In late February 2011, Banksy, the secretive British street artist, was in Los Angeles to promote his Oscar-nominated film, Exit Through the Gift Shop. Sometime during his visit, he spotted an odd structure high on a hillside facing the Pacific Ocean – an old, abandoned water tank. White, cylindrical and as long as a bus, the tank was raised off the ground on stilts, with a large tap protruding from one end, which made it look a bit like an elephant. So Banksy climbed up and sprayed a caption along its side: “This looks a bit like an elephant.”

Hours later, a photograph of the tank appeared on his website, Banksy.co.uk. Knowing he was in LA, the artist’s fans quickly confirmed its location, overlooking the Pacific Coast Highway (PCH) between Santa Monica and Malibu. Before long, they flocked to see the tank for themselves.

What none of them knew at the time, however, was that somebody lived inside. And what happened next exposed not only the hubris of the contemporary art market, but also the comforting decency of its most subversive star.

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Tachowa Covington prefers to be described not as homeless, but as self-sufficient. He was born in 1958 and grew up in Sacramento, California. As a young man, he worked as a choreographer, a Michael Jackson impersonator, a Chippendales dancer and a male escort. For a few years he would strap on rollerblades and a spectacular, self-made suit of armour, to be snapped by tourists for a few bucks a pop on the boardwalk at Venice Beach. He called himself Rollerball. “Most of my life I’ve been a performer,” Covington says. “I never had a real job.”

He first became homeless decades ago, and loosely attributes his slide into transience to “a couple of bad relationships”. But he was never one to sleep on benches or under bridges, nor does he care for homeless shelters. Instead, he was drawn to a secluded spot beside the PCH, far from the unwelcome attentions of the authorities. It’s prime LA real estate: the properties perched atop the cliff are worth millions. But Covington could live rent-free in the brush below – and that was where he first saw the tank.

In the early 1990s, the City of LA had hired Calex Engineering to convert the area known as Potrero Canyon into a park. The company installed a water tank while the landscaping work went on, but in 2004 the project’s cash-flow dried up and Calex abandoned the site, leaving the tank behind. “I watched it for a month or so,” Covington recalls. “Eventually, I climbed inside and saw that it was empty. I thought, ‘Wow. This would be a cool place to make a house.’ I picked it as a sanctuary, a place to kick back, to be close to God and to the ocean.”

Getting inside was a challenge: you had to scale a ladder, clamber on to the tank and climb in through a hatch at the top. But Covington was undeterred. He sanded the rust from the walls and repainted the interior. He salvaged plywood from the alleys of nearby neighbourhoods and made a level floor. He built shelves, and fixed pictures to the walls with magnets. He broke down a sofa and a king-size bed, squeezed the parts through the hatch, and then reconstructed them inside, like ships in a bottle. “It started more as an art piece,” he says, “but then it became a home.”

The police, apparently charmed by this friendly eccentric, would leave him alone when they came to clear vagrants from the hillside, sometimes calling up to the tank to say hello. The US postal service delivered mail to his exclusive address: 15145 Pacific Coast Highway. “People left me alone because they thought it was an empty tank and I was just climbing up there with a sleeping bag,” he says. “But I was building inside the whole time.”

After a few years of work, the tank had a generator which powered lights, a stereo, a TV, even a set of security cameras. If one of the wealthy homeowners from the hills above had bought the structure and done something similar, it might have made a great episode of Grand Designs. Yet in 2005, the residents’ association partnered with the local council to campaign for Covington’s eviction. They were ruthless in their attempts to remove him, and – he alleges – paid another homeless man to start a fire, which destroyed many of his possessions. Whatever their tactics, by 2011 he was still there, and in the process of claiming squatters’ rights to the tank.

He was at home on 21 February, when he heard someone moving around outside. “I looked out of the hatch, and there were two guys there,” he remembers. “I asked what they were doing, and one of them said, ‘We’re just making a joke’. I climbed down the ladder, looked at the writing, and I said, ‘Hey, that looks pretty cool!’ I introduced myself, and the English dude told me his name was Banksy. I didn’t know who he was, so I didn’t think twice about it.”

People go to great lengths to acquire Banksy’s public works. In June, a work removed from a wall in Wood Green in north London was sold for £750,000, and last week another of the artist’s murals was sliced from the concrete wall of a shop in Tottenham.

Some years ago, an exasperated Banksy issued a statement, saying: “Graffiti art has a hard enough life as it is … before you add hedge-fund managers wanting to chop it out and hang it over the fireplace. For the sake of keeping all street art where it belongs I’d encourage people not to buy anything by anybody unless it was created for sale in the first place.”

That didn’t stop two owners of an LA media design firm called Mint Currency, who, as soon as they learned of the water tank’s existence, made plans to claim it for themselves. The pair reportedly bought the tank directly from the City of LA, enlisted two more friends with access to heavy moving equipment, and at 8.30am on 3 March 2011, arrived at the site with a crane. For a while, their website featured a video of Covington’s home being strapped up, severed from its stilts, and driven away on a truck.

The removal job took 16 hours. Covington had been living in the tank for seven years. He managed to remove most of his possessions before it was taken away, and then retreated to the woods where he’d camped when he first came to the hillside. “I’ll always be bitter about it,” he says. “I was nothing but an asset to the community; I was not a threat. That’s why the police and everybody let me live in that tank for so long.”

Two weeks after its disappearance, the tank was tracked down to a warehouse in the San Fernando Valley, where it was being kept while Mint Currency sought a buyer. One of the partners, who preferred to be known as Tavia D, made vague promises about donating some of the money from the sale of the “Banksy Elephant” to a homeless charity, to put a roof over Covington’s head. “People are saying that whoever removed the piece is just out to make money,” she said. “But that’s not true. We love art and did this because we want to preserve it and inspire others with it.”

Covington never did see any money from Mint Currency, but help came nonetheless – and from an unexpected source. Speaking about Banksy’s involvement for the first time, Covington told The Independent: “He helped me so fast, I didn’t have to spend a single day more on the streets. It was like a miracle.”

The artist gave him enough to get him on his feet, find an apartment and pay the bills for a full year. Covington becomes emotional when he talks about it. “There ain’t no better man than Banksy,” he says. “He was an angel to me. He helped me more than anybody helped me in my life.”

Recently, the money from Banksy ran out, and Covington moved out of the apartment. He says he’s now on the waiting list for state-funded housing, and expects to have a new place in the next few months. In the meantime, he has returned to the hillside, where he lives in a tent among the trees. His neighbours are squirrels, skunks and deer, but he’s not overly romantic about his situation. At 54, he’s too old to be sleeping outside on cold nights. Yet he plans to maintain a spot on what he calls the “mountain”, even once he has a more conventional home.

Meanwhile, this newspaper’s original 2011 article about Covington has inspired a play, Banksy: The Room in the Elephant, which begins its run at the Edinburgh Festival on Wednesday. He is the subject of a documentary by two Texan filmmakers who have followed him on and off for the past five years. Some of their footage is already online, showing the tank’s interior in all its glory. Covington has also made a new set of skates and a glittering helmet: Rollerball will ride again.

And what of the tank itself, which – when Covington last saw it – seemed destined for some rich man’s sculpture garden? The photo disappeared from Banksy’s website, and when Mint Currency contacted the artist’s people to ask for it to be certified as a genuine Banksy artwork, he refused. Without authentication, the Banksy Elephant became nothing but an empty water tank. Several months later, it was sent to the scrapheap. “Banksy’s other work is brilliant,” says Covington. “But the writing on the tank wasn’t art, it was just lettering. The art was what was inside the tank. I regret that it’s gone: it was meant to be seen.”