Housing Plan Would Emphasize Renovation : Renewal: Officials want to spend $20 million a year to help buyers acquire ailing property for low-cost units.
As part of a new campaign to save neighborhoods and house more poor people, the Los Angeles Housing Department wants to help buyers take advantage of today’s cheap prices for apartment buildings to acquire and rehabilitate some of the city’s worst slum properties.
The department is proposing to lend private investors and nonprofit groups money to buy and restore graffiti-scarred buildings taken over by drug dealers, boarded-up hulks occupied by transients, and properties given up by owners who bailed out on their debts.
Although the city already has loaned money for a few such projects in the past, housing officials now want to spend $20 million or more in federal funds annually on the strategy, making it a key element of efforts to close the gap between supply and demand for low-income housing.
It is estimated that 100,000 Los Angeles families must share quarters with others, and another 150,000 spend more than half their income on rent.
In the past, market conditions have made it more economical to construct new buildings to close that gap. But the current unprecedented bust in the long boom for rental housing has caused foreclosures in growing numbers and sent values tumbling as much as 50%, making it possible to snap up bargains all over the city, but especially in low-income neighborhoods.
TRW Redi-Data, a real estate research company based in Riverside, reported that already this year foreclosures of apartment buildings and duplexes countywide are up by more than half compared to 1992. TRW market analyst Nima Nattagh also found that foreclosed buildings were selling for about 20% less than the amount of their loans and one-third less than assessed value.
The City Council Housing and Community Development committee will review the shift in strategy Monday as part of an update of the city’s housing affordability policy. The full council’s endorsement is necessary to borrow federal housing funds.
“What we’re looking at is an opportunity to do more numbers,” said Housing Department General Manager Gary Squier. Buying and fixing a run-down building now can cost a third or even less than building one from scratch, he said.
For example, A Community of Friends, a nonprofit group that specializes in housing for the mentally ill, took out a city loan recently to buy and convert a long-abandoned bathhouse in Boyle Heights to apartments. The building sold for about $800,000, about half the asking price of two years earlier.
A total of 160 units in four buildings already are being rebuilt under the proposed strategy, which still must go to the Los Angeles City Council. The rent for those apartments, many of which were either vacant or unlivable when acquired, will be affordable because the new owners were given discounted interest rates and favorable repayment terms. For example, a family of four with an income of $24,150, or half the county median, is expected to pay $513 in rent.
Not all housing experts agree on how much money the strategy shift would save. And other agencies that produce low-income housing, such as the Community Redevelopment Agency, are not immediately falling in line with it.
Some also question whether acquisition and rehabilitation makes sense as a citywide affordable housing strategy because apartment buildings vary greatly in quality and quantity from area to area.
City Councilman Mark Ridley-Thomas, chairman of the committee that will review the proposal Monday, said, “It is not a done deal at this point.”
He said he favored a “balanced approach that would . . . maybe accelerate the rehab but pay close attention to how we get new units built.”
All agree, however, that the housing stock in a growing number of neighborhoods is decaying, even in some formerly stable areas such as North Hills, Van Nuys and Hollywood.
“Some multifamily neighborhoods are in a real tailspin because of the impact of gangs and drugs and the increasing numbers of bankrupt properties and lost cash flow,” Squier said. “All of these factors are converging simultaneously in some neighborhoods . . . sometimes in the middle of otherwise good neighborhoods.”
Worried that such trends will worsen the city’s shortage of low-income housing, Squier created a Neighborhood Recovery Program this past summer. The program is aimed at organizing city services to attack blatant drug selling, mount a crackdown on slumlords and try to create jobs for residents. In addition, program staff members will work to enlist tenants and owners in the cause of neighborhood improvement.
“We’re willing to be the department that takes the lead in renewing these neighborhoods, even if we get out of our traditional role of just doing housing, because it’s just that important,” said Sam Luna, who heads the new neighborhood recovery program. “We’re at war against decline.”
One housing department target is North Argyle Avenue, a slice of down-on-its-luck Hollywood just blocks away from posh hillside homes, including a castle that is under construction. Using a city loan and other sources of financing, the Hollywood Community Housing Corp. has purchased one building there, a cancer of crime at 1934 N. Argyle Ave.
Only a block from the freeway, the building attracted small-time pushers ready around-the-clock to offer their goods to families walking to the supermarket as well as junkies needing a cheap buzz. Then, last January, bullets from a passing car killed one and wounded another of the building’s residents.
Fear drove away many of the remaining rent-payers, the owner stopped paying the mortgage and the 70-year-old, two-story building became one of five on that block taken back by lenders, city officials said. The housing group took over in June and it is now vacant, except for an on-site manager.
“It was a jungle; you have no idea how bad it was,” said Enrique Noguera, president of the community housing group. If all goes well, the building will be remodeled and its 21 studio and one-bedroom apartments rented to low-income senior citizens by next summer. The project’s cost is expected to be about $50,000 per unit.
“There’s a contagious effect” of such efforts, Noguera said. “When you start fixing up one building, other owners will start doing the same.”
But rather than rely on housing projects alone to revitalize neighborhoods, city officials want to make them part of multifaceted neighborhood recovery plans. The department is planning to test that approach in parts of Boyle Heights, Pico-Union, Mid-Wilshire, South Los Angeles, Venice, Van Nuys, Sun Valley, Northridge and Hollywood.
Tony Swan, whose property management firm handles buildings in several low-income areas of the San Fernando Valley, has been pushing the city to begin such efforts for nearly a year. He also has argued for the shift to fixing existing buildings. Already, he said, areas such as North Hills have vacancy rates of 15% or more, leaving some apartments vulnerable to squatters while two or three families squeeze into others.
Swan said the city or banks or both should give current owners a financial break. “If you reduced their mortgages, owners would reduce their rents and instantly provide affordable housing,” he said.
Sherri Franklin, program director for the Concerned Citizens of South-Central Los Angeles, a nonprofit group that has used city loans to build or rehabilitate nearly 100 housing units, said that part of the city needs at least some new construction.
Demand for three- and four-bedroom apartments outpaces the supply in that area by 4 to 1. Enlarging apartments would be costly and would actually reduce the number of affordable housing units. “We have to find a way to support more new construction,” she said.
Whatever the elements of neighborhood recovery efforts, the stakes, as well as the odds against success, are high.
That’s seen in the dilapidated brick buildings near the intersection of West 11th Street and South Lake Street in the Pico-Union area. One building owner, expressing the sense of hopelessness rife in the area, painted in neat blue and white block letters on a back wall: “U.S. Government and City of L.A. Have Abandoned This Area.”
The area has one of the highest crime rates in the city, with assaults occurring at a rate of nearly one a day. Raw sewage flows in the gutter. Although apartments can be had for less than $400 a month, some of the buildings in the area are more than half vacant. Meanwhile, homeless people have set up elaborate quarters, complete with radios, fold-out couches and mirrors, in the alleys.
Although plans are still preliminary, Luna said the city might become partners with a private developer to buy and renovate 10 or more buildings in the area. But he said the city must work to make the streets safer and attract jobs.
Unless the problems of such areas are addressed, many areas of Los Angeles, once insulated from blight by a buoyant economy and even more buoyant real estate values, could soon look like the urban ghost towns of the South Bronx and parts of Newark, Detroit and other Rust Belt cities, some experts said.
Allan Heskin, a UCLA professor of urban planning, said much of the housing in those cities was abandoned when middle-class residents moved away, and the percentage of poor people unable to pay high rents increased.
He said areas of Los Angeles, such as around the now-vacant General Motors plant in Van Nuys, already are being hollowed out as owners walk away from half-empty buildings with high mortgages and daunting repair costs. Eventually, he said, whole neighborhoods could die. “It’s real scary,” Heskin said.
That process, known as disinvestment, is well under way along Kenmore Street in the Mid-Wilshire area. Many of the small 1940s-era apartment buildings there are still well-kept, with tiny but neatly tended front lawns. But the facade of fading prosperity belies the economic ruin owners face.
Most of the buildings have numerous vacancies, most are for sale and some already have been taken back by banks.
Two sooty buildings in the 200 block, where 6-foot-high spray-painted letters declare them to be 18th Street gang territory, are apparent headquarters for drug trade that is driving tenants away.
The owner of a nearby building, who asked not to be identified for fear of retaliation, grumbled that he has lost tens of thousands of dollars in rent because half of the apartments in his neatly kept eight-unit building have been vacant for most of the past year.
Several years ago he turned down an offer of $400,000 for the building. More recently he listed it at $350,000 but got no offers.
He has mixed feelings about a city cleanup plan that would likely include forcing the sale of the two eyesores to new owners.
“If they clean up the drugs and they want to help the buyers, then fine, I’m for it. But they should help the rest of us and recognize the money we’ve lost,” he said. “If I was younger . . . I’d put a couple of thousand dollars into a pot and sue the city for neglect.”
