Article Courtesy of The Sun Sentinel 

By Megan O'Matz

Published September 12, 2012

Here's an odd side effect of South Florida's foreclosure crisis: Some immense homes with pools and three-car garages in gated communities are being rented out to unlikely tenants — poor people paying with Section 8 aid.

Among the properties are homes with up to 4,500 square feet of space in private communities with guardhouses and regal names such as "Monarch Lakes" and "Bellagio at Vizcaya."

The association is threatening eviction.
  
Federal law does not expressly outlaw such bans. But the prohibition can't be used as a pretext for other illegal acts, such as denying housing to people because of their race, gender, national origin, disability or number of children.

  
The owner of the Coral Springs house, Henri-Claude Marcellus, has hired a lawyer to challenge the restriction, claiming his mostly white neighbors are discriminating against him because he is Haitian and his tenants are African-American.

A retired software engineer, real estate investor and radio show host, Marcellus said he confronted the association's officers, demanding to know: "What do you have against blacks?"

"I hit a very sensitive nerve," he said in a recent interview.

The association's lawyer and directors did not respond to requests for comment.

The Sun Sentinel examined federal housing subsidy data from housing authorities in Broward and Palm Beach counties and found 230 homes commanding rents of $2,000 or more, up to $3,375 a month, from Section 8 families. Typically, tenants pay about one-third of their income toward the rent and the government pays the rest.

Most of the homes were basic, modest-looking residences in unassuming neighborhoods. But about a dozen were far grander, upscale houses concentrated in Broward County's western suburbs, including Coral Springs, Miramar and Cooper City, where one six-bedroom rental is worth $500,000.

In Palm Beach County, housing advocates say the Section 8 inventory has expanded in recent years to include not luxury, but lovelier homes, in prosperous neighborhoods.

"We've seen some really amazing houses," said Judith Aigen, executive director of the Boca Raton Housing Authority, one of more than a dozen South Florida agencies that administer the federal program for the U.S. Department of Housing and Urban Development.

Some see irony in that sprawling homes, once pushed to dizzying values by the machinations of unscrupulous Wall Street financiers, now are occupied by the very poor.

"Poetic justice," said Dorothy Ellington, president of the Delray Beach Housing Authority.

GoSection8.com

One recent online ad for Section 8 properties pitched a large home in Greenacres in central Palm Beach County for $2,000 a month rent: "Excellent 5 bed 3 bath with pool in a gated community."

The house, on Wishing Star Lane, had been foreclosed on by the homeowners' association for unpaid fees and purchased at auction this summer.

Abandoned, it had fallen into disrepair and is being renovated by the new owners to include amenities such as central air and a dishwasher, but not high-end items such as granite countertops and sunken tubs.

"We cannot afford to do all that," said Vibha Thacker, who is marketing the property for the owner. "But we are making it nice. We are not making it luxury."

Homes cannot be rented with government vouchers unless they are inspected and determined to be safe and in good repair by local housing authorities, which rely on standards set by HUD.

Landlords then advertise that the property is "Section 8 approved." Many listings are found on the Internet at http://www.GoSection8.com or at housing authority web sites.

In Miramar's gated Windsor Palms neighborhood, homeowner Melbourne Maxwell receives $2,521 a month rent split almost evenly between taxpayer and tenant for his five-bedroom home, which narrowly escaped foreclosure. Maxwell relies on the steady government rental income to hold onto the house.

"It is huge," Maxwell said. The second-floor bedroom is so big, "You could play football up there."

Generally, the larger the family and the more bedrooms in a house, the larger the payment voucher. Federal rules require the homes have at least one bedroom for every two people in the household. (Living rooms and even garages with windows can qualify as bedrooms in some cases.)

The Sun Sentinel found the house costing the most per month, $3,375, was not lavish, however, but was a weathered, seven-bedroom home in a bleak Pompano Beach neighborhood. Government housing records show 17 people lived in the home but a March police report put the figure at "about 22."

The woman renting the house told police she had 12 children and also grandchildren in the home.

"The house is dirty and the carpets are extremely nasty," a Broward Sheriff's Office report states. "There is hardly any food in the fridge … Out of the seven bedrooms only four of them have mattresses in them. Some children sleep on the couches in the living room and some sleep with their older siblings in the same bed."

The family was evicted in August for not paying their portion of the rent: $1,426 a month.

To arrive at the $3,375 allowable rent, records show the Broward County Housing Authority reviewed nearby six-bedroom properties and found asking rents of $2,000 to $2,650 a month. But the agency adjusted the allowable Section 8 rate upward as much as $1,300 to account for the additional bedroom and higher utility costs paid by the owner.

Luck with tenants

In Miramar, the government is paying Christian Mateo $2,250 a month to accommodate a family of eight living in his five-bedroom home with pool. The family pays nothing.

Mateo had bought another, more lavish, property in 2007 for $753,000 with the intention of reselling it but the market collapsed, cutting the home's value about in half.

So he moved into the newer house and put his other Miramar property up for rent. He turned to Section 8 "out of desperation," he said, to keep it out of foreclosure after a private-paying tenant vandalized the interior, forcing him to make costly renovations.

Initially, the government's rent was lower and did not cover his costs, but he said he was able to reduce his mortgage payments, and he learned that the government voucher would be greater if he accepted a larger family.

He said he worried that "the more people in the home the more chances of it being destroyed," but his current tenant "has kept up the house really nice."

Professional poker champion Michael "The Grinder" Mizrachi and his family were not so lucky.

Mizrachi, who has won $14 million in tournaments over his career but faced early financial challenges, not long ago rented his five-bedroom, 3,000-square-foot home in Miramar's gated Bellagio at Vizcaya neighborhood to a woman in the Section 8 program and her six children.

The government paid Mizrachi $2,236 a month, the woman paid $177, housing records show.

"It was a bad choice to rent such a huge home to a lady that didn't take care of it," said Mizrachi's wife, Lily.

Inspection records show the kitchen sink fell through the countertop, the home became infested with roaches, and the carpets needed cleaning. The tenant moved out.

"A $4,000 rug I installed had to be torn apart," Lily Mizrachi said. "I had to spend over $2,000 in extermination."

Michael Mizrachi had bought the house in 2005 for $440,000 only to watch it plummet in value. The lender moved to foreclose in 2009 but agreed the following year to drop the case and modify the loan, court records show.

Living elsewhere and reeling from other property investment losses and tax woes at the time, Mizrachi and his wife chose to rent out the Miramar house rather than lose it. A real estate agent offered the home to the Section 8 program.

"It's upsetting talking about it," Lily Mizrachi said.

Marcellus, the investor who bought the vast Coral Springs home, hopes to keep his unhappy neighbors at bay long enough to recoup his investment.

He bought the house in January 2011 in an online foreclosure auction, sight unseen. Though the house was valued at $446,000, he paid just $13,700. The court sold the house for that amount to cover a lien filed by the homeowners association for unpaid assessments racked up by the prior owner.

The bank, meanwhile, can still foreclose on the delinquent mortgage and claim the home.

"Unless I make a deal with them to buy it," Marcellus said, noting he spent more than $60,000 to spruce the place up. "It is a beautiful house."