“Los Angeles politicians’ plan to preserve affordable housing might just end developers’ incentive to ever build more of the stuff in the city.
Last week, the Los Angeles City Council passed a resolution directing city agencies to explore options for freezing rents at privately owned buildings with expiring affordability covenants. These covenants require building owners to keep their rents at below-market rates for a specified period of time, typically 30 to 55 years, in exchange for various government subsidies—including tax credits, low-interest loans, and relief from zoning restrictions.
Covenants covering thousands of these units are set to expire within the next few years, allowing landlords to raise rents to market rate. Lower-income tenants benefiting from affordability restrictions could be faced with unaffordable rent increases.”
“A rent freeze would be a pretty radical move, particularly when compared to other policies people have floated to preserve affordability covenants. That California Housing Partnership report recommended more subsidies and tax credits to preserve affordable units.
HCIDLA has proposed forgiving building owners’ debt they owe the city in exchange for extending affordability covenants, or, in the case of debt-free buildings, subsidizing owners for forgoing market-rate rents.
All those ideas involve compensating property owners for voluntarily keeping their rents low. Cedillo’s proposal would require them to eat the entire cost of maintaining below-market-rate rents.
That would be a huge disincentive for anyone to ever participate in future affordable housing programs, says Dan Yukelson, executive director of the Apartment Association of Greater Los Angeles.”