed on their house. Since it wasn't immediately habitable, they continued to live in a rental while paying the mortgage. The Wolffs planned to stretch their rehab loan by doing a lot of the work themselves. They removed huge amounts of debris and tore up layers of decrepit carpeting and other floor covering. Overall, the rehab was going to be a big job, much of which would require professional contractors. The electrical system needed to be replaced, the house had no heat, the bathroom and kitchen needed total overhauls, and lead paint required treatment.

But as the Wolffs worked other problems became evident. There was long term and ongoing water damage. A sump pump with a surface drain line was needed. The roof and various vents (including the waste vent) were in bad shape. But most alarming was the condition of the foundation, which the Wolffs discovered when trying to address the termite problem. The post and pier foundation within the perimeter foundation was failing. Beams supporting the upstairs were over stressed.

When Steve and Sharon Wolff began working, they reportedly received a verbal OK to do so from their RCAA representative. But when they pointed out the damaged foundation, the RCAA rep denied any problem existed (the Wolffs' analysis of the foundation was eventually confirmed by a structural inspection) and demanded they stop work. The Wolffs then asked that an engineer be brought in and offered to foot the bill. But Mister RCAA brought in a local contractor, who he described as an "expert" in foundations. The expert, without any relevant building permits, raised the house improperly and cracked the rafters. He also placed a partial beam beneath the house and filled in the hole the Wolffs had dug in order to access the foundation. After the expert left, the Wolffs re-excavated and went on attempting to repair the foundation themselves.

The RCAA rep had the city of Rio Dell issue a stop work order on Steve and Sharon Wolff, citing a lack of permits. City officials guilt-tripped the Wolffs, telling them that if they didn't do what the RCAA said, low income families in Rio Dell benefitting from CDBG loan programs would suffer. The Wolffs let the expert return. He still had no permits. This time he ignored the foundation. Instead the expert worked on (over?) the kitchen and bathroom. Though the Wolffs told the expert they wanted to tile the kitchen floor, he laid down linoleum. And installed cheap kitchen cabinets, using too short screws on the upper ones. They fell off the walls. Areas subject to dampness weren't sealed and proper materials weren't used. The new drywall and underlayment in the kitchen rotted almost immediately. When little more than $200 dollars of the Wolffs' CDBG home rehab loan was left, the expert departed.

Though their home still had no heat, was missing a number of interior walls and sections of floors, had a badly damaged foundation and beams, plus newly cracked rafters, the Wolffs moved in on January 1st , 2004. The rent and mortgage combo had become impossible to carry. Not that their expenses nosedived after moving. For instance, the space heater in the living room where the children slept sent electric bills soaring.

Later that month the Wolffs went to the Rio Dell City Council and asked for help with the rehab. With little result. In February, Sharon Wolff met with the director of the RCAA, Lloyd Throne(!), and requested the situation be rectified in a way that wouldn't mean more debt for her family. Later, she received a letter from Director Throne suggesting the Wolffs take out a bigger loan for the RCAA to administer. At that point the Wolffs began to complain to HUD, the agency from which CDBG flows.

Seven months later, after mounds of paperwork and many pleas to HUD, investigators from California's Department of Housing and Community Development (HCD) showed up at the Wolffs' door. They also visited city hall in Rio Dell. Their findings resulted in an 09/21/04 report from the state CBDG Program of the Community Development Section of the Department of Housing and Community Development of the State of California. The investigators had determined that the Wolffs' house should never have passed the initial inspection qualifying it for the CDBG homebuyer/rehab program because the work needed was too extensive. Particularly the damaged foundation and beams. According to the inspectors' report "...if RCAA staff had done all their true diligence at the beginning of the project, then it could not have been approved by the city loan committee."

As a result of the HUD/HCD investigation, the City of Rio Dell was required to apply a grant (as opposed to a loan) of up to $50,000 to repairing the Wolffs' home and lodging the family in a motel while work was done. In return, the Wolffs signed a release of liability for the city of Rio Dell. The grant money was to come out of the same state and federally funded revolving loan program that juiced First Time Home Buyer and Housing Rehab programs in Rio Dell. Though lack of "diligence" on the part of the RCAA and city officials made the grant necessary, taxpayers took the hit. As did low income, potential recipients of CDBG home purchase and rehab loans in Rio Dell.

The impact of the lost CDBG funds on low income, potential homebuyers was pointed out by a Humboldt County grand jury in Summer, 2005. As result of a complaint filed by the Wolffs, the grand jury had launched "An Investigation into the First Time Home Buyer and Housing Rehabilitation Programs in the City of Rio Dell". The findings, released in late June, were damning. After expressing concern that problems found in Rio Dell "could occur in First Time Home Buyer/Rehabilitation Programs similarly administered throughout Humboldt County" the grand jury went on to declare that relevant city officials failed in their duty to monitor how the RCAA administered the CDBG funded programs in Rio Dell. And that they cared little about structural reports, health and safety issues, and paid project invoices even when no permits were issued. The grand jury also declared that city officials and their staff had a habit of not responding appropriately to complaints from citizens.

Did the grand jury findings make Rio Dell officials see-- and change-- the error of their ways? Think again. In California, grand jury investigations into the performance of local public servants often seem to do little except, as a grand jury member put it, "bring public attention and shame onto a situation." Only problem is, some folks are shameless.

On October 25th, 2005, the city council and city manager of Rio Dell issued their response to the grand jury's report. It was a point by point denial, delivered in a style smacking of Queen Victoria in a snit. To the finding that the city of Rio Dell failed to properly monitor the RCAA, the response was, "the recommendation [for change in oversight procedure] set forth by the report will not be implemented because it is not warranted." Re invoices paid without permits, "...the city of Rio Dell feels that the Grand Jury report fundamentally misunderstands the nature of the [home buyer/rehab] program and the role of Rio Dell and RCAA in that program." As for those officials accused of being unresponsive, "The city of Rio Dell disagrees wholly with the finding. The recommendation will not be implemented because it is not warranted."

Meanwhile, back at the Wolff ranch, some genuine rehab work had taken place. Albeit after a few more rounds of HUD paperwork. A new project manager and his recommended contractor worked in tandem with the Wolffs. The foundation received a mega infusion of cement. Supports were added. (Though the rafters cracked by the expert had caused a nasty sag in the roof.) A forced air heating system was installed, along with double paned windows. No more huddling by a space heater. At present, the Wolffs' house still needs work, but is definitely livable.

Life in Rio Dell is another matter. Anyone who has ever pressed for their rights in a small pond with a rep for old boy rule, knows how ugly such scenes can be. The Wolffs say they've experienced retaliation. They also say they've had a hard time obtaining local legal assistance or much media coverage due to the importance of the RCAA.

In early January the Wolffs received a 1099 Misc. tax form from the IRS. The form was filed by the city of Rio Dell and said the Wolffs received $50,000 from the city. The money in question being the CDBG rehab grant HUD required Rio Dell to apply to the Wolffs' home. The independent contractors who worked on the Wolffs' home submitted their bills to the city. And were paid by the city. The money never passed through the Wolffs' hands. The only part of the $50,000 they received directly, was a small reimbursement for material expenses. And after checking around with other municipalities, Sharon Wolff discovered that 1099 forms are sent to contractors who are paid with CDBG funds-- not to homeowners.

Steve and Sharon Wolff are persistent people. They're also angry. They believe in the stated purpose of HUD's CDBG Home Ownership and Rehab programs, but would like to see real change in how-- and by whom-- federal and state programs are handled in Rio Dell and Humboldt County.

Though Steve and Sharon Wolff finally received assistance for a meaningful rehab of their home, it hardly makes up for what they had to wade through. Any kind of "affordable housing" advantage the Wolffs hoped to realize from the initial CDBG loans disappeared into the extra expenses of living in, and almost having to rebuild, an unlivable house. After signing onto a program intended to help people realize the American Dream, their life became a bureaucratic nightmare. They and their five children resided in a home with "alarming structural and safety issues"* and were blocked from properly addressing those issues by out-to-lunch, and frequently outright hostile, public and quasi-public servants. And instead of being able to enjoy their home and family in peace, Steve and Sharon Wolff have had to spend huge amounts of time and energy taking on a raft of government agencies and non-profit entities. Including the municipal government of Rio Dell, the Redwood Community Action Agency of Humbolt County, the California department of Housing and Community Development, and the U.S. Department of Housing and Urban Development.

An investigation into CDBG's First Time Homebuyer/Rehabilitation program in Humboldt County and Rio Dell as regards the Wolffs' case, has been opened by HUD's Inspector General in Washington. The Wolffs received a letter saying so. The HUD letter also said the Wolffs will be notified when the investigation concludes and they shouldn't expect to hear anything until then. Though this sounds a little like don't-call-us-we'll-call-you, it could just be that DC HUD is so busy investigating all the other cases around the nation where CDBG home ownership and rehab programs have been mismanaged, that they have little time to yak on the phone with the people whose lives have been affected.

Carola Von Hoffmannstahl-Solomonoff

*Grand Jury Report #2005-CD-01, "An Investigation into the First Time Home Buyer and Housing Rehabilitation Programs in the City of Rio Dell"

Sources include:

Account & Documents re Rio Dell, Sharon Wolff, 2006

City of Rio Dell Responses to Grand Jury Report, City Council, City Manager Jay Parrish, Mayor Bud Parrish, filed 10/25/05

"Rio Dell disappointed with report," Mike Morrow, The Times-Standard, 06/01/05

Grand Jury Report #2005-CD-01, "An Investigation into the First Time Home Buyer and Housing Rehabilitation Programs in the City of Rio Dell," June 2005

Humboldt County General Plan Housing Element, 2003 Housing Element Update, Humboldt County Board of Supervisors, Humboldt County Planning Commission, Humboldt County Community Development Services Department, Approved 12/16/03, Amended 11/30/04

"Humboldt gets housing dollars," Bob Doran, Amanda Lang, Judy Hodgson, North Coast Journal, 02/10/00

Redwood Community Action Agency Organizational Chart, www.rcaa.org

History of Rio Dell, www.riodellcity.com

Rio Dell, California, www.city-data.com

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Copyright (c) 2006 by Carola Von Hoffmannstahl-Solomonoff. This material may be freely distributed subject to the terms and conditions set forth in the Open Publication License. This license relieves the author of any liability or implication of warranty, grants others permission to use the Content in whole or in part, and insures that the original author will be properly credited when Content is used. It also grants others permission to modify and redistribute the Content if they clearly mark what changes have been made, when they were made, and who made them. Finally, the license insures that if someone else bases a work on this Content, that the resultant work will be made available under the Open Publication License as well.


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