Like many homeowners these days, Victor and Yvonne Delia stood to lose a lot — about $90,000 — when they sold their townhouse near Midway Airport five months ago.

Instead, the two retired Chicago police officers managed to walk away with a 23 percent profit — thanks to property taxes collected from 61,145 of their fellow Southwest Side homeowners.

The Delias benefited from a law Illinois legislators passed in 1988 to curb white flight in Chicago’s bungalow belt. The law offered homeowners a guarantee: They wouldn’t lose money if they sold their home even if property values declined.

But there was a catch: No one was supposed to profit if their property values went down because of a national housing slump — as has happened in Chicago the past several years.

Still, some, like the Delias, have ended up profiting, while others aren’t getting paid at all.

And a law that was meant to keep people in their homes in the city has often ended up paying for them to move out of Chicago.

The Delias paid $293,000 in 2003 for their new, three-level townhouse. A year later, they enrolled in the Southwest Home Equity Assurance Program — one of three small government agencies established by referendum in Chicago as a result of the state law — which appraised their home at $360,000 and guaranteed that if they didn’t sell for at least five years, they would get at least that much money when they did. The only cost to enroll: $125 for the appraisal.

The Delias put their home up for sale in January 2010. Fourteen months later, they finally found a buyer — who bought the home on May 3, paying the couple $205,000, or $88,000 less than they paid when they bought it.

Six days later, the home equity program wrote them a check for $155,000 — a taxpayer-financed windfall that not only covered their loss on the sale but also allowed them to make a profit of $67,000, or 23 percent.

“We were extremely lucky,” says Victor Delia, 69, who has since moved, paying $265,000 for a townhouse in Tinley Park.

The Delias got the biggest payout anyone has ever received from the 21-year-old Southwest Home Equity Assurance Program, one of the three agencies created to stem block-busting and white flight on the Southwest Side and the Northwest Side.

The two other government agencies — the Northwest Home Equity Assurance Program and the Southwest Guaranteed Home Equity Program — haven’t paid a single claim in 13 years, even as they continue to collect property taxes, pay staff and operate offices.

Together, the three agencies have stockpiled $25 million — more than 10 times their combined operating budgets — even as the state of Illinois and most local governments are slashing jobs and services.

As of Oct. 3, the agencies have paid 33 homeowners a combined total of $904,860 since the programs began operating in 1990. At least 20 of those homeowners have moved out of Chicago.

The Northwest Home Equity Assurance Program and the Southwest Guaranteed Home Equity Program have been refusing to pay claims because they maintain that housing prices here have fallen because of the recession and the continuing economic slump. They point to a line in the law that says the programs “shall not guarantee against a decline in the value of housing due to economic forces such as a national, regional, or municipal recession or depression.”

“Nearly all 85 million American homeowners have lost substantial value,” according to a statement from the Northwest Home Equity program’s director, Robin Larson, and its chairman, Tom Bucaro, “but the Home Equity Illinois Statute makes it clear that the housing recession/depression losses are not covered.”

The Southwest Home Equity Assurance Program — the only one of the three agencies that continues to pay claims — views the law differently. It maintains that the national recession isn’t the sole reason for declining property values within its borders.

Still, acknowledging the impact of the bad economy, that agency changed its rules a month after the Delias got their money, limiting payouts. Since June 8, it’s been paying 59 percent of the difference between the sale price of a home and its guaranteed appraised value, rather than 100 percent.

That figure was settled on as a result of a study that found that housing prices in the portion of the city the agency covers have fallen farther than elsewhere in Chicago and statewide, according to Kenneth Pannaralla, the program’s executive director.

Differing with the other two agencies’ interpretation, Pannaral-la says, “The Southwest Home Equity Assurance Program is not violating Illinois law” by continuing to pay homeowners during the nationwide economic slump.

That Pannaralla’s agency has cut the percentage it will pay at all has upset homeowners with pending claims. They say they didn’t realize a bad economy could mean they get paid less by the program when they sell their homes.

“They pretty much changed . . .
mid-game,” says David DeMato, a Chicago police detective who hopes to close on the sale of his home this week.

“There was no asterisk that if there’s a recession, we’re screwed,” says Edithe Cavanaugh, who has been trying to sell her home for months.

In fact, there is, though homeowners say that wasn’t made clear to them.

The law that established Chicago’s three home equity assurance districts caused controversy even before it was passed in 1988 at the urging of white legislators who feared their constituents would flee the city following the election of Mayor Harold Washington, the city’s first black mayor. They argued the legislation would combat “panic peddling” if the racial composition of certain neighborhoods begin to change.

Every black legislator voted against the measure. Then-state Sen. Howard Brookins (D-Chicago), whose son is now a Chicago alderman, was among them.

“We see it as a racist, dividing bill to divide the city of Chicago,” Brookins said at the time. “If it was a good thing, then we would have it for the entire state of Illinois.”

The legislation’s sponsors included House Speaker Michael J. Madigan (D-Chicago), whose 13th Ward power base lies within both Southwest Side home equity programs.

Madigan continues to encourage people to enroll in the Southwest Home Equity Assurance Program, the agency that’s made payments to the Delias and 13 other homeowners since 2009.

“For most families, their home is their single greatest asset,” Madigan writes in a brochure promoting the program. “The path-breaking Southwest Home Equity Assurance Program preserves the value of those investments and keeps our neighborhoods healthy, vibrant and desirable places to live.”

In the 1990s through the mid-2000s, when the housing market in Chicago was booming and home values were rising, few people enrolled in the home equity programs. Even now, fewer than 10 percent of eligible homeowners have enrolled in the programs, which collect taxes from every residential property in each district. Last year, the owner of a home valued at $200,000 paid as little as $1.89 in equity taxes on the Northwest Side to as much as $27.63 on the Southwest Side.

When homeowners enroll, their property is appraised and given a “guaranteed appraised value.” To be eligible for compensation, they have to wait at least five years before they put their homes up for sale.

Payouts must be approved by the home equity agencies, which are governed by boards whose members were appointed by former Mayor Richard M. Daley.

Dennis and Mary Ann Prohaska are among those who have benefitted. They lived in West Lawn, on the Southwest Side, in a bungalow that they bought in 1980 for $54,000. Over the years, they extensively rehabbed it, in part using an interest-free loan of $10,000 they received from the home equity program, which appraised the bungalow in 2003 at $255,000.

The Prohaskas’ house sat on the market “for months and months” before they sold it on May 5, 2009, for $210,000 — after agreeing to make $10,000 worth of improvements. Ten days later, the Southwest Home Equity Assurance Program wrote them a check for $55,500 — agreeing even to cover the improvements the Prohaskas made to sell their home.

Dennis Prohaska, a retired Chicago Fire Department battalion chief, knows how lucky he and his wife were to get that.

“God bless the Southwest Home Equity Program,” says Prohaska. “The program is set up so they don’t have to pay in a housing recession — but they did.”

The Prohaskas have since moved to a sprawling home in Mokena. But his mother still lives on the Southwest Side. She, too, is enrolled in the home equity program.

Still, Prohaska says he thinks the program has outlived its usefulness and the districts should be disbanded — a move that would require voters’ approval in a referendum, just as it required voters’ approval to create the districts. Taxpayers then would get their money back — roughly about $200 per taxpayer.

“If anybody joins now, the property values are so low, it’s not going to make any difference,” says Prohaska. “They should shut the program down. It was good to me, but I don’t think it’s going to help anybody else.”


This two-part series follows the money trail of three little-known government agencies established in the late-1980s to offer financial assistance and incentives to Chicago homeowners in certain neighborhoods.

PART I: Taxpayer Money Set Aside to Curb White Flight Helped Some Flee Chicago

PART II: Home Agency Gave Interest-Free Loans to Director>

This article was written and reported by Robert Herguth, the BGA’s editor of investigations, and Tim Novak and Chris Fusco of the Chicago Sun-Times. To contact Herguth, call (312) 821-9030 or email