Key points to remember
- Melvin Court in Penn Hills is one of several low-income resorts in the area where expiring tax credit warrants can unlock rent caps.
- Nonprofits and governments struggling to preserve low-income units are struggling to keep up.
As real estate developers and landlords buy into a tight housing market in the Pittsburgh area, affordable housing advocates see preserving cheaper rental units as a way to counter market forces.
In an attempt to do just that, the nonprofit ACTION-Housing tried last year to buy a 43-apartment complex in Penn Hills with an expiring affordable housing term. He offered $2 million. A private property management company, CityLife, bid $261,500 and got the property — a scenario some advocates fear will become common as rent control expires.
“There are these traumatic acute cases like the Penn Hills property. . . where affordability requirements have expired,” said Matt Madia, director of real estate services for Neighborhood Allies, a nonprofit focused on building strong community connections. “We are not strong enough to push back the investor market.”
Melvin Court Apartments are located on both sides of Beulah Road in the suburb of Penn Hills. In 2006, apartments received social housing tax credits [LIHTC] which required that all units be occupied by renters who earned no more than 60% of the region’s median income.
While that requirement is being phased out, the new landlords say they have no plans to move residents who pay rent.
“We got it for a good purchase price and we don’t have to immediately evict a bunch of residents trying to get top rents for the renovations,” said Casey Quinn, the owner of CityLife. “With this purchase price, we could put in place a good maintenance program to update over time and we don’t have to evict tenants.”
Overtaken by the private market
In 1986, the federal government created the LIHTC program, which provides tax credits to developers in exchange for building, maintaining or rehabilitating properties and keeping them affordable housing for 15 to 30 years.
From 1987 to 2009, there were approximately 2.2 million units nationwide developed by LIHTC. In the first 20 years of the program, LIHTC properties accounted for nearly a third of all newly built multifamily rental units, according to the federal Department of Housing and Urban Development.
Both for-profit and non-profit developers can participate in the program. Statewide funding is provided by the Pennsylvania Housing Finance Agency [PHFA].
Besides Melvin Court, there is another property in Allegheny County, a 79-unit property also located in Penn Hills, which is expected to have its LIHTC designation expire this year, according to PHFA. Last year, the designation of a property in Findlay Township with 38 units expired, and another in West Deer Township, with more than 40 units, will follow in 2024. Overall, there are more of about 100 LIHTC properties in the county, with the state providing tax credits to six more properties last year.
When the term of the affordable housing mandate for Melvin Court expired, ACTION-Logement took a chance. They asked the seller for a 90-day hold on the property to collect the $2 million, according to Lena Andrews, director of property development at ACTION. She said the plan was to maintain the complex’s one- and two-bedroom units at their affordable housing designation without trying to extend the LIHTC compliance period, as they were not planning to make major renovations that would require an investment. in tax credit.
But CityLife’s extra quarter-million landed it the resort in December for $2,261,500, according to the Allegheny County real estate website.
The meteoric encounter between the private sector and the nonprofit sector has shown the limits that nonprofits and public funds face when competing in the private housing market.
“As the demand for property purchases in Pittsburgh increases, it becomes more difficult for nonprofit developers to compete in the private market,” Andrews said. “It takes time for us to gather funding from the plethora of sources that are part of the acquisition and development of affordable housing.
“In the case of the Penn Hills apartments, by the time we came out to see it, the broker was already calling offers,” Andrews said. “Although we ended up making an offer to buy it, the entity that bought it was able to close faster than we could have.”
No mass eviction plan
There are no plans to evict low-income residents, CityLife’s Quinn said, and they will continue to accept tenants who have housing choice vouchers.
“We’re not trying to do anything high end,” he said.
Quinn said his company is not an out-of-town investor looking to sell property. He said CityLife is a minority shareholder in the limited liability company [LLC] used to purchase the property. He declined to share the identity of the majority owner.
“We are local,” he said. “We all live in these communities. Our model is not to expel people. We don’t want to do that.
According to court records, CityLife has filed 75 landlord-tenant cases, seeking evictions, since 2020. According to the company’s website, CityLife operates 547 units. Quinn noted that they often file evictions against tenants in order to motivate them to pay rent.
“We try to follow all the rules. Some of these tenants want to live for free and don’t play by the rules,” he said. “A lot of tenants see the eviction notice and then pay their rent.”
Quinn said they have no plans to evict tenants who pay rent from Melvin Court. They also have no intention of asking for another LIHTC that would require them to keep rents low.
“If I had to sum it up, our plan is to run the building the same way it has for the past 20 years, only much better – maintenance, cleaning, accountability to tenants,” he said. -he declares. “We will take care of all their problems. We will keep this affordable.
More money, same limits
The City of Pittsburgh is working with the Urban Redevelopment Authority [URA] to create a pool of funds that can be used to purchase affordable housing. But even with increased funds, there are other challenges.
In Pittsburgh, the median asking rent is $1,240, up 13% from a year ago, according to apartment listing company Dwellsy. When rents increase, investor interest may also increase.
“There is currently no nimble source that could prevent the loss of affordable housing,” said Evan Miller, acting director of home loans for the URA.
Miller said the URA would receive US bailout funds through the city to be used for housing preservation efforts. In July, the Pittsburgh City Council reallocated $8.9 million in US bailout funds to the URA.
“We are working on the process of creating a program that would do several things, including providing quick access to cash so that organizations like ACTION-Housing can compete with the private market and preserve housing that may have a LIHTC expiration,” he said. .
The money, Miller said, could also be used to rehabilitate buildings, something the URA has been focusing on for some time.
“It’s a potential boost to help us continue this mission,” Miller said.
But even with additional funds, government-funded organizations will have to cope with the high speed at which real estate transactions are currently taking place.
“You have businesses offering cash, on the spot, 20% above the market rate, sight unseen,” said Lance Chimka, director of economic development for Allegheny County.
“The most important thing to consider, whenever you use public money: rigidity,” he continued. “There are due diligence and serious constraints on transferring money that private funders don’t have to do. So even if we had a pool of money, it would be difficult to move it as quickly as private offers.
Chimka said the county has tried to build and preserve affordable housing by working with homeowners to apply for or extend their tax credit compliance.
“We typically invest in three to four LIHTC transactions per year,” Chimka said.
But in situations like Melvin Court, Chimka said that “even if something goes at the market rate, it depends on where it is and the state of the building, which leads to what they can to invoice. Very often you see new owners renting out a vacation at similar prices.
“But there is no guarantee that these prices will not increase in the future.”
This story has been verified by Jack Troy.
Do you feel more informed?
Help us inform people in the Pittsburgh area with more stories like this – support our nonprofit newsroom with a donation.