Paul Koenig: The One-Man Housing Crisis

He's been dragging down property values for years, and neighbors want him out

On the 1500 block of Hillside Avenue in north Minneapolis, a brown and white handrail leads to a vinyl-sided beige duplex a mere few hundred feet from Minneapolis City Councilman Don Samuels's house.

Inside, a bowing chimney has split a crack in the drywall beginning at the floor and disappearing into the upper unit. An occasional mouse scurries through a breezy two-inch gap under a door leading to the deck.

Next door and across the street, neighbors lament the years of problems they've had with the property and its renters. Two summers ago, a second-story tenant thought an open window would be more convenient than a trashcan—Amy Haddy, a next-door neighbor, recalls vividly the steaming pile of dirty diapers that accumulated on the front lawn.

But nuisance tenants are only a minor problem for Haddy compared to what she and other neighbors fear will be the long-term damage to the block: "It's bringing our property value down," says Haddy.

The man who Haddy says is responsible for their declining property values is Paul Koenig, a notorious Twin Cities landlord with a slick, hairless cranium and a beefy build. Koenig owned the house until a few months ago, when he lost it—as well as two other houses just a few doors down—to the bank.

In 15 years, Koenig and his companies have owned more than 120 properties, many in north Minneapolis. More than 40 of those are presently in various stages of foreclosure, according to city records.

Koenig is best known for his part in the crumbled empire of cheap, factory-built homes known by those who lived through it as "the Dream Home fiasco."

Koenig says his rental properties have served a need in north Minneapolis, but residents don't see it that way. Now they want him out.

Councilmember Samuels says Koenig's lost properties tell a familiar tale of failure and blight that drags down the already depressed value of homes across the North Side.

"If he did anything illegal he will be dealt with, you can be assured of that," says Samuels. "But the way things are going, it's possible to be totally unethical and not be illegal. It's incalculable, the damage this does."

   

CAROL PASS, a small woman with bulky gold-framed glasses, sat in the Holy Rosary Church on a February evening in 2001 for the East Phillips Improvement Coalition's monthly meeting. It was nearly 9 p.m., and the last item on the agenda was to address problem properties in the neighborhood, of which there was only one: 2427 Bloomington Ave. S.

"Premises are dirty, substandard and tenant behavior is dangerous," the meeting minutes read. "Very young children wandering outside, doors hanging open, loud people coming and going all night. Fights. Bare dirt yard."

Nearly a decade later, Pass remembers vividly the rundown property and the man who managed it: an up-and-coming young landlord named Paul Koenig

"It looked like a back alley of Port-au-Prince," says Pass. "Everything was dirty looking and grimy and shabby."

City records show the property was actually owned by Michelle Milbrandt, now Koenig's wife and business partner, but the rental license was registered under Koenig's name.

After it was marked as a blighted property by the neighborhood, complaints came pouring in. Koenig made a show of being concerned, remembers Pass, but the condition of the house, and its problem tenants, only grew worse.

Mark Welna, the owner of a hardware store across the street, also remembers it as a neighborhood eyesore.

"It was rundown, inside and out," says Welna. "They tried to get by on a shoestring."

Later that year, the city took control of the property and tore it down. A spacious garden owned by a nearby alternative school now stares across Bloomington Avenue at Welna's shop, a welcome improvement to the block's aesthetic.

"After he was done owning it, it was an empty lot," says Welna, a man wearing a carefully trimmed white goatee and a checkered flannel shirt. "That speaks volumes to me."

Around the same time, Koenig filed for bankruptcy. While neighbors were urging him to rejuvenate the shabby Phillips property he managed, Koenig had apparently been losing money to one of his favorite hobbies: $1,700 in dishonored checks was owed to Mystic Lake Casino.

Months later, Koenig and a business partner broke ground on what seemed sure to be his most lucrative business venture yet—a company called Dream Home Development.

   

DREAM HOME'S business model seemed like a nightmare to the neighbors who got a peek at the floor plans. The properties each had six dorm-sized bedrooms and cheap yellow vinyl siding. The original models didn't have basements or garages. The houses were built in factories, transported in sections, and assembled in days—"From dirt to tenant in three weeks," as Koenig's partner Dave Kohlenberger told the Star Tribune in 2002.

"They were using materials that were just this side of legal," says Jonathon Palmer, then the Jordan Area Community Council director. "I mean, it was like the baseline of what you could get away with and still call something a house."

The plan was to build 350 of the so-called Dream Homes, many in north Minneapolis. From the get-go, residents and neighborhood associations protested the wave of pre-fab houses.

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