Photo by Tenaya HillsHuntington Beach city officials knew for years that speculators were illegally converting dozens of apartment buildings into condominiums but did nothing to stop them.
It's bad enough the city lost some 120 affordable rental units and thousands of dollars in fees. But following a Weekly investigation into the conversion scandal, the city has announced it will go after the unwitting victims—charging them more than $20,000 each for the city's bungling.
Two of those victims are Steve and Brissa Martin. In August 2003, the Martins purchased what they thought was a two-bedroom, two-bath condominium near the intersection of Beach Boulevard and Ellis Street. Their new condo was part of what used to be a four-unit apartment complex.
“When we looked at it, it was still being remodeled,” said Steve Martin, a 42-year-old graphic designer. “They took the apartments, evicted everyone, remodeled them and split them up. We bought a killer condo and fell into this mess.”
The city originally told owners like the Martins that $2,000 should clear up the mess. Now the city says the figure is likely to be more than 10 times that amount.
“Just the idea of paying $2,000 is killing us,” Martin said. “Where's my class-action lawsuit? There are attorneys waiting to line up on this, but they don't know who to sue. . . . I'm freaking pissed beyond belief.”
“It's understandable that people are angry,” said City Councilwoman Connie Boardman. “It's their homes. They were misled through no fault of their own and no fault of the city. When people are angry, they look for someone to blame, and some of that blame is reflected on the city. I hope we can make the units legal, but the city has lost as well and doesn't have any right to sue the folks involved in the illegal conversions. But the people who bought them do, and I hope they do get legal advice.”
Councilwoman Debbie Cook was less sympathetic. “The bottom line is that the city's not to blame in this,” she said. “The title companies are to blame, and they don't care if the homeowner goes through a nightmare. All these people out there are blaming the city. Some people are claiming we knew about it for 14 years.”
H.B. City Attorney Jennifer McGrath acknowledged the city knew about the illegal conversions for at least two years before the Weekly broke the story (“Condo-mania,” Oct. 17, 2003). And one homeowner says he alerted the city eight years ago—and asserts the city did nothing.
“About eight years ago, I was looking for a four-plex to buy,” said Mike Hoskinson, a local developer and owner of the Spaghetti Bender restaurant in Newport Beach. “The agent, as part of his selling speech, told me that I would be able to convert it all to condos. Not understanding the process, I asked how it was done, and he told me that Phil Benson was the only person who could convert an apartment to a condo.”
Benson was a real-estate broker and owner of Huntington Beach-based Pier Realty. One of his employees there was Pam Julien Houchen, a Huntington Beach council member since 1996 and a real-estate agent now implicated in illegal conversions.
Hoskinson says he was suspicious that only one real-estate firm could broker a condo conversion and never went forward. Then, a few years ago, his neighbor converted seven cottages to condos—with Benson brokering the deal.
“I went to the planning department to see about the legality of my next-door neighbor's plan,” Hoskinson recalled. “I was told point-blank that the city knew people had converted rentals to condos but did not license or permit them and 'neither approved nor disapproved' of the practice.”
Benson later sold Pier Realty to Jan Shomaker, Houchen's former planning commissioner until she recently resigned from the commission amid the scandal. City police have turned over their investigation of Houchen, Shomaker and Benson to the FBI, which is probing for evidence of bank fraud, forgery and other federal crimes.
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Award-winning investigative journalist Nick Schou is Editor of OC Weekly. He is the author of Kill the Messenger: How the CIA’s Crack Cocaine Controversy Destroyed Journalist Gary Webb (Nation Books 2006), which provided the basis for the 2014 Focus Features release starring Jeremy Renner and the L.A. Times-bestseller Orange Sunshine: The Brotherhood of Eternal Love’s Quest to bring Peace, Love and Acid to the World, (Thomas Dunne 2009). He is also the author of The Weed Runners (2013) and Spooked: How the CIA Manipulates the Media and Hoodwinks Hollywood (2016).
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