City Hall squanders 15 units of affordable housing

For more than three decades City Hall has had a policy wherein developers obtain generous construction bonuses including extra height and density over that allowed by current zoning codes in return for providing community benefits such as affordable housing pursuant to a development agreement (DA).

The Dorchester House at 1040 Fourth St. is a 1988 condominium building required by terms of its 1982 DA (one of the city’s earliest development agreements) to set aside 15 ground floor units out of a total of 42 units for low and moderate income rental housing which can only be occupied by income-qualifying tenants who lease from unit owners.

In January, 2010, local attorney Stanley Epstein discovered that all 15 Dorchester units had been sold repeatedly over the years at market rates and were illegally occupied by owners, or illegally leased to family members and possibly others. There’s evidence that owners assumed City Hall would continue its 25-year history of not enforcing the DA and were ignoring the consequences of living in them, which is eviction.

With none of the units appearing to be in compliance with the DA, Epstein brought the situation to the attention of Deputy City Attorney Gary Rhoades.

As a result, the City Attorney’s office obtained documents from 11 of the 15 owners alleging that their units were in compliance because their condos were leased to non-related low and/or mid income tenants.

It appears that nobody followed up to see if these documents were truthful and if the units were really in compliance. In February 2011, I filed a Freedom of Information Act (FOIA) request concerning proof of compliance which was denied by the City Attorney’s office. Meanwhile, staff repeatedly informed the City Council that the units were in compliance with the DA.

One big problem: owners would lose big bucks when they lease their units at low to mid income rates because the rental income would be far less than the total of mortgage payments, home owners association (HOA) dues, repairs, maintenance, taxes, insurance, utilities and other expenses.

The sale price for many of these units has been well into the $700,000s. One two-bedroom owner is currently asking $725,000. It defies rational belief that any owner would move out and take losses amounting to thousands of dollars a month in order to lease at less than market rates to non-relatives. And, everyone in City Hall knows this because they have the income and expense numbers.

Of the remaining four units, the status of one of them hasn’t been resolved since 1988.

In May 2010, City Hall sued Kathy Golshani and a related entity Bilet Properties, LLC. (that collectively owned the three remaining units) to enforce the Dorchester’s DA.

Some 27 months later, City Hall entered into a settlement agreement stating the three units owned by Golshani or Bilet Properties must be designated for rental only to low income persons as called for by the development agreement. Inexplicably, it also provided that ”owner occupancy shall be allowed at each of the units …” What? Isn’t this having your cake and eating it, too!

“Owner occupancy” is the operative provision in this agreement and it clearly alters the development agreement on these three units, forever.

On top of everything else, City Hall hasn’t even adhered to its own procedure for amending development agreements as required by law. The process of staff reports, public noticing, public meetings and input before the Planning Commission and City Council has been completely ignored. Therefore, a good legal argument will probably be made that the agreement is invalid. Stay tuned for more litigation.

Making things worse, the City Council, Planning Department, City Attorney and City Manager have all been parties to the wrongful conduct relating to affordable housing at the Dorchester. In addition, the council never approved the settlement, although, in closed session, it authorized the City Attorney to end legal proceedings against the two defendants.

The comedy of errors continues. When Epstein learned of the settlement two weeks ago, he asked if it was approved by the council and if the public had been notified. Last week City Attorney Marsha Moutrie — 11 weeks after the fact — finally disclosed during the City Council meeting only that a settlement had been reached on the Golshani/Bilet units.

City Hall’s number one priority is affordable housing. Through bungling, inattention, manipulation, incompetence, fraud and lack of interest, 15 units of existing affordable housing were lost. And, all or substantially all of the 15 deed-restricted Dorchester units are still in violation of the development agreement.

Epstein called Santa Monicans for Renters’ Rights (SMRR) in 2010 to enlist SMRR’s help in the fight to save the affordable housing.  Co-chair Patricia Hoffman wouldn’t comment and hung up on him. That’s how SMRR protects its so-called “top priority.” Slam down the phone.

Nobody seems to care that 15 units of valuable low/mid income housing are being occupied by well-heeled owners instead of the low or mid income families for which they were intended.

I’m thinking the reason this was handled so badly was because staff and politicians alike didn’t want owners tossed out of their homes even though there’s ample evidence the owners were well aware their units were deed restricted.

Right now, the fumbling of the Dorchester House DA and all the prevarication surrounding it has made City Hall’s “number one priority” a number one faux-pas. There’s a lot of shame to go around and heads should roll for this debacle.

Bill can be reached at mr.bilbau@gmail.com. Thanks to Stanley Epstein for his assistance in the writing of this column.