Tenants May Face Eviction or Rent Hikes as Subsidies Expire

Thousands of tenants in subsidized housing in the county could face evictions or huge rent increases in coming years as federal rent subsidy contracts expire, making an already severe deficiency of affordable housing much worse, experts say.

Housing authorities estimate that during the next 20 years, between 4,000 and 5,000 housing units will be affected as apartment owners withdraw from the subsidy program to join the more lucrative open market. According to a report prepared by the Community Development Council, a subsidized two-bedroom apartment that rents for $326 would rent for about $625 if put on the open market.

“Our estimate is that none of the landlords that can opt out will stay with the affordable housing program,” said Alan Baldwin, executive director of the Orange County Community Housing Corp., a nonprofit group that administers low-income housing. “They can’t afford not to get out of the program. They are investors, and rental housing is a commodity.”

The problem in Orange County is likely to be especially severe because of the high cost of housing in the area and because more than half of the affected units are occupied by senior citizens, for whom a move might be difficult.

In addition, the high cost of new construction in the county would make replacing the lost units impractical. According to a report by the state Senate’s Office of Research, if only one-third to one-half of the units eligible were withdrawn from the subsidy program, the cost to build replacements would be between $2 billion and $3 billion.

Although many tenants are not likely to be affected for years, housing advocates have already begun assessing the possible impact and urging tenants to become aware of the situation and organize to protect their rights.

“We are trying to stress to residents that even if their units are up for termination 10 years from now, whatever will be done to save those units will be decided now,” said Joe Caux, housing manager for the county Community Development Council.

“One thing we are trying to do is to assist residents in forming tenants associations to collectively try to negotiate with landlords or the government.”

Kathy Neher, a resident for 9 years at the Villa Yorba Apartments in Huntington Beach, is trying to rally fellow tenants to form such an association. “When things start happening and people wonder why their rents are going to triple and want to know what they can do about (it), I’ll be ready,” she said, flipping through hundreds of pages of obscure state and federal affordable housing regulations.

“I’m thinking of going door-to-door to try to get residents informed,” Neher said. “We have to do something now to be prepared to deal with whatever happens.”

The Villa Yorba Apartments is one of 57 federally subsidized developments in the county that could end participation in the program during the next 20 years.

The subsidy programs, most offered in the late 1960s and early 1970s, were designed to encourage both nonprofit and profit-making developers of multifamily housing to build and operate rental units for low- and moderate-income households.

Some of the programs offered direct payments to owners of the difference between what the tenant could pay and what the unit could command on the open market.

Another program provided low-interest loans to developers. In return, owners were to limit rent and rent increases for 40 years. As an incentive, the program allowed owners to withdraw from the agreement after 20 years.

Under that arrangement, the Villa Yorba owners may terminate the subsidy contract in 1993, but they could not be reached to comment on their intentions.

For Neher, who is a member of the Orange County Renter’s Assn., organizing tenants seems the natural way to deal with a “potentially devastating” problem.

But other tenants she has approached are less concerned.

“Those living here the longest know that it’s been almost 20 years and that something might happen,” she explained one evening in her small two- bedroom apartment. “But for many it’s like waiting for the big one. They act like it’s never going to happen.”

Neher was a 26-year-old full-time student at Golden West College and a divorced mother of a 6-year-old son when she qualified for her subsidized apartment. She has since finished school and gotten off welfare, but she doubts that her modest income from a job with a Huntington Beach freight company would cover a large rent increase. She now pays $307 a month for rent, not including utilities.

“I’m hoping some government action will be taken, or else I’m hoping I’ll win the Lotto between now and then,” she said.

Melba Kirby said she too is worried about what will happen if her apartment is removed from the subsidy program. Kirby, 48, and her 20 year-old, learning-disabled son have lived for the past 9 years in a two-bedroom apartment at the federally subsidized Westminster Arms in Garden Grove.

Kirby, who said she is physically incapacitated and unable to work, said she is barely able to cover the $337-a-month rent with her son’s disability payments. If rents were to increase to market rate and there were no other assistance, both she and her son would end up on the street, she said.

“I really don’t think we could make it,” she said. “There are already so many homeless people out there who need housing.”

Housing advocates say that tenants must lobby both state and federal lawmakers to ensure that either the subsidy programs are continued or realistic alternatives are found.

Recognizing what it termed an “impending emergency” due to the expiring subsidy programs, Congress passed the Housing and Community Development Act of 1987, which among other things, places restrictions on the ability of owners to terminate contracts.

William Glavin, a spokesman for the Department of Housing and Urban Development, said the restrictions amount to a “moratorium,” but they expire in 1989, when Congress will again face the problem of how to ensure that a supply of affordable housing is available.

Scott Reed, a spokesman in HUD’s Los Angeles office, said that rental supplements or vouchers will be provided in the worst cases when tenants are displaced because they cannot afford rent increases.

“We don’t anticipate as much of a problem as some others anticipate,” Reed said. “A tenant might have to leave a building, but with the voucher program they will have flexibility in where they live. Nine times out of 10 a landlord will accept these vouchers because it is a guarantee they will get money.”

Reed said the amount of the vouchers will be based on the cost-of-living index in a particular area.

However, many housing advocates question whether rental supplements will cover the costs of housing in Orange County and say there is not enough money in the voucher program to guarantee aid for all those who might be eligible.

For example, at least 6,000 people in the county are eligible for some form of subsidized housing but typically must wait 1 to 3 years before such housing becomes available, according to the Orange County Housing Authority.

“The jury is still out on whether vouchers are a viable tool,” said Baldwin, of the Community Housing Corp.

William Gorman, president of the Orange County Apartment Assn., which represents apartment owners, said many owners will remain in the subsidy program if the right incentives are offered.

“I think the biggest concern for owners is whether upcoming laws enacted by Congress renew or change incentives,” Gorman said. “If contracts or promises are broken, it will severely hurt the rental industry. We do think there is a problem out there, but there are still people who want to work in the public sector. The less conflict there is, the happier we will be.”

Both apartment owners and housing advocates say one solution may lie in helping tenants to become owners and managers of their residences in nonprofit cooperatives.

“I know many of us would like to see something done where we could buy our places,” said Neher. “That would be an ideal solution.”