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Hundreds of Affordable Housing Units at Risk - Los Angeles Downtown News - For Everything Downtown L.A.!: News

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Hundreds of Affordable Housing Units at Risk

With Limited Funds for New Residences, Officials Try to Preserve Downtown’s Existing Stock

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Posted: Tuesday, August 28, 2012 6:00 am

DOWNTOWN LOS ANGELES - In the past year, Downtown Los Angeles has seen a wave of projects that will boost the area’s apartment stock. Firms with national portfolios are buying up parcels for tens of millions of dollars, and some are prepared to pump hundreds of millions more into glimmering new complexes. 

The creation of new units masks a growing concern: In the wake of the state’s elimination of redevelopment agencies, low-income housing providers are increasingly nervous about the city’s existing stock of affordable apartments.

Affordability requirements established by the now-dead Community Redevelopment Agency of Los Angeles are set to expire on 13 Downtown buildings, representing 1,052 units, in the next five years, according to the city Housing Department. When they do, some of the property owners could choose to convert their buildings to market-rate status.

In an era when funds for building new low-income housing complexes are increasingly scarce, finding ways to preserve existing affordable units has become a priority, said Rushmore Cervantes, interim general manager of the Los Angeles Housing Department.

“To go about creating just new affordable units in the Downtown area or elsewhere is very expensive,” Cervantes said. “We have a large number of existing affordable units in buildings that are cheaper to maintain than building new, so we have to focus our efforts on that.”

Low-income housing is not about to disappear in Downtown. An array of affordable residential developers who are committed to the area serves as a built-in check for the low-income stock. In recent years, organizations such as Skid Row Housing Trust, SRO Housing Corp. and Meta Housing have added a healthy number of high-quality affordable complexes. The trend will continue this year when Skid Row Housing Trust’s New Genesis debuts with a mix of market rate, low-income and permanent supportive housing units at Fifth and Main streets.

Affordability covenants — contracts that provide a developer with tax incentives or other benefits in exchange for maintaining set, low prices in their buildings — expire after specific time periods. When such deals through the CRA or another government entity are set to fade out, the housing department negotiates with the property owner to try to extend the low rent limits. Usually, the city offers to issue tax-free bonds.

Sometimes property owners agree to the trade. Sometimes they don’t.

Diminishing Streams

Preservation, housing advocates say, will be extra important in the coming years because there will be fewer ways to finance new projects.

Los Angeles’ CRA, which along with some 400 other California redevelopment agencies was formally dissolved on Feb. 1, spent 25% of its annual budget to support new affordable housing development and maintain low prices in existing buildings. In 2012, the agency was slated to spend $162 million on such projects.

Other key funding sources are gone or on thin ice: The federal government this year slashed by 38% the budget for its Home program, which replenishes the city’s Affordable Housing Trust Fund. 

There also was the state’s $345 million Multifamily Housing Program, funded by a voter-approved bond measure in 2006. The key financing source for affordable housing developers in the last few years is now “overwhelmingly depleted,” said Colin Parent, a spokesman for the California Department of Housing and Community Development.

The cuts come at a time when demand for inexpensive units is exploding. A line formed around the corner when Skid Row Housing Trust opened its application rolls for the 106-unit New Genesis. The $22.3 million project was funded in part with dollars from the state’s Multifamily Housing Program, said Molly Rysman, the SRHT’s director of external affairs.

“The demand is just staggering,” Rysman said. “Preservation is extremely important to us because we know that we’re not going to build our way out of the affordable housing crisis. It would be wonderful if we could provide as many homes Downtown as people need at reduced rent, but we can’t.”

To Market They Go, or Not

The 13 buildings in which CRA covenants are due to expire in the next five years represent a variety of properties. They include several Skid Row complexes, as well as buildings like the 102-unit Bristol Hotel at Eighth and Olive streets, where the affordability mandate expires in January 2015. That’s also when a CRA mandate sunsets for the 27-unit 932 Mei Ling Way Apartments in Chinatown.

Whether a building transitions to market-rate status often depends on the owner. Entities like the several nonprofits that build and manage residential projects in Skid Row are less likely to abandon affordability — providing housing for impoverished residents is their raison d’être.

Take Ballington Plaza, a 135-unit apartment complex at 622 S. Wall St. in Skid Row. Its CRA covenant expired in 2010, but the owner, the Volunteers of America organization, has no intention of taking advantage of their new flexibility, said VOA spokesman Orlando Ward.

“We could actually go market rate with the Ballington if we wanted to, but we will work like the dickens to make sure we can ensure that those who need services can find it with us,” Ward said.

The VOA subsidizes rents at the Ballington through a mix of sources including federal Section 8 housing vouchers, he said. Most of the other Skid Row buildings with CRA covenants expiring in the next four years are owned by SRO Housing Corp., another nonprofit that works primarily to provide homes for the needy. 

Projects outside Skid Row may face a greater risk. A CRA covenant at the Renaissance Tower apartments at Hope Street and Olympic Boulevard expired in 2010. The 29 units bound by the agreement have since been transitioned to market rate, a building spokesman said. 

Then there is the Huntington Hotel, which for 20 years was required by the CRA to keep all of its 196 units affordable. It was no coincidence that a deal to sell the building closed two months after its CRA covenant expired. The owners have already undertaken improvements and plan to price the apartments according to the market, though the small size of the residences, most of which lack bathrooms or full kitchens, will limit rents.

While some owners will follow suit and take their properties market rate, others could choose to maintain affordability in exchange for financing incentives offered by the city.

Forest City, a publicly traded real estate investor that has long been active in Downtown, was bound by a CRA affordability covenant at its Metropolitan apartment complex at 950 S. Flower St. through 2010. 

The company opted to extend its affordability agreement in exchange for tax-exempt bond financing coordinated by the CRA, said Forest City spokesman Jeff Linton. Now, 42% of the building’s units are reserved for moderate-income tenants, a property spokeswoman said.

Correction: A previous version of this story identified the owner of Ballington Plaza as the Veterans of America. The organization is the Volunteers of America.

Contact Ryan Vaillancourt at

© Los Angeles Downtown News 2012