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They called it a discount. Trayawn Brown had lived at the Mount Vernon Plaza apartments at 930 M St. NW for 10 years when she received a letter from the building managers on Nov. 16, 2013, informing her that she had a month and a half to choose among three unsavory options: sign a new lease and start paying 66 percent more in rent each month; do nothing and have her rent more than double; or move out.
“Market rate for your apartment is $2,175.00 and your current rent is $935.00,” the letter from the property owner read. “The difference between the market rent and your current rental rate is $1,240,00. Management is offering a 50% discount in the amount of $620.00 for the next 12 months which will result in your lease renewal rate being $1,555.00 per month.”
Her decision was due by Dec. 30; otherwise she’d forfeit her right to the “discount” and have to pay $2,175 a month. She looked for other apartments in the area, since her 7-year-old son goes to school nearby, but there was nothing in her price range. “The rent is just outrageous in D.C.,” says Brown, 34, who works at the Department of Homeland Security. So she took the discount.
Azieb Tesfamariam got the same letter in November. She’d moved to Mount Vernon Plaza in April 2013, after her previous landlord had raised her rent several times. Tesfamariam, a native of Eritrea and single mother of three, settled on Mount Vernon Plaza after the property manager assured her there would be no substantial rent increases. Seven months later, she was informed that her rent would jump by more than 50 percent, or much more if she didn’t agree to the terms.
A part-time hotel housekeeper, the 49-year-old Tesfamariam doubted she could afford the higher rent. But she also couldn’t find another place to live on such short notice. So she took the discount, too.
The owner of Mount Vernon Plaza, the Bush Companies of Williamsburg, Va., had received a federally insured $12 million loan financed through city-issued bonds in 1987 and a subsequent $4 million city grant in exchange for an agreement to charge below-market rents in a quarter of the building’s units to low-income tenants like Brown and Tesfamariam. But the agreements required only a limited period of affordability, and Bush’s obligation to maintain affordable units at Mount Vernon Plaza had recently expired.
With rents in the Shaw neighborhood rapidly rising, Bush had every incentive to start charging something closer to market prices. The tenants were upset by what they considered indecently short notice, but they understood Bush’s reasoning.
“I was a realtor for 10 years,” says Ebony, a 39-year old Mount Vernon Plaza resident who asked to be identified by only her first name, and who likewise signed a new lease at the higher rate, “so I understand capitalism and the developer trying to make money.”
For Ebony, Brown, and Tesfamariam, the expiration of Bush’s tax-credit obligations has meant paying more rent, struggling to get by, and most likely trying to move in a year’s time, when the rent will rise to the full market rate. For some of their neighbors, it meant moving out immediately. In both cases, the previously affordable units were lost forever to the ever-rising demands of the free market.
This isn’t the first time the Bush Companies saw financial opportunity in a recently valuable neighborhood, at the expense of affordable housing. In June, after stating its intention to opt out of its Section 8 contract for the Museum Square Apartments in nearby Mount Vernon Triangle, Bush informed the residents there that their building would be demolished unless they could come up with $250 million to buy it—a sum beyond the means of the 100 percent low-income tenants, and one so seemingly exorbitant that it led At-Large Councilmember David Catania to draft legislation restricting the price developers can charge in such situations. Last week, Bush reversed course and announced it would not opt out of the contract.
At Mount Vernon Plaza, however, no one’s accusing Bush of wrongdoing, other than perhaps a lack of courtesy. (Bush did not return calls for comment.) Instead, this loss of affordable housing is fairly routine. And that’s what makes it so dangerous.
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There are several ways for the government to subsidize the development of affordable housing, but the most prevalent one is the Low Income Housing Tax Credit program. According to the U.S. Department of Housing and Urban Development, one-third of all rental apartments constructed between 1987 and 2006 took advantage of these tax credits. Apartments subsidized through what’s known as LIHTC (pronounced lie-tech) must keep their rents below a specified level for 15 years. (Those built after 1990 have an additional 15-year “restricted use period” after the first ends, although property owners can opt out under certain circumstances.)
A 2012 report prepared for HUD by the Bethesda-based Abt Associates warned that thousands of LIHTC-financed properties had reached the end of their affordable housing requirements, and that “in the worst-case scenario, more than 1 million LIHTC units could leave the stock of affordable housing by 2020, a potentially serious setback to the goal of expanding housing choices for low-income households.” While most properties don’t immediately move to market-rate rents once the 15-year mandatory affordability period ends, the report states, “the risk of this shift occurring is greatest in strong housing markets.”
The District certainly qualifies, especially in changing neighborhoods like Shaw. And the threat is particularly acute in the coming years. The total number of LIHTC-financed properties completed in D.C. in the program’s first 13 years, through 1999—in other words, the properties whose initial 15-year affordability period has expired or will expire by the end of this year—was 19, according to HUD’s LIHTC database. In the 13 years that followed, through 2012, that number was 105. (Figures provided by the D.C. Department of Housing and Community Development differ slightly.)
In fact, just in the next five years, 45 properties will reach the end of their mandated 15 years of affordability. These include the 224-unit Rockburne Estates in Buena Vista (expiring next year), the 406-unit Columbia Heights Village along 14th Street NW (expiring 2017), and the 422-low-income-unit Capitol Park Plaza in Southwest (expiring 2018). Some of these properties, particularly those in poorer areas east of the Anacostia River, are likely to remain affordable. But for owners of properties with expiring obligations in newly high-demand parts of town, the allure of market rents may be irresistible.
“Good urban planning would anticipate how many buildings are going to age out of the tax credit program,” says Will Merrifield, an attorney with the Washington Legal Clinic for the Homeless who’s working with Mount Vernon Plaza tenants. “Instead of doing that, the city wants to maximize economic impact with all their developments, which means bringing in high-end retail and condos and attracting people with a lot of disposable income.”
Merrifield suggests that the city could protect tenants in buildings with expiring affordability requirements by subsidizing their rent, such that the developer makes a profit but the tenants don’t experience sudden rent increases. Ebony, who’s organizing a tenant association for the building, also proposes a kind of rent control for tenants in her situation, in which the city would ensure tenants don’t see their rent increase by more than the rent-control standard of inflation plus 2 percent annually, and would make up the difference to the property owner.
There are several legal means by which property owners can erode the city’s stock of affordable housing. They can offer buyouts to rent-control tenants and replace them with higher-income residents. They can file so-called hardship petitions, which allow them to raise rents beyond the rent-control limits in order to ensure a 12 percent annual rate of return. They can opt not to renew Section 8 contracts when they expire.
But of all these threats to the city’s affordable housing in the coming years, the end of tax-credit obligations might be both the largest in scale and the most predictable. It’s no secret when the properties’ 15-year (or, if they don’t manage to opt out, 30-year) commitments end; they’re all listed in HUD’s database. And yet tenants are being surprised by the announcements, and the city has no apparent plan to help these residents.
In the absence of help, their options are limited. The D.C. Housing Authority closed its waiting list for public housing and subsidy vouchers last year after it grew to an unwieldy length or more than 70,000 names. The waits for affordable units at private apartment buildings often take longer than a year, and competition for those units is fierce.
Asked if she looked for other housing after receiving her letter from Bush, Ebony replies, “Did I! I looked everywhere. But how much can you look in two months? All the affordable housing places are full. You have to be on the waiting list for at least a year. Market-rate units in the area are $3,000 a month.”
And so low-income Mount Vernon Plaza residents like her have been paying the “discount” rent, which is well beyond some of their budgets.
“Right now I’m scared,” says Tesfamariam, unsure of whether she’ll be able to pay next month’s rent. “I don’t want to be homeless with my kids.”
Photo by Darrow Montgomery