Out of homelessness, into a hovel: Public money spent on Seattle houses with bugs, trash, no water

Carolyn Malone didn’t like the look of the place. The front yard was overgrown. Trash was strewn around the property.

Inside, the two-story, turn-of-the-century home was in even worse shape: She found broken smoke detectors in the hallways and bedbugs on her bedroom carpet. Rodent droppings lined the stairwell leading to the illegal basement bedrooms, where cardboard covered broken windows and mold stained the walls.

But after months of sleeping in her car, Malone, a 72-year-old retired educator, was desperate to move back indoors. So last year, when Mary Hackney, director of a Seattle transitional-housing provider, offered Malone a room in the Central District home for $500 a month, she moved in. A rental subsidy from the city of Seattle helped pay her first few months’ rent.

Weeks later, a city housing inspector, responding to Malone’s complaints, discovered 75 building-code violations at the house. Several had lingered since a previous visit from Seattle code enforcement a month before Malone moved in, when an inspector found 54 violations.

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Malone’s experience was not unique. In the past four years, Steps to Ethically Profiling Stability (STEPS), the nonprofit run by Hackney, has collected at least $180,000 from three taxpayer-funded rental-assistance programs while housing its clients in homes with long histories of neglect and disrepair.

As debate over state and local governments’ handling of the ongoing homelessness crisis intensifies, authorities are still struggling to find quick and effective ways of moving people off the streets, out of shelters and into housing.

They’ve increasingly turned to temporary rental subsidies, which provide upward of $1,000 to help put Seattle’s superheated rental market within reach of low-income and homeless people. Hackney tapped into three separate subsidy programs managed by Seattle, King County and the state.

Hackney is a small player, but her record reveals weaknesses in government oversight of those programs, which allowed public money to pay for rooms in dilapidated and potentially unsafe homes.

That’s partly because none of the programs require that properties are checked for previous code violations. And while each has rules requiring some form of on-site inspection, the agencies that oversee them can’t guarantee that every property meets their own health and safety standards.

Officials at those agencies — the state departments of Corrections and Commerce, along with King County’s and Seattle’s human-services departments — were mostly unaware of the conditions at Hackney’s leased properties until informed by The Seattle Times.

While acknowledging some oversight lapses, they portray STEPS as an outlier. Existing safeguards have proved adequate to keep most subsidy recipients out of substandard conditions, they say.

To verify that claim, The Seattle Times requested records showing all addresses where rental subsidies were used in King County. Two agencies refused, claiming the addresses are personal information exempt from public disclosure. Other requests are still pending.

Had the agencies looked closer, they would have learned that some of the subsidy money ended up in the pocket of Dirk Mayberry, a property owner with such a long history of code violations that city staffers once included him on a short-list of “bad landlords.”

Hackney now calls the decision to rent homes from Mayberry a “mistake,” and says she did so in desperation after losing a lease on another property. Mayberry, through his attorney, declined to be interviewed.

Those homes were seized in foreclosure and later sold at auction while her clients lived there. In the end, after public dollars were spent, Malone was evicted and ended up right back where she started: homeless.

“When you’re homeless, you’re vulnerable,” Malone said after learning the extent of Hackney’s record. “And there’s always someone waiting to pounce.”

STEPS as middleman

Years of public advocacy turned Hackney into a familiar face around Seattle. Speaking at city-council meetings and hearings, she railed against gentrification and the disappearance of affordable housing options in South Seattle.

Hackney founded STEPS in 2008. The nonprofit organization acts as a sort of middleman, leasing homes throughout Seattle’s Beacon Hill and Central District and offering rooms and social services to people who are homeless, in recovery and who otherwise have no place else to go.

Over the years, Hackney built relationships with social-service and housing organizations throughout King County, along with programs overseen by the state departments of Commerce and Corrections.

When you’re homeless, you’re vulnerable. And there’s always someone waiting to pounce.” - Carolyn Malone

The details and the demographics of the subsidy programs vary: the Commerce and Seattle subsidy programs used by STEPS can last up to a year. The Corrections program, which serves people with felony records leaving prison who have no home to go back to, is capped at three months and $500 a month.

The number of providers like STEPS operating locally is hard to come by. Corrections has approved at least 27 transitional housing agencies in the region.

STEPS had income of $313,776 from 2013 to 2015, according to federal tax records. Hackney said she is not paid for her work as director of the nonprofit, although she did not disclose records to verify that claim.

Between 2010 and 2017, Hackney leased at least six different homes in Seattle for various lengths of time. During the rental periods, city inspectors investigating complaints found roughly 173 building-code violations at her properties. The homes also had extensive code enforcement files before STEPS clients moved in.

In that same span they issued about a dozen citations for other code failures, including junk vehicle storage, unauthorized basement bedrooms and utility services cut off when the bills went unpaid.

Seattle police logged 140 incident calls at the six homes. They visited several times looking for sex offenders who failed to register, and in response to domestic disputes, assaults and minor disturbances. Separately, medics visited at least twice in response to drug and alcohol overdoses.

Some former tenants say the lapses at STEPS properties went beyond what’s detailed in city records. They describe Hackney as a well-intended but absentee landlord who ignored complaints and disputes between residents.

Despite STEPS’ checkered history, Hackney received a multiyear federal grant to provide clean-and-sober housing for people in recovery.

Who’s responsible?

Last spring, as Cesceani Quesada neared her prison release date for an identity-theft conviction, just one of Corrections’ approved housing vendors had an opening for a woman — STEPS.

Her expectations weren’t high, but Quesada said she was still startled by the trash piles she found inside her room at STEPS’ Central District house, the same where Malone would later find herself living with bedbugs. Water service was shut off due to unpaid bills a short time later, leaving tenants without a working toilet or shower.

“I was devastated, but you have to deal with it” said Quesada. “It’s this situation where you can reoffend, try one of the homeless shelters, or stay and just work through it.”

In a recent phone interview, Hackney admitted that some homes leased by STEPS were in poor condition. But Seattle housing prices limit what she can afford to lease, and STEPS has never had the resources to purchase its own property, she said.

“We’re not going to get top quality. We’re getting fixer-uppers,” she said.

I was devastated, but you have to deal with it.” - Cesceani Quesada

Others in Seattle’s homeless services community agree with Hackney about the difficulties of finding adequate housing, but only to a point.

“Rental-assistance programs as an alternative are certainly better than leaving people out on the street,” said Daniel Malone, executive director of DESC, one of Seattle’s largest homeless-services organizations. “But our obligation as a system doesn’t end there. We need to make sure they’re in decent housing.”

Hackney has worked with state rental-assistance programs for nearly a decade, but claimed she only recently became aware that the programs require housing that meets state and local housing laws.

“I know people should be housed and shouldn’t be living underneath bridges, and if anything, that’s a code violation you should investigate,” she said before hanging up.

Hackney, in a statement emailed later by her attorney, blamed conditions at the properties on their owners, including Dirk Mayberry.

Tedd Kelleher, head of the state Commerce department’s housing-assistance unit, said vendors like STEPS are responsible for housing people in decent conditions.

“Pattern of abuse”

Hackney says that Mayberry approached her about renting property in 2015. In desperate need of rooms after a prior lease wasn’t renewed, she agreed to rent two of his houses. Hackney claims she was unaware of his background at the time.

But Seattle’s housing-code enforcement staff was certainly familiar with Mayberry, and had been for years.

After a federal conviction for housing fraud in 1988, he amassed a portfolio of single-family homes throughout the Seattle region and an array of violations that in some cases went years without correction.

Code-enforcement staff in 2012 included him on an internal list of “bad landlords” alongside infamous names like Hugh Sisley, according to emails obtained through public disclosure.

Mayberry controls his properties through a network of at least 17 companies or trusts, making it difficult to tell exactly how many he owns. Records show that when local authorities sue or his mortgage lenders attempt to foreclose, he files for bankruptcy protection or transfers the properties among his network, effectively halting the proceedings in what federal authorities have called a “pattern of abuse.”

Even under federal sanction, Mayberry continued the practice. A federal judge in May 2014 barred him from filing for bankruptcy for a year. He violated the court order just 10 months later.

In all, Mayberry’s companies and affiliated businesses have filed for bankruptcy 10 times since 2012. Court records show he owes creditors over $1 million.

City authorities say their options for forcing Mayberry into compliance are limited. “We take the violations as far as we can go,” said Jill Vanneman, supervisor with Seattle’s code enforcement unit.

We’re not going to get top quality. We’re getting fixer-uppers.” - Mary Hackney

Seattle has sued Mayberry five times since 2012. But the city also settled cheaply after he amassed large financial penalties. Three years ago, after Mayberry corrected several violations found at one of his buildings, city code enforcement agreed to reduce the $155,000 fine to $2,105.

About a year later inspectors found makeshift electrical wiring and several other code violations in another part of the same building.

Had Hackney checked, she might have seen these and other red flags in Mayberry’s record.

Instead, she housed clients receiving publicly funded rental subsidies at one of his properties, and oversight of those programs was too weak to prevent her.

Lax inspection rules

The three rental-assistance programs that benefited many of Hackney’s clients — funded by the state departments of Commerce and Corrections, and another by Seattle — have a common flaw.

None require that code-enforcement records are checked for prior violations. Moreover, some officials were unaware that Seattle and other municipalities make those records available in easily accessible online databases.

All three programs require a form of on-site property inspection. But there are ways around the rules. One program allows landlords to opt out.

Commerce, which oversees the statewide Housing and Essential Needs program, allows landlords to essentially do the inspection themselves with a document attesting to the “habitability” of a property. Records show Hackney signed the forms herself, even though she admits poor living conditions at some of those homes.

Corrections did not apply the inspection rule for Hackney’s recent leases because she was grandfathered onto a list of approved landlords when a new program was created.

And under Seattle’s program, called Rapid Rehousing, the home where Malone stayed — where city inspectors found 75 code violations shortly after she moved in — should’ve been inspected. Malone says it wasn’t.

Citing privacy concerns, officials with the nonprofit contracted for day-to-day operations of the program refuse to say whether the inspection took place.

Managers with all three subsidy programs say that funding and staffing shortages limit their ability to vet properties and landlords. Moreover, they argued existing policies are adequate.

Bill Hallerman, director of Catholic Community Services (CCS), the nonprofit contracted to operate the Commerce subsidy program in King County, said the group takes client health and safety seriously, but it’s up to them to raise complaints.

“If you’re somebody who’s renting using HEN benefits, our role is to be your advocate,” he said.

CCS’ own record demonstrates both the successes and pitfalls of that more reactive approach. Administrators once approved Mayberry himself as a housing vendor, but they cut him off in 2014 after he failed to respond to tenant complaints.

After The Seattle Times began asking Corrections staff about STEPS, it sent inspectors to one of Hackney’s properties. They found her housing people in the home’s basement in violation of the department’s standards. Hackney was suspended from the program, and after an internal review, Corrections determined it will no longer use STEPS.

Even with all these problems, STEPS continues to receive public money. As of March, at least four subsidy recipients still lived at a property on Beacon Hill.

Homes lost again

Last summer, Hackney sat in the kitchen of the Central District house where Malone stayed, fielding questions after her tenants learned the house was seized by Mayberry’s creditors and sold at auction.

The new owner, a Bellevue-based real-estate company, had sent a letter warning tenants — at least seven had been placed there by Hackney — that they had 60 days to move out. Several in the group accused her of keeping them in the dark about the status of the home.

As the meeting grew more tense, Hackney explained she’d taken the lease in hope of buying the home for cheap, according to a video of the meeting obtained by The Seattle Times.

“Yes, we did invest in substandard properties that needed fixing up,” she told the tenants. “Because it’s the only way that we can get in. We cannot afford properties that are already fixed up.”

Seattle and King County are increasingly relying on those subsidies to help decrease homelessness. Seattle alone increased funding rental subsidies from $3 million to $8 million in 2018. In Olympia, state lawmakers expanded eligibility for Housing and Essential Needs subsidies — serving about 7,800 people statewide — but did not increase oversight of the housing quality.

STEPS may not be around to take advantage. Asked about her future, Hackney was both defiant and resigned, suggesting she could retire. “I will die fighting this fight in Seattle,” she said. “But I don’t need this hassle.”

Some of her tenants are worse off now than they were before coming to STEPS.

Malone hung on until being evicted, and her subsidy expired. With no other options, she went back to living in her car. It was later impounded. She has since moved into a homeless shelter on Capitol Hill.