Handshake Hotels: The Documentary

Handshake Hotels: Part 1
Wednesday June 25 during Morning Edition
Twenty years ago, New York City began moving homeless people into hotel rooms rented by the night. That business has continued to grow, and this year the city is on track to spend more than $180 million dollars placing homeless people in hotels and temporary apartments. But this money is changing hands without city contracts. In a seven-month investigation, WNYC's Andrea Bernstein and Amy Eddings found that this system based on handshakes has a high cost for taxpayers, the homeless, and city neighborhoods. Andrea Bernstein has the first in our three-part series.

Handshake Hotels: Part 2
Thursday June 26 during Morning Edition
New York City increasingly relies on private hotels to house its homeless people. These shelters sit on private property and operate outside the city's usual contract process. In a seven-month investigation, WNYC's Amy Eddings and Andrea Bernstein found that the handshake deals mean communities and elected officials have no say when these homeless hotels move into their neighborhood. Amy Eddings has the second in our three-part series.

Handshake Hotels: Part 3
Friday June 27 during Morning Edition
New York City has been putting homeless people in private hotels for two decades, and in the last few years city payments to hotels has skyrocketed. A WNYC investigation found that this business goes to just a few landlords ... and that the city knows almost nothing about them. WNYC's Andrea Bernstein has the last in our three-part series.

Handshake Hotels: Part 1
Walking down the long brown hallway in the Marion Hotel on the Upper West Side, Jacqueline Davis fingers a keychain around her neck.


Bernstein: You've got a lot of keys on that keychain. What are they to?
Davis: Hotels I've been in. I keep them as souvenirs. This is my room.
Bernstein: I see you're leaving the TV on, why is that?
Davis: "˜Cause I sleep with the TV on because of the mice. They go over there in the corner and they go down the hole and it's scary. I keep my radio and my TV and here's the refrigerator but it's not too good here far as safe is concerned.


She sits down on the child-sized bed her tiny room. Jacqueline Davis has AIDS. As she talks she wipes a bead of sweat from her forehead.


Davis: A lot of people are not clean in the hotels, you could catch anything they leave behind them. If they got bugs or use the bathroom behind them you go in with a can of bleach thing and you spray before you sit.


Like so many of the homeless people we talked to in a dozen homeless hotels, she has detailed complaints. The buildings are vermin-infested, dirty, unsafe. Drugs are dealt in the bathrooms and the hallways. The security guards accept bribes for the larger rooms.


There are some hotels where the rooms are clean and quiet.


But unprompted, the residents often compare their room to jail cells.


Their cost? Up to $3000 a month. By those standards, Davis's room is cheap — it costs about half that.


Bernstein: How long have you lived in these hotels?
Davis: Ever since I was 18 off and on I never had an apartment yet.
Bernstein: How old are you now? 35.


Jacqueline Davis is not alone. She is one of tens of thousands of New York City's homeless, trapped in the system.


A rank elevator ride downstairs lives 56-year old Sadie James. James says she was evicted from her Harlem apartment after 21 years when the landlord accused her daughter of selling drugs. That was three years ago. James has been on the hotel circuit ever since.


James: My youngest is fifteen and I gave temporary custody of him to my older son until I find a place because he's in school and I do not want him traveling around with me every 28 days.


The New York City Aids Housing Network, which advocates for the rights of these residents, describes this as typical. In a survey, it found not even half of the residents were even given applications for permanent housing. And with permanent housing for the homeless in short supply, residents are bounced from hotel to hotel.


That wasn't the idea. This was supposed to be emergency housing.


Lilliam Barrios-Paoli was the Human Resources Commissioner under Mayor Giuliani. A long-time city worker, she remembers when the homeless were first housed in armories — as if they were temporarily displaced flood victims.


Barrios-Paoli: The assumption was that this was a problem that would eventually go away. It was an emergency.
Bernstein: Do you remember when they started using the private hotels?
Barrios-Paoli: Yes. I think it was because they ran out of space and it was as simple as that and you were under court mandate to house people and you didn't know what to do or where to go.


In those days the rules were simple. You called a hotel manager, you booked a room, you paid a daily rate.


Then, there were a few hundred families in the system. Now there are close to 10,000. This year, the city is on track to spend 182 million dollars. That's almost five times what it was spending just six years ago.


And how does the city do business with the owners of these hotels? The same way it did two decades ago.


Officials call a hotel, book a room, pay a daily rate.



Non-contracted housing, fiscal years 1997 through 2003

And with all of this business — $180 million taxpayer dollars changing hands, there are no contracts — just "gentlemen's agreements" or "memoranda of understanding." And because there are no legally binding contracts, there is no accountability. Armen Merjian is an attorney for Housing Works, a non-profit AIDS housing group.


Contracted housing, fiscal years 1997 through 2003


Merjian: With a contract comes the power to enforce minimum standards and conditions. You have power over those whom you do business with if you have a contract. You don't if you don't have a contract.


Part of that power is knowing who you're doing business with — and if they've done a good job in the past.


But that isn't what happens in the emergency hotel world.


In this world, the need for emergency housing is so great it is administered by two entirely separate agencies. One is the Human Resources Administration. It handles emergency housing for people with AIDS. The other agency, is the Department of Homeless Services handles emergency housing for almost every other homeless person in the city.


A visit to a Bronx hotel shows how the two agencies can work at cross purposes.


At the Anthony Hotel a 24-year old woman in a gold velour track suit is just arriving.


Pregnant Woman: Where's the key, no key to the room, oh okay. What are you allowed to bring
Worker: what you really need, that's what you could bring, not all your stuff.
Pregnant Woman: no I don't have much I don't have much.


Up in her room, the woman, who is three months pregnant, shows us a small, black backpack.


Bernstein: This is your stuff in this backpack, it's all you got?
Pregnant woman: It's all I got this backpack, a little backpack.
Bernstein. What's in it? Two pairs of jeans, two tee-shirts, a lot of tee-shirts a lot of underclothes and that's it, I got a jacket with me and the stuff I have on.


This hotel used to be full of homeless people with AIDS, sent by HRA, the Human Resources Administration. But HRA doesn't send its clients here any more. It took the building off its referral list, along with every other hotel run by David Somerstein, one of the largest landlords in the business. We asked Patricia Smith, the first deputy commissioner of HRA, why they don't use his hotels anymore.


Smith: The reason, the primary reason and frankly at the core we take places off line when there is something medically inappropriate in the main and that's what we found. What we found were dirty conditions, unlivable conditions, one might say but certainly medically inappropriate conditions for a person with AIDS or HIV.


Owner David Somerstein outside the Anthony Hotel in the Bronx.
Photo: Andrew Lichtenstein

But with no contracts, there's no violation of any legal agreement. There's no formal way to notify city agencies that there's a problem. So when HRA stopped sending people to the Anthony, the other city agency that handles emergency housing — the Department of Homeless Services, DHS simply took over the rooms. We asked Smith why the rooms were deemed inappropriate for people with AIDS — but not pregnant women.


Smith: I can't speak for DHS. I can't speak for DHS and why they think it would be appropriate for a pregnant woman I have no idea.


When one city agency would no longer place people with AIDS in The Anthony Hotel, another city agency filled it with pregnant women.
Photo: Andrew Lichtenstein

A DHS spokesman would only say the facility was inspected before any women were placed there — and conditions were found satisfactory. And in an interview, DHS commissioner Linda Gibbs expressed confidence in all the emergency housing providers, even in the face of media scrutiny of some of the landlords.


Gibbs: What I feel is that they are doing a great deed for the city that they are going out of their way and they have been the reason that this agency has been able to meet its mission. That they are not in this just to make money that they are committed to the service and they are mission driven.


Amy Eddings: Really, really, I mean you read the Post report and David Somerstein and the site at E 21 Street with 1000 building code violations. You can look me in the eye and say David Somerstein is providing a good service in that situation?


Gibbs: I work with these individuals routinely. What I am going to do is have results based accountability system that will have every provider for profit and not for profit and judge them on the results they are producing.


But the results aren't squaring with HRA's results. After HRA stopped referring clients to Somerstein's buildings —the landlords business with that agency fell by about $1.2 million dollars. But at the same time his hotel business with the Department of Homeless Services went up, by almost exactly that amount.


Hevesi: That's absurd -- that's dumb. The left hand doesn't know what the right hand is doing.


In 1998, State Comptroller Alan Hevesi — who was then the City Comptroller, audited both the Department of Homeless Services and HRA's AIDS housing program. His conclusion: the emergency housing services, in BOTH agencies, should be contracted. And his warning came when the system was a fifth the size it is today.


Hevesi: The bottom line is there are rules that were violated and HRA is violating the rules to this day. They are required to have contracts based on a competitive process, and that's been violated systematically by HRA. It's wrong.


Patricia Smith of HRA says her primary objective is to get a medically appropriate roof over each clients head. She says she's stepping up inspections and putting pressure on landlords to improve conditions. And HRA is forcing clients to move from hotel to hotel less often. Smith says she'll "take under advisement" the question of whether to have contracts.


We wanted to talk to the landlords for this story, but almost none — including David Somerstein returned our calls. We did get Jerry Pollack, the owner of the Marion on the phone, but he declined our request for an interview.


WNYC began asking about why there were no contracts for this huge business back in February. Now, homeless Commissioner Gibbs says she wants to institute tougher standards for emergency housing providers, and to move to a contracted system.


Gibbs: Looking forward, our goal would be to convert the conditional capacity that remains in the system over to contract. We do this in the context of seeing a much smaller shelter system in the future. And so we're looking for both ways to better prevent homelessness so that people are not becoming homeless, and doing a better job at moving folks who are in shelter to permanent housing more quickly.


But as we pressed Gibbs on exactly how she would move the system to a contracted one, she wouldn't say. At that point, an aide ended the interview and ushered us out the door. Still we asked the Commissioner: when would the system change? She would only say: "many months." And many months, she pointed out, could mean years.

For WNYC, I'm Andrea Bernstein


Handshake Hotels: Part 2
For several weeks, there was a banner that hung outside the new, six-story red brick building at 65 Clermont Avenue, in Brooklyn's Fort Greene neighborhood. The banner trumpeted the arrival of luxury condominiums to passing drivers along the nearby Brooklyn-Queens Expressway. So Peter Mark, who lives several doors up the street, was surprised to hear it was actually going to be a homeless shelter.

Mark: The way that we found out about it was a woman down the street saw mattresses being carried in. That seemed an odd thing to carry into brand new luxury condo 12-unit building. And so she asked, and apparently, whoever the workman was knew more about what was going on there than anyone who lived near the building. And he said it was going to be a shelter.

Mark and his neighbors felt betrayed by the developers, and by the city, which had yet to tell them, or their elected representatives, that a hotel for the homeless was coming to the block.

Mark: We had protests and we were out in front of the building, during the month and a half before it opened. A lot of the kids in the neighborhood were out there yelling, "Houses, not Hotels."

The Clermont Family Residence now houses twenty-four homeless families, placed there by the city at a cost of ninety-seven dollars a night. That's nearly three thousand dollars a month — roughly three times the market rate for a studio apartment in Fort Greene.

About a mile away, in Prospect Heights, Patti Hagan stands before what used to be a mattress factory at 768 Pacific Street.

Hagan: We saw work going on here starting last spring, And, both this building and 603 Dean, when they asked, said, oh it's going to be a school, it was gonna be artists' lofts.

Instead, it became a shelter for ninety homeless families last summer, over the last-minute objections of stunned local officials. The desire to find out how this happened has sparked a year-long quest for Hagan, a former fact checker for the New Yorker.

Hagan: I have the architect's plans, where it started off as artists' lofts. You can see, they were double the size — and more than that — of these rooms...

She reaches into one of her bags of documents and notebooks, and pulls out a map of social service providers in her neighborhood.

Hagan: I mean, this was just such a sneaky maneuver. We have got, with these, it comes to about 48 social service facilities, most of them group residences. But of a much smaller size, and they have come openly and honestly into the community. And answered questions. You know, come in, in the light of day.

In the 80s and 90s, the city moved the homeless out of its own inadequate and dangerous shelters, and into privately-owned facilities. The public has far less say over what's done on private land than on public land. It's as if someone built a Holiday Inn, and decided to rent the rooms exclusively to city agencies to house the homeless. There's no public input required for such an arrangement. Fort Greene resident Peter Mark.

Mark: That is the loophole that this system is based on. The fact that these properties are privately owned. If it's government owned, you have to go thru all this — you know — the process. And obviously a lot of people like to cut corners on those things to get things done.

The city's Department of Homeless Services uses sixty-one homeless hotels; more than half of them have opened since 2000. WNYC has learned that the city is paying more than 180 million dollars this fiscal year alone to house the homeless in these hotels, and in temporary apartments. Democratic City Councilman James Davis represents Fort Greene.

Davis: The community has the right to be a part of the process. You just don't come in with a city-financed business into a block where people are city taxpayers and ignore their concerns. It just doesn't work that way. Everyone has a right — especially when there's city dollars involved — to be a part of the process.

Even though these hotels are privately owned, they could still be subject to a public process, if they had a contract with the city worth more than one hundred thousand dollars.

WNYC found that the city's Department of Homeless Services paid more than one hundred thousand dollars this fiscal year to all but four of its 61 homeless hotels.

However, these hotels operate without any contracts. They do tens of millions of dollars of business with the city based on handshake deals.


Sister Barbara Lenninger with one of the children at the Thorpe Family Residence. Photo: Andrew Lichtenstein
That doesn't seem quite right to Sister Barbara Lenninger. She's a Roman Catholic Dominican nun and runs the Thorpe Family Residence in the Bronx. On a recent afternoon, three children played tag in the recreation room. Lenninger's program provides child care, and other social services, on-site. And Lenninger has a contract with the city.

Lenninger: There's an incredible amount of paperwork we have to provide for what's going on in our program, many meetings we have to go to, and we really work hard.

So Lenninger was surprised when she found out a few months ago that an apartment building a few blocks away was becoming a homeless hotel.

Lenninger: I was astounded. I was astounded as a member of the community board, and I was called by the head of the community board to verify my knowledge of the program. I knew nothing about it...

That's because the homeless hotel, the Lex Bronx Residence, is privately owned, and it doesn't have a contract. Lenninger is upset that it wasn't scrutinized the way her organization was.

Lenninger: On the one hand, I can understand the great need for providing some kind of housing for homeless people. But I don't think it's fair to just jump over the process and announce that this is opening.

The operator of the Lex Bronx, David Somerstein, did not respond to numerous requests for comment.

Gibbs, at a hearing, to one of the council members: So, I would like to start with an apology to you personally, because in the one instance when we did fail to give notice —

At a city council hearing last September, Linda Gibbs, the commissioner of the Department of Homeless Services, apologized several times to angry council members about hotels that opened in their neighborhoods. Gibbs explained that communities are told, at least seventy-two hours in advance. But council members wanted to be consulted, not just notified with a phone call or letter....which Democratic Councilmember John Sanders complained he didn't even get when a 350-room Best Western near Kennedy Airport turned into a homeless hotel.

Sanders: I received not one sentence from any office, we had to actively get out there and get this. The only information I received was from very disgruntled constituents, and I had to play catch-up.

Gibbs: I only want to repeat that I will continue to work on this issue. I don't think it's an easy issue. I think it's a difficult issue for any community, even if it ultimately is a shelter that is flawless in opening and presents no community problems. The fears and the misperceptions are very difficult to deal with, and I will continue to do my job of communicating when we have new shelters that will be present in your community.

As for contracts, city homeless officials, past and present, say that providing an ever-growing number of homeless people with shelter in twenty-four hours, as required by the courts, means opening facilities faster than contracts will allow.

Bailey: Making contracts for anything in the city of New York is a convoluted process. It takes a lot of time.

Bob Bailey provides legal counsel to the Human Resources Administration, which provides housing for homeless people with AIDS. Speaking with WNYC's Andrea Bernstein, he articulated a long-held city position.

Bailey: The demand for emergency housing is something that fluctuates unpredictably from month to month. We need to get housing quickly. We also need the flexibility to decommission somebody who's not providing medically appropriate housing quickly, without him being able to sue us, because he doesn't think we had cause to decommission him.

Andrea Bernstein: There are lots of needs that fluctuate in the city, and the city has ways of dealing with it. Salt to clean up snowstorms. I mean, you don't know whether it's going to snow one inch, or three feet in any winter. The city has a lot of things it procures that it doesn't know what the need is going to be, and those are contracted. So there is a model for doing it.

Bailey: I don't have anything to add.

HRA officials now say they're taking the issue of contracting homeless hotels "under advisement." As for DHS, in the past year, the agency has contracted with more facilities, but that effort is barely keeping pace with the increase in non-contracted hotels. Gibbs says she's going to start moving those "handshake hotels" into contracts. When pressed, she couldn't provide details.

In interviews with current and former city officials, it's clear that part of the resistance to contracts is an underlying fear of community input. Muzzy Rosenblatt, acting commissioner of homeless services during Mayor Rudolph Giuliani's second term, says "doing the good government thing" sometimes comes at a political price.


Rosenblatt: We would actually have to close some facilities. Good facilities that were running fine, that we said, okay, we're going to put "˜em on contract, and then the community said, all right, now we have a voice in the process and we want it closed. And we were closing facilities that were good facilities. And that was the tragedy of it.

But the city itself may have been partly responsible for sowing the seeds of prejudice and fear. Joan Malin worked for more than twelve years on homeless issues, and was the commissioner of the Department of Homeless Services from 1994 to 1996.

Malin: I do know painfully the experiences of, in the 80s, opening up facilities and literally opening up drill floors in armories, where we would put 500 to 1,000 men that night because we had no place else to send them and the furor that would create in the communities. And I think we still live in the aftermath of that, where they're feeling disillusioned and abused and a lack of trust in government.

Malin notes that the city doesn't place hundreds of homeless people overnight in an armory anymore. And she believes that smaller facilities, with supportive services, do not have a negative affect on neighborhoods.

Malin: And God knows, I've been through enough siting battles where I would get screamed at and then I would come back and be invited back for Thanksgiving dinner and there would be the local block association helping the families, and it's a very positive experience. So it doesn't have to be negative.

New Yorkers, though, may be less inclined to embrace their local shelter when it seems to be foisted upon them, almost overnight. For WNYC, I'm Amy Eddings


Handshake Hotels: Part 3
On Nancy Wackstein's office wall, there's a framed copy of an old report.

Wackstein: We had done this whole report, when Mayor Dinkins was borough president of Manhattan and I had worked for him then. We had done a whole report, a shelter is not a home.


Wackstein went on to be a top advisor to Mayor Dinkins. She spent the early 1990's trying to move families OUT of what were then called "welfare hotels." We gave her a list of the hotels the city is placing the homeless in today.


Wackstein: So these hotels, as I'm looking at your list, some of them are the ones that we phased out you know 12 years ago, 13 years ago. I see the Cross Bronx, the Cross Bronx is on here, the Stadium. A lot of them are owned by the same people who owned them then. The Prospect, Hamilton Place, Allerton house these are familiar to me, Baychester.


In the emergency hotel world, there are no contracts, and no competitive bidding. And that's enabled a relatively small group to control almost all the business. Linda Gibbs is the Commissioner of the Department of Homeless Services.


Gibbs: We do work regularly with a group of people who do understand our work and quite frankly step up when we need them.


But Gibbs says this is an open process.


Gibbs: The reality of the past year is the proposals are all eagerly reviewed because we have an increasing demand for family shelters.


We spoke to one would-be provider who has a track record in homeless housing outside New York. He said he submitted five proposals in recent years that have been turned down. He didn't want us to use his name, because he says he'd still like to do business with the city.


Senora Selzy admitted it's a hard business to enter. As the recently retired Director of the Family Hotel Program for the Department of Homeless Services, she was the one responsible for bringing new hotels into the system.


Selzy: I know of, personally, a number of people, a number of organizations, who offered buildings to the city, that were truly decent to house their homeless families and it didn't happen, it just didn't happen.


Yet the city's payments to hotel owners have increased five fold in just six years, to $180 million. But despite this huge growth in spending, the same small group of a dozen or so operators just keeps getting more and more of the business.


For example, in the first nine months of this fiscal year, homeless services brought on line sixteen new hotels. Almost $9 million was paid out to hotel owners already in the business. Just sixteen thousand dollars went to a new owner.


Harvey Robins was a top official in the Koch and Dinkins Administrations.


Robins: It is a small group and they controlled the air in my room when I was trying to address this issue and they clearly have the city exactly where they want "˜em.


We asked one of those landlords, David Fuld, whether he thought the industry was controlled by a tight-knit group.


Fuld: I think in the real estate industry there's cross-investments and limited partnerships. People invest in one another. People do joint ventures and do deals together. Upper class, middle class, lower class. I don't think that's uncommon in the media and the press either, is it?


But for officials like Harvey Robins, that group had the control.


Robins: We were desperate. At 1, 2, 3 o'clock in the morning to be able to make a match and have a family move into a hotel. They knew they had the city over a barrel and they took us to the cleaners.


Prices remain high, costing the city up to $3000 dollars a month for tiny, often dirty rooms. Joan Malin, the Homeless Services commissioner under Mayor Giuliani, says she tried to get a better deal, once.


Malin: This was a particular moment when we did have some give in the system, so we reduced the rate. For the hotel owners. But they went crazy. But I had sufficient vacancies that I could handle it. But that lasted for maybe six months or a year, and as soon as there's pressure back on the system, you're in no position to negotiate.


Without contracts, the city works out a rate on a hotel to hotel basis, shakes hands, and the deal is done.

In his building on East 104th Street, hotel owner David Fuld invited Amy Eddings to take a whiff of the garbage area.

Fuld: Smell it.
Eddings: Smells like oranges.
Fuld: Look up. It's not by accident. It squirts out every few minutes, keeps the place deodorized, people generally are neat, because this is available, people don't generally throw garbage in the hallways, and things ARE kept neat.
Fuld: by the way.
Amy: No roaches.
Fuld: You don't see a roach.

In the hallway, he flags down a resident.


Fuld: Are you very pressed for time? She doesn't know who I am, I stopped her at random. Did you ever talk to me before?
Woman: No
Fuld: I'm one of the owners. This lady works for a radio station. Would you talk to her?
Woman: It's nice, it's comforting.

Fuld was the only one of the dozen or so major players in this industry who would grant us an interview.

In the course of our investigation, we found that David Fuld has been in the business for two decades. In the past four years, the city paid him 75 million dollars. One of his business partners is a director of a company being investigated for bribery.

But that information isn't in the city's central database. Unlike people who have contracts, the city doesn't require these hotel owners to disclose anything about themselves, their business partners, their past performance, or whether they've been investigated. None of this information would necessarily prevent the city from doing business with the owners — but these are taxpayer dollars, and taxpayer dollars are usually subject to public scrutiny.

We also learned in this investigation that one city agency is so dissatisfied with David Somerstein it will no longer refer people to his hotel... and that that three members of another family in the business, Stuart, Jay and Zenek Podolsky, were convicted in the 1980's of grand larceny.

But the city hasn't required the hotel owners to divulge these details.

Patricia Smith is the first deputy commissioner of the city Human Resources Administration, which provides emergency housing for people with AIDS. We asked her how, without contracts, she would know if one of the hotel owners was partners with, say the late mobster John Gotti.

Smith: How would I know? I wouldn't know, and if I did know the question would be how one acts on that in an emergency housing situation. .. I'm not saying it's not good information, what I'm saying is that our responsibility our primary responsibility at HRA is to house people in a medically appropriate environment because if it's a medically appropriate environment we will put an individual there in an emergency.

After we began working on this series, the city said it wanted to move toward a contracted system. As for landlord David Fuld, he said contracts would help him get financing. Yesterday, we asked Mayor Bloomberg: do you as a business man, think it's a good idea to end $180 million with no contracts?

Bloomberg: The procurement rules of the city are very complex and there should be some oversight on everything. In some of these cases you can't get multiple vendors who are willing to give you the product that you want so the city isn't conducting a real arms length negotiation, we are asking people, please, please sell us a service that we absolutely have to have.

In the last 20 years, the lack of contracts has surfaced from time to time. Officials promise reform. But the tremendous crush of homeless families continues to arrive, and the emergency housing system doesn't change. This summer, the numbers of homeless are expected to reach record highs. For WNYC, I'm Andrea Bernstein.

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