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Los Angeles politicians will make housing affordable, by force if necessary.
On Friday, City Councilmember Gil Cedillo introduced a motion that asks city staff to draft plans for using eminent domain to seize Hillside Villa Apartments, a 124-unit, privately-owned development in the city's Chinatown neighborhood to avoid rent increases at the property.
The property is currently under an affordability covenant that requires its owner to rent out a number of its units at below-market rates. That covenant is set to expire soon, meaning rents on some 59 units will increase to market rates—which means rent hikes of up to $1,000 per unit.
"We think it is important enough that we need to take action to preserve those units. We don't want to generate more homeless people," Conrado Terrazas Cross, Cedillo's communications director, tells Reason, saying that many tenants would not be able to afford the coming rent increases.
"I think it's a brilliant idea but I need to know: Are we in Cuba or Venezuela?" says Tom Botz, the L.A.-area developer who owns the building, about the proposal to seize his property.
Botz tells Reason he purchased the development company that built Hillside Villa roughly 20 years ago. The building's construction had been financed by a number of government grants and loans, including a $5.4 million loan from Los Angeles' since-abolished Community Redevelopment Agency in 1986.
A condition of that loan was that the developer rent out units in the building at below-market rates for 30 years. Other government grants and loans that helped finance the building came with their own specific affordability requirements.
The affordability requirements from the redevelopment loan were supposed to expire in June 2019. Beginning in May 2018, tenants in Hillside Villa started to receive notices that their below-market rents would be increasing in a year's time. In March 2019, tenants were given the option of signing new leases at the increased rates or face eviction.
Read the rest
here.
Very early on a Wednesday morning in September, the city council of Richmond, Calif., did something that no American city had yet managed: It voted for a plan to wrest underwater mortgages from the hands of Wall Street, depriving investors of tens
of millions of dollars in order to save borrowers from foreclosure...
...In short, here's how it would work: Richmond condemns mortgages on homes that are now worth far less than what the borrower owes. The note holders -- investors such as pension funds and mutual funds -- are forced to settle for the current fair market value. The city pays for this with cash from a new set of investors, who now own the mortgage. The new price is set by the current market, and the homeowner settles into a more manageable loan.
It's that smashing of the bond between lender and debtor that animates investors. They've acted aggressively to stop it, lobbying the mayor and council members directly. Wells Fargo and Deutsche Bank, on behalf of scores of investment funds, sued to stop the plan. The securities industry points out that the plan would also hurt pensioners who own pieces of Richmond's mortgages. Indeed, last week, California Public Employees' Retirement System -- the safety net for some Richmond workers -- expressed concerns.
Read the rest
here.
Despite the criticism of the Supreme Court’s eminent domain ruling in Kelo, the city of Auburn, New York appears undeterred and is threatening to invoke eminent domain to seize private property for a private company. The Kelo opinion was wrongly decided in allowing a Connecticut town to seize homes to give the land to a private company. Putting that flawed legal logic aside, I am astonished that elected officials continue to abuse eminent domain powers in this way and shows the need for state laws barring the practice. Mayor Mike Quill insists that the interests of the majority (and one powerful developer) must trump the property rights of a few citizens.
Ironically, after selling out their fellow citizens, the people of New London, Connecticut never did reap the rewards that they sought. The city is threatening citizens that if they do not reach an agreement with a developer, the city will come in and take the land and give it to the developer.
Read the rest
here.
