Disappearing Affordable Housing: Expiring Section 8 Contracts in L.A.

1. Disappearing Affordable Housing: Expiring Section 8 Contracts in L.A. Doug Smith UP 206A Midterm Project Feb. 8, 2011

2. Defining the Problem • Project-based section 8 properties: contracts between owner and Department of Housing & Urban Development (HUD) • The National Housing Trust lists 274 properties that have contracts that are/were set to expire between 2010 and 2014 (12,251 affordable units in total). • Owners of these properties can: • Enter a new contract with HUD • Sell to a non-profit • Sell to a profit-motivated entity • Allow the contract to expire (opt out)and convert to market rate housing. • If contracts expire and properties are converted to market rate, residents may be displaced and the city will experience a reduction in affordable housing stock.

3. Location and Density of Section 8 Properties with Expiring Contracts in Los Angeles

4. Project Focus: Risk Factors Locating and Analyzing Risk Factors should guide the development of a city-wide early warning system A 2006 HUD-commissioned study identified several factors that increase the opt-out risk for subsidized properties. This presentation will analyze three of these factors in Los Angeles : 1. Ownership type • Properties with Profit Motivated and Limited Dividend Ownership are more likely to opt out than properties with non-profit ownership. 2. Rent to FMR ratio + Surrounding Rent • Lower Rent to FMR ratios increase the opt out risk, as owners can obtain higher rents in the private market. 3. Percentage of total units that are assisted • Properties that are 100-percent assisted have a higher likelihood of opting out compared with properties where only a few units are assisted. Additionally, a 2009 Report by Reconnecting America, National Housing Trust and the AARP suggests that increased demand and government support for TOD creates an increased opt out risk for properties near transit stations. This presentation will also analyze this factor as it applies in Los Angeles 4. Proximity to Transit • Market pressures resulting from an increased desire for TOD can provide additional incentive for owners to opt out. Econometrica & Abt Associates (2006), Multifamily Properties: Opting In, Opting Out, and Remaining Affordable. Harrell, Rodney, et.al. (2009) Preserving Affordability and Access in Livable Communities: Subsidized Housing Opportunities Near Transit and the 50+ Population

5. Risk Factor 1: Ownership Type Sources: National Housing Trust, UCLA MapShare, US Census – American Community Survey

6. Risk Factor 2: Rent to FMR Ratio + Surrounding Rent • A Rent to FMR Ratio below 100% indicates that the rent obtained by the property owner is less than the estimated fair market rent for a unit of the same size. • In other words, a low Rent to FMR ratio suggests that the property owner can obtain higher rents for their properties in the unassisted market than they can charge under the assisted programs, thus increasing the incentive to opt out. Sources: HUD, UCLA MapShare, National Housing Trust, US Census – American Community Survey

7. Risk Factor 3: Percentage of Total Units That are Assisted Properties with a higher proportion of assisted units have a higher likelihood of opting out compared with properties where only a few units are assisted. A study suggests that this may be because properties that are 100percent assisted can receive the maximum rent increase after the conversion to market rate. Sources: UCLA MapShare, US Census, National Housing Trust

8. Risk Factor 4: Proximity to Transit Proximity to transit has been linked to speculative investment and rising property value, creating an incentive for profit -motivated owners to opt out of affordability contracts and sell or convert properties to more lucrative uses. Sources: National Housing Trust, METRO, LA County,

9. Proximity to the Expo Line Phase I

10. Council Districts with Highest Risk of Significant loss of Affordable Housing Final index score was obtained by combining and giving weight to each of the four risk factors as they applied to expiring units in each council district. Index score= total number of expiring units (x1) + total number of units under profit-motivated or limited dividend ownership (x2) + total number of units with a rent to FMR ratio below 80% (x3) + total number of units in properties that are 100% assisted (x1) + total number of units that are within ½ mile of a metro rail stop (x2)

11. Future Analysis • Degree of tenant organization • Where are preservation funds spent? • Deeper research into neighborhood change surrounding new transit to determine if it is a significant risk factor • What happens to properties after opt-out?

12. Skills Utilized • Inset map (slides 3,9) • Point graduated symbol (slide 5,6,7) • Boundary subset selection (slides 3,5,6,7,9) • Buffering (slides 8,9) • Geoprocessing (all maps utilized the clip tool) • Geocoding (slides 5,6,7,8,9) • Charts/graphs/tables (slides 5,7,10) • Index (slide 10)