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Property Owner Abides By Agreement. Now Government Wants His Property.

The owner of Hillside Villa Apartments in Los Angeles, California is looking at having his building seized through eminent domain if the LA County Council has its way.

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 30 years of rent control ran out in June of 2019.

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.

Now the City of Los Angeles is looking to seize the building using eminent domain:

Now, City Councilman Gil Cedillo has another idea for keeping rents low in his district: Force a landlord in Chinatown to sell its building to the city.

On Friday, Cedillo announced plans for having the Board of Public Works — the agency that oversees sidewalk repairs, street repaving and the construction of bridges — use its power of eminent domain to acquire a 124-unit apartment building from landlord Thomas Botz.

Cedillo said the strategy is needed to keep 59 units of affordable housing inside the building, known as Hillside Villa, from switching over to market rate prices. A 30-year agreement to keep rents low between the property owners and city expired in 2018 — and attempts at reaching a new deal have fallen apart.

“We will use all of the resources of the city, both legal and fiscal, to protect these tenants,” he said. “The city is in crisis … with respect to housing and affordability.”

What most people in government don’t understand is that the affordable housing “crisis” is mostly the making of government regulations. Governments make unrealistic demands on size, design, and amenities adding costs to the project which developers have to recover through higher rental rates. Instead of allowing more housing, the government restricts housing and apartment units making the law of supply and demand come into play. Less supply means higher costs, and people will automatically blame developers rather than sharing the blame with the makers of hoops the developers had to go through. Often time those hoops – the number and complexities of the hoops – results in smaller developers being priced out of jobs. They literally don’t have the capital to do all the things that government’s demand. In that case, larger developers – the very people that residents and city officials vilify – swoop in and make the money.

That being said, the case with Hillside Villa is alarming, to say the least.

After thirty years of abiding by the agreement with the City of Los Angeles, the City wants to take over the property because it doesn’t like the fact that the owner is going to do what the agreement allows him to do.

The rent increases to be sure, will be stiff:

Rents in 51 of Hillside Villa’s apartments are slated to go up an average of 50% in September, according to Botz, whose company, 636 NHP LLC, owns the building. In at least one three-bedroom unit, the monthly rent is expected to go from $889 to about $2,500, he said.

According to Apartments.com, a rent of $2500 is still below average for the area:

There’s a legal issue as to whether the City can take the building as well:

Elena Stern, spokeswoman for the Bureau of Engineering, said her agency acquires property only for public infrastructure projects in the public right of way. Meanwhile, one lawyer who specializes in eminent domain law said he thinks Cedillo is “posturing” to look good in front of the tenant groups.

Under state law, the city officials would need to demonstrate that they have the legal authority to seize property for the purpose of preserving housing, said Christopher Sutton, an attorney based in Pasadena. Furthermore, Sutton said, the city cannot legally purchase the property unless it pays fair market value — a matter that could take years to resolve in court.

“I think the city has both a legal problem and an economic problem trying to carry this out,” he said.

Assume for a moment that the City steals the property.

Who is going to pay for it? Does the City have the money lying around waiting to buy buildings like this? (They don’t.) Even if they did, it is still the taxpayers who are footing the bill. Who will manage the property? Will the City hire a company to do so incurring more taxpayer costs?

More regulations and more taxpayer money is not going to solve the housing crisis. That’s the bottom line.

Taking a person’s property because he lived up to the agreement and the City no longer likes the terms of that agreement says far more about the government actors than it does citizens.

If people can’t trust the government in the agreements they make, why agree do anything?



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