U.S. to Boost Low-Rent Housing Subsidies

By DARYL STRICKLAND

May 1, 1999 12 AM PT

TIMES STAFF WRITER

Alarmed by a shrinking number of subsidized units for poor families, the nation’s major housing agency said it will boost subsidies in an effort to preserve thousands of low-income rental units throughout Orange County and Southern California.

The Department of Housing and Urban Development said it hopes the higher subsidies will curb the growing number of property owners who are pulling out of the subsidy program in favor of the higher rents of the open market.

HUD will spend $30 million more on subsidies nationwide in coming months, agency spokesman Lemar Wooley said. The money will be earmarked for units considered most likely to be removed from the program.

The state’s largest group of apartment owners said it has lobbied HUD to raise subsidy levels, thereby encouraging landlords to stick with the federal program.

The agency’s Section 8 subsidy program had been popular with property owners because it helped them maintain an income stream during the state’s economic downturn earlier this decade. But they have now turned away from Section 8 because federal payments lag far behind rising rents in the open market.

Without HUD stepping in, “it would have been disastrous,” said Tom Bannon, executive vice president of the California Apartment Assn., whose 20,000 members own 1.5-million rental units throughout the state.

Over the last five years, the number of members participating in HUD’s program has shrunk from about 50% to just 25% because of inadequate subsidies, he estimated.

HUD contracts covering 78% of the 115,000 subsidized units in California, about 89,000, will expire over the next five years. That portion is about the same in Los Angeles and Orange counties--some 75%. In Ventura County it’s more than 80%. When the contracts expire, the property owners will have the option of renting out their units on the open market.

The new HUD measures come at a time when the surging economy has pushed home ownership to the highest levels in history. More than two-thirds of Americans own their homes. Still, the economic recovery has created an affordable-housing crisis: Scores of families cannot afford to pay rents on the open market.

In Orange County, the rent for a typical apartment has risen steadily to $983 a month, the highest rate ever, according to RealFacts, a Marin County research firm.

But HUD found that 54,000 Orange County households have incomes of $32,900 or less--and that’s considered an impoverished level in this county. Typically, these people pay more than half of their incomes for rent or live in severely substandard housing.

When the nation’s largest rental-housing subsidy was created 25 years ago, assistance came in two forms: vouchers that tenants can use to find private-market housing and subsidies paid to property owners so that rentals would be available to low-income families. In the latter case, 20-year agreements were signed starting in 1975.

But in recent times, as vacancy rates decreased and rents went up, more property owners have elected to fill their units with higher-paying, unsubsidized tenants.

Over the next five years, two-thirds of the Section 8 contracts will expire nationwide, jeopardizing one million units. Already, 1,000 properties are pulled out of the federal program each month.

But if every unit were subsidized at open-market rates nationwide, the cost would be prohibitive to the government--ranging from $600 million to $800 million, HUD said.

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Housing Subsidies Expiring

With rents climbing, subsidized units for low-income renters have declined, and they could drop further over the next five years. Thousands of subsidy contracts are expiring. leaving landlords clear to put their units on the open market.

Los Angeles

Units subsidized by county: 39,000

Subsidy contracts expiring in next five years: 29,300

San Bernardino

Units subsidized by county: 3,200

Subsidy contracts expiring in next five years: 2,600

Riverside

Units subsidized by county: 3,000

Subsidy contracts expiring in next five years: 1,600

Orange

Units subsidized by county: 4,100

Subsidy contracts expiring in next five years: 3,100