By Niki Cervantes
Staff Writer

April 26, 2016 -- Nearly a quarter of all low-income HUD rental buildings in Santa Monica will be at risk in the near future, as federal loans come due and owners decide whether to continue current operations or move to sharply higher market rates, according to a new City report.

A dozen Santa Monica apartment buildings are on the at-risk list reported April 18 by City housing officials. Combined, the buildings include 1,014 units – or 23 percent of the 4,567 units subsidized by the federal Department of Housing and Urban Development (HUD) in the city.

Nearly all of the units are home to senior citizens or the disabled, the report issued Wednesday said.

Five of those buildings – totaling 628 units -- are deemed by officials to be most immediately at risk because their agreements (or covenants) and financing as low-income housing are coming to an end, and whether they’ll continue is uncertain, City officials said.

Only two nonprofit groups responsible for three at-risk apartment buildings have expressed a commitment to staying affordable over the long haul, according to the report to the City Council by Lisa Varon, a senior City development analyst.

The future is less clear for the rest of those on the at-risk list. The owners can prepay their government mortgages or opt not to be renewed for rental subsidies, both of which can open the door to conversion to market rates.

The most immediate problem is at the 24-unit Ocean Park Villas, with its HUD Section 8 contract expiring in 2019. Four others over the next 15 years also become endangered -- Barnard Park Villas, Geneva Plaza, Santa Monica Christian Towers and Westminster Towers, the report said.

City officials do have purchase options on some of the at-risk properties, including a buy option of $1.5 million for Ocean Park Villas and another for $1 million for Barnard Park Villas, which faces possible conversion in 2023.

If the City purchases the properties, it would arrange for other entities to manage them, Varon said.

Santa Monica’s housing market in general is extremely tight, with high demand also driving some of the highest rents in Southern California.

But the housing shortage is far worse for the poorest renters, a problem that plagues most of Los Angeles County. Waiting lists are sometimes so long many of the neediest say they don’t bother applying.

The City of Santa Monica Housing Division received more than 33,000 applications in 35 hours last year for the Master Wait List for all types of affordable housing, including Section 8 vouchers from HUD, according to the City’s website.

As part of its General Plan, the City decided in 2013 to try to make sure its remaining stock of HUD housing is not increased to market rates.

All 12 properties on the City’s at-risk list use a combination of loans and rental subsidies to provide affordable rents. To be eligible, potential renters must live on incomes at or below 50 percent of the $58,252 per person median income for the area.

Varon said her report is part of the effort to keep Santa Monica’s HUD housing intact.

“It’s an ongoing issue the City Council has asked us to keep an eye on,” she said. “The City wants in-depth information and to ensure that it HUD-funded units stay affordable.”

The report makes note of a rare happy ending in the effort to save subsidized housing that took place at Neilson Villa, a subsidized complex on 3100 Neilson Way. Most of the elderly tenants there were about to lose their units last year when owners said they were paying off the mortgage and jacking rents to market rates.

A deal between the City, HUD, the owners and others allowed the enhanced vouchers that tenants were using to be converted to Section 8 vouchers administered by the City Housing Authority. The new “Project-Based Vouchers” saved residents about $215 a month on average. ("Santa Monica Seniors Get Big Rent Break for New Year," January 4, 2016).

Under the agreement approved by the Council last August, the City secured 55 years of affordability at the complex, established an affordability reserve and helped with rehabilitation work.

The near-miss with Neilson Villa “provided the City an early blueprint for Santa Monica’s preservation strategies,” the report said.