City Agency Delays Paying $1 Million : To Stay in Black, Housing Authority Withholds Rent Subsidies
To prevent its checks from bouncing, the Los Angeles City Housing Authority has withheld $1 million in rent subsidy payments to private landlords participating in a housing program that provides 20,000 apartments to low-income tenants in the city.
The hold on the checks has set off an avalanche of complaints from landlords demanding their overdue money and threatening to pull out of the so-called Section 8 Housing Assistance Payment Program, agency employees said.
“It’s gotten so bad that we’ve turned the phones off,” said one Housing Authority employee who asked not to be identified.
One landlord, who said that the Housing Authority owes him about $5,000 dating back four months, told The Times:
“You can’t get through on the phone. . . . You almost have to physically go down there to get something done. . . . You want to knock somebody over the head, but you can’t because you know you’ll have to deal with them next week.”
The executive director of the agency, Leila Gonzalez-Correa, said that the agency has a cash flow problem that has forced her to hold up about $1 million in rent checks to landlords.
Describing the situation as “not a big crisis, but it is a problem,” Gonzalez-Correa said it will be resolved by the end of the month, when the U.S. Department of Housing and Urban Development sends the Housing Authority “a big check” to cover outstanding bills.
$6 Million Due Monday
HUD spokesman Scott Reed confirmed that HUD will transfer $6 million to the Housing Authority on Monday as an advance on the agency’s September quarterly payment. He said HUD was not aware that the Housing Authority has held up rent payments to landlords in the Section 8 program.
The program is designed to allow low-income tenants to live in well-maintained private apartments by subsidizing their rent. Tenants are required to pay the landlord an amount equaling 30% of their annual income, while the Housing Authority pays the rest. Apartment rents are now fixed at $490 for a one-bedroom apartment and ranging up to $979 for a five-bedroom apartment.
About 15,000 people are on waiting lists for Section 8 housing, agency officials said.
Section 8 appeals to landlords because a large portion of the rent is guaranteed by the government, and the current financial pinch has especially hurt small landlords who must make mortgage payments and are strapped when their rent is held up.
As Bennie Thomas put it: “I’m no big tycoon. . . . This money ($900 in his case) makes a difference.”
Fred Bassuk, a senior citizen who owns a 10-unit building in Hollywood where rents are subsidized by the Housing Authority, said: “It’s under $1,000 that they owe me, but the money is due. When my mortgage payment is due, it’s due!”
Bassuk said that when he inquired about the money he is owed, an agency official told him: “We have the check on the desk here, but we can’t release it.”
Checks ‘Would Bounce’
One agency employee told The Times there are “three boxes of checks sitting here” that would bounce if they were cashed.
While the financial crunch may be resolved by HUD’s cash infusion, some observers believe that the Section 8 program has suffered a public relations setback among landlords.
“Periodically, there will be snafus,” said Bill Harrison, a former HUD official who now runs a property management firm. “But if all of a sudden landlords decide (the program) is not worth it and they start pulling out, it has the effect of reducing the supply of housing” for low-income people.
Lewis Shaw, who owns a three-unit building on East 62nd Street, said that he has decided to get out of the Section 8 program since the Housing Authority has fallen two months behind on rent subsidy money amounting to $1,258.
“I’m on disability, living off the income from my units,” he said. “I’m not getting paid, so I can’t pay my bills.”
‘From Bad to Worse’
Mary Hooper, a schoolteacher who owns two small rent-subsidized apartment buildings in South-Central Los Angeles, described the situation at the Housing Authority as “the pits. . . . It’s gone from bad to worse.”
Hooper said her tenants are up to date in paying their portion of the rent but that the Housing Authority has fallen way behind, now owing her about $2,500--some of it dating back as far as August.
Problems are not a new phenomenon at the Housing Authority.
The agency’s former executive director, Homer Smith, came under repeated fire from his own employees, outside consultants and city officials for improper contracting practices, wasteful spending and dictatorial personnel moves within the agency, which has an annual budget of more than $175 million.
After Smith resigned in November, 1985, the Board of Commissioners of the Housing Authority ran the agency for 11 months, with Robert Zampino acting as interim executive director. During this time, Commissioner Alvin Greene asserted that the Housing Authority was turned around “from a financially deficient and demoralized operation to the position of being a ‘winner.’ ”
Gonzalez-Correa assumed control of the agency in October of last year. The former head of a housing authority in Austin, Tex., Gonzalez-Correa was selected from a field of 200 applicants for the $85,000-a-year Los Angeles post.
Working With HUD
The new executive director said that she has been working closely with HUD, which provides the bulk of financing for the Housing Authority, to make major improvements in the agency.
In March of this year, HUD formally declared the Housing Authority to be an “operationally troubled” agency that needs to become “more efficient . . . to give us a better return on our dollars,” Benjamin Bobo, manager of the Los Angeles HUD office, said in an interview last week.
Gonzalez-Correa said that the Housing Authority incurred its recent cash flow problem because of inadequate financial “forecasting methods” that have prevented the staff from accurately projecting how much money to requisition from HUD.
Gonzalez-Correa said that last year, for example, the Housing Authority advanced its own money for Section 8 program improvements. But “we were not requisitioning enough money” from HUD to recoup expenses. Furthermore, she said, the agency’s documentation supporting its funding request contained some “mistakes.”
One landlord got so upset with the payment delays that he has written an article lambasting the Housing Authority’s Section 8 program in a trade magazine that circulates among apartment owners.
City ‘Worked Me Over’
In the May issue of Apartment Age magazine, landlord Les Cole, who owns a four-unit apartment building in downtown Los Angeles, describes how “the city has worked me over.”
“I am writing this to warn you of the unseen dangers of doing business with the city, especially if your income is dependent on your (apartment) units,” Cole wrote.
He asserted that the Housing Authority fell so far behind in paying him rent that he had to dip into his savings to make up for the missing money. The agency finally paid him $1,750--which was as much as five months overdue--but only after he threatened a lawsuit and enlisted the support of his City Council representative, Cole said in an interview.
“I’ve had to undergo economic hardship and gut-wrenching stress,” Cole wrote. “The fiery nether regions will have to have six solid feet of ice cap before I ever again rent to the city.”
