The Roof: The NPACH Blog

From The Portland Tribune (Oregon) we find a story maddening in the details.

A real estate developer buys a large apartment complex, begins to renovate the units which are affordable housing, a community of a low income tenants are evicted.

Rose City Village apartments — a mammoth 18-building complex that was home to hundreds of low-income Latino and Southeast Asian immigrant families — had become a ghost town practically overnight.

Research by the Portland Tribune found that most of the inhabitants had left to avoid months of dislocation due to renovation by new ownership, as well as rents that were swelling by $200 to $300 a month.

Neighbors and residents told of families and friends being scattered around the city, of tenants crying as they packed their bags to go.

. . . “It feels wrong,” she wrote in an e-mail to the Portland Tribune, recalling the day she asked the property manager what was happening. “On the way to the office we passed a Spanish-speaking family having a garage sale on their front lawn. In another apartment we could hear a large group singing hymns in Vietnamese and holding a small church service. … Our next-door neighbors are refugees from Laos and have lived in their small apartment for 10 years.”

An investigation reveals that the development had originally been subsidized by the state and local government back in the early 90's. That created a set of responibilities to maintain affordable housing, give tenants ample notice of changes and to give the city an option to buy the units under certain conditions.

Another person who took note of the project was Micky Ryan, a crusading lawyer for the Oregon Law Center, which advocates for low-income people. She began amassing documents in order to figure out what happened and who was responsible.

She found evidence that the complex was not, as city officials initially thought, merely private property whose owners could do with it as they wished. Rather, documents and interviews show, in 1991 the apartment complex was funded with state low-income-housing tax credits of at least $2.3 million.

The Portland Development Commission, meanwhile, provided a $1 million rehabilitation loan as well as $7 million in bond financing.

The original owner bought the property for about $4 million in 1989. In May 2003, he sold it to Steve Rose, a Portland developer, and a limited-liability corporation called Dylan/Bristol, for $11 million. In June 2006, Rose sold it to Brenneke of Guardian Management LLC, which was partners with a California investment company, for $16.5 million.

Because of its history of PDC funding, city officials decided the complex fell under the city’s affordable housing preservation ordinance — and furthermore that the previous owner, Rose, apparently had not complied with it.
The ordinance requires that the landowner notify the city of plans to sell or otherwise make the project no longer affordable, giving the city a chance to buy the property rather than lose it to market-rate housing.

“The property falls under our local preservation ordinance, requiring a 90-day notification to both the city and tenants,” wrote Andrea Matthiesen of the city Bureau of Housing and Community Development in an Oct. 2, 2006, e-mail to her counterpart at the state. “We did not actually get notification.”

Rose, contacted by the Tribune, said he was not aware of the city’s preservation ordinance. He declined to elaborate, saying, “I don’t know what to say about that.”

City officials told the Tribune that the city’s affordable housing preservation ordinance is largely unenforceable anyway. In part, that is, because state law may pre-empt it. Also, the city never developed the regulations called for by the ordinance.

Ryan said she is concerned that the city was not even aware that Rose City Village was a publicly funded project.

White, the city’s housing director, said he tracks local and federal housing projects within city limits, but not state-funded ones. “We’re too overwhelmed, with a small staff, to keep track of what the state is doing,” he said.

Ryan’s bigger issue is with the state. In order to receive the tax credits, the original owner of Rose City Village signed a complicated agreement that, among other things, committed the property for 30 years to offer 100 percent of its units at rents that are affordable to people earning only 60 percent of median income, as determined by the U.S. Department of Housing and Urban Development.

But in March 2005, citing “noncompliance” with program requirements, Marlys Laver, the property management administrator for the state, signed an agreement that released Rose from his obligations under the agreement, essentially “kicking them out” of the program, as one of Laver’s co-workers put it in an e-mail.

The state also turned to the Internal Revenue Service to recover the tax credits. The IRS does not comment on such cases, but Rose said that he has been informed that the credits were recovered.

Still, Ryan likens lifting the affordability requirements to “punishing” a parole violator by releasing him from parole. She was echoed by housing advocate Ian Slingerland of the Community Alliance of Tenants, who said the rationale “seems asinine.”

Laver, however, said that her agency had no choice, and that the previous owner had ruined things by letting tenants move in who did not meet income restrictions — meaning, in her analysis, they could not then be evicted. “Ask anyone in Legal Aid” to confirm her view, she said.

But Ed Johnson, a tenant-rights specialist and former Legal Aid lawyer who works with Ryan, disagreed. Echoing several housing lawyers interviewed by the Tribune, Johnson said, “That’s simply not true.”

Furthermore, an expert in federal tax law, speaking on condition of anonymity, said that just because the previous owner was in violation of the law and the tax credits were recovered did not mean that the state had no choice but to let the owner out of the 30-year contract requiring the apartments stay affordable until the year 2021. Rather, the state could have renegotiated the contract.

Told that the state canceled Rose City’s contract because the property owner did not comply, Sten, who oversees the city’s Bureau of Housing and Community Development, said: “That’s pretty crazy; that’s really not our philosophy on these deals. If people are not in (compliance with an agreement) we take legal action. Why else have lawyers?”

The state has created an impossibly bad situation. The new owners bought the property without knowledge of the obligations to their tenants created by the initial subsidies. They have made costly improvements to the property based on plans to improve the property and charge more rent.

The law should have been on the tenants side, but a state bureaucrat simply voided it. The tenants are dislocated, many won't find comparable rents that they can afford. The pay for higher rents some will forego medical treatment or skimp on their diet and otherwise see their standard of living fall. Some may become homeless. Maybe not from this eviction, but perhaps when they are evicted from their new apartment with a higher rent.

The community has lost affordable housing units. Instead of being able to maintain them at 10's of thousands of dollars per unit they will have to build new units at a cost of nearly $100,000 a unit.

I'll stay on top of this story as it unfolds.