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CES In The News

The Dallas Morning News
August 12, 2001
More landlords exit low-income market.  Push for more affordable housing intensifies.

By Russ Rizzo

WASHINGTON - The stock of affordable housing in Texas and around the country is shrinking as landlords chase after hot real estate markets and drop low-income residents, housing advocates say.

Taking advantage of changes in federal policy, the owners of more than 73,000 apartment units nationwide in the last five years have opted out of commitments to provide low-income housing, according to the National Housing Trust.

"Property owners are getting out of it because they can. And the bottom-line reason is almost always economic," said John Henneberger, co-director of the Texas Low Income Housing Information Service. "They want to convert to higher rents and the market rate, or to sell their property to other investors who will use it for other purposes."

Owners are leaving government programs because "the economy's good and the rents are out of sight," said John Bentz, director of the National Leased Housing Association, a trade group that represents apartment owners. Most landlords, he said, are fulfilling their requirements and going after profits no government program can match.

Landlords can end their commitment to provide low-income housing either by prepaying government loans or by opting out of the Section 8 program, which guarantees housing for those who can afford to pay one-third of their income in rent.

Texas has lost more than 10,000 affordable units to loan prepayments since 1996, the second most in the country behind California, the Texas Tenants' Union estimates. Texas also has lost nearly 7,000 other units - the most in the nation - because owners have decided to opt out of their Section 8 contracts.

"We're leading the nation in a way we don't want to be," said Texas Tenants' Union head Sandy Rollins, whose organization tracks affordable housing in the state.

Ms. Rollins and a group of Texas tenants joined more than 400 low-income earners in Washington in June to lobby for more federal spending to preserve the country's affordable housing stock.

Last month, Sen. John Kerry, D-Mass., and 16 co-sponsors introduced legislation that would establish a multibillion-dollar Affordable Housing Trust Fund to finance the construction of new housing and help low-income tenants purchase homes. Similar legislation in the House would fund the construction of 1.5 million new affordable units over 10 years.

The bill's sponsor, Rep. Bernie Sanders, a Vermont independent, notes that the number of people with "worst-case" housing needs - living from paycheck to paycheck - has risen by 12 percent or 600,000 people since 1990.

Establishment of a housing trust fund would have a "significant impact on housing for people with the lowest income in the country," said National Low Income Housing Coalition President Sheila Crowley.

New incentives

Government officials say they already have taken steps to address the affordable housing crunch.

The Department of Housing and Urban Development in 1997 created a program designed to keep owners in the affordable housing market. It allows HUD to pay owners higher-than-market rents under some conditions.

While participation in that Mark-to-Market program was limited starting out, HUD has added new incentives - prompting more owners to provide affordable housing.

"Owners in the past were really waiting around because they viewed what they had to give up as not nearly equal to what they were gaining" entering the Mark-to-Market program, said Charles Wehrwein, vice president of a nonprofit housing developer in Denver. "It's the right movement in terms of recognizing the economics that even nonprofits have to consider."

Even with new incentives to renew government contracts, Mr. Bentz said, some booming markets are a lost cause for affordable housing.

"I think the new incentives are going to definitely help," he said. "You are going to lose certain developments, but don't let the marginal ones go."

The owners of an estimated 50,000 apartment units in Texas are now faced with the decision of whether to cut their ties to the government program or pursue higher rents.

In areas such as Dallas, where apartment occupancy rates are as high as 95 percent, owners are finding residents willing to pay higher rents. As a result, low-income renters either are having to pay higher rents to stay in their apartment or move out in search of lower rents.

When the owner of her apartment complex in North Dallas opted out of an affordable housing contract last year, Gene Hopkins began paying $220 more a month.

A monthly $70 housing voucher helps ease the burden, but Ms. Hopkins said she has a harder time paying the insurance for her truck and other bills on her $1,200 a month salary.

"I'm always drawing late on some of my other commitments," she said recently. "I haven't bought groceries in a while. It doesn't give me a whole lot extra for paying my other bills."

Other Dallas properties also have converted to market or above-market rents in the last three years, with one-bedrooms jumping as much as several hundred dollars a month after the switch.

"I know that there are a lot of property owners who are really scared with the restructuring going on that they're going to end up with units that people can't pay rent on," said Sharon Ewing, property manager of Rolling Meadows, which didn't renew its contract with the government. "That's why they want to gear up and start attracting more middle-class families. And they have been able to."

Effect on renters

Tenants don't feel an immediate impact when properties terminate their contracts with the government. They can stay in their apartment, paying a third of their income in rent, with vouchers from the government covering the remainder of the rent up to the market value. Vouchers are working, says Assistant Housing Secretary John Weicher.

"The purpose of the enhanced voucher is if the owner wants to get off the [Section 8] program, the tenants have protections in place and the option to move if they want that option," Mr. Weicher said.

The problem, some say, is fewer landlords are accepting vouchers once their housing contracts expire.

"We're finding more and more owners refusing [vouchers]," said Larry Gross, who heads the Coalition for Economic Survival, a tenants' association in California.

Mr. Weicher defends the voucher program, saying, "As far as I know, this part of it is working reasonably well."

Some HUD officials and tenants agree that low-income residents in Dallas and other cities with rising property values could face a housing crisis if low-income properties continue to turn to market rates and more owners refuse vouchers.

But there is no consensus on when that crisis could occur.

"It's sort of a slow death of affordable housing that is taking place," Mr. Gross said.

Some voucher holders in Dallas, which has seen rents rise 3 percent to 5 percent annually in recent years, are having to move, HUD acknowledges. And while low-income renters still have places to go to for now, housing officials say at some point the affordable housing crunch will have to be addressed.

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