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Mayor Fined Renters Out of Homes So Builder Could Replace Them With the Rich, Lawsuit Says

Residents of an Indiana neighborhood allege the city fined landlords over small things as part of a ‘scheme’ to bulldoze their homes and rebuild them for pricier digs.

The past year has not been very pleasant in Pleasant Ridge.

Residents of the low-income Charlestown, Indiana, neighborhood allege they are being driven out of their homes as part of a scheme between city officials and a housing developer to build higher-priced homes.

A lawsuit filed against the city of Charlestown by the neighborhood association representing Pleasant Ridge residents accuses the city of running a “code-enforcement scheme” by “imposing illegal and unconstitutional fines” on residents in an alleged effort to push them to sell their homes to development company Neace Ventures. Approximately 160 homes in the low-income neighborhood have been bought in the past year by Neace, who wants to rebuild the neighborhood for a wealthier market, the lawsuit alleges.

“[The city] would use code enforcement against the rental properties, and most are rental, and fine the landlords to such a degree that they wouldn’t be able to pay the fine and they’d have to sell,” said Anthony Sanders, a senior attorney at the Institute for Justice, representing the plaintiffs.

“Mr. Neace and his other investors would then be the only people willing to buy the homes and take them away from the landlords so they wouldn’t have to pay these fines,” he continued. “They gave the landlords an offer they couldn’t refuse.”

The city allegedly imposed accumulating daily fines for each day code violations were left unfixed. Sanders said this includes daily $50 fines for a one-inch hole in a screen door or mildew on the side of a house.

The city filed a motion in Indiana court for a preliminary junction in the Pleasant Ridge neighborhood in April. A decision is still pending after the court held a hearing on the motion last week.

The Institute for Justice said new documents they filed in court last week corroborate claims that the city and the development company have a “secret plan” to use fines to “force the residents out and destroy the neighborhood.” Planning documents show that developers wanted to offer fined residents $10,000 for their properties, which the lawsuit claims have been appraised for between $30,000 and $60,000.

The documents include notes, emails, and text messages between real estate developer John Neace, John Hampton, the company’s project manager, and Charlestown Mayor Bob Hall. City officials have repeatedly denied involvement in the sale of neighborhood houses, but the documents suggest the city and developers collaborated on selling and redevelopment efforts while maintaining an “arms length” appearance.

“Bob says for all of this to work properly for the condemnation of homes we need to remain independent of the city as we are right now considered a private developer with no contractual relationship with the city, which is 100% factual,” Hampton wrote to Neace in a July 2016 email referencing plans discussed with Hall. 

Hampton told The Daily Beast he did not want to comment until the lawsuit is resolved.

“These documents provide concrete evidence that the city and developer have engaged in a secret plan to drive down home prices prior to using eminent domain,” Sanders said in a statement. “The city not only wants every home to go, but wants it done on the cheap, with minimal compensation for property owners who are largely of modest means.”

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Josh Craven, president of the Charlestown Pleasant Ridge Neighborhood Association and a plaintiff in the lawsuit, said Pleasant Ridge residents “knew this all along.”

“It was right there for everyone to see,” he said. “We just never had any documentation showing proof of it. Now that we got it it’s no shock to us, really just like how did this take so long for this to come out.”

The documents also make several references to a proposed agreement between the city and Neace, with the suggestion that the city would compensate the company if they got sued.

“John Neace reminded me this morning that you were going to get some form of a subornation [sic] agreement indemnifying us from a lawsuit if such a suit was filed against us and/or the city for what we are trying to do at Plessant [sic] Ridge,” Hampton texted Hall in June 2016. “We’d like to have that in place before we start closing on lots if possible.”

City Attorney Michael Gillenwater said there was never such an agreement.

“In order for a city to do anything, to take any legal action, any action that is enforceable, that has to happen at a public meeting,” he told The Daily Beast. “And I can tell you I’ve never even seen a draft of such an agreement or alone, seen one in a public meeting... There is no subordination agreement and I would probably know about that because I’m the city attorney.”

Craven said the city’s abuse has hurt a lot of the Pleasant Ridge residents, who struggle to find affordable housing elsewhere in the city.

“Some of them have found rental properties throughout the city but others had to move away completely, had to move to another city or things of that nature,” Craven said. “Some have had to switch jobs to relocate because they didn’t have transportation at the job they had so they had to move to another city. It’s been life changing for a lot of people.”

Some people with nowhere else to go are still living in those boarded up homes without water or electricity, Craven said.

“Some people just decided to stay and some don’t even have water or electric because they have nowhere else to go,” he said. “No one has come there and it’s a pretty sad situation.”

Gillenwater said no one has been evicted and that the city is not aware of anyone living in a shuttered house.

Plans to tear down the modest neighborhood for redevelopment began in 2014 when the city applied for a federal Blight Elimination Fund grant to demolish the homes for redevelopment, but the city council vetoed the plan. When a new city council was elected in 2015, the city adopted a new rental ordinance so homes could be inspected every two years, instead of only when a property was vacant, as was the previous policy.

Hall said in April on Facebook the city started the inspection program at the request of Pleasant Ridge residents who wanted their landlords held accountable for property and safety violations. He said landlords could either fix the code violations or tear down the property, but many chose to sell to a Neace Ventures.

“These sales were entered into between a willing seller and a willing buyer, both private citizens,” he wrote. “The city has not been involved in any of those sales.”

The boarded-up homes purchased by Neace would drive down the cost of the expected 20 to 40 “holdouts” in the neighborhood, Hampton said in the court documents. Then, he suggested, the city would use eminent domain to buy the remaining properties, but would now have to compensate the residents less for their houses.

“Once a development plan has received final approval,” Hampton wrote in an email to Neace, “we will become the approved developer and we would be able to enter into an indemnification agreement. At that point, the plan with us as developer would be in place, and then the city would commence condemnation proceeding against anyone remaining that has not agreed to sell. Michael [Gillenwater] said there are only limited things someone can challenge anyway because what we are doing has a ‘public purpose.’”

Gillenwater said Charlestown has never agreed to use eminent domain, though it is an option.

“The only documents that we have approved in public meetings says that the city doesn’t have plans to use eminent domain at this time,” he said. “Now, is it possible that it may happen in the future? Yes it is possible. If there’s 400 license and 390 of the people have sold and there’s 10 people that are holding out that may be an option if that’s preventing the blighted area from being approved.”

The past year for Pleasant Ridge residents has been like “living with this cloud over your head,” Craven said, adding that the neighborhood association has spent several hours every day trying to save the neighborhood.

“This goes on everywhere in America,” Craven said. “A lot of people in America all around they get railroaded and they don’t have the opportunity that we did to bond together and look into it and say, ‘Hey this isn’t right.’ They have to just take it because they have no choice. I hate to see it for anybody in America, but I’m glad that we’re not standing up for just ourselves, we’re standing up for everyone because this is unconstitutional in so many different ways.”