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The president of the Los Angeles City Council is poised to introduce new legislation addressing one of the biggest structural problems of LA’s housing crisis: the expiration of long-term covenants that guarantee affordable housing at privately-owned apartments financed with low interest city loans.
Details of the legislation weren’t public Thursday, but local tenant associations and their allies want the city to begin using its eminent domain authority expropriate affected properties and turn them over to nonprofits that would maintain affordable rents.
Los Angeles is home to hundreds of buildings with an estimated 12,000 affordable units whose long-term covenants are set to expire over the next five years, raising the specter of huge increases in the region’s homeless population.
Hugo Ortiz, District Director for Los Angeles City Council President Gil Cedillo told the South Pasadenan News “the bottom line is we are seeking to extend covenants so these people are not displaced.”
The poster child for the proposal is Hillside Villa at 636 N. Hill Place in Chinatown, which has a covenant applicable to about half its 124 units and is set to expire Sept. 1, 2020, freeing the owner to implement rents well beyond existing tenants’ means.
The Hillside Villa Tenants Association and allied groups have been pushing the city and building’s owner for solutions to the looming rent increases and complaints that the building suffers from deferred maintenance, unreasonable eviction threats and inadequate response to flooding problems. They want the city to take initiate the expropriation process by having the building appraised and making an offer to buy it to “prevent an impending mass eviction and to provide relief to tenants living in slum conditions.”
Hillside Villa owner Thomas Botz told the South Pasadenan News he anticipates average rents will go up about 50 percent, though the market rate for several units now renting for $850/month should be $3,000/month. Some of the rents are “quite a bit lower” than under standard LA rent control, he said.
Botz, who in 2000 bought the company that developed the building, said that to date it has not made money. Now the subsidy is ending “and we are supposed to rent at market value. That was the agreement. The strategy is: rents go up and whoever can afford it stays and the others who can’t make other arrangements.”
“The fact is he is putting greed over the lives of people who want to stay in their homes,” said Jacob Woocher of the LA Tenants Union. “Property rights are not more important than the human right to housing.” He said he had “no sympathy for Tom Botz and his millions of dollars.”
Hillside’s 30-year covenant actually expired last year but Botz ran afoul of notification procedures resulting in a lawsuit that ended after he agreed to a one-year extension of existing rents. By the end of the current notification period, “I’ll have been personally supporting 59 people every month” for two years, he said, costing him about $60,000 per month.
Cedillo’s office said that last summer, Botz also made a deal to extend the covenant for 10 years in exchange for restructuring the $5.4 million loan the city made to the original developer in 1986. The city approved a motion charging the Housing and Community Investment Department of Los Angeles (HCIDLA) to work out the details.
Cedillo “believed he’d negotiated a deal” because they’d shaken hands on it, Ortiz said. “We were writing up the agreement, but [Botz] began sending out rate increase notices. So we saw a negotiation in bad faith.”
HCIDLA spokeswoman Sandra Mendoza told the South Pasadenan News it “made every effort possible” to work out a deal with Cedillo and Botz “to negotiate an extension of the affordability period for Hillside Villa. In July 2019, we believed that we had reached an agreement with the owner including additional funds in consideration of the owner agreeing not to increase rents for a period of 10 years. Shortly thereafter, the owner increased rents at the property. As a result, there have been no further negotiations.”
It appeared that Cedillo also stopped pushing. On January 15, a spokesman for his office said, “Nothing has changed since we last heard that Mr. Botz did not want to agree to the deal made with the Councilmember.”
Botz tells it differently. He said he met with Cedillo and his staff. They discussed “the outline of a potential deal” using his debt to the city to continue the subsidy, which would have generated tax problems but spared him from looking for new tenants. It was looking promising when “some woman showed up with a camera and said: ‘Shake hands!’ They used that to say we reached a deal, which we hadn’t. That was a little underhanded,” he said.
Nevertheless, Botz said he was willing to make a deal and believed Cedillo was acting in good faith to try to help the tenants. But the tenants’ union and their attorneys have taken an approach of “hostility and militancy.” They came to his attorney’s house and made noise and to Botz’s home in Malibu where they put up signs “thinking they can somehow extort or embarrass us into something–supporting them longer, I guess.”
Botz said the situation has driven him to his wit’s end. “These people deserve support,” he said. But if that’s want the community wants then they should be supported by the government, “not by Tom Botz and his family.”
Woocher said Botz “threatened to raise rent by over 1,000 percent and throw families, elderly and children out of their homes. He might end up making dozens of people homeless. He doesn’t get to then pretend we are the ones being aggressive.”
Ever since the negotiations broke down last year, “we have not tried to negotiate with Tom Botz,” Woocher said. “If the city offering him $12.7 million over 10 years wasn’t enough to get him to negotiate, then us being nice to him isn’t going to do anything.”
Meantime tenants have been living in uncertainty as the new termination date approaches. Some have had eviction proceedings initiated against them and allegations of mismanagement have continued.
After a Jan. 8 flood in a ground floor unit where Jacinto Martinez and Monica Ruiz live with their four children, the family was given no option even though other units were available, they said.
The family stayed in the unit for weeks while loud pumps operated continuously to dry things out. Martinez, a 49-year-old construction worker, believes he wasn’t offered a separate unit because he’s worked with the tenants’ association. Management instead offered him $12,000 to leave the building, where he’s lived and raised his family for 24 years.
Chloe Botz, the owner’s daughter who lives at and helps manage Hillside Villa, said Martinez was offered a separate unit but he declined. She said three other units were also affected by the flood, which was caused by a pipe in the building, and residents of those units were also offered other units, though only one elected to accept.
Ms. Botz also said the flood damage has now been addressed and that a building inspector who came by Wednesday said we were doing “a great job with remediation.”
Insisted the elder Botz, “Anyone in the city’s housing department will tell you we have gone ‘above and beyond’—their words—in the ways we’ve treated these tenants” including with generous, “never before seen” relocation incentive payments.
He said no one from the city has contacted him in months. But is he still willing to negotiate? Botz said he is always willing to talk, but “that’s not what they’re talking about anymore. They want to expropriate. That is what they do in Cuba and Venezuela.”
The Hillside Villa Tenant’s Association, LA Tenants Union and the Chinatown Community for Equitable Development are set to make their demands known at a press conference Friday morning.
