Power crisis may hurt affordable housing

The Associated Press
Monday June 11, 2001

LOS ANGELES – As power bills soar throughout California, affordable housing advocates fear there could be a devastating impact on low-income housing developments and their private landlords. 

The problem could impact hundreds of thousands of rent-restricted housing units — nonprofit and for-profit alike, the Los Angeles Times reported Sunday. 

And it comes at a time when the state’s low-income housing shortage already has reached crisis proportions. 

“If something is not done quickly it’s going to affect the financial integrity of our projects,” said Ana Baiz-Torres, executive director of the nonprofit Metropolitan Area Advisory Committee Project in San Diego. “If you look a few years out, it’s potential catastrophe.” 

The organization owns the Mercado Apartments, which is subsidized housing where utility costs are factored into rents. The rents are capped and cannot be raised, forcing landlords to shoulder the burden of skyrocketing energy costs. 

State Treasurer Phil Angelides, who heads the state’s Tax Credit Allocation Committee, has asked his staff to study the problem and look for potential solutions. 

“These are very tough projects to put together, and this will make it tougher,” Angelides said. “What would be a tragedy would be to stand by and watch some good affordable housing projects not make it financially.” 

The state committee awards federal tax credits to low-income housing developers, who then partner with private investors. Those investors pump a one-time equity injection into the project and get a 10-year tax write-off in return. 

Already, the committee has added criteria to its selection process to give competitive advantage to energy-efficient projects. Angelides, however, said more radical measures may be necessary to stem serious damage to the industry. 

The energy crisis is affecting all areas of government-assisted housing, from tax-credit properties like the Mercado, to public housing projects, to the Section 8 federal subsidy program. State officials and housing advocates estimate the number of such units in California to be 300,000 to 350,000. 

“It becomes the worst of all worlds,” said Tim English, chief financial officer of Los Angeles-based Alpha Property Management, which manages about 2,500 units in Los Angeles County. “Here we are in a very regulated business and one of the key cost components is going to be deregulated. We’re stuck with fixed rents and unfixed utilities.” 

Some limited remedies are in the works. Last March, the U.S. Department of Housing and Urban Development awarded one-time emergency funds to certain housing authorities — including Los Angeles — to help cover higher energy costs at public housing projects. 

Another solution would be an appropriation of federal or state funding to help building owners meet operating costs, said Julie Bornstein, director of the state’s Department of Housing and Community Development. 

But some say the chances of such a bailout are dim. 

“This is like dealing with a cancer. There’s no good way to treat it,” said Jeffrey Burum, executive director of the nonprofit National Housing Development Corp.