Preservation in Transit-Oriented Districts: A Study on the Need, Priorities, and Tools in Protecting Assisted and Unassisted Housing in the City of Los Angeles

Executive Summary

Los Angeles is transforming our future by investing in the largest transit expansion in the United States. By the end of 2012, the City alone will have 71 operating light rail or bus rapid transit sta­tions, with dozens more in nearby communities throughout the county. Planned Measure R in­vestments will add another 42 stations to the City, for a total of 113 stations in 30 years. These plans could happen instead within a quick, ten year time frame if the federal government approves America Fast Forward, bringing thousands of new transit construction and operations jobs to the City and connecting over 1.2 million existing jobs to high quality, fixed-guideway transit rich areas.

Ensuring that all of our families and workers are able to continue to live and work in our most transit rich neighborhoods is a key priority of the City of Los Angeles Housing Department (LAHD). One way to achieve this goal is to preserve existing affordable and rent stabilization ordi­nance-subject housing opportunities near transit.

Preserving Affordable Housing Near Transit is Important Because:

• Our economic competitiveness relies on offering housing for workers of all incomes. The majority of workers in the City's major job centers do not have a college degree. In fact, 70% of Downtown Los Angeles workers have an Associate's Degree or less. And about 60% of jobs in our fastest growing sector – Health Services – require less education than a Bache­lor's degree. Many of these jobs will be filled by low and moderate income workers. Further, many of the city's critical workforce development institutions such as Los Angeles Trade Technical College, Los Angeles City College, Los Angeles Valley College and Pierce College, are located along the transit system, offering a built-in opportunity to connect low income workers to better job opportunities through training and education.
• Low-and moderate-income workers support a successful transit system. Approximately 70% of workers who commute by transit earn less than $25,000 a year. Nearly one in five workers earning less than $25,000 in annual pay, take transit to work. If these workers are un­able to afford to live near transit in the City, the transit system suffers, and our most vulnera­ble, transit-dependent residents will have an even more difficult time accessing jobs affordably.
• An opportunity exists today that might not exist tomorrow. Today, the City's most transit-rich neighborhoods house a high percentage of low and moderate-income residents. These residents are able to take advantage of the many benefits that have been discussed. However there is concern that as transit catalyzes reinvestment in these core, transit-rich neighbor­hoods, lower income residents and workers might be displaced to areas with fewer transporta­tion choices.
• More so than ever before or ever again, the City's affordable housing stock is at risk. Nearly 15,000 income-restricted units have covenants, rental assistance contracts, mortgag­es, or other time-limited affordability requirements that will expire or are at risk of being termi­nated between 2012 and 2017. While many property owners will choose to continue to serve low-and moderate-income residents with below market rents, the temptation of rising rental prices near some station areas may be too great to resist. Preserving these units today will be substantially more cost effective and energy efficient than having to replace them with new af­fordable housing stock tomorrow.

Priority Transit-Oriented Districts for Preservation, 2012-2017

Given the deep need for the preservation of affordable housing in the City, the many economic, social, environmental, and health related benefits offered in transit-rich locations, and the dauntingly large number of station areas in the City, this study focused on defining a limited number of transit-oriented districts with the greatest need and opportunity for preservation of affordable and vulnerable housing over the next five years. To do so, the Los Angeles Housing Department and Reconnecting America conducted a data-and mapping-intensive analysis of demographic, economic, and transportation-related conditions at all existing and planned Measure R station areas throughout the City. Factors evaluated include:

• Median Household Income
• Percent of Renter-Occupied Households
• Potential Change in Market Strength Resulting from:
  • Proximity to Major Job Centers
  • Areas with Lower Transportation Costs
  • Rising Property Values
  • Transit Access to Downtown Los Angeles and Westwood Resulting from Measure R Investments
  • Historic Neighborhood Character (age of buildings)
• Vulnerability of Housing Stock:
  • Concentration of Income-Restricted, At-Risk Units
  • Concentration of Larger Buildings Subject to the Rent Stabilization Ordinance
  • Concentration of Smaller Buildings Subject to the Rent Stabilization Ordinance

Based on the evaluation of these factors, four existing transit-oriented districts were selected as areas of focus for preservation activities over the next five years. Specifically, these areas exhib­ited the higher confluence of vulnerability factors. Where other geographies in proximity to transit investment are also subject to market pressures, the four districts in Figure 1 have the higher concentration of combined factors today. These include station area clusters along the Red Line, Purple Line, Venice Blvd. Central L.A Rapid Bus corridor (North of I-10), and Expo Line.

City of Los Angeles Strategy Areas

These areas have common characteristics including a high share of low-income renters, a strengthening real estate market, and rich transit connectivity. While other areas such as Downtown Los Angeles and Boyle Heights also meet these characteristics, the intention of this analysis was to select areas that could serve as pilot locations for coordinated transit-oriented preservation strategies to potentially be replicable in the future. Downtown Los Angeles requires a unique approach that addresses issues related to single room occupancy buildings, and Boyle Heights lacks the same concentration of expiring units seen in the selected transit-oriented districts.

Within these four geographies collectively, there are about 160,000 rent stabilized properties(25% of City total), and about 6,200 affordable units with expiring restrictions in the next five years(41% of City total).

Developing Coordinated Strategies for Preservation

It is important to identify ways in which the City and key partners can work together to prioritize the preservation of units in these geographies, develop pilot, coordinated strategies that can be evaluated and later applied in areas facing similar issues in the future. Addressing preservation issues in these areas can stave off the potential loss of a significant share of the City's affordable housing stock, but also possibly offer some opportunities to get ahead of the market and acquire key transit-rich properties for long-term preservation or development.

There are several possible next steps to address preservation in these four areas, including but not limited to:

• Coordinating existing tools to move proactively and aggressively in preserving buildings
• Anticipating property owner behavior, and focus outreach to owners and tenants
• Conduct pilot assessments for development and deployment of new tools

A next step for preservation stakeholders is to define the specific types of tools that need to be coordinated within each area, and to identify gaps that new tools or policies could address.

To delve more specifically into the types of possible strategies to be coordinated and deployed throughout these adjoining areas, it is important to have a deeper understanding of the actual risks of potential loss of affordable units. These risks vary based on the characteristics of the affordable and rent-stabilized housing stock. For example:

• Affordable units with expiring restrictions could potentially be removed from the City's affordable and rent stabilized housing stock, depending on a number of factors including the remaining term of rental subsidies and/or restrictions, current funding structures, property size, property ownership (non-profit, private for-profit, etc.), and rental market;
• Any rental property on a parcel larger than ¼ to ½ acre may be a potential site for tear-down and redevelopment of buildings, which would not be subject to the Rent Stabili­zation Ordinance (RSO); property owners that demolish RSO units and build replacement rental housing within five years of the demolition are required to register the new units with the RSO. The landlord may set the initial rent on these units, but all subsequent increases are subject to the RSO's annual percentage. Any demolition or redevelopment that takes place after five years would not be subject to the RSO.
• Large RSO-Subject properties with 50 units or more demonstrate an elevated possibility of removal from the rent stabilized stock. Also, these properties more easily meet the typical minimum standard to be (re)capitalized for a loan.
• Small RSO-Subject properties (approximately 5 units or fewer) are more likely to be owned and operated by property owners who are not professional property managers (i.e.“mom and pop” landlords). Owners of smaller properties are more likely to be uninformed about the City's Rent Stabilization Ordinance rights and responsibilities. These types of properties also more frequently building code violations.

Different geographies within priority transit-oriented districts have a unique mix of these types of vulnerable housing units. These geographies (see the figure below) have been divided into four “preservation types” based on the concentration of affordable at-risk properties, the presence of large RSO buildings and small RSO buildings to reflect the different types of vulnerability de­scribed above.

1. Areas with Large RSO Properties (red). Many Expiring Units are key targeted areas for financing of property acquisition and preservation because they yield the greatest financial opportunities.
2. Areas with Large RSO Properties (green). Few Expiring Units may also be key targets for preservation through property acquisition; these could be more reliant upon limited, local funding sources (e.g. the Affordable Housing Trust Fund).
3. Areas with Small RSO Properties (brown). Many Expiring Units will require the most hybridized set of preservation strategies, such as property acquisition and outreach/enforcement related activities. This combination becomes important as market strength changes in these neighborhoods; redoubled tenant outreach efforts may help prevent both building code and RSO violations if property owners attempt to evict tenants without just cause.
4. Areas with Small RSO Properties (yellow). Few Expiring Units will be priorities for tenant and property owner outreach and enforcement. As with the previous type, redoubled tenant outreach efforts may help prevent both building code and RSO violations if property owners attempt to evict tenants without just cause if/when market strength changes.

City of Los Angeles Preservation Types

The figure above is evolved from the previous figure, which identifies four transit-oriented districts selected for preservation activities. This figure is color-coded based on the number of expiring units and concentration of different types of RSO properties, which defines four possible preservation types.

Maps from this report are available in the Maproom