An Orange County-based management company is attempting to use the federal Low Income Housing Tax Credit program (LIHTC) to displace dozens of Tenderloin tenants from their homes. The company also seeks to remove the 50 plus unit apartment building at 1030 Post from San Francisco’s rent control law. Although the LIHTC is designed to increase affordable housing, as applied at 1030 Post Street the program will raise rents for virtually all tenants, evict those unable to pay the higher rents, and permanently exempt the entire building from rent control. Even more troubling is that the LIHTC gives tax breaks for “creating” affordable housing without investors having to construct or substantially renovate a single unit. This means that 1030 Post could set off a wave of speculator acquisitions of large buildings, and the subsequent loss of rent control protections for tenants paying below-market rents. Preventing this development requires the San Francisco Rent Board and the Board of Supervisors to act to keep LIHTC properties under rent control.

In light of the Bush Administration’s steady attacks on the federal housing budget, it is imperative that the limited funds available are put to best use. That is what makes the situation at 1030 Post so particularly shocking, as federal tax breaks are being given to investors for evicting tenants and raising rents.

On May 16, 2006, the 1030 tenants received a letter from VPM Management, Inc announcing “great news” for the building. According to its website, VPM is an Orange County-based “full service residential property management company specializing in affordable apartment communities. We manage mid-large sized Tax Credit and HUD assisted apartment communities.”

VPM’s Regional Property Supervisor and contact person for 1030 Post is Angela Robinson-Spencer. She reportedly has worked for many nonprofit housing groups, including San Francisco’s Chinatown Community Development Center (CCDC).

I learned of the problems at 1030 Post from an elderly and disabled tenant who has lived at the fifty- plus unit apartment building since 1980. He currently pays $572 in monthly rent. VPM told him that his rent would potentially increase by at least $200 per month, depending on his income. If his income exceeded tax credit limits---and it is close-- he would have to move.

A call to the manager confirmed the tenant’s account. It also confirmed that VPM was telling all tenants that the building was now exempt from rent control even though the San Francisco Rent Board has made no such determination. VPM was also informing tenants that if they did not fill out the application to be part of the LIHTC program that they would be given a thirty-day eviction notice.

The claim of rent control exemption is based on the notion that rents on LIHTC units are “regulated or controlled” by a government entity. But no government entity is regulating or controlling the rents of existing tenants who do not wish to apply for the LIHTC program.
I eventually spoke to Robinson-Spencer, who expressed a willingness to sit down and go through the tenant roster to try to avoid any rent increases or evictions. But following that conversation I received a fax from the eviction specialists at the law firm of Wiegel & Fried, who stated that all contacts with VPM should go through them.

The attorney sending the notice then went on vacation. Meanwhile, VPM’s on-site management continued to threaten tenants with eviction, and gave no indication of any interest in “working out” any problems at the building.

At the time, I mistakenly assumed that tenants whose rents were not well below- market would not incur increases under the LIHTC. But examining the rent limits published by the Mayor’s Office of Housing reveals a huge difference between tax-credit median rents and regular median rents.

For example, the maximum rent for tenants earning 40% of area median is $606 without utilities. But under the LIHTC, VPM could charge a tenant earning 40% of median $759.
Similarly, whereas San Francisco’s inclusionary housing law requires rentals at no more than 60% of median or an already high $925, the LIHTC hikes this amount to$1155.

And the LIHTC claims that this $1155 rent level is for tenants who are “very low income.” Since the same MOH chart reveals that HUD values the fair market value for a studio at $1000, this means that wealthy folks are getting tax breaks for renting units at $150 above current market rents!

As a result of the inflated LIHTC rent limits, virtually every tenant at 1030 Post is likely to see their rents increase. One tenant currently paying $910 was told his rent would increase to as much as $1150. This “affordable housing” program would force most 1030 Post tenants to leave the city to obtain housing they can afford.

Some single tenants at 1030 Post earn more than the $47,500 LIHTC limit, which increases to $54,000 for couples and $61,000 for three. VPM has told these tenants that they will have to move, because they “do not qualify” for the program.

Affordable housing advocates are shocked to hear how the LIHTC is being applied at 1030 Post. TNDC Executive Director Don Falk told me that “this is not how the program is supposed to be used,” and noted that when nonprofits use the LIHTC they combine it with other subsidies to bring the rents down.

As an incentive to stimulate new housing construction, the LIHTC is sound policy. But the fact that the program does not require investors to build new units or substantially renovate substandard rental housing is alarming. This puts hundreds of San Francisco apartment buildings at risk, and jeopardizes the future of tenants living in the large properties that have not been at risk from the Ellis Act.

So what is to be done?

First, on July 13, a hearing officer at the Rent Board will consider the issue of whether the LIHTC eliminates rent control protections for existing tenants. The hearing officer’s decision is likely to be appealed to the full Rent Board, and then potentially to the courts.

Second, the Tenderloin Housing Clinic has asked Supervisor Aaron Peskin, whose district includes 1030 Post, to sponsor legislation amending the Rent Ordinance to make it clear that the LIHTC does not exempt existing tenants from rent control. This legislation would protect tenants from an adverse court ruling on the issue.

Third, tenant groups should contact Assemblyman Mark Leno to find out what he can do to prevent the state from approving tax credits for the purchase of habitable rent-controlled buildings.

Fourth, there may be a need for Congressmember Nancy Pelosi to introduce legislation modifying the federal regulations governing the LIHTC program. This would likely have to wait until January, but if the problem is not resolved by other means, federal action is imperative.

1030 Post has many tenants willing to fight for their rights. Their struggle is only the latest chapter in the battle to save rent- controlled housing, and it deserves broad support.

Send feedback to rshaw@beyondchron.org