Getting Rich Off Low-Income HousingOakland nearly lost 126 affordable apartments due to a nonprofit's mismanagement. And behind that nonprofit is a wealthy Southern California resident who owns a $19 million mansion.By Darwin BondGraham
Photo of E.C. Reems by Darwin BondGraham Photo of 108 The Strand from Zillow.com
While E.C. Reems has been in disrepair, Charles Brumbaugh has lived in luxury.
When it was originally built in 1948, E.C. Reems Gardens was a modern, middle-class apartment complex nestled in a forested valley on the north side of MacArthur Boulevard in East Oakland. But according to a city report, by the 1990s, "the then privately held property had earned a reputation in the community as a site for drug traffic and violence."
In the late 1990s, the Southern California nonprofit Corporation for Better Housing and Oakland's Center of Hope Community Church purchased E.C. Reems. The nonprofit, which owned 99 percent of the property and was responsible for managing it, used city, state, and federal housing subsidies to repair 15 of the original E.C. Reems buildings that included 126 apartments. Things were improving.
But several years ago, the same nonprofit virtually abandoned E.C. Reems' residents and stopped paying back city and federal Housing and Urban Development (HUD) loans that financed the repairs and maintained rents at affordable prices, according to interviews with city officials and public records.
According to city inspection reports, the property became plagued with raw sewage leaks, broken windows, chipping paint, and other health hazards. A large number of units became vacant, and squatters moved in. The property failed a recent HUD inspection, registering one of the lowest scores in California. Robberies and assaults increased, as did burglaries and vehicle thefts. For a time, an on-site manager reportedly walked door-to-door with a gun strapped to his hip to collect rent.
"It's like New Jack City back there," said Oakland city Councilmember Larry Reid, referring to E.C. Reems Gardens. "There were abandoned cars and raw sewage leaking into the creek. They weren't doing anything to invest in these facilities, and it was not fit for anyone to live in."
Pastor Maria Reems, daughter of Ernestine Reems, whose church was involved in the takeover of the complex in the 1990s and from whom the apartment complex got its name, said some of the buildings had mold and broken stairs, and lights were out in hallways making them dark and dangerous. "The problem is there wasn't proper management on site," she said.
"There was a hole in the ceiling, holes in the floor in my bedroom," said Betty Brown, a former tenant. "Water ran in from the ceiling. And on the stairs, I slipped and fell often."
Behind this mess is the apartment complex's owner and manager, the nonprofit Sherman Oaks-based Corporation for Better Housing (CBH). The nonprofit describes its mission as the development of low-income housing throughout the state, but government records, inspections, court documents, and interviews paint another picture of the organization and its leadership. Although CBH has built thousands of units of affordable housing, it has served another purpose, too: enriching one of its former executives, Charles Brumbaugh.
Brumbaugh has earned millions from California's quirky system of building affordable housing. According to state records, his privately owned, for-profit construction firm, BLH Construction, has built most of CBH's affordable rental housing projects, financed with state and federal tax credits.
While CBH isn't keeping any profits from these affordable projects, Brumbaugh's construction companies are. And the profits have been considerable.
Brumbaugh has lived a life of conspicuous consumption, purchasing expensive art, luxury cars, and multimillion-dollar homes in ritzy neighborhoods like Los Angeles' Bel Air and on The Strand in Manhattan Beach — all while affordable housing he's built and renovated is jeopardized and tenants complain of substandard conditions and large rent increases.
The problems at E.C. Reems Gardens got so bad that earlier this year, HUD threatened to foreclose on the property's already defaulted loan and auction off the buildings. Doing so would have eliminated affordability protections on all 126 units at E.C. Reems — at a time when the region is suffering from an affordable housing crisis.
The predominantly Black renter households living there could have been displaced. And the city of Oakland would have lost the $4.1 million that it had invested in the project because its loan was subordinate to HUD's. "They could sell it on the open market, and Oakland would be wiped out," said Michelle Byrd, Oakland's director of housing and community development, about a HUD foreclosure.
In June, the Oakland City Council responded with a costly solution. The council decided to spend another $4 million to purchase HUD's loan. This bailout succeeded, but now the city is scrambling to find a new manager who could buy the building from CBH and bring stability back to the neglected property.
CBH Executive Director Lori Koester also didn't answer multiple phone calls and emails, and didn't return multiple voice mail messages seeking comment for this report. Brumbaugh didn't answer more than a dozen phone calls to his Los Angeles office during the past month, and his three voice mailboxes have been full and unable to record messages. He also didn't respond to several emails requesting an interview. Jake Lingo, a vice president for Integrated Community Development, another for-profit company owned by Brumbaugh that appears to be closely linked to the nonprofit CBH (they share the same phone number and office address), answered a call two weeks ago and said he would pass a message to Brumbaugh. But Brumbaugh never called back.
Oakland city officials told the Express that the Corporation for Better Housing hasn't communicated well with them either.
But public records tell some of CBH and Brumbaugh's intertwined story. Brumbaugh began his career in affordable housing in 1993 as the in-house attorney for the Corporation for Better Living, a precursor to CBH, according to a biography on the website of a foundation where he's a board member. In the early 2000s, he was the executive director and president of CBH, drawing no salary, according to its tax returns.
By 2004, Brumbaugh no longer appeared to have had an official role with CBH, but that year the nonprofit paid $450,000 to a for-profit company controlled by Brumbaugh — Lynx Realty & Management. The payment was for construction and consulting services.
In subsequent years, Brumbaugh's other companies, BLH Construction and Integrated Community Development, were paid millions by CBH to build apartments in low-income urban areas, farmworker housing in rural California, and low-income homes for purchase in the Central Valley. CBH obtained millions in tax credits to finance this.
One project was the The Commons at Oak Grove, a large apartment complex in the East Bay city of Oakley that has received millions in state low-income housing tax credits. In 2013, CBH requested approval from Oakley to expand the development from 404 units to 509. Brumbaugh's companies would be paid to do the construction. But at public hearings, tenants complained of numerous safety issues and said CBH wasn't addressing these problems.
In July, CBH and the management company it employs at another Oakley low-income housing development increased rents on seniors by as much as 20 percent, sparking complaints. The East Bay Times' Aaron Davis reported that he attempted to interview Koester and the management company, but "multiple calls to both companies were not returned."
Last year, a half-dozen tenants were threatened with eviction from a CBH apartment complex in Calistoga due to what the renters said were management errors.
But of all the CBH properties, Oakland's E.C. Reems Gardens appears to have been the most poorly managed. In 2016, HUD inspectors reviewed 2,024 affordable housing properties in California that receive federal subsidies. On a scale of 0-100, E.C. Reems scored a 35, a failure. Only two other buildings in the state had lower scores. In 2014, it was actually worse. E.C. Reems scored a 25. "You need a score of 70 or more to pass," explained Byrd.
Oakland city inspectors also found numerous problems with CBH's performance and the condition of E.C. Reems. An April 2015 inspection revealed that only 95 of the 127 units were occupied, leaving about 25 percent of the complex empty. Paperwork was a mess, with many occupied units listed as empty. Information about the tenants actually living there was frequently incorrect. Some tenants were being charged more — or less — in rent than what their leases stated. Credit reports, criminal background checks, and rental histories were missing from all of the tenants' files.
Physical inspections of the units over the past several years have revealed water leaking through ceilings and walls in multiple units, resulting in outbreaks of black mold. Raw sewage was spilling from a broken pipe that was "causing a major health hazard" for an entire building, wrote city inspectors in 2014. In 2016, inspectors found again a "building sewer line is clogged causing kitchen sink and toilet to overflow. Kitchen and bathroom are flooded with sewage."
In one case of mold appearing throughout an apartment, CBH simply moved the tenant to a different unit rather than fix the problem, according to city records. Multiple other units in the complex were affected by mold over the past several years.
By contrast, the world Charles Brumbaugh inhabits couldn't be more different. His home is located on The Strand, a trendy slice of oceanfront property in Manhattan Beach. The three-story house is currently listed for sale at $18.5 million and described as a "trophy property."
"Dramatic 3-level floating glass staircase intertwines the lines of custom pocketing Fleetwood doors that command the entire beach-side of the home bringing the ocean into every room," a real estate agent wrote about Brumbaugh's home.
He previously owned a mansion in Los Angeles' Bel Air neighborhood but sold the house for $6.4 million last year, according to public records. Court filings from 2016 pertaining to Brumbaugh's ex-wife's bankruptcy include some hints as to how wealthy he's become by building and renovating affordable housing like E.C. Reems. Brumbaugh's attorneys described him as an "affluent man" who is "worth tens of millions of dollars." They disclosed that he earned over a million a year in 2012 and 2013 from BLH Construction.
Brumbaugh also owns an art collection worth at least $447,520, according to court records. This includes works by well-known painters and sculptors like Tony Bevan, Frederick Hammersley, Lorser Feitelson, and Don Suggs.
At E.C. Reems, there's not a lot of high-end art on the walls. There was a computer center in the complex, but thieves stole the electronics years ago.
Whether the city can turn around the apartment complex's fortunes and maintain affordable housing for more than 100 families remains to be seen. The city issued a request for bids last month for a new affordable housing developer to take over E.C. Reems Gardens and repair its numerous problems.
"They weren't doing anything to invest in these facilities," complained Reid. "It was not fit for anyone to live in."
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