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CES In The News
Monday August 18, 2008

Low-Cost Housing At-Risk in Los Angeles

Los Angeles could lose thousands of affordable apartments in the next five years, as contracts that required building owners to rent to low-income tenants expire on more than 14,000 units.

By Kerry Cavanaugh,
Staff Writer

This Picture Does Not Appear With the Original Article
Los Angeles could lose thousands of affordable apartments in the next five years, as contracts that required building owners to rent to low-income tenants expire on more than 14,000 units.

City housing officials can't predict how many units ultimately will be converted to higher rents or how many poor renters could be displaced - a lot depends on the housing market, the availability of public dollars for preservation and property owners' individual choices.

But Housing Department General Manager Mercedes Marquez said the city must act now to ensure there's not a tidal wave of lost affordable housing in L.A.

"Most of these developments are approaching 20 years in age and most of these are long-term residents. They are members of the community and neighborhood stability affects everything we do," Marquez said.

"If we don't do anything, then we're definitely going to lose those units."

The race to preserve affordable apartments comes as a formerly hot real-estate market in recent years spurred the demolition and conversion to condominiums of more than 12,000 rent-stabilized apartments.

Long-term tenants in those apartments paid low rent and were thrown into a market where the average monthly rent is $1,580 - and there are long waiting lists for low-income and senior units.

And housing advocates worry that the looming mass expiration of subsidized housing contracts will further decrease the number of apartments affordable for minimum-wage workers, poor seniors and the disabled.

"A lot of these buildings are in gentrifying communities. They are important in that they provide affordable housing and they keep these communities diverse," said Larry Gross, executive director of the
Coalition for Economic Survival

"Otherwise, we're looking at neighborhoods only for the rich and wealthy."

Affordable housing contracts and covenants began in the late 1960s, when the federal government decided to offer low-interest mortgages to encourage private developers to build and manage low-income housing.

In exchange for the financial incentive, building owners agreed to restrict the rent for a certain number of years and rent to poorer tenants.

Later, the state, city and the city's redevelopment agency also offered loans or financing to developers in exchange for maintaining units as affordable for a certain amount of time - anywhere from 15 to 55 years, depending on the contracts.

Contracts began expiring in the late 1980s and Los Angeles has already lost about 4,000 low-rent apartments over the last 10 years. But a wave of expirations hit this year and will continue in the coming years.

In Los Angeles, nearly 80 percent of the rent-restricted apartments that are expiring in the next five years were financed by the federal government's Department of Housing and Urban Development.

When owners of those buildings convert to market rent, low-income tenants can usually stay in their units with a Section 8 voucher in which the federal government pays a portion of the rent.

But once those tenants leave, the apartment is no longer bound by the affordable restrictions.

"When you lose project-based housing, that results in a net loss of affordable housing for the community," said Todd Nedwick, assistant director of the National Housing Trust's preservation initiative.

His group has tracked the expiration of federal affordable housing contracts and estimates more than 900,000 units across the country could be lost over the next five years.

In Los Angeles, about 20 percent of rent restrictions that are set to expire in the next five years were funded by the state or city. And when those agreements expire, tenants immediately face higher rent.

In 1999, hundreds of senior citizens and low-income families in a Warner Center apartment complex were forced to move when their rent doubled. The city offered the apartment developer tax breaks in exchange for discounted rents on 256 units for 12 years.

City officials were caught off guard, and pledged to do a better job informing tenants before housing covenants expire.

But Gross said the covenants continue to pose a problem because the city and nonprofits can do little to help tenants when their apartment converts to market rent.

"We have a difficulty going out there. All we can say is `You're going to have to move. Here's a list of affordable housing that doesn't exist,"' Gross said.

"That subsidy ends at a cliff and there's nothing for the tenants."

In 2004, the Los Angeles Housing Department began a preservation program to track the pending expiration of affordable housing covenants and contracts.

Preservation Coordinator Franklin Campos monitors buildings with expiring covenants and ensures that owners who plan to end rent restrictions give the city and tenants a legally-required one-year notice.

During that year, Campos tries to convince building owners that renewing the affordability covenant can make good business sense - they'll continue to have stable tenants, regular rent checks and can apply for government financing to pay for upgrades to aging buildings.

In the past four years, owners of 11 buildings have been convinced to stay in the program, preserving about 900 low-income units.

When owners want out of the rental subsidy program, Campos tries to line up nonprofits that could buy the building with government assistance and ensure the apartments stay low-income.

In the current slow real-estate market, Campos has an easier time convincing building owners to stay in the program or sell to a nonprofit.

But when the housing market picks up again, many of these buildings will convert to condominiums or market rent as profit and red-tape troubles drive owners to opt out of rent-restriction programs.

Arnie Corlin with the Apartment Association of Greater Los Angeles said building owners who fulfill their covenant obligations should be able to easily convert to market rent.

"A deal's a deal. If they want to come back to me to negotiate a fair means to make a living and a profit, then I'll stay in," Corlin said.

"They just have to be more business friendly."

L.A. officials said that's one of the reasons they are seeking more public and private sources of money to offer owners incentives to preserve their buildings or sell to a nonprofit.

The city has an Affordable Housing Trust Fund and recently partnered with banks and private foundations to create a $100 million New Generation Fund that can be tapped to help developers buy at-risk buildings and maintain them as affordable.

Together with the Community Redevelopment Agency, housing officials have mapped all the at-risk buildings within a half-mile of transit stops.

"We want to make sure that those are the first ones saved," said Marquez.

"This is the time for government to step up. The values are dropping and our dollars will stretch further."

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