Coast Panel to Rule on Affordable Housing Resale Profits

In a dispute that affects more than 500 south Orange County homeowners, the California Coastal Commission staff is trying to force participants in an affordable housing program that collapsed earlier this year to turn over profits from the sales of their houses to the state.

The 12-member commission is meeting in Marina del Rey today to decide whether to follow that recommendation by its staff, which is abiding by a state attorney general’s opinion that the profits are illegal because they constitute “gifts.” The money would go into a state fund for housing programs if the opinion adopted by the commission.

Many homeowners say they plan to protest at the meeting, claiming that they should keep all the money they make off sales of their homes because there no longer is a housing program.

Some of the condominiums were purchased for as little as $88,000. They could now sell on the open market for as much as $120,000, giving the owners a $32,000 profit.

The Coastal Commission had offered affordable housing in Orange County until five years ago, when the state Legislature repealed the commission’s authority to order developers in prime coastal districts to open up a certain amount of property for low- and moderate-income people.

The commission then used local agencies to monitor the buying and selling of the 585 homes it had designated as affordable housing. But the program collapsed in chaos this February after the agencies bailed out.

Now, there are 515 homeowners left who the state says cannot sell until a decision is made on the profit question. Forty-four residents have already petitioned the commission to release them from any obligations to the old housing program so they can sell. Their requests are being acted upon today.

Many of those people planned to attend today’s meeting to protest the commission’s proposed action.

“My own opinion is they are using coercion to extort an agreement from me by holding my property hostage,” said Karl Overbeck, 42, a systems analyst who owns a two-bedroom condominium in Laguna Niguel.

“I basically think it’s a breach of our contract,” said Larry Fenwick, 36, a customer service representative who also owns a two-bedroom condominium in Laguna Niguel. “Our original agreement was that we would be able to keep all profits, if they don’t find a buyer within 60 days.”

County officials who bailed out of the state program five years ago, saying it was too cumbersome to administer, predicted that it would be difficult to enforce the no-profit policy.

“That sounds like another administrative nightmare coming up,” said Scott Morgan, aide to Supervisor Roger R. Stanton, an outspoken critic of the Coastal Commission’s affordable housing program.

Coastal Commission staff members, however, defended the no-profit policy, saying the money they receive will compensate for the money they poured into a failed program.

“The commission invested substantial amounts of time and effort into this housing program, and I think the staff views this loss as being a very regrettable development,” said commission staff attorney John Bowers in San Francisco.

The Coastal Commission operated the affordable housing program from 1977 until

1982. Qualified buyers had to make within 80% and 120% of county median income.

Since the south Orange County housing market was the hottest along the California coast during that period, Bowers said, almost all the affordable housing units were created in that area.

The units consisted mostly of condominiums, concentrated in seven subdivisions in Laguna Niguel, Dana Point and San Clemente. The subdivisions include Beacon Hill Terrace, Sea Watch, Spinnaker Run, Niguel Beach Terrace (the biggest), Aliso Meadows, Pacific Terrace and Cypress West.

The great moneymaking potential in reselling the property on the open market doomed the program from the outset, county officials said.

Under terms of sale, an owner wanting to resell had to agree to allow the agency administering the program to try first to find a qualified buyer at a price well below the fair market value, which would ostensibly keep the property affordable.

If after 60 days the agency could not find a suitable buyer, then the homeowner was released from the agreement and could determine the price and buyer.

Many home buyers, consequently, had little incentive to cooperate in finding a low- or moderate-income buyer, Morgan said.

Homeowners would go to such lengths as blaring their stereos and intimidating prospective buyers when they came by to inspect a house that was for sale, said Jean Albott, chairman of the private, nonprofit Community Housing Enterprises in Santa Ana, which was contracted to run the program from 1983, when the Orange County Housing Authority dropped out, until last year.

‘Anti-Cooperation’

“There was definite non-cooperation, in fact anti-cooperation,” Albott said.

Albott said another headache was that many people were violating terms of their contracts by renting their homes out. She said she and the two volunteers she used did not have the resources to police the violations.

“There was nothing we could do except write letters,” Albott said.

The homeowners had their complaints against Community Housing as well. They accused company officials of ignoring telephone calls and dragging their feet in processing sales applications.

The program was so difficult to administer that Community Housing dropped out in frustration, Albott said. Afterwards, the Coastal Commission turned to the state Department of Housing and Community Development for help in administering the program. But the state agency declined, citing inadequate resources.

During the time the Coastal Commission was scouting for another agency to replace Community Housing, homeowners wanting to sell were caught in bureaucratic limbo, they said. The Coastal Commission would not release them from the 60-day agreement until it could find another administering agency. People like Fenwick and Overbeck, consequently, said they could not sell when they wanted to.

130-Mile Commute

“I recently changed jobs and am faced with a 130-mile round-trip commute (to Torrance),” said Overbeck, who wants to find a home closer to work.

Fenwick said his family had outgrown its condominium and had wanted since March to move into a bigger home. But Fenwick said an elderly woman named Raye Abrams had an even more pressing need to move. He said she had fallen ill and could not climb stairs to her upstairs condominium.

With all home sales frozen at the time, Abrams moved to Leisure World in Laguna Hills in December and paid double mortgages until the Coastal Commission finally released her property for sale last week, Fenwick said.

In February, the Coastal Commission ran out of agencies to ask to administer the program and decided to release all homeowners from their selling conditions.

But after granting releases to 13 people, the state attorney general’s office came down with its opinion that the profits violated state law, and ordered a halt to any further releases, Bowers said.

That is when today’s hearing was scheduled, he said. Also at today’s hearing, Bowers said, the commission will consider in closed session whether to force those other 13 people to turn over their excess profits as well.