With only $770 a month in rent to pay, Mariana Puche Hernandez endured mold growing in the bathroom of her studio apartment, even enduring sparks flying when she plugged her phone into an outlet.
Then the 11-unit complex on Simmons Avenue in East L.A. went up for sale and became a prime target for investors looking to renovate apartments and raise rents beyond what residents can afford.
“There was panic,” Puche Hernandez said.
Across the country, the United States is losing thousands of homes affordable Individual investors and large companies buy old apartment buildings to renovate and rapidly increase rents for low-income families. The investments have raised concerns over gentrification, displacement And homelessness.
But affordable housing advocates say there is no choice between renovation and affordable rents. Several models exist to repair older properties and keep rents low – including nonprofit ownership and some bond financing programs. they just want public subsidy and the political will to preserve them or land new ones.
“It’s important to save these units,” said Matt Alvarez-Nissen, a researcher with the nonprofit California Housing Partnership.
That’s because only 16% of low-income California renters own a home where government policy limits rents based on income, according to the partnership. The remainder, 2.9 million families, live in unsubsidized units, subject to the whims of the private market. Rent control laws help keep some of those tenants from seeing huge rent increases each year, but the laws don’t mandate affordability.
While most non-subsidized households have fares That creates a financial burden for low-income tenants, not a significant number. In 2020, the partnership estimated that about 1 million of those units had rents low enough to be considered affordable because landlords set the price at that rate, even though there was no government mandate to do so. .
By last year, the partnership said the number of these “naturally available affordable” units had dropped to about 823,000.
This loss is largely due to the housing shortage, which makes renovating older apartments an attractive investment for tenants who can pay more.
Sometimes, properties are old, but functional. others want serious repairs,
In recent years, wealthy professionals such as doctors and lawyers have invested in renewal Handing over their money to private real estate firms to complete deals, projects.
Big players are also included.
a fresh Times investigation found that American public pensions are investing billions of dollars in risky real estate funds that acquire apartment buildings, renovate them and, on average, raise rents faster than other landlords in the surrounding community.
The money that public pensions use for their investments, including high-risk real estate funds, comes from both worker and government contributions.
As a result, some taxpayer dollars contribute to increasing rents, while other public funds flow to create lower-rent units – mostly by building new, income-restricted homes.
According to the Housing Partnership, there is no state fund in California dedicated solely to purchasing market-rate homes and placing income restrictions on them, even though doing so is generally cheaper than building new homes.
State Senator Anna Caballero (D-Salinas) tried to change that when she introduced a bill last year that would create a community anti-displacement and conservation program. He called for $500 million to acquire and rehabilitate currently unoccupied units and place affordability restrictions on them.
In introducing the bill, Caballero described it as “a fast and cost-effective way to increase the supply of affordable housing in California.” In an interview, he said the bill died this year because the money was not available, partly due to Sacramento’s budget shortfall.
“We just have to identify where the money will come from,” Caballero said. “My work is not finished yet.”
Caballero said she does not support the state Legislature dictating the investments that public pensions can make, but she said retirement systems should look internally at whether they should invest in such high-risk funds. There should be discussion.
“Housing people in California is our priority and we may be working at cross purposes,” he said, referring to the public money spent both raising rents and lowering them.
Destiny Jaramillo, left, waves and smiles at a neighbor in front of her apartment complex on Simmons Avenue, with Mariana Puche Hernandez, right.
(Michael Blackshire/Los Angeles Times)
On Simmons Avenue in East Los Angeles, tenants were lucky.
Instead of private investors, the property was sold to a non-profit partnership that housed Puche Hernandez and other residents in temporary housing. The new owners then repaired the units and fixed electrical, plumbing, and foundation problems that affected the entire property.
The tenants went back inside. fares stayed the same.
Finding funds to complete such projects can be a challenge.
The new owners, the nonprofit Little Tokyo Service Center Community Development Corp. and community land trust Fidecomiso Comunitario Tierra Libre, turned to a county pilot program that sought to support the community land trust model.
In the model, community organizations acquire land to keep off the private market, then rent or sell units on the site at affordable prices.
If residents purchase a unit, the land is typically held in trust. While new homeowners can build up some equity, they face limits on how much they can resell their unit for in order to keep the home affordable for the next owner.
The $14 million pilot program funded the acquisition of eight properties by five different community land trusts. There is no money left for additional acquisitions, but Supervisor Hilda Solis, who proposed the pilot, said she wants to make it permanent in the future.
A dedicated funding source for such efforts will soon be available to the City of Los Angeles measure ulaOften referred to as the mansion tax.
The measure requires one percent of ULA revenue funds to acquire, rehabilitate unsubsidized units, and impose affordability restrictions on them.
Over the next few years, the city estimates about $15 million will be available annually for that effort, which would increase substantially if total ULA revenues grow as supporters hope.
Other options also exist.
A man rides his bike near the Sienna Residences in Pomona, California.
(Michael Blackshire/Los Angeles Times)
In 2021, using a bond financing program, the California Statewide Community Development Authority purchased a 1980s-era apartment complex in Pomona and partnered with a real estate firm to manage the deal.
Before the acquisition, 302 of the property’s 472 units were reserved for very low- to moderate-income households, but those restrictions were about to expire.
Tenants at the property said that gym equipment was often broken; The buildings were fading; And strangers freely entered the premises, sometimes stealing packages.
Since then, the Development Authority of Newport Beach and its private partner Waterford Property Company have spent millions. They repainted buildings, installed new exercise equipment, hired security guards and built parcel lockers for packages.
The property, known as Sienna Residences, also received a new hot water system, which the owners hope will save tenants on utility costs. New rent restrictions were imposed on all units.
“I’m pretty comfortable,” said Bradley Rosales Garcia, who lives in a one-bedroom apartment with his 4-year-old daughter and has the ability to show her around California because of rent subsidies. “Two weeks ago we went to June Lake. On her birthday, I was able to take her to Legoland.
Bradley Rosales Garcia prepares to move out of his apartment at Sienna Residences on August 14.
(Michael Blackshire/Los Angeles Times)
The property’s average rent has increased just 0.6% in the past two years since the sale, according to a Times analysis of bond documents. Nearly half of the units saw a decline in rents during that time.
According to Waterford, rents can be kept low because the development authority owns the property and, as a government agency, does not pay property taxes. The money for the acquisition and rehabilitation of the Sienna Residence came from bonds sold by the agency to institutional investors, offering the opportunity for a public pension if they desired.
Waterford co-founder John Drachman said, “If you invest in projects like this, they might be making a little bit of a diminishing return, but they’re not raising rent on teachers.”
Newport Beach firm has Partnered with CSCDA On 14 other deals to buy buildings and reduce rents. However, all those properties were new, luxury buildings. Rents decreased, but remained high compared to older properties nearby.
Waterford’s other co-founder, Sean Rawson, said the company did not want to acquire an older property in the program until it could better understand how repairs to such buildings would be budgeted, but so far Rawson said Sienna Residences is working on it. Plan created for bond investors.
dispute with some people local tax assessor New projects are on hold for now, Rawson said, but Waterford wants to work with CSCDA to buy more older properties, including those that don’t have income restrictions but will after acquisition. .
“It’s scalable,” Rawson said. He estimated that such deals could eventually generate $2 billion to $3 billion of annual investment for older buildings in California. “We know there will be interest from bond investors.”
