|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
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
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"
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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