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Elderly Facing Ouster as Rent Subsidies End

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Times Staff Writers

Silver-haired Rose Louis is moving--reluctantly--from her apartment home of 20 years.

There is the clutter of packing boxes in her extra bedroom. “I thought I’d never leave here,” she says, with a tear in her eye. “A lot of my nostalgia went down the incinerator.”

It is a perfect neighborhood for a senior citizen--with a supermarket a block away and public transportation even closer, relatively little crime, and Lake Michigan just two blocks to the east.

A few floors up in the same high-rise on Chicago’s North Side, Pearl Rebbe, 75, is packing up and getting out. After two decades, she too is being forced to move. “It’s an upheaval,” says the chain-smoking former secretary.

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Harriet Cohen, another tenant in her 70s, may also be moving soon from the building at 533 W. Barry. “It’s very difficult for older people to be displaced at this time in their lives,” she says.

These three elderly women are in the initial ripple of what may become a nationwide wave of new economic refugees. They are among the first in the country to be forced out of federally subsidized housing as 20-year-old government programs providing shelter to individuals and families with low and moderate incomes begin to expire.

As many as 1 million people could be affected in the next 10 years as subsidized mortgages reach their 20th anniversary, allowing landlords to pay them off and begin charging what the market will bear.

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So far, problems have appeared only in Chicago, Boston and Dallas, but housing experts say that most urban areas, including Los Angeles, will be affected in coming years. According to the federal Department of Housing and Urban Development, there are 64 projects in Southern California similar to the one in Chicago, and they represent 7,315 apartments that could be lost in the next five years.

Sees Problems Coming

“This is just the beginning of a wave of dislocation,” says Naomi Cohn, an organizer with Chicago’s FHA Tenants United.

“We’re right at the precipice,” says Jim Grow, a staff attorney with the National Housing Law Project in Berkeley, Calif.

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Twenty years ago the apartment house at 533 W. Barry was a celebrated symbol of the way the federal government and private developers would work together to solve some of the nation’s housing problems. Now, it is a symbol of the shortcomings of that partnership.

The 17-story apartment building was one of the first to be built during the Johnson Administration under a Great Society housing program that appeared to benefit both developers and renters with low or moderate incomes. In exchange for keeping rents considerably below those being charged in the marketplace, developers were able to get 40-year mortgages at a 3% interest rate, and with enhanced depreciation allowances that made the buildings attractive as tax shelters.

Have Option to Pay Early

A provision in the law gave developers the option of paying the remaining balances on the mortgages after 20 years, so they could be free to do whatever they wanted with the buildings at that time.

That is what has happened to the 160 units at 533 W. Barry. Having prepaid the balance of their 40-year mortgage, the developers are refurbishing apartments and sharply increasing rents that, until now, have been kept artificially low. For example, Pearl Rebbe pays $284 a month for her two-bedroom apartment. Once it is rehabilitated, the monthly rent will jump to $750--about what the young professionals who have moved into the neighborhood in the last decade are paying to live in in nearby buildings.

“We couldn’t maintain the property at current (government-set) rental rates,” said Gloria Telander, one of the six owners of 533 W. Barry and president of Miller Midwest Real Estate Co., which manages the property.

Hindsight Reveals Problems

“It’s easy now, in hindsight, to say they never should have made these subsidies available if eventually they were going to run out,” says Barry Zigas, president of the National Low Income Housing Coalition, based in Washington. “That’s one view. The other side is that the owners and investors will never get into these properties if they have no sense that they can sell the property.

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“So you end up losing the better housing,” adds Zigas. “You take what’s viable out of the government programs and you leave what isn’t, and let the government worry about it. That’s one of the drawbacks of depending on the private sector--you’re constantly having to provide them with incentives to do what you want them to do.”

“Real estate is a business like anything else,” displaced tenant Rose Louis says philosophically.

According to various estimates of the situation, between 200,000 and 1 million people nationwide could find themselves forced to move, like Louis, Rebbe and Cohen, within the next 10 to 15 years.

No Exact Numbers

The disparity in those estimates is part of the problem. First, HUD, which administers most of the rent subsidy programs, has been unable, so far, to provide Congress with the exact number of housing units included in various and sometimes overlapping subsidy programs.

And even when that number becomes available, it will not make clear which of the buildings are in neighborhoods where developers would find it economically attractive to drop out of subsidy programs, as in the case of 533 W. Barry.

The Webb Forest project in booming north Dallas, 240 garden apartments built in 1964 under the same program that created the Barry building in Chicago, offers another example. After new owners bought the project, they announced plans to prepay the mortgage and demolish the apartments to make way for an office.

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“Situations like these will confront low-income tenants in cities throughout this country over the next several years,” John Fullinwider told a House Banking, Finance and Urban Affairs subcommittee in June. “It is a housing disaster waiting to happen,” added Fullinwider, coordinator of a Dallas nonprofit housing corporation.

20th Anniversary Looms

The National Assn. of Home Builders estimates that there are more than 580,000 units built with federal mortgage subsidies that could, like 533 W. Barry, be prepaid within the next 10 years. Almost 140,000 of those units will have a 20th anniversary in 1989 or sooner.

The Department of Housing and Urban Development, on the other hand, estimates that only slightly more than 300,000 housing units will be eligible for prepayment. But the HUD figures have been met with skepticism from the staff of the housing and community development subcommittee.

“Our expectation is that a great majority of owners will keep their projects as low- and moderate-income properties . . . because they are now located in low- and moderate-income areas and their prospects for serving other markets would be nil,” R. Hunter Cushing, a deputy assistant HUD secretary, told the subcommittee last June.

Other federal housing subsidy programs are also reaching a time when developers will have the option of dropping out.

15-Year Contract Program

One of these programs permits low- and moderate-income families to pay up to 30% of their income for rent while HUD pays the balance of the market rate. Begun in 1974, this 15-year contract program allows some landlords to withdraw every five years. It is estimated that contracts covering almost 300,000 rental units in this program will expire during the next 10 years. What is not known is how many of them will be renewed.

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The problem is not entirely urban. The Farmers Home Administration also oversees a number of rural housing programs with similar provisions for allowing developers to drop out.

An estimated 50,000 housing units in California are included in these programs.

Congress is just beginning to confront the problem. The House subcommittee on Housing and Community Development will follow its June hearing with another one later this month.

‘It’s Going to Be Too Late’

“It is time now for HUD and Congress to look at this,” says John J. Koelemij, immediate past president of the National Assn. of Home Builders. “If they don’t start looking until 1988 or 1989, it’s going to be too late for many people.”

Minimizing Problem

So far HUD, in congressional testimony, has minimized the problem. Cushing, HUD’s deputy assistant secretary for multifamily housing programs, has testified that rent vouchers or other assistance will be made available to those who are displaced as properties are withdrawn from federal subsidy programs.

Tenants at 533 W. Barry in Chicago were given a list of alternative buildings operating under similar programs--most of them not as well maintained and none in as desirable a neighborhood.

“The testimony from Hunter Cushing did not tell the true story,” said Koelemij. For example, he said, the federal budget proposals for 1986 and 1987 included a two-year moratorium on the issuance of rent vouchers, an attempt to cut the budget. That does not encourage landlords to participate in voucher programs, which require renters to pay 30% of their income in rent, with the government subsidizing the rest.

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Problems Compound

Another problem facing those forced to leave buildings being withdrawn from federal subsidy programs is a shortage of housing for the less affluent tenant.

Currently, the government is assisting fewer than 100,000 new low-income and moderate-income households per year, according to congressional committee records. That contrasts with between 250,000 and 300,000 households per year during the Jimmy Carter Administration. Spending has dropped from $27 billion to $9 billion. Meanwhile, the National Assn. of Home Builders estimates it would cost $130 billion to replace the current stock of low- and moderate-income housing nationwide.

Warns About Deterioration

“There are virtually no federal programs to produce or rehabilitate additional low-income housing units,” testified Belinda Mayor, vice chairman of Philadelphia’s Tenant Action Group. “The existing stock of housing thus takes on greatly increased importance. It is an invaluable legacy which cannot be allowed to deteriorate or disappear from the low-income rental market.”

“It’s something that’s taken 20 years to become current, and not a lot of thinking has gone into what we’re going to do,” says Zigas. “The attitude has been, ‘We’ll worry about it when it comes,’ and suddenly, it’s here.”

“Twenty years seemed a long way off when I moved in,” says Pearl Rebbe. “Then, all of a sudden it hit us: Our 20 years are up.

“Oh, they went so fast.”

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