West Dallas Landlord Threatened Mass Eviction, Offering Path to Home Ownership, Continued…

Whoa, hang on there a moment. I am back from my City Council run , catching up on real estate, and have a whole lot to say. But first, let’s take a DEEPER look at the story of Khraish Khraish and his West Dallas properties that we just reported on. I mean, this is a real estate story with a huge political component.

First of all, thank you all for letting me take time off to campaign. The CandysDirt.com staff did a more than stellar job of holding the fort down whilst I campaigned in District 11 for the District 11 seat. While disappointed I lost, I thought the 37% turn out for a first time candidate (who started campaigning Feb. 10) was pretty darn cool. I am concerned about all the voter fraud, however, in this election and was surprised when the Dallas Morning News reported that my district had a massive number of mail-in votes. More, in fact, than in any previous year:

In his contentious race against real-estate blogger Candy Evans this spring, incumbent City Council member Lee Kleinman sent mail-in ballot applications to registered likely voters who are older than 65 so they could fill them out and send them back to the county.

As a result, of the almost 2,900 votes Kleinman received, more than 440 were by mail — a massive number considering that in West Dallas, ground zero for alleged voter fraud, 568 mail-in votes were spread among six candidates, including Alonzo.

West Dallas is now ground zero for alleged voter fraud, though I am taking a closer look at those 440 Mr. Kleinman received right here in North Dallas. Personally, I think the mail-in ballot system is ripe with fraud and should be eliminated altogether.  Surely you saw the report on WFAA-TV and read this piece in the Dallas Observer. I mean, there is a problem with the integrity of our elections, people!

If I were on council, I’d comb Silicon Valley for a tech company to bring absentee voting into the digital age. Mail? Stalking the postman? We could vote on smartphones with fingerprint recognition.

I learned so much running for public office. To spare you from a constant political blare, (because we know you come here for real estate dirt, not city council dirt, though the two are related) I moved political reports to CandyforDallas.com, which is up and running and to which I will be contributing about once a week for a political fix. 

Back to West Dallas. We know that is ground zero for voter fraud, and we know that Monica Alanozo is headed for a run-off there with Omar Narvaez, whom I support.

Dallas has a problem with affordable housing. Like, there isn’t any. Cranes are working all over this city for huge luxury apartment complexes where the only affordable housing component will be a chance to tinkle in the public bathroom. Homelessness in Dallas is at an all-time high. Where are living spaces for folks making $30,000 a year?

 

Enter the story of West Dallas and Mr. Khraish Khraish, a wonderful man who I got the chance to know better during the campaign. Our Heather just reported on his decision to sell some of his low income property portfolio to his tenants, those who have been able to keep up their rent, to let them enjoy full home ownership. She gave us a great balanced framework, but I wanted to expand on it.

And I want to make it very clear that the decision to sell to those homeowners was a decision made from the heart, not the Khraish/HMK bank account, and was inspired by Omar Narvaez.

As Heather told us, the city changed the rules for so-called slum landlords midstream, putting not just the brakes, but the emergency brakes, onto a system that had been in place for years. I do not mean to be offensive with the term “slum landlords”. Let’s be honest: there are landlords in Dallas who offer tenants a $12,000 a month penthouse and those who offer 800 square feet for $500 a month. Many of Mr. Khraish’s homes are old, maybe substandard, but they are a roof. They were built in the 1930’s and ’40s of frame wood. Therefore it is not to be disparaging that I refer to landlords with older, maybe in-not-so-great condition homes, as slum landlords. 

The tumult over these particular homes began when the City passed tougher minimum housing requirements. Like most investors forced to change the game, Khraish wanted out of the game entirely. Facing displacement from the homes they’d occupied for years, his tenants flocked to City Hall for a solution.

At face value, the elevated standards seemed to be a great step: amp up the standards for rental housing in Dallas. Among them:

— All rental units must be registered annually at a cost of $21 a year and owners of limited liabilities companies owning properties must list their principals.

— Leases must be provided in English, Spanish and Vietnamese upon request.

— Single-family rental homes will be inspected for a grade at least once every five years, but no more than once a year. 

— Multifamily rentals will be inspected for a grade once every three years, but no more than once a year.

— The property’s latest inspection score must be posted “in a conspicuous place” in a common area.

— The city will hire 15 code inspectors to handle single-family home inspections.

— Apartments with more than 60 units must have a full-time property manager, who doesn’t have to work onsite full time but nevertheless keep an eye.

— Renters must be provided a contact person, possibly a hotline, who can be reached 24 hours a day in case of an emergency.

— Landlords will have to correct pest infestations and keep pools clean and free from breeding insects.

— Landlords must provide better lighting.

There were other requirements, too, including minimum interior temperatures: the new ordinance requires all rental units to have air conditioning that can bring interior temperatures to 85 degrees or lower. (Previous rules required a maximum temperature of 85 degrees or at least 20 degrees lower than the outside temperature, which was 90 on a 110-degree day).

Everyone on City Council voted for these standards, except Mark Clayton, who felt the AC requirements were not stringent enough: he wanted 82 degrees as the hottest. That is hot.

The only problem with the standards was, it forced landlords with large quantities of aging housing stock to go on speed-dial to meet the new requirements. For example, to meet those cooling standards, homes would have to be better insulated and HVAC systems likely revamped. Windows might have to be replaced. Caulk. Cha-ching. Costly to do in one bunch.

That’s why I might have suggested stair-stepping the new requirements. I agree with Mark Clayton: 82 degrees is the hottest anyone should have to bear, but perhaps better achieved by graduating the requirements from the current to 82 over a three year period. Property owners cannot do these things overnight, especially when you own multiple units.

In any case, Khraish’s company, HMK, couldn’t make costly adjustments by deadline.  So HMK decided to clear out of the the low rent housing business altogether, bulldoze the homes and start developing middle class family multi-level residences on the property, and senior living units, something HMK had wanted to do all along.

Selling all the homes would have left about 100 families homeless. Khraish did not want that option, but the courts were pressing.

So tenants went to City Hall and protested: nice to think of us, they said, but now we are going to be homeless.

Enter our Mayor. Mayor Rawlings offered to have some developers BUY Mr. Khraish’s properties. Acting as a sort of intermediary, he said he was representing some developers who were willing to pay, get this, a little over $2 million for all those properties. Read this: Jim Schutze did a splendid job explaining the story:

The letter suggests a different lot value. It offers the Dallas County Appraisal District values as the lot values. These are values assigned by tax officials, predating the current wave of gentrification and inflation. These values for all 263 properties come to a total of $2,261,710.

“So I’m reading this letter,” Khraish tells me, “and I go from $20 million, pretty good, to $17 million, still OK, to $2 million? Not OK.”

Would Mayor Rawlings sell his DCAD valued $2.3 million Lennox Lane house for $500,000?

Nobody – not me, not Khraish, not Carney – is accusing the would-be buyers of anything remotely dishonest or even unfair. Why not offer a guy $2 million for something you know is worth $20 million? He doesn’t have to take it. Might as well try. Faint heart never won fair lady.

Khraish does wonder why the offer came through the mayor. “If they [Jackson and Morgan] had an offer for me, why didn’t they just come make it to me themselves?”

The suspicion is that the Mayor might have been trying to help some developers make a land grab for the properties, which are located right down the street from the new Trinity Groves, where apartments are going up across the street and it could be the next great Uptown. Or Design District. 

I am very, very certain, after meeting Mr. Khraish and talking with him for a good length of time, he decided this: someone is trying to strong arm me into selling my land at a ridiculously low cost. Someone doesn’t give that much of a damn about the displacement of the homeowners here, who will have a tough if not impossible time finding shelter. Someone wants to get middle and upper middle class development on speed dial on my property in southern Dallas NOW at all costs.

So, he decided to sell and finance them himself, to keep his tenants from displacement. The terms seem fair enough: 20 year fixed rate mortgages, 4.75 interest rates, zero down.

Heather brought up the DCAD question: why should these people pay market value for their homes ($65,000) when DCAD has them valued at only $10,000 per home? At first blush, this may make Khraish look like he’s trying to squeeze every penny.  But as we know too well, DCAD values are not selling values, and when structures become functionally obsolescent, often the property is valued at land value alone. 

In this case, the homeowners will also pay about $150 in property taxes, which is tax deductible, which, combined with their mortgage, will still match the amount of rent they were paying.

How is this not a win/win for everybody?

“A critical lesson that I am personally assisting not just my new homeowners with, but the entire community, is how to protest property taxes effectively,” Khraish told me. “My attorney claims that I am the largest property tax litigant in the City.”

This is really an incredible outcome: the city’s move, while well-intentioned, could have resulted in the displacement of all these families, the scraping of a smattering of homes, and, once again more apartments. Instead, we will preserve a group of simple, but purposeful, small homes, yards, trees, and an entire neighborhood. Perhaps the new owners will be inspired to put in some sweat equity.

At least it’s a first step towards affordable housing.