A Win for Affordable Housing? Not so fast.

By reading the headline of Ansel Herz’s story in The Stranger back in July about an apartment building in the Central District, you’d think that the scrappy Socialist party lead by the Tenants Union and Councilmember Kshama Sawant looked a greedy developer square in the eye and that the developer blinked. A private buyer had been found for a building owned by the Central Area Development Association (CADA), a building that had an affordable covenant on it that was about to expire. But just this week Herz corrected the story.

It appears that it was all a misunderstanding. Back in February, the city’s Office of Economic Development told Council Member Nick Licata, in response to his written questions, that the new owner of Squire Park would not have to abide by the building’s minimum affordability requirement. Since the building was built with the help of taxpayer money, that requirement, also called an affordability covenant, mandates that 51 percent of its 60 units remain affordable to those who make 80 percent area median income. (That’s $44,750 a year for a single person.) Licata’s office circulated that information to other city council members.

CADA and the OED wouldn’t tell me who the prospective buyer was, but it’s certainly possible, given the mayor’s statement, they were misinformed as well.

“That was a staff mistake,” says OED director Steve Johnson.

The city agency, whose mission is “to create a robust economy and broadly shared prosperity,” didn’t correct the error for months—until mid-to-late June, according to spokesperson Karin Zaugg. By then, they’d realized that the affordability covenant would remain in effect, regardless of the sale, until 2027, and could only be lifted before that date by the city council. Squire Park was built in 2007 on government-owned land with $9.7 million in public financing.

I am pointing this out for a few reasons.

First, it is yet another example of anecdotal alarmism about rents. As I have pointed out here and here, rents change; they go up and they go down (as do operating costs). And yes, sometimes older properties with rents below the market get sold, and in order for the buyer to get a return, rents have to go up. But this isn’t happening all over town. And in this case it wasn’t going to happen. It was all a mistake. But someone pushed panic button, bad information was circulated, and the apartment became a cause celebre for Sawant and others. The truth was much more complicated than the dominant narrative of greedy landlords throwing people out of low income housing.

Second, why wasn’t anyone asking CADA, a non-profit that is supposed to be looking out for the people in their own buildings, why they were selling in the first place? I can’t judge CADA business decisions. I have no idea what was behind their decision to put the building on the market. But why would the press and the community immediately attack a prospective buyer and not question the seller. This is yet another glitch in the greedy landlord narrative. In this case the building had a covenant from government agencies requiring it to operate to support rents for poor people. Why wouldn’t the community be rallied around supporting CADA to find a way to keep doing that instead of trotting out the tired old class warfare saw.

Third, almost every affordable housing project is structured with forgivable loans or conditional grants that require that a building be operated with a strict schedule of rents, in other words, “we’ll give you the money and you don’t have to pay it back if you operate the building at rents that are 40 percent of Area Median Income.” If the non-profit sells the building or the rent structure, then they have to pay the money back. Usually this makes a transfer or conversion infeasible. But all the government agencies doing housing know exactly when these covenants expire — or do they? The goof up in this case is worrisome.

The bottom line here is that purchasers of older properties that have lots of deferred maintenance are not the bad guy! The glaring error and the people the press and the public should going after are the government agencies that allow these crises to develop when they know that they are impending. They know how to read a calendar, right? Councilmember Sally Clark and Housing Director Steve Walker should, by the end of next week, publish a list of all properties that might be facing this issue in the next five years. Then lets all get to work to prevent this from happening every again — even though this time it didn’t actually happen. That would be a win for affordable housing. 




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