It took six years for Victoria Davis to get an affordable apartment in Chicago. She felt lucky, she said, because the apartment was in Kenwood on the city’s South Side, less than a mile from where she grew up.
Davis celebrated by painting the living room walls in gray tones and buying new furniture. But the celebration didn’t last long. First, a friend told her to patch holes where pests could travel through. Then she noticed mold and mice droppings underneath the sink. Later, she spotted roaches walking up the walls on the hallways.
Davis eventually joined neighbors who, with the help of tenant advocates, formed a tenant association to push the city and the federal government to act. Their first victory came in March 2021, when the city took their landlord to court to address building violations.
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More than two years later, with the case still pending and more than a dozen repair requests unresolved, an unlikely player has stepped up: The Federal Home Loan Mortgage Corp., the mortgage finance giant better known as Freddie Mac, which holds the $11 million mortgage on Ellis Lakeview Apartments.
In what housing experts say is a new strategy, Freddie Mac has filed a lawsuit in Cook County to foreclose on the building’s owner, Apex Chicago IL, because of substandard living conditions.
“This is actually an example of public agencies really stepping up to protect tenants; to protect an important federal subsidy; and to ensure people are living in decent, safe, and sanitary housing,” said Kate Walz, the associate director of litigation at the National Housing Law Project. “But it’s also an anomaly.”
Walz and five other local and national housing experts say they know of no other instance in which Freddie Mac has filed such a suit. They say the move signals a significant new trend in favor of tenants, who until now were mostly on their own to organize against recalcitrant landlords. Officials at Freddie Mac did not return telephone calls and emails from Injustice Watch seeking comment.
Since 2008 during the housing crisis – when the federal government took control of mega lenders Freddie Mac and the Federal National Mortgage Association (Fannie Mae) – there have been a handful of cases in the Midwest in which the lenders have begun to take a stand on behalf of tenants, housing experts say. All the other cases were filed by Fannie Mae, they say.
The Freddie Mac suit alleges Apex violated its loan agreement to maintain the building. The lender wants a receiver to immediately take control and begin repairs to “ensure the health and safety of the tenants,” according to court documents.
In May, the Federal Housing Finance Agency, which regulates both companies, signaled a renewed effort to its “public mission to support the availability of safe, decent, and affordable housing” by issuing a public call for ideas to better track living conditions at all multifamily properties with mortgages backed by Fannie Mae and Freddie Mac.
Foreclosure suits such as the one filed against buildings receiving federal subsidies, like Ellis Lakeview, are unique because the mortgage giants rarely get involved in disputes over living conditions at affordable housing buildings. Instead, the federal authorities typically move to end the federal subsidy against problematic landlords, leaving tenants with a rent voucher and a scramble to find a landlord who will accept it.
Housing advocates credit the efforts of the Ellis Lakeview tenants and their advocates with getting Freddie Mac to enforce its loan agreement with Apex. They called, sent emails, held signs, hosted press conferences, and invited officials to tour the building so they could see their living conditions.
“I’m standing up for me and the people around me,” said Arthur Evans, who’s lived in the building for about a decade. Evans said the effort reminded him of the long-ago fights with the city to improve public housing buildings. He said he joined the tenant association because he thought it was the right thing to do.
“If you see something that ain’t right and you can help it — try to help.”
As rents increased during Covid-19 pandemic, a new wave of tenants began organizing against their landlords in neighborhoods across Chicago. Many said their rents increased even as building conditions worsened. Last month, residents of a courtyard building in Woodlawn said their landlord threatened them with eviction suits if they didn’t move out in five days or pay back rent.
The Woodlawn tenants said they withheld rent because of the lack of repairs — from faulty electrical wiring to a roach infestation to mold. Their unorganized efforts prompted the landlord to issue the five-day move-out notices, they said. So they formed a union and in late July sent formal repair requests and notices they planned to withhold rent if repairs weren’t addressed within the required 14-day period.
Chicago’s 1986 landlord-tenant ordinance allows renters to withhold rent in some cases when it “reasonably reflects the reduced value of their unit.” Under the law, tenants can also opt to make repairs and withhold up to $500. However, tenants must follow specific rules, such as writing a letter to the landlord, waiting 14 days to begin withholding rent, and keeping receipts.
Tenant advocates said many renters are not familiar with the specific requirements of the provision. But even when they follow the rules, they often end up with move-out notices, late-rent fees, or eviction filings. Advocates have been pushing for more tenant protections, including the 2020 Fair Notice Ordinance, which requires landlords to give some tenants up to 120 days notice before raising the rent or terminating their lease. However, other proposals have stalled, including an ordinance to require the city’s health department to inspect homes at least once every five years.
Apart from the city and Freddie Mac suits, Ellis Lakeview tenants have also taken their landlord to court over alleged unhealthy and unsafe living conditions. Their suit, which is in its early stages, accuses Apex and its management company of negligence for failing to maintain the property, “resulting in systemic building wide problems, and causing tenants to suffer.”
Apex and the management company have denied the allegations in court. Apex, through its attorney, declined to comment.
Residents say the living conditions at Ellis Lakeview worsened after Apex bought the building in July 2019. The following year, building code violations increased to at least 45 — up from an annual average of 15, according to city records. Inspectors found broken elevators, torn and stained carpets, peeling paint, mice and roach infestations, water leaks, and malfunctioning exit signs.
The tenants, whose rent is subsidized by the U.S. Department of Housing and Urban Development, launched a campaign to call attention to their living conditions and push the city and the federal government to act. In 2021, after Block Club Chicago reported on their substandard living conditions, HUD withheld its March subsidy payment and fined Apex $702,000. The same month, the city filed a housing complaint against Apex on similar grounds.
Since then, Apex and its management company failed to comply with court orders to fix several of its code violations, court records show. The city has twice asked for the court to appoint a receiver, going as far as picking a company to take over. No receiver was appointed after Apex began to comply.
Davis said the only improvement to her apartment since she moved there in 2019 has been new kitchen and bathroom flooring, but her apartment still has pests and lacks ventilation. She said her requests for new carpet went nowhere. Frustrated, Davis said she bought tile to replace the worn carpet, but the landlord didn’t let her install it. She is battling cancer, she said, and thinks the building conditions are part of the reason why she’s not getting better.
“I’m stuck because this is all I can afford,” Davis said. She added, “As bad as it is, it is still a blessing.”
In court, Apex’s attorney S. Joshua Kahane has argued the company made “substantial progress” in completing repairs, and a receiver is “the wrong course of action.” More broadly, he has said depriving an owner of its property rights is “the most dramatic and severe action the court can take.”
Apex has addressed several of the violations, including installing fire-resistant doors in hallways and fixing a crumbling exterior facade. Yet the building failed an elevator inspection in early July, records show.
Freddie Mac raised alarms about the building conditions earlier this year, when it called for an emergency hearing on the city’s suit. At the hearing in May, Freddie Mac’s attorney told Cook County Circuit Judge Lisa Ann Marino progress had stalled, and basic repairs, including fixing broken washing machines, had not been made.
Kahane, who declined a request to be interviewed, argued in court the allegations were “simply not true.”
The city’s attorney, Steven McKenzie, said work was progressing slowly, but the city didn’t have a “reason to be alarmed.”
The judge asked all parties to communicate better and ordered Apex to repair the washers and dryers.
The following month, Freddie Mac filed the foreclosure suit. A 43-page report attached to the suit lists the more than $3.4 million in priority repairs — from plumbing and roof problems to replacing windows and modernizing elevators. HUD said Freddie will fund the necessary repairs.
“It’s vindicating,” said Shoorai King, who’s lived in the building for more than 20 years. “It’s a sense of I knew I was right. And I know I deserve better. And all of us deserve better.”
Injustice Watch senior reporter Maya Dukmasova and reporter Grace Asiegbu contributed to this report.