By DANIEL TAUB
Faced with a growing demand for low-income housing, shrinking budgets and a potential crisis stemming from federal welfare cuts, Los Angeles agencies are being forced to do more with less.
But that has also created an opportunity for private developers and property managers.
G. Allan Kingston, president of Century Housing Corp., which held a seminar last week on low-income housing, said there are several ways for-profit businesses can make money in the field.
One way, Kingston said, is for a property management company to partner with a non-profit, social service organization to run a low-income housing complex.
Typically, a property manager deals with the day-to-day operations of the housing complex and collects rent from the tenants. The management company then forwards 50 percent of the profits to the social service group to run such programs as counseling and job training.
“Those are done with the private entrepreneur collecting those rents and recycling the profits to the nonprofit that provided the social services,” Kingston said. “He’s not making as much as he otherwise would but, on the other hand, what’s being provided is a social service.”
Kingston said that property owners might take some general cues from these social service partnerships.
For example, property managers can charge tenants a slightly higher rent and provide such amenities as after-school tutoring for school-age students who live in the complex.
“If you took an apartment house that has the amenity of a student tutoring program versus one that has an amenity of a swimming pool, the one that will win out is the one with the amenity of the tutoring program,” Kingston said.
The need for private investors in the affordable housing market will grow, Kingston and others said, because of an expected greater demand in the wake of federal welfare cuts.
California lawmakers are now working on plans to handle those cuts, and Los Angeles County which handles distribution of welfare aid eventually will have to deal with those cuts too.
In addition, the Los Angeles Housing Department and the Community Redevelopment Agency have been dealt large budget cuts in recent years.
The Housing Authority of the City of Los Angeles funded by the U.S. Department of Housing and Urban Development has attempted to fill the gap, but HUD’s budget also has undergone cuts.
“The problem is that there are fewer and fewer resources to be made available,” said Ruth Schwartz, executive director of Shelter Partnership Inc., a non-profit organization dealing in homeless issues.
At the Housing Department, there is a waiting list for city residents looking for about $63 million in home loans. The department has already borrowed $40 million from the federal government for the loans, and it is seeking further funding from the city.
After having its budget cut nearly in half in the last three years, the Housing Department has also been forced to give less financial help to low-income residents, and rather focus on regulation such as partnering with the City Attorney’s Office and the Building and Safety Department to crack down on slum lords.
“We’re becoming the slum capital of the Western United States, and we’re losing the resources that we used to have to fight the battle,” said Gary Squier, general manager of the Housing Department.
“So one alternative is to move more into a regulatory mode than a funding mode, which is OK but there’s only so much you can do with code enforcement,” he said.
Jan Breidenbach, executive director of the Southern California Association of Non-Profit Housing, is dismayed by the shrinking amount that the city allocates for low-cost housing.
“Overall, from our perspective, there’s not real leadership on the issue from our elected officials. There’s no real champion you can point to in the Council or, specifically, in the Mayor’s Office,” Breidenbach said. “(Mayor Richard Riordan) just doesn’t want to take the leadership and put the funding to it.”
Sharon Morris, Riordan’s deputy mayor for neighborhood and community affairs, said the mayor is committed to low-cost housing, but has concentrated less on new housing, and more on working with landlords to rehabilitate run-down buildings.
“The mayor has put a real focus on working with the owners of those properties to repair them and bring them back on line,” Morris said.
The Community Redevelopment Agency which used to be a competitor to the Housing Department in providing low-cost housing also has had its budget shrink in recent years.
The CRA has not only reached its cap on property tax revenues from the Central Business District, but has also seen flat revenues from Bunker Hill, where it gets a percentage of property tax revenues.
John McCoy, the CRA’s deputy administrator for housing, said that the drop in revenues is forcing the agency to build significantly less housing than it has in years past.
“We’re not doing as much. Our starts this year will probably be 500 units, and that’s down from 2,000 units two years ago,” McCoy said.
But even with the drop in starts, the CRA has 10 projects providing homes for 346 families under construction. About $8.5 million in agency money has been committed to those projects, with an additional $42 million coming from banks, corporations and other investors.
Another 33 projects providing housing for 1,245 families are in the pre-construction stage. The CRA already has committed $42.2 million in loans to the projects.
The Housing Authority of the City of Los Angeles, meanwhile, has been updating some of its outdated housing. The authority began tearing down the Pico-Aliso public housing project in the Boyle Heights area earlier this year, and will be replacing the 577-unit complex built in the 1940s and ’50s with a new development.
The project, funded by a $50 million grant from HUD, will include 421 units 280 rental units, seven for-sale units, 74 detached homes and 60 senior citizen apartments.
With city, state and federal funding for low-cost housing being cut, non-profit corporations like Century Housing have also stepped in to fill the gap between what public agencies provide and what is needed.
Century Housing has helped fund more than 5,300 units of affordable housing since the late 1970s. The organization was first formed as the Century Freeway Housing Program, a state program, but was privatized in 1995 as Century Housing Corp.
Kingston said corporations like his which also provide for-profit businesses with low-interest loans to build affordable housing have become even more important in recent years in light of shrinking government budgets for housing.
“The Housing Department of the City of L.A. has less money, the Community Redevelopment Agency has less money, and Housing and Urban Development is putting out less money on a federal level,” he said. “There’s a great need to generate additional sources of capital for affordable housing because the need hasn’t lessened at all.”