Monday, September 20, 2010

Article: "Affordable Housing "Out of Reach"

A recent report from Multifamily Executive magazine tells of the coming affordable housing crisis from a confluence of factors including neglect of the current stock of older rent-controlled buildings, such as the Norwood. Now, more than ever, it is critical that tenants protect their affordable housing by exercising their rights to demand proper maintenance, and buy their buildings when owners want to sell (under the Tenant Opportunity to Purchase Act, or TOPA).



When it comes to affordable housing, Douglas Shoemaker, director of the San Francisco Mayor’s Office of Housing, has a lot on his plate. Of course, there are the production issues. But that isn’t Shoemaker’s No. 1 concern. Instead, he’s worried about those older, rent-controlled units that San Franciscans are living in today. Many owners of those units are facing financial difficulties, and he is concerned that the city could ultimately lose those homes.

“If we get to a place where it’s clear that the borrower won’t make good on the note, then we will see a disinvestment in the property and a lack of willingness [by the owner] to put basic repairs into the place. They don’t feel they’ll get that money back out,” Shoemaker says.

He’s not alone. In New York, another city with a significant share of rent-controlled units, Denise Scott, managing director for the New York division of the Local Initiatives Support Corp. (LISC), saw a lot of multifamily housing fall offline when owners struggled in the ’70s and ’80s. A recent New York Times story said that of the 200 properties on the New York housing agency’s 2008 list of the most poorly maintained apartment properties, at least 77 were in foreclosure from January 2005 to October 2008, according to “We’re very concerned about the issue of ‘deferred maintenance,’” Scott adds. “Owners start juggling their expenses. In an effort to keep the mortgage current and the taxes current, what’s likely to suffer is the maintenance. We expect to see an uptick in problems with deferred maintenance because of the over-leveraged situations or because the owner is strapped for cash.”

Michelle Norris, chief development officer for National Church Residences, a nonprofit affordable housing owner and developer based in Columbus, Ohio, has already seen what can happen to units in seniors housing when the owner faces financial difficulties. “You can walk down the hall and see rips and stains in the carpet,” she says. “There’s deferred maintenance on the boiler systems and the heating and cooling systems.”

The hope, for now, is that these units don’t altogether disappear. Some may fall offline briefly, but down the road, an opportunistic investor may eventually swoop in and bring them back online, says Richard Moody, chief economist at Austin, Texas-based Forward Capital. “Somebody else might buy them at sharply reduced prices,” he adds. “There are too many factors that come into play to make an assumption about a likely outcome.”

—Les Shaver (Multifamily Executive)

1 comment:

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