
Aaron Gornstein – New units ‘costly
A Senate bill to preserve the affordability of “expiring use” housing units in Massachusetts has pitted tenant organizations against real estate interests in ways unseen since the end of rent control.
Sponsored by Democratic Sen. Steven Panagiotakos of Lowell, S.634 would allow municipalities to place local ballot referenda to preserve the affordability of approximately 24,680 units built from the 1960s through the early 1980s with Department of Housing and Urban Development-subsidized mortgages, low-interest loans, tax credits and other federal programs whose 20-year Section 8 contracts are due to expire within five years or which are subject to market-rate conversion when their federal mortgages are prepaid.
Loss of these units would affect thousands of elderly and handicapped tenants and low-income families, all earning less than 50 percent of the median state income, according to Michael Kane, director of the Massachusetts Alliance of HUD Tenants, the organization that wrote the bill. It was written in reaction to the loss of 5,200 affordable units, including the Salem Heights development, as a result of congressional legislation in 1996 that liberated their for-profit owners from federal regulatory agreements once HUD-insured mortgages were prepaid.
“The market’s so strong, many property owners want to opt out of these programs,” said Panagiotakos. “All statistics have shown that the senior population is going to be larger and larger, and people are going to be on fixed incomes, which do not increase as the market does. If we lose affordable and protected units, you’ll see a terrible crisis of senior homelessness.”
“I don’t want that kind of disruption in my life, so I definitely support the bill,” said Annette Healy, a fixed-income elderly resident of Reservoir Towers in Brighton, whose Section 8 contract expired in 1999 but received a five-year renewal.
“If the elderly and disabled have to relocate outside their community, they’ll be away from hospitals and support systems they’ve had,” said Dennis Heaphy, a quadriplegic resident of Boston’s Section 8-subsidized Symphony Plaza East and West and a member of the Symphony Tenants Association. “The bill would give the community the opportunity to vote and decide whether or not subsidized and low-income buildings should stay that way. It gives people a voice in the system.”
Real estate industry spokemen, however, find S.634 dangerous. “It violates Question 9, and we’re afraid that if they let a little of it [rent control] back in, it’s a slippery slope,” said Skip Schloming of the Small Property Owners Association, the organization that spearheaded the 1994 ballot question ending rent control statewide. “We’d have local rent boards with highly mobilized tenants all over the commonwealth … It’s not about existing tenants, it’s about capturing buildings long-term.”
Panagiotakos, who supported Question 9, said S. 634 would apply to units that were exempted from the referendum. “Rent control placed constraints or mandated rents on privately owned and financed units, whereas this legislation would only protect rents in privately owned but publicly financed units,” he said. “Public money was used to develop the units or keep them going, and therefore there is a public nexus that should allow us to place on a ballot in a local community whether they want to protect these rents.”
“What’s going to happen to these properties if this ill-conceived legislation is enacted is lack of maintenance, because rents will be capped by local government,” said Ed Shanahan, president of the Greater Boston Real Estate Board. “It says we should allow local communities to impose rent control on all of these properties that were formerly government-involved … The deal from the ’60s and ’70s was, once they maintained these properties as affordable, [after the expiration] the option would be the owners’ whether to continue to maintain these properties as affordable or take them to market [rates].”
“That’s not only an 18th-century concept, it’s a license for greed,” said Kane. “These buildings were built with taxpayers’ money and tenants’ rents, so if the public wants to preserve its investment in affordable housing, it has the right to do so.”
The GBREB endorses the “enhanced sticky voucher” program passed by Congress in 1999, which would, in theory, entitle Section 8 tenants displaced from expired-use apartments to a rent subsidy up to a prescribed limit in market-rate units. “That’s the point that’s being missed in this debate,” he said. “I understand how it benefits advocates to stir up emotional discourse from this. It blurs reality and the facts.”
Not so, say S.634 advocates. “The major problem with ‘voucherization’ is no one’s obligated to take these vouchers, so there’s no guarantee they’ll be able to find housing,” said Heaphy.
“It’s a federal government program, and I don’t think the money is going to be there for it,” added Panagiotakos.
Shanahan mentioned the Massachusetts Housing Finance Agency’s “friendly pre-payment program,” in which expiring use property owners prepay their mortgages with new mortgages that require them to preserve the affordability of 20 percent of the units for at least 30 years. The MHFA also runs low-income tax credit and refinancing programs that maintain 100 percent of a development’s affordable units. Symphony Plaza’s affordability has been preserved for 30 more years through these programs, according to Colleen Duffy, director of external affairs for MHFA.
“We have mortgage financing on these properties that could be jeopardized [by S.634], because we have underwritten them with increasing net operating income that would be based on market-rate conversion that could occur,” said Duffy. “If municipal rent control were imposed, it would be hard for us to meet the underlying assumptions of mortgage financing.”
More Legislation
An additional bill heard before the Joint Legislative Committee on Urban Development on March 14 would allocate $35 million from the state budget to enable nonprofit organizations and housing authorities to purchase expiring use properties from private owners to keep them affordable. The Citizens’ Housing and Planning Association has endorsed that bill, on the grounds that state funding to acquire and renovate the properties would be more cost-effective than new housing construction.
“If we lose the units, we’d have to build more affordable housing, which is costly,” said Aaron Gornstein, executive director of CHAPA.
“We would support [the bill] because it’s not asking the owner to take less than the fair market value,” said Shanahan. “If the nonprofit can match that offer, and it’s up to you as to who you want to sell to, that’s the market working.”
A bill sponsored by state Rep. Alice Wolf, D-Cambridge, would require expiring use property owners preparing to pay off their mortgages and convert their units to market rates to give tenants and local housing authorities 120 days’ notice. The bill would also give local housing authorities the right of first refusal on the properties, in an attempt to preserve their affordability.
The bill was drafted in response to Gov. Paul Cellucci’s 1998 veto of home-rule legislation allowing municipalities to regulate rents in expiring use buildings. “Rep. Wolf’s bill goes in a different direction,” said Shanahan. “It doesn’t give communities the ability to punish owners for fulfilling their contractual rights.”
“Being a bill that doesn’t cost much money and doesn’t have extensive regulation with it, I’m confident it’ll move forward,” said Wolf. “I also hope other bills can move forward, so we can have a spectrum of protection.”