DOWNTOWN — Since the beginning of the year, City Hall has intervened behind-the-scenes to keep approximately 50 low and extremely-low income individuals in their apartments after rents increased beyond the threshold of their government subsidies and ability to pay.
Individuals with federally-subsidized housing vouchers and those on other forms of assistance living in seven Santa Monica apartment complexes owned by NMS Properties received notices in January informing them that their rents would increase by $300 a month. If they couldn’t pay they would have to move.
Those affected held Section 8 vouchers, federal subsidies that pay a significant portion of rent, or other forms of assistance and were placed in the apartments several years ago despite the fact that rents rose far faster than the dollar amount of their assistance.
According to Jim Andersen, president of NMS Properties, it made sense to rent to Section 8 voucher holders for a time, but eventually the difference between what the vouchers could pay and what the apartments were worth was too much.
“The gap between Section 8 and moderate-income housing has grown. We were OK with that for a period of time,” Andersen said.
Once NMS had enough low-income apartments in its portfolio to house those on vouchers and other assistance that were in higher-priced units, they sent out the rent increase notices, Andersen said.
That raised alarms amongst renters who reached out to the Housing Authority for help. Over the course of the intervening weeks, housing officials, in concert with the City Attorney’s Office, invoked other housing restrictions and hammered out deals to keep all residents in place.
NMS backed off.
“We looked at it as a solution,” Andersen said. “We were happy to honor Section 8 housing if you want to move. It was $300 under the rent that we could charge under the deed restrictions. The gap was growing and we wanted to address it.”
The lay of the land
How a person on limited income could get into an apartment worth so much more is a complicated question, but Santa Monica housing prices and who can get access to them is governed by far more than the so-called invisible hand of the market.
Most new developments have affordable housing built as part of the project. Some developers choose to build units off-site or contribute cash to an affordable housing fund.
The housing built can come in a variety of income ranges. Each designation depends on how much the individual or family earns compared to the median income in the area.
In Los Angeles County, that number is $64,800 for a family of four.
A single person can qualify as “moderate income” under federal housing program standards if they make $54,450 per year.
Section 8 housing vouchers allow recipients to go out and select their own apartments rather than forcing them to live in specific rentals.
Because the vouchers are not meant to place low-income individuals in luxury condominiums, they do come with restrictions. The vouchers only cover rents to a certain “maximum” dollar amount, which varies based on location.
In addition, those with vouchers may not spend more than 30 or 40 percent of their income on rent, further restricting the cost of the apartment they choose to acquire.
As private business people, landlords can always choose to accept Section 8 vouchers regardless of the price of the apartment.
It might even make sense to do so, depending on the rental climate at the time, given that most of the payment is covered by the federal government.
According to a City Council presentation given by Housing and Economic Development Director Andy Agle in February, landlords can get more money from renting moderate income apartments with zero to one bedrooms to those with vouchers than they would be renting the apartment to someone who does not because of thresholds set by the feds.
It’s only when apartments hit the two or three-bedroom range that income restrictions attached to the apartments bring rents below market-rate.
According to the report, a one-bedroom moderate income apartment goes for $1,708 a month, but a Section 8 housing voucher only covers $1,352 of that.
And, according to the rules of the program, the voucher holder is not allowed to pay more than $580 each month on top of that for the remainder of the rent and utilities.
That’s the situation that led to the $300 gap that NMS started to see between what its apartments were worth and how much it was getting out of its tenants.
If it sounds complicated, it is.
Some landlords, either through inexperience or recent acquisition of properties, might not even know what rules apply to which units, be it Section 8 or inherited income restrictions.
That can work against them if, as in the case of NMS, they decided that rents were being held artificially low without reason.
Arnie Corlin, a Los Angeles landlord, follows affordable housing, and Section 8 requirements in particular, as part of his work with the Apartment Association of Greater Los Angeles.
“I follow all of it, and I have difficulty,” he said. “It’s extremely challenging to learn it or understand it.”
Corlin accepts the vouchers, but the added inspections required by the public housing authority and other red tape adds another $200 to each unit, he said.
Groups like NMS Properties have their own in-house professionals to manage Section 8 requirements and keep track of income restrictions on units in their portfolio, but most landlords don’t, Corlin said.
“Three-quarters of rental units are mom and pops of four units or less,” Corlin said. “Rarely do they have more than 10.”
NMS does have specialists on staff that deal specifically with affordable housing, however, and, unlike landlords with smaller holdings and fewer staff, knew exactly who was in what apartment and what could be charged.
On Jan. 10, 2012, some tenants received 90-day notices that their rents would be increased.
The Housing Division, City Attorney’s Office and Legal Aid came together to work to find ways to keep the residents in place.
In large part, it was Santa Monica’s complicated hodge podge of rental restrictions that saved the homes.
Beyond income requirements, some of the units had restrictions still on them from agreements made with City Hall after the 1994 Northridge earthquake. Landlords whose buildings had been damaged in the earthquake received low interest loans from City Hall in return for affordable housing guarantees.
“We paid the money back, but the restrictions stay on for life,” Andersen said.
Other units fell under Santa Monica’s rent control laws, which govern 71.7 percent of units in the city, according to a 2011 Rent Control Board report.
After “innumerable hours” of work and a great deal of stress on the part of older tenants who feared that their units might be taken from them, NMS agreed to rescind the increase notices.
The company still feels that it had the right to raise the rents, but “wanted to do the right thing by people in our buildings,” Andersen said.
“We think we followed the rules,” he said. “It’s complicated, interpretational stuff. There’s room for debate about what the right process was to go through with all these things.”