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Lost in America: Low-Rent Housing

June 12, 1988|W. John Moore | W. John Moore is a staff correspondent for the National Journal.

WASHINGTON — The winners and losers are easily distinguished. As home owners reap enormous economic rewards from booming property values, low-income renters find their situation deteriorating. "America is increasingly becoming a nation of housing 'haves' and housing 'have-no" William C. Apgar Jr., director of the Harvard University and Massachusetts Institute of Technology Joint Center for Housing Studies, warned a Senate panel last year.

For more than a decade, the median income of renters has declined while rents have soared, up 25% in the West between 1981 and 1986, according to the Center for Housing Studies. From 1974 to 1983, more than 2 million units renting at less than $250 per month were abandoned or converted into more expensive housing.

Nor do recent housing trends offer much relief to lower-income renters. The trickle-down theory of economics flops miserably when it comes to housing. Despite the increasing level of housing construction and more rehabilitation of existing units, the supply of low-income housing continues to decline. Federal housing policy conspired against the poor and the elderly. The 1986 Tax Reform Act ended the tax break for investors in rental properties. The Department of Housing and Urban Development budget went from $35.8 billion in 1980 to $14.7 billion in 1987; spending on new federal housing-assistance programs was cut more than any other Reagan Administration program.

Despite widespread concern about the plight of the homeless, the adequacy of rental housing for the poor and the elderly generated little publicity and less discussion in this presidential election year.

Yet another crisis for low-income renters looms. By 1995 as many as 1.5 million privately owned, government-subsidized rental units could vanish from the nation's inventory of low-cost housing, according to a 1988 report by the National Housing Preservation Task Force. Physical deterioration could ruin as many as a third of those units. The remaining million in private buildings receiving federal assistance would be lost through conversions or default, the study said.

No black hole will swallow up these rental units. Despite federal subsidies, these units are privately owned. In the early 1960s, President Lyndon B. Johnson and his housing advisers created a public-private partnership to build hundreds of thousands of rental housing units. The sweetener in the deal for the private developer was an agreement that after 20 years the owner could pay off the mortgage and either raise rents or convert to expensive condominiums. The end of a rental subsidy program will only exacerbate housing problems for the poor and elderly living in many of these privately owned units.

Officials at HUD have maintained that the problems are exaggerated because many owners will, for economic reasons alone, decide against prepayment of the mortgages. But the National Low Income Housing Preservation Commission, in a report released in late April, reached a different conclusion. More than 500,000 of these federally subsidized units will be lost without a $17-billion transfusion of federal money. Even that amount, the report added, would only be a stopgap measure, not a solution. And 70% of the tenants in these units have incomes of less than half the median for their area; they cannot afford housing without government help, the report said.

The hotter the housing market, the more units will be lost as owners realize Gargantuan profits from their 20-year investments. The immutable laws of real estate apply most dramatically in California. HUD estimates of the number of units that may be lost is considered extremely low compared with other studies. But 36% of all units HUD considered most likely for conversion are in California, with most of the low-income housing in either Los Angeles or San Diego.

The California Senate Office of Research has identified 117,000 eligible units subject to either mortgage prepayment or loss of rental subsidy over the next 20 years. By the end of 1989, 22,248 units could be lost, with 12,000 of those units now rented to senior citizens. Los Angeles County alone has almost 39,000 units of subsidized rental housing apartments that could disappear in 20 years.

Some limited efforts have been made to defuse this time bomb. A federal housing bill allows HUD to delay a developer's prepayment until 1990--unless the owner can show that the tenants would not suffer any economic hardship and that there is an alternative supply of low-income housing nearby. No building owners in Los Angeles are expected to be able to pass those tests, given the tight supply of low-income rentals. HUD officials also believe housing vouchers will safeguard tenants from some of the ill-effects of conversion. But in high-rent Los Angeles, housing vouchers won't cover the prevailing market-rate rents.

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