‘Miracle’ Comes to Rental Housing : Upgrading: County loan program helps landlords improve run-down apartments, houses. Subsidies aid tenants to live in updated, safe homes.
Eva Fernandez, 65 and disabled, had been renting a tiny, run-down, termite-ridden apartment in a vulnerable neighborhood of East Los Angeles.
“There was no shower, no heating and very little security,” said the former nurse. “It was quite depressing. Sometimes I felt afraid, living there alone. But that’s all changed now. It’s like a miracle.”
“I still live in the same one-bedroom apartment that I rented for $200 a month, but I now have a shower, newly painted walls, new kitchen floor, new windows and good security.”
Fernandez’s “miracle” came about when Gabriel and Beatriz Castro, owners of her apartment building, applied to Los Angeles County’s Rental Rehabilitation Loan Program, whose function is to upgrade the affordable housing stock in 27 cities and unincorporated areas.
The program provides owners of single-family or multifamily rentals with two loan options, depending on the individual needs of the applicants.
The owners can either borrow 50% of the cost of rehabilitation, which is forgiven after 10 years and becomes a grant. In the interim, there are no interest fees. Or they can borrow the full cost of rehabilitation at a 5% fixed-interest rate over a 15-year period.
The loans may be used for such basic needs as a new roof, electrical, plumbing and heating repairs, termite and pest elimination and seismic upgrading, as well as new flooring, new fixtures and a general cosmetic overhaul of the property.
Ranked in the top 10 in the nation in size and productivity among large counties, the Los Angeles County program has been honored for excellence by the U.S. Department of Housing and Urban Development, the primary source of its loan funds.
According to David N. Lund, executive director of the county’s Community Development Commission, which established the program in 1984, rental units built before 1970 represent 81% of rental stock in unincorporated areas of Los Angeles County, and many of these apartment complexes have fallen into various
stages of disrepair.
“With increased costs of single-family homes and only 12% to 14% of home buyers in the county currently able to qualify as home buyers, the vast majority of the population must rely on rentals,” Lund said.
To address this need, the rental rehab program provides “financial incentives to landlords so that quality housing can be available to low-income families,” he said.
The Castros learned about the loan program when they received a mailing from the county offices offering owners of rental properties in their area the opportunity for financial assistance to fix run-down rental properties.
“Our rents were so low, and we were barely hanging on trying to make ends meet on our Social Security allowance,” Beatriz Castro said. “Meanwhile, we were getting panicky because the property was coming apart and we couldn’t afford to fix it. We didn’t want to become slum landlords.”
The Castros bought their 10-unit apartment property on Indiana Street in the 1960s with the hope that eventually, when it was fully paid for, it would provide extra income in their old age.
“The county’s estimate for rehabilitating the units was $165,000,” Castro said. “They told us they would fund 50% of the cost, but we would have to come up with the other $80,000,” Castro said.
“Several banks turned us down. Finally, we got a 20-year loan from Security Pacific Bank and began work on the property. It took six months to finish the project.
“It was very hard on the tenants and hard on us because we were already paying on the loan before the rents could be raised. But the result is that we have almost tripled our regular income.”
Fernandez and other renters, also benefited financially.
She qualified for a rent subsidy and now pays only $141 of the current $500 rent. Her neighbor, Fernandez said, with an even lower income, pays only $23 for her share of the rent.
To keep improved properties within reach of low-income families, HUD housing vouchers are available to eligible renters to assist them to pay for improved accommodations.
HUD makes up the difference through its Section 8 (Lower Income Rental Assistance Program), between what a low- and very low-income household can afford and the fair market rent for an adequate housing unit.
Section 8 renters pay the highest of either 30% of their adjusted income, 10% of gross income or the portion of welfare assistance designated to meet housing costs.
Very low-income families whose incomes do not exceed 50% of the median income for the area also are eligible to occupy the assisted units, according to HUD guidelines.
The manager of the county’s rental rehab program, Terry Gonzalez, said the program places particular emphasis on assisting projects where a minimum of 70% of units house low-income tenants.
“We offer two types of loans,” Gonzalez added. “The no-interest deferred loan becomes a grant after 10 years, provided the terms of the note are met throughout the life of the loan.”
“Each year 10% of the loan balance is forgiven and by the end of the 10th year, nothing is owed.”
With a fixed-interest loan, amortized over a 15-year period, the minimum loan amount is $8,000 per single-family unit and $5,000 per unit for multifamily properties. The maximum amount is determined by the total rehabilitation cost.
In fiscal 1988-89, the Rental Rehabilitation Loan Program completed 62 projects, which resulted in the renovation of 306 units at a cost of $3.3 million, Gonzalez said. “And, since the program started in 1984, it has helped finance 259 projects, or 953 units.”
Incentives to the applicants of these loans are:
--Increased cash flow and property values.
--Low-cost financing, approved faster than most private sector lending institutions.
--Reduced long-term maintenance costs.
--Potential tax advantages.
--No charge for assistance with all kinds of technical services, including on-site inspections and recommendations.
Arthur and Rosa Carpenter have rehabilitated four apartment buildings through the county’s rental rehab program and are working on a fifth one. But the fact that the Carpenters have used the program more than once does not disqualify them from further loan assistance.
“The idea is to provide affordable quality housing to tenants who might otherwise be living in an unsafe, unsavory environment,” said Frank Cardenas, the program’s marketing specialist who frequently steps in to clarify or resolve any problems the applicants may encounter.
“Our loans are approved not on the basis of the owner’s income but on whether a project provides housing for low-income families,” Cardenas said.
“At the moment we are funding 50% of the $1.3 million rehabilitation costs for a 67-unit project in Lancaster on a no-interest deferred loan. But that will guarantee us 67 affordable quality units for the next 10 years,” Cardenas said.
The Carpenters, now totally involved with rehabbing, maintaining and managing their properties, have some observations to pass along to others considering this kind of involvement.
“While it’s been a wonderful opportunity for us and we’ve found the people at the county offices very cooperative,” Rosa Carpenter said, “you have to be very patient with all the paper work and the problems that come up.
“Inherited tenants on a rental property can be a real nightmare, especially when they haven’t been screened by the previous owner.”
“In the case of an eight-unit property we own in Maywood, the tenants hadn’t been paying the rents, some were dealing in drugs, and it took us about six months to finally get them all out so we could start fixing up the units.”
But, Cardenas said, a non-displacement policy ensures that tenants will not be arbitrarily displaced and may be eligible for rental subsidy.
Art Carpenter, who has a crew of eight working for him, believes that rehabbing apartments has worked well for him because he is an owner/contractor.
“I’ve been able to avoid the potential for disagreement and delays that frequently arise between owners and contractors,” he said, adding that he is working on a 13-unit property in Bell Gardens while negotiating to obtain an additional rehabilitation loan for a three-unit property in Huntington Park.
Blanche Goodman said she had no idea the program existed until someone mentioned it to her and she applied for rehab assistance.
“I had bought my parents’ three-bedroom home on Whittier Boulevard in East L.A. and was renting it to a low-income family. But it got pretty rundown and it just cost too much to repair all the things that needed fixing,” said Goodman, who works for a pipe manufacturer.
“I found I could qualify for a no-interest deferred loan because I owned a single-family rental in an unincorporated county area and the family renting it had a low-income. Frank Cardenas at the county office took care of my case and was very helpful.
The $8,000 loan enabled Goodman to substantially improve her property by redoing the plumbing, the bathroom, replacing all the windows, sandblasting and repainting the house, adding new doors and security screens, a new garage and new fixtures.
“In 1997 we will file a deed of reconveyance to Blanche Goodman,” Cardenas said. “Her loan has been set up as a second mortgage and becomes a lien on her property for 10 years. This helps keep out investors dealing primarily in property speculation.”
AREAS SERVED BY RENTAL LOAN PROGRAM
The 27 cities participating in the L.A. County Rental Rehabilitation Loan Program include Agoura, Artesia, Azusa, Bell, Bell Gardens, Claremont, Commerce, Cudahy, Duarte, Gardena, Hawaiian Gardens, La Mirada, La Puente, La Verne, Lancaster, Lawndale, Maywood, Monrovia, Palmdale, Paramount, Rosemead, San Dimas, San Fernando, San Gabriel, Santa Fe Springs, Signal Hill and South El Monte.
In addition, the program is also available in unincorporated areas of Los Angeles County. If your Los Angeles County property is not located within the limits of any city, it is in an unincorporated area.
They include the communities of Acton, Alondra Park, Altadena, Arcadia islands, Athens, Avocado Heights, Castaic, Charter Oak, Covina islands, East Antelope Valley, East Carson, East Compton, East Los Angeles, East Pasadena, Florence, Glendora islands, Hacienda Heights, Inglewood island, La Crescenta, La Habra Heights, Lennox, Little Rock, Newhall, North Claremont, North El Monte islands, Quartz Hill, South Antelope Valley, South San Gabriel, South San Jose Hills, South Whittier, Sun Village, Valinda, View Park, Walnut Park, West Carson, West Compton, West Hollywood, West Pomona, West La Mirada, West Whittier, Whittier Narrows and Willowbrook.
If you are not sure whether your rental property is eligible or is located within our service area, please call the Rental Rehabilitation Loan Program at (213) 260-2119.
