I spoke Friday afternoon with people closely involved in Postville rental housing, including Trevor Siebert, who owns his own properties and now manages properties for Nevel and Ron Wahls – about 160 to 180 units in total – along with another landlord and a senior state official..
Briefly, here is the chronology that leads up to where Postville finds itself today:
1. In the aftermath of the Agriprocessors bankruptcy and closure, the state gave Postville a $698,000 aid package. The money was slated for use primarily for rental and energy assistance.
2. Each individual renter or household had to be approved for the aid.
3. The rent and other assistance, if approved, would then be paid to the landlord or utility – but those first payments would come 4 to 6 weeks after the initial application and screening of each individual renter.
4. In return, landlords agreed to stop evictions and, in some cases, even took in new non-paying tenants at the request of Northeast Iowa Community Action, with the program's initial screening and approval letter as collateral for rent.
5. However, one landlord appeared to be trying to price-gouge. This caused the state and related agencies to reassess aid.
6. That reassessment led to a change in the rental assistance program. Rather than paying close to market rates for rentals, the program would now pay Housing and Urban Development (HUD) rates. In many cases, this means landlords would be getting 1/3 less than promised a month ago when they accepted renters under that aid and called off evictions.
7. This caused landlords – primarily Trevor Siebert, Nevel and Ron Wahls – to pull out of the program entirely.
8. I'm told by multiple sources that local banks, including Citizens and Freedom, that are the mortgage holders for many of these properties, urged landlords to pull out of the program and close up their properties. Why? Because the cost of keeping them open is not that much different than closing them up – especially when damage to units caused by non-paying tenants is taken into account.
9. Another factor that pushed landlords and the banks to walk out of the rent assistance program is the lag time between a tenant's "acceptance" into the program and the actual funds reaching the landlord. If a tenant is "accepted" into the program, he can still be dropped later, before the first money has reached the landlord. This means a landlord can find himself with an "accepted" tenant, find out 4 weeks later that that "acceptance" has been revoked because the tenant was just called back to work or the assessment criteria changed, and be left with a tenant who still has no money and cannot yet pay rent.
10. If that tenant stays in the unit and if the job at Agriprocessors continues, that tenant may have enough money to begin paying rent a month or more down the line. That means the renter will be at least two months behind after paying one month's rent – and that doesn't take into account what he owed from before that.
11. Landlords fear many of these renters, stuck in that situation, will move out in the middle of the night and move into another landlord's unit – leaving the original landlord without any money he is owed.
12. The landlords (and, in effect, the banks) agreed to accept rental assistance in leu of evicting delinquent tenants. That agreement called for a specific amount of money per unit.
13. After those agreements were made, the state unilaterally reduced that amount of money, cutting it by as much as 1/3. And now the state is surprised by the evictions that again loom over Postville.
Before going further, we need to look at actual costs for the landlords.
(For the purposes of this post, we are not discussing the so-called "dormitory style housing," in which workers paid more than $200 per month for a mattress on the floor in a small unkept house shared with 7 to 10 other "dormitory-style" renters. There is no question that arrangement was overpriced and exploitative.)
1. Much of Postville's rental stock is overpriced.
2. Some of that overpricing comes from competition between landlords, primarily GAL and Nevel, in acquiring new properties.
3. Bidding wars between GAL and Nevel – usually, it seems, instigated by Nevel and its owner, Rabbi Sholom M. Rubashkin – drove up the price of units as did the housing bubble.
4. Other landlords faced higher prices when acquiring new units, even if those landlords did not participate in bidding wars.
5. More expensive units have higher mortgages.
6. Higher mortgages mean higher rents.
7. Landlords often have a mix of properties, some they have owned for a longer period of time than others. In the same way, they have a mix of mortgages, some higher than others.
8. Two seemingly identical homes on seemingly identical blocks owned and leased out by the same landlord can have very different mortgage costs, one having a monthly payment in the $450 range and the other in the $650 range.
9. Landlords also must carry and pay for insurance on each property, and pay property and other taxes.
10. Landlords also (at lest in theory) need to maintain their units.
Faced with the problem of at least one price-gouging landlord, the state should have looked at each unit's mortgage, taxes and insurance, added a fixed amount for property management over that, and set each unit's reimbursement rate.
Instead, the state reneged on its original promises and tried to get landlords to take HUD rates, 1/3 less than what landlords originally were promised.
What the state did was impose a one-size-fits-all solution to a XXXL problem – the solution looks good on paper, but it just doesn't fit in real life.
As a result, Trevor Siebert told me he and the property owners he manages properties for "have no interest" in participating in the state's aid program.
Siebert has at least one eviction scheduled for Monday, and there may be more in the near future.
GAL Investments has 3 evictions scheduled each day next week, starting Monday the 29th, with more to come in the near future.
So, faced with looming evictions known to it on December 22, what did the City of Postville (the mayor and the city administrator) do?
Not much, other than allegedly make an offer to GAL Investments: keep the tenants in their homes and the city will cut off water. That way, the mayor allegedly said, GAL would not have to pay water bills incurred by nonpaying tenants.
And what about the government-sponsored relief center operating out of Turner Hall?
1. Iowa Legal Aid tried to stop the evictions. It failed.
2. Iowa's Department of Economic Development was asked for help. It had none to provide.
3. The coordinator of efforts at Turner Hall was unable to do much of anything. Why? It seems anything she wants to do has to be first approved by the county and the city.
Friday afternoon I called Ralph Rosenberg, the state's point man for Postville and told him about the looming evictions. Rosenberg was aware that a landlord had been accused of price-gouging, and thought state and other agencies were responding to that.
Did he know evictions were starting Monday morning? No.
Rosenberg quickly hung up the phone to try to stop the evictions. (As of early this evening, it seems he has not been successful.)
After hanging up with Rosenberg, I called Jeff Abbas at Postville Radio – the man who more than any other person held Postville together during the recent crisis and whose all-volunteer team arranged housing and food for hundreds devastated by Agriprocessors' collapse.
Jeff I and spoken earlier in the week about the pending evictions. I called him to update him.
We spent a few minutes looking at the numbers: 40 to 50 homeless people by the end of this coming week, with the potential for hundreds more by late January.
We spoke about shelter options and daily hot food for those evicted, and made tentative plans. (Unfortunately, Jeff and a few close volunteers bear the brunt of all this. I'm not in or geographically close to Postville.)
Right now, Postville has plenty of food. What it needs is money – money to do in some form what government cannot seem to do in any.
You can send checks to either of the following:
Agri Workers Relief Fund
(at Citizen’s Bank, Postville)
c/o St. Paul Lutheran Church
116 E. Military Road
Postville, Iowa 52162
St. Bridget’s Hispanic Ministry
P.O. Box 369
Postville, Iowa 52162
The worker's relief fund will be the most germane to this current crisis.
St. Bridget's is still caring for many illegal workers who are in legal limbo, waiting to testify at the Agriprocessors trials.
So, which landlord is suspected of price-gouging and of precipitating the current crisis?
Multiple sources tell me that landlord is GAL Investments.