Tenants Face Loss of Homes as Developers Leave HUD Program

CHICAGO — Sylvia Manning moved into her comfortable 16th-floor apartment three years ago. From her living room window, she has a view of Lake Michigan, her neighborhood synagogue and sunsets she never thought she could see in the city.

Because her retirement income is less than $20,000 a year, she qualified for a federal subsidy program that allows her to rent her one-bedroom apartment for $268 a month, a remarkable bargain in Lake View, one of the city’s most expensive rental neighborhoods.

Twenty years ago, Howard Fink, the developer who owns Manning’s building, got a similar bargain. In exchange for agreeing to keep rents down, he received a federally backed 40-year mortgage, tax credits and enough of a subsidy to guarantee a small profit. But because the government made it possible to opt out of the program after 20 years, Fink and other developers are likely to begin refinancing privately next year with terms that will almost surely drive rents up beyond the reach of people such as Manning.

Could Escape Ceilings

By 1995, more than 300,000 units in developments built under programs backed by the Housing and Urban Development Department in the early 1970s could escape federally subsidized rent ceilings. Another 636,000 units rented under Section 8 program rent restrictions also could return to the private market, 12,000 of them next year, according to the National Advisory Council of HUD Management Agents.

In many cases, rents on the open market are double those of the federally protected variety, raising the prospect of thousands of low-income families being forced to find affordable housing just as Congress and a new Administration begin to grapple with critical housing issues again.

Manning belongs to a tenants’ organization that is attempting to stave off the displacement of low-income renters. Similar groups, as well as local and state governments, are waging similar battles. In Maryland, for example, both houses of the General Assembly have approved legislation that would require owners eligible to leave the federal programs to give tenants three-year lease extensions or hundreds of dollars in displacement assistance. State officials there have estimated that 11,000 households could be forced from their apartments by 1992.

“You’re allowed to make only a tiny little return on your money” under the government programs, said Fink, who also manages another subsidized building in the nearby Uptown neighborhood. “Who wants to own a building and not make any money?”

Ann Curtice Rich, director of the Lake View Tenants’ Organization in Chicago, said rents rose 230% in one neighborhood building that paid off its government mortgage before a federal moratorium was imposed. Seventy percent of the neighborhood’s residents are renters.

“I’m getting the strong impression that HUD wants to get out of the affordable-housing business entirely,” said Rich, who spends much of her time counseling elderly residents about their options.

Bill Wylen, a lawyer with Chicago’s Legal Assistance Foundation who has been involved in challenges to the moratorium, blames HUD for failing to preserve the low-income units. “HUD has done nothing in this case we know about,” he said. “They have made no effort to encourage the owners to renew these contracts.”

Two-Year Moratorium

Responding to concerns of housing advocacy groups, Congress in 1987 imposed a two-year moratorium on allowing developers to prepay their federally backed mortgages, a move that effectively blocked developers from raising rents beyond federal limits.

This year, Rep. Henry B. Gonzalez (D-Tex.) has included a renewal of the two-year moratorium in a housing bill. In a Senate housing bill, Sens. Alan Cranston (D-Calif.) and Alfonse M. D’Amato (R-N.Y.) proposed creating an Office of Preservation within HUD but requested no funds for its operation.

HUD Secretary Jack Kemp has been questioned repeatedly by Congress on the issue and has tried to offer reassurance.

“I want to tell those families living in these projects at risk that this Administration is committed to maintaining a housing safety net,” Kemp told the House Budget Committee. “They need not fear that they will lose their housing and become homeless.”

A HUD official said that units considered at risk will be reviewed on “a case-by-case basis,” with special attention given to opportunities for tenant ownership.

But some members of Congress remain skeptical that anything can be done. Developer Fink said he plans to be “sitting at the doorstep waiting to prepay” when his time comes.

The fight to maintain low-income housing is not a tenants’ struggle alone.

“You’ll see, finally, some very strange bedfellows in our fight for affordable housing,” said Brad Paul, a housing expert with the Chinese Community Housing Corp. in San Francisco.

Neither Anne Marie Dennis, a single mother of two sons, nor Conrad Egan, a former HUD official, wants to see the federal programs expire.

Dennis, a resident of the Northgate Apartments in Burlington, Vt., has been the driving force behind the tenants’ effort to buy the complex from owners who were eligible to leave the federal program.

Egan is executive vice president of the Washington-based National Corp. for Housing Partnerships, which owns and operates 500 low- and moderate-income projects with 60,000 units across the country.

Best Potential Owners

Tenants are the best potential owners, Dennis said, because “we’ve had 20 years to find out what doesn’t work in low-income housing.”

Egan said many buildings, unlike Manning’s, are in depressed areas where housing values are not appreciating and could not survive on the private market.

“I fear that we would have no alternative but to default on these units and they would go back to HUD,” Egan said. “I doubt that HUD wants to be saddled with these units.” HUD’s Federal Housing Administration insures the low-interest mortgages on these properties and would have to absorb the loss on any defaults.

Housing experts reserve their greatest concern for the future of the Section 8 subsidy program, which limits tenants’ housing costs to 30% of their income in buildings that frequently have non-subsidized units at market rates.

Cites Gentrification

“Nobody, in my judgment, anticipated gentrification, and that’s the problem,” said Rep. Barney Frank (D-Mass.). “Yuppies are now dying to live in parts of Boston where they wouldn’t walk 20 years ago.”

Frank has suggested that Section 8 subsidies be extended for a year at a time but said he is not enthusiastic about HUD’s preference for providing vouchers to give tenants rental subsidies. In areas of the country where little rental housing is available, he said, tenants simply end up paying more.

“No one wants to face up to the dollars involved,” said Linda Parke Gallagher, executive director of the National Low Income Housing Preservation Center. The federal government, she said, “reneged on its part of the deal” with private developers when it curtailed the low-income housing tax credit program in the 1986 tax law.

“It’s really a ticking time bomb that’s going to explode on Jack Kemp’s watch,” Gallagher said. The shrinking supply of low-income housing, she said, has a direct effect on the growing number of the working poor among the homeless.

Mount Challenge

More than 70 tenants moved out of a building on Buena Avenue in Chicago’s Uptown neighborhood when they received notices that their rents were about to increase. But several who stayed mounted an ultimately successful challenge to the owner’s right to pay off his government-backed mortgage.

But the battle, said tenant Rose Winblad, is not over.

“The people that need these types of apartments, they’re running them right out,” said Winblad, who pays $414 a month for the two-bedroom apartment she shares with her husband and daughter. From her windows she can see Wrigley Field, the lake and Illinois Gov. James R. Thompson’s new mansion.

Manning is active in her tenants’ organization but worries that her involvement may not be enough to save her home.

“It never occurred to me in my whole life that this would be the problem I would be facing right now,” she said. “I thought about ill health, family separations, death. I never thought of this.”