Quake Repairs Fall Behind in Poor, Old Neighborhoods : Recovery: U.S. loan policies slow effort. In some areas, less than half the affected buildings have gotten permits.

The repair of Northridge earthquake damage is humming toward completion across much of the San Fernando Valley while it is falling behind in older, poorer areas of Los Angeles, building records show.

Hampered by federal loan policies that work against economically depressed areas with low property values, the recovery has stalled in scattered neighborhoods from Hollywood to south of the Coliseum, a Times computer analysis of federal loan statistics and Los Angeles city building permits shows.

Among the signs of lagging recovery in older parts of the city:

* Twenty months after the earthquake, repair or reconstruction permits have been taken out for fewer than half of the red-tagged and yellow-tagged buildings in large parts of Hollywood, East and Northeast Los Angeles and South-Central Los Angeles. In contrast, across the San Fernando Valley, permits are on file for 70% of all red- and yellow-tagged buildings. (A red tag signifies that a building is unsafe to occupy and a yellow tag that part of it is unsafe).

* In many of those older communities, many office buildings, apartments and houses that were not red- or yellow-tagged have nonetheless been vacated or demolished, and the land simply left vacant or put up for sale.

Particularly hard hit is the northern portion of the Crenshaw area of Los Angeles, where dozens of heavily damaged structures--most of them outside the area’s only designated “ghost town”--remain just as they were in January, 1994, raising the specter of long-term blight.

On one block of West Boulevard, about a quarter of a mile east of the three-block West Adams ghost town, the walls of an abandoned three-building bungalow court are propped up with old lumber, and two other vacant buildings are fenced and boarded, with no apparent progress toward reconstruction.

Similar buildings dot streets in both directions over a two-mile stretch, with repairs just getting under way on some while others remain derelicts.

“It’s getting to be chaos,” said a contractor who has several earthquake jobs under way in the Crenshaw district but said he is astounded by the number of damaged buildings still awaiting the first hammer blow.

“People are walking away from the properties because they can’t do anything. They can’t get rent, they can’t pay the mortgage, the bank won’t do anything.”

The San Fernando Valley also has scattered pockets where repairs are slow getting started. With the exception of the large “ghost towns” areas singled out for special government attention because of concentrated earthquake damage, these too are concentrated in older, less affluent neighborhoods such as Pacoima and Canoga Park.

Rigorous Guidelines

Across the city, disparities in the speed of recovery correspond closely with rejection rates for U.S. Small Business Administration recovery loans. In 15 ZIP codes in central, south and southwest areas, more than two-thirds of all SBA applications were denied or withdrawn--primarily because of insufficient earnings--and the average rejection rate for the central city was 57%, compared to 45% in the San Fernando Valley.

Although SBA loans constitute the primary form of long-term federal recovery assistance, they are intended to be repaid, and rigorous qualification guidelines are applied to protect the public’s money, officials said.

“That’s disgraceful,” City Councilman Nate Holden, who represents Crenshaw, said of the sluggish progress. “This is a housing stock that should be providing shelter for the needy. Two years is much too long.”

Los Angeles housing officials insist that they have assembled an adequate safety net of federal housing grants to help those rejected by the SBA and that they have not neglected older neighborhoods.

So far, $177 million has been loaned from the city’s $300-million fund, enough to repair 9,000 units, said Robert Moncrief, director of housing development for the Los Angeles Housing Department. Loans for another 7,200 units will be made by next June, he said.

Though a large portion of those low- or no-interest loans were earmarked for the areas designated as ghost towns, almost all of them in the Valley, the Neighborhood Preservation Program has directed $52 million to owners outside the ghost towns, said director Solomon Banks.

Almost no one has been rejected for bad credit, Banks said, and only unusual circumstances would disqualify an applicant.

“It may be the owner doesn’t want to rebuild,” Banks said. “He just wants to let it sit there and demolish it and rebuild at some future time. Or there may be title problems. There may have been judgments. It probably went into foreclosure and the bank hasn’t been able to sell it again. But it certainly wasn’t for lack of resources to repair.”

The city’s loan program has some built-in delays, however. Property owners must be denied by the SBA before they can turn to the city, a process that often stretches over a year or more. Moncrief said the city didn’t start receiving applications until last summer and they are still coming in. He said $20 million will be held in reserve to ensure funds for late applicants.

To lessen the delay, Holden proposed that the city and the SBA process questionable loans concurrently. “What we ought to do is have the city pick it up and in the cases when they do qualify for SBA, have the federal government take it over,” he said.

Contractors complain too that they don’t get paid until after the work is performed, causing them to carry labor and material costs.

“They were so eager about getting that [Santa Monica] freeway open,” said one contractor who complained that he has worked two months on a major construction project without a payment. “I think they should be just as eager about people getting back into their homes.”

Also, because of general economic ills, a high percentage of damaged south-side buildings fall into precisely those categories Banks named that preclude the owners from getting city loans.

The zigzag course such stories can take is illustrated by the cracked and buckled apartments in the 4000 block of West 28th Street. Ana Padilla and her family are the only occupants left in the yellow-tagged complex whose stucco walls are crumbling.

Quaker City Federal Savings and Loan Assn. took the property back under foreclosure in September and sold it in December. The buyer then put it back on the market.

“A lot of people come. They tell us they’re not the owners,” said Padilla’s daughter, Janet. “They’re planning on buying it. They look at it and that’s it.”

It appears that the building has finally sold this month. Evan Kristol, an associate for the brokerage firm Marcus and Millichap, said he has closed a deal with a church group that has obtained a city loan to build low-income housing.

Kristol sees the slow recovery of the inner city as a matter of economics.

Kristol said there was a huge market for earthquake-damaged properties, but “all the good stuff in the Valley was gobbled up in a second. . . . The properties in the city were sold, but they weren’t sold as fast. They’re in less desirable areas.”

Now that the market has dried up, investors are looking at the tougher properties, Kristol said.

Still, some owners are just hanging on, preferring to work with the system no matter how long it takes.

Winston Moss said he has yet to complete his application for an SBA loan to repair his red-tagged apartment complex in the 2600 block of Wellington Street.

Moss said he has been told his application will be better received if he comes up with a plan to turn the unreinforced, but retrofitted, brick building into a home for troubled youth. He’s working on that but isn’t optimistic.

“I know a lot of people whose credit is better than mine and got turned down, but I’m going to try anyway,” Moss said. “If I don’t get anything from anybody, I’ll just make the best move, try to sell as is or tear it down and build something that makes sense like a wood frame place.”

Housing officials say Moss is the kind of owner they can help, but they have no way of seeking him out until he is rejected by the SBA.

“We don’t have a marketing tool that we go out citywide,” Banks said. “We have to go out to the people who’ve been denied.”

Vacant Buildings

Eventually, the Los Angeles Department of Building and Safety will force the owners of all red- or yellow-tagged buildings, as well as others that were green-tagged but have serious damage, to repair or demolish them.

Officials are tracking about 1,800 damaged buildings--400 to 500 of them vacant--on which no repairs have been made, said department spokesman Nicolino Delli Quadri.

Starting with the most heavily damaged, community safety officers are turning derelict properties over to authorities for abatement.

But tens of thousands of earthquake-damaged buildings will escape the enforcement process, Delli Quadri said. Although the code requires the repair of even minor stucco cracks and leaking roofs, the immense volume of earthquake damage has overwhelmed department staff.

“There are a horrendous number that need permits,” Delli Quadri said. “Many of them we haven’t even tracked.”

In those cases, inspectors will take action only if someone complains.

And, once a building is boarded up, fenced or demolished, the Building and Safety Department can do nothing to remove the blight it causes.

“That can go on indefinitely,” Delli Quadri said.

Consequently, some neighborhoods, such as a two-block stretch of Rimpau Boulevard in the West Adams ghost town, will bear pockmarked reminders of the earthquake for years to come.

Two new houses are rising there, replacing old ones damaged beyond repair in the earthquake. But three other lots remain vacant and fenced and a fourth house--a turn-of-the-century Craftsman that partly collapsed during the earthquake--remains unchanged except for the tall fence encircling it.

Neighbors said the owner, an elderly man, suffered a stroke and moved to Las Vegas. An elderly woman down the street moved to Santa Barbara after razing her house, they said.

They did not know why the other two owners demolished their houses, or where they went.

Times staff writers David E. Brady, Lucille Renwick and Martha L. Willman contributed to this story.

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Delayed Recovery

Despite suffering only a small percentage of the damage in the Northridge earthquake, the older, poorer neighborhoods of the Los Angeles basin are falling behind the San Fernando Valley in the recovery. Inability of property owners to qualify for SBA loans, the primary form of long-range recovery assistance, corresponds closely with a lack of progress on repairs.

Red- and Yellow-Tagged Buildings

In several ZIP codes of central and south Los Angeles, the owners of 55% or more of the red- and yellow-tagged have still not taken out permits to make repairs or rebuild. Across most of the San Fernando Valley, permits are on file for 70% or more of the red- and yellow-tagged buildings.

SBA Loans

The percent of applications rejected or withdrawn is highest in ZIP codes in Hollywood, the west central city and along the Harbor Freeway corridor, the same areas where repairs are lagging. The lowest SBA rejection rate is in the West San Fernando Valley.

Sources: L.A. Department of Building and Safety, Small Business Administration