City Might Pay To Fix Homestead Houses

May 20, 2004 - Source: Matt Williams, Staff Writer

Taxpayers would pay for up to $60,000 in repairs to dozens of homes built by the bankrupt nonprofit Project Homestead if the City Council agrees to a plan crafted by city officials.

The city has told Homestead customers that it will step in to fix problems on some homes after the nonprofit collapsed earlier this year. Inspectors followed up on complaints from 40 homeowners about shoddy construction and have agreed to use city money to fix problems in some of those homes.

The homes to be repaired by the city were built by Homestead on land the city donated to the group or financed with the help of city-sponsored second mortgages. Dozens of low-income clients of Homestead have said their new homes have flimsy walls, drainage problems, sinkholes and cracked foundations. Many said Homestead ignored their complaints and wouldn't honor the homes' warranties even before the group declared bankruptcy in January.

Project Homestead board Chairman Alton Thompson could not be reached for comment on the city's proposed repair effort.

Inspections chief Butch Simmons and Housing Director Andy Scott wrote in a memo that most of the problems involved minor building-code violations or drainage problems with the plots.

Four houses had serious cracks in their foundations, but an engineering firm that certified the construction, S&ME, has agreed to make repairs on two of the homes, Simmons said.

Money for the repairs would come from a special "contingency fund" that Scott asked the council to create to pay for Homestead-related costs. Scott asked the council to set aside $252,868 from the Housing and Community Development Department's budget, though he said he didn't expect to need the whole sum.

A group of 40 homeowners who bought Homestead homes has filed claims against an insurance policy the nonprofit bought to insulate itself from lawsuits. Attorney Jeff Peraldo said that with Homestead in bankrupcy, his clients' only option is to ask the insurer, Nationwide, to cover their claims of shoddy workmanship.

Peraldo's clients live in several neighborhoods developed by Homestead in the 1990s and earlier this decade, and they have found numerous defects and serious structural problems.

If Nationwide agrees to pay the claims, Peraldo said taxpayers wouldn't have to foot as much of the bill.

"We wouldn't want the taxpayers to pay for something if Nationwide has already been paid a premium" to cover the obligation, Peraldo said.

Simmons said the city is also working to collect from the insurance policy, which could reduce the amount of city money needed for the repairs. Simmons said the council would be asked to approve the repair plan at its next meeting.

Memo: UPDATE

So far: Homeowners have complained of shoddy workmanship in homes built by the bankrupt nonprofit Project Homestead.

The latest: City officials are asking the City Council to pay for up to $60,000 in repairs to several dozen homes.

What's next: Homeowners are waiting to see whether Homestead's insurer, Nationwide, will pay for some of the repairs.


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