Alameda settles suit to add low-cost homes - April 30, 1990

“Alameda settles suit to add low-cost homes”

By Janet Joson (The Tribune)
April 30, 1990

ALAMEDA – Fearing the courts could overturn its low-density law, the city council has settled litigation with two residents who claimed the measure discriminates against poor people.

Measure A, approved by voters in 1973, prohibits construction of homes larger than a duplex. But the city has agreed to an interpretation of the measure which allows the Alameda Housing Authority to replace lost low-cost homes built with federal funds, said City Attorney Carole Korade.

The Housing Authority can now provide up to 325 low-income apartments by building new units or acquiring existing ones.

Clayton Guyton and Modessa Henderson filed their lawsuit on behalf of the Buena Vista Community Association in January 1989 after the city refused to provide low-cost housing when the 615-unit Buena Vista Apartments converted from subsidized to market-rate rents.

“I’m glad it’s over,” said Henderson, a single mother who’s lived at the complex (now called the Bridgeport Apartments) for 13 years. “It’s been three years of personal sacrifice.”

“We’re not bitter. We’re not disgruntled,” added Guyton, a transportation dispatcher at the Presidio in San Francisco. “We’re very pleased with the results of this lawsuit.”

The city council agreed to the interpretation Tuesday. None of the council members would reveal the closed-session vote, but Vice Mayor Lil Arnerich and Council members Lil Arnerich and Bill Withrow said in separate interviews that approving the settlement was the best way to save Measure A from further tampering.

“All of us want to preserve Measure A,” Arnerich said. “If this had continued through the courts…the courts would have probably struck it down in some manner.”

But Mayor Chuck Corica, who was elected to the city council on a Measure A platform, disagreed.

“How do they know we would have lost in court? If we did, we could have appealed,” he said.

Council member Barbara Thomas could not be reached for comment. The settlement requires the city to provide money for additional affordable housing using redevelopment and federal Community Development Block Grant funds and new commercial development fees. The city also will have to pay the Legal Aid Society of Alameda County, which represented Guyton and Henderson in the lawsuit, $95,000 in attorneys fees and other costs.

Legal Aid attorney Michael Rawson said his clients were instrumental in rallying other low-income tenants together and using state and local laws to challenge the city’s housing and land-use policies.

“This wasn’t handed to us on a silver platter,” Guyton said. “Nobody did more for us than we did ourselves. “He and Henderson said Friday at a press conference that they will help other tenant activists fight for low-income housing.

Tomorrow the council will vote on a resolution reaffirming its support of the law and discuss the merits of rezoning the city’s residential areas to better preserve Measure A.

Source: Joson, Janet, "Alameda settles suit to add low-cost homes." Oakland Tribune. 30 April, 1990.

Tenant activists see more fights - April 28, 1990

Tenant activists see more fights
Couple wants others to take bigger role in addressing demands for affordable housing

By Karen Matthews (Alameda Times Star)
April 28, 1990

ALAMEDA – Tenant activists Clayton Guyton and Modessa Henderson, whose suit challenging the city’s housing policy was settled this week, said Friday that their fight is not over.

Rather than resting on their laurels after having reached a settlement with the city that will allow up to 325 low-cost apartments to be built, they want to make sure that when and if those units are built, they can be part of the process.

“Tenants should be in on every phase, when it comes to affordable housing,” said Guyton. “Cities don’t know how to approach tenants.”

Guyton and Henderson filed a suit in 1989 challenging Measure A, the city law that restricts new housing to duplexes and single-family houses.

The settlement allows a 325-unit window in Measure A for low-income apartments.
Guyton and Henderson sued after the Bridgeport Apartments, formerly the Buena Vista Park Apartments, were converted in 1987 from subsidized to market-rate rents – something that is happening all over the country as landlords pay off the mortgages on federally subsidized low-income apartment buildings.

The 325 potential units won through the settlement are supposed to replace the low-income units lost in the conversion.

Guyton said he would like tenants to be involved in the process of developing low-income housing, rather than non-profit corporations like the San Francisco-based Bridge Housing Corp., which is developing Alameda’s Independence Plaza senior housing complex along with the Housing Authority.

Two San Francisco tenant activists joined Guyton and Henderson for an informal news conference Friday at a Bridgeport Apartments playground.

They said Guyton and Henderson are role models to them.

“They’re like a big brother and a big sister,” said Raja El-Amin, who lives in the Ammel Park Housing Cooperative.

“Everyone has to start somewhere,” said El-Amin. “They’ve laid some groundwork for us and others.”

Source: Matthews, Karen, “Tenant activists see more fights.” Alameda Times-Star. 28 April, 1990:3.

Council majority praises deal - April 26, 1990

Council majority praises deal
But Corica says city should have kept fighting the lawsuit against Measure A

By Karen Matthews (Alameda Times Star)
April 26, 1990

ALAMEDA – Tuesday’s settlement of a lawsuit challenging the city’s density-limiting law, Measure A, was praised Wednesday by the plaintiffs and by three of the five City Council members.

“I’m quite satisfied,” said plaintiff Modessa Henderson, who along with Clayton Guyton, charged that Measure A discriminates against poor people because it makes it difficult to build affordable housing.

“It was a long process, but we didn’t leave any stone unturned,” Henderson said. “Unfortunately, we had to go to court.”

Measure A; which the voters passed in 1973, prohibits new residential development except for single-family houses and duplexes.

[insert photo: Photo of Lil Arnerich & Bill Withrow]

[link to other article]The city may have saved the law by changing it. –back of section

With the settlement, the city has opened up a window in Measure A to allow the Housing Authority to build up to 325 low-cost apartments.

Councilmember Joe Camicia said Wednesday that he believes the city “came out pretty well.”

“It’s a small price to pay, compared to losing Measure A,” Camicia said.

Councilmen Bill Withrow and Lil Arnerich agreed that the settelement represented the best deal the city could have negotiated.

“It’s not an easy decision, but it’s a decision that had to be made,” said Arnerich.

Mayor Chuck Corica disagreed, saying, “I’d rather have fought it in court.”

Councilwoman Barbara Thomas did not return calls to the Times-Star, but she criticized the agreement in an interview on a local cable television program Wednesday.

Although Tuesdays’s vote settles the Guyton-Henderson suit, many questions about the future of the city’s housing policies remain.

Corica said Tuesday that he would like to put another ballot measure before the voters, this one to “down-zone” all the residential zones in the city to relatively restrictive designation of R-2, which he said would preserve the “intent” of the weakened Measure A.

Camicia said he would prefer that the council adopt an ordinance to down-zone the city and ask the voters reaffirm the vote during a regularly scheduled election.

Norton prepares report
City Manager Bill Norton said he will prepare a report for the council at its Tuesday meeting outlining the different approaches “to see if they can select an approach at that time.”

The settlement does not require the city to build 325 low-cost apartments.

Rather, it allows the Housing Authority to build up to that number of units to replace the low-income apartments that were lost when the owner of the Buena Vista Park Apartments, now called he Bridgeport Apartments, converted the complex to market-rate rents.

Housing Authority Executive Director Tom Matthews said it’s unlikely that his agency will develop a single 325-unit complex.

“There isn’t a while lot of land left in town,” Matthews said. “It’ll probably be a lot of little ones.”

While there are no deadlines for developing the affordable housing, the settlement does require the city to apply to the state for a grant under Proposition 84, a 1988 bond issue, to built at least 85 low-income units.

Other provisions of the settlement require the city to commit resources from an expanded redevelopment area, impact fees on new development and federal Community Development Block Grant funds to low-cost housing.

Housing element scrutinized
Also still at issue is the housing element of the city’s general plan, a blue print for development through 1995.

The city submitted a revised housing element to state housing officials in November. On March 1, the Department of Housing and Community Development found the document to be out of compliance with state law, in part because of Measure A.

Nancy Javor, chief of the Division of Housing Policy Development, said Wednesday she is still awaiting an official response from the city to the state’s rejection of the housing element.

Javor said she had not seen Tuesday’s settlement agreement.

The city will be required to pay out $95,000 to the Legal Aid Society of Alameda county for Guyton’s and Henderson’s legal fees and costs.

The city will also have to pay an undisclosed amount to McCutchen, Doyle, Brown & Enersen, the law firm it hired to handle the case.

Before going into closed session Tuesday, council members debated whether they should discuss the settlement in an open meeting.

Only Corica and Thomas favored an open vote on the settlement.

Withrow said Wednesday that to discuss litigation in an open session “would have set a bad precedent.”

Discussion of pending litigation is one of the exceptions to California’s open-meetings law, the Ralph M. Brown Act, which in general requires legislative bodies to conduct their business in public.

Source: Matthews, Karen, “Council majority praises deal.” Alameda Times-Star. 26 April, 1990:1.

Federally subsidized Housing at Risk - April 1, 1990

Federally subsidized Housing at Risk
Rents May Rise as Owners Buy Out Projects

By Thomas J. Lueck (New York Times)
April 1, 1990

AT a time when homelessness and the shortage of affordable housing are high on the nation's political agenda, lawmakers and housing officials are grappling with the problem of how to prevent steep losses in the federally subsidized apartments built during the 60's and 70's.

Across the country, more than a million subsidized low- and moderate-income apartments were built in those two decades and housing analysts now fear that as many as 200,000 could be transformed into market-rate housing by 1995. In New York City, with 90,000 of the federally subsidized apartments, a study released last month found that more than 19,000 were ''at risk'' over the next two years.

''These programs were designed to self-destruct,'' said Representative Barney Frank, Democrat of Massachusetts and a member of the subcommittee on housing and community development of the House Banking Committee. The panel is working on legislation that it hopes will retain most of the subsidized apartments. But some have already been lost. ''This thing just fell out of the sky,'' said Clayton Guyton, a transportation dispatcher who lives at Buena Vista, a subsidized complex of 236 apartments in Alameda, Calif., near Oakland, whose owners bought out their mortgage and began charging market rate rents last year.

Mr. Guyton, his wife, Delores, and their three children have managed to remain, even though their rent jumped to $675 from $271. Many of his neighbors have not.

''Some moved in with relatives,'' he said. ''Some just got in the car and drove away.''

The problem results mainly from financial deadlines written into several Federal housing initiatives. By offering cut-rate loans to developers and rent subsidies to poor tenants, the programs formed the bulk of the nation's housing policy before 1980.

But the subsidies were not designed to last forever. Developers given low-cost Government mortgages were promised the option of paying them off after 20 years and converting their subsidized apartments into much more expensive market-rate housing.

Other deadlines are passing. Landlords whose tenants are receiving direct rent subsidies from Washington are allowed to ''opt-out,'' deciding they will no longer accept the Government checks and instead seek higher income market-rate tenants. In many cases, the option can be exercised every five years.

Solutions are being tested. In Burlington, Vt., a nonprofit housing group, fearing that the owners of a 20-year-old subsidized rental complex would convert it to condominiums, raised $21 million last year, bought the complex and are renovating it extensively. Most of its low- and moderate-income tenants have retained their apartments.

Still, housing analysts say the biggest threat of losses, and the most urgent need for solutions, will come over the next five years, as hundreds of the subsidized buildings become eligible for mortgage buy-outs or the withdrawal from rent subsidies.

''We are sitting on the edge of some big problems,'' said Victor Bach, an analyst with the Community Service Society, a nonprofit social advocacy group in New York City. The city has more apartments built with the Federal mortgages and rent subsidies than any other urban area.

In a study released in March, Mr. Bach said 6,106 of the subsidized apartments were at risk this year and 13,624 would be at risk in 1991 if owners excercised all their options to withdraw from the Federal programs. The most vulnerable buildings, he said, are in Chelsea, Clinton and other neighborhoods where the subsidized housing of the 60's and 70's now coexists with newer market-rate rental buildings, co-ops and condominiums.

The Federal subsidy programs, with names layered in bureaucratic jargon, have financed low- and moderate-income housing in cities across the country. They include three major programs:

* The Section 221 Below Market Rate Program, which provided developers with 40-year mortgages at 3 percent interest, and the Section 236 program, which provided similar mortgages at 1 percent interest. Over 500,000 low- and moderate-income apartments were built under the two programs from 1961 to 1973 when they were phased out.

BOTH require developers to charge rents that are affordable for low- and moderate-income tenants, but also allow them to ''prepay'' their mortgages after 20 years.

* The Section 8 Program, begun in 1974, which provided rent subsidies to tenants and assured developers of new or rehabiliated apartments of market-rate rents, which are set and adjusted by the Government. Tenants in the program are designated ''moderate income'' if their earnings are less than 80 percent of the median in their areas, or ''low income'' if they make less than 50 percent of the median. They pay 30 percent of their income in rent, and Federal subsidies make up the difference.

More than 800,000 apartments were built under the Section 8 program, most in the late 70's. Owners with Section 8 tenants can ''opt-out'' every five years.

To be sure, no one is predicting the complete dismantling of Federal housing subsidies, at least not right away. Housing analysts say that many of the subsidized buildings are in blighted or declining areas where owners would find it difficult or impossible to find higher-income tenants, and therefore need the Federal subsidies to assure a profit on their buildings.

In Washington, several measures have been approved or proposed to preserve the subsidized housing. The Bush Administration has proposed a Federal budget that would maintain rent subsidies under the Section 8 program, and Congress has imposed a moratorium on the loss of housing that was put up with discounted Federal mortgages.

The moratorium, imposed in 1988, has temporarily forbidden building owners from paying off their subsidized mortgages when the original 20-year deadline passes. But the moratorium will expire in September.

In the meantime, several measures are working their way through Congress that would extend the moratorium, or provide a more permanent solution with new incentives for the owners of subsidized housing.

Proponents say the incentives would persuade owners to continue renting to their poor tenants, or sell their buildings to others who would.

Several states have begun testing ways to head off the loss of federally subsidized housing. Rhode Island and Maryland have passed laws requiring owners to give their tenants or nonprofit housing organizations a ''right of first refusal'' - the first opportunity to buy their subsidized buildings if they are going to be sold.

OTHER states, including California, have begun requiring notice far in advance to subsidized tenants if the ownership of their buildings is going to change, or if rental subsidies will no longer be accepted. And in New York, housing activists are proposing a state law that would require owners to notify their tenants of ''at-risk dates'' when mortgage buyouts, or rental-subsidy opt-outs would be allowed under Federal guidelines.

''My sense is that there is enormous pressure not to lose subsidized buildings,'' said Robert C. Rosenberg, chairman of Grenadier Realty Corporation, New York City's largest manager of subsidized low- and moderate-income housing, with 14,000 apartments.

He added that he expected lawmakers in Washington and Albany to provide a ''reasonable program of incentives'' for owners and managers. Nonetheless, he said, because some of the subsidized buildings are in neighborhoods where values have soared, owners will receive a much higher return by withdrawing from the Federal programs. ''There are instances where owners will go,'' he said. Rising property values are not the only problem. Housing analysts predict a rapid increase in defaults among the owners of subsidized housing, particularly in blighted and declining neighborhoods, because their rental income is not providing enough cash to maintain their aging buildings.

Some of the buildings ''are in such poor financial condition that, in the absence of any Government intervention, the owners' best alternative is to stop making interest and principal payments,'' said a recent report commissioned by the House Subcommittee on Housing and Community Development and the Senate Subcommittee on Housing and Urban Affairs. Although properties in default would revert to the Federal Government, which could maintain them as low-income housing, the report said continuing financial losses would have to be corrected.

But experts say the most likely candidates for removal from the federally subsidized housing stock are buildings whose owners could profit by turning them into market-rate housing. In cases where the buildings could be converted into high-priced condominiums or cooperatives, or rented out at far higher rates, they say the pressure to withdraw from Federal subsidies is particularly strong.

Changes in the Federal tax code, enacted in 1986, have added to the pressure. Accelerated depreciation, the deduction of passive losses and other incentives that had made investing in low-income housing one of the most popular tax shelters have been all but eliminated, and investors who put their money into the projects in many cities are looking for a way out.

In New York, some low-income tenants say they fear an impending disaster.

''Gentrification is going on all over the place,'' said Deborah Alston, a resident and editor of a tenants' newsletter at Stevenson Commons, a complex on White Plains Road in the Clasons Point section of the Bronx that was built with 1 percent Federal loans under the Section 236 program in 1974.

Families in the complex, who qualified for their apartments because their incomes were 80 percent of the New York City median or lower, pay no more than $445 a month for two-bedroom apartments and $530 a month for three-bedroom units, little more than half of what market rate apartments would cost in the neighborhood. The complex is managed by Grenadier Realty, which said it now has no plans to change its federally subsidized status.

Nonetheless, Mrs. Alston said tenants in the complex, many of whom have lived there with their families for more than a decade, are aware of the 20-year deadline that would give their private landlord the option of buying out his Federal mortgage, and are worried about the risks involved.

''We know they are going to try to move us out eventually,'' she said.

In New York State, the near-term future of subsidized housing is clouded further by questions surrounding the Mitchell-Lama program, begun in 1955, under which 170,000 low- and moderate-income apartments were built with tax abatements and low-interest mortgages. Many of the buildings were put up in the 60's and received financing under the Federal Section 236 program, in addition to state benefits.

LIKE the Federal programs, Mitchell-Lama allows building owners to pay off their subsidized mortgages after 20 years. Twenty of the buildings have already been removed from subsidized status, and most of them converted to much more expensive co-ops. Notice has been filed by the owners of 21 other Mitchell-Lama buildings that they intend to pay off their mortgages.

Lawmakers in Albany are deadlocked over how to prevent further losses in the Mitchell-Lama inventory. Many endorse a 15-year moratorium on mortgage buyouts, a measure that has prompted fierce opposition from building owners, who say it would simply deny them rights they were assured of when they built the subsidized housing.

In Washington, meanwhile, the Department of Housing and Urban Development sent proposals to Congress in March that it said were designed to preserve most of the Federal subsidized housing. One element in the proposal would provide $1.1 billion in Federal grants to be used by the tenants of subsidized housing or nonprofit groups to buy out their buildings if landlords elect to sell them. Under the proposal, as much as $90,000 would be allocated for each subsidized apartment.

Other Federal housing agency proposals, which must be approved by Congress, include offering the owners of Section 221, Section 236 and Section 8 housing higher rents to give them a better return on their investments. Another would require current owners to pay nine month's rent and cover moving expenses for their subsidized tenants who are forced to move because their buildings are being converted to co-ops, condominiums or market-rate rentals.

One unresolved issue is how to determine a fair-market value for the subsidized housing complexes, particularly if they are to be bought by their tenants or nonprofit groups that intend to continuing operating them for low-income tenants.

Although owners expect the same price they would get if they were to sell to private, market-rate landlords, many in Congress say that that price would be too high, particularly because of the Government benefits the owners received when they went into construction in the 60's and 70's.

''It is going to be sticky,'' said Representative Floyd H. Flake, a Democrat whose district covers sections of Brooklyn and Queens. Mr. Flake is a member of the House Subcommittee on Housing and Community Development, which is exploring ways to preserve subsidized housing.

If many owners attempt to sell at to the highest bidders, he added, ''we don't have enough money in the housing area to buy them out.''

But others in Congress said they were confident a plan would be approved this year to preserve most of the subsidized housing.

''There are some areas that have become so gentrified that it will not pay'' to try to prevent conversion of subsidized apartments to market-rate co-ops, condominiums or rentals, said Representative Frank of Massachusets. But he added that ''we can preserve 90 percent of the units.''

Although the proposal to finance buyouts by tenants or nonprofit groups would represent a sharp departure from past Federal policies, such measures are not without precedent.

One was in Burlington, Vt., where Northgate Housing, a nonprofit group, has raised $21 million to buy and renovate the Northgate Apartments, a complex of 336 units built with Federal mortgage subsidies in 1968 and '69. The previous owners had planned to pay off their Federal mortgage last year and convert the complex, now surrounded by expensive condominiums, into market-rate housing.

Brenda Torpy, director of Northgate Housing, said buying out the complex required support from the city of Burlington, which adopted strict laws limiting the conversion of apartments to condominiums, and the State of Vermont, which raised $8 million in tax-exempt bonds to help finance the acquisition of Northgate.

BECAUSE of the newly enacted laws on condominium conversion, she said, the previous owners were limited in their plans for the complex, and were willing to negotiate a lower-than-expected selling price to the nonprofit group. They agreed on $10.1 million.

In buying the complex, Ms. Torpy said, her group was also able to reduce its costs by taking over a 3 percent Federal mortgage, which had been extended to the project in 1968 but still has 20 years to go before it is fully amortized. The mortgage was obtained in the Section 221 program.

Many subsidized tenants have remained in the complex, she added, receiving rental subsidies under Section 8 that are still available even though the ownership of their complex has changed.

With extensive renvoations under way, she said the tenants have been given greater responsibility for managing the complex, and have formed a committee to supervise maintenance and set rents for higher income newcomers who do not qualify for Federal subsidies.

''If we are going to preserve the bulk of our subsidized housing,'' said Ms. Torpy, ''a lot more money has to be set aside for this kind of approach.''

Photos: Clayton and Delores Guyton with their three children at Buena Vista complex, Alameda, Calif. Family's rent rose 250 percent after owner bought out the mortgage on the subsidized complex (The New York Times/Terrence McCarthy); Brenda Torpy, director of Northgate Housing, at 336-unit Northgate Apartments complex the group is renovating in Burlington, Vt. She and other tenants bought the complex to prevent condo conversion (The New York Times/Paul O. Boisvert) (pg. 1); Stevenson Commons in the Bronx. Manager says there are no plans for a mortgage buyout, but tenants are concerned (The New York Times/Alan Zale) (pg. 13)

Source: Lueck, Thomas J., “Federally Subsidized Housing at Risk.” New York Times, 01 April, 1990; 10.