Apartments for low-income families are at risk, advocates say

A few years ago, the housing bubble was making affordable apartments disappear.

High prices meant property owners could make more money converting their rental buildings to condos, or they could increase rents. Either way, it was tough for working families to afford the units.

Now that bubble has burst, bringing with it falling prices and foreclosures. The unstable market has created a new hole where those affordable apartments can fall out of the market.

The recession means available credit for landlords for the repair and upkeep of their properties, says Stacie Young, housing expert at DePaul University's Real Estate Center. As a result, units for low and middle income families are vanishing because landlords can't afford to stay in the business, says Young.

"A lot of the owners that we talk to...they're just sinking," says Judy Levey, director of the Preservation Compact, a project of the Urban Land Institute and the McArthur foundation trying to preserve rental housing in the Chicago area.

Costs for owners are going up, says Levey, and their incomes are going down. Landlords can't charge as much for rent during a recession, and rising unemployment means the tenants they do have often can't pay.

Building owners say they're under pressure from all sides, and they're struggling to keep up.

Marty Max, owner of MLC properties, has about 500 units on the North, South and West Sides of the city that he rents to lower income people. Although he tries to keep his buildings affordable, Max says higher costs and lower rents are making it more difficult.

"Our income is either flat or less than the year before. What expense is less than the year before? Nothing," says Max.

Max says the city is making it difficult for landlords, increasing fees and inspections that keep their costs climbing.

"The city of Chicago is absolutely crucifying landlords right now," says Max. One example of tougher city regulation is porch standards.

After a porch collapse in Lincoln Park in 2003 that claimed 13 lives, the city tightened structural standards. Porches now have to be able to withstand 100 pounds of pressure per square foot, much higher than other parts of a building, like parking lots that must meet 75 pounds per square foot or 50 pounds per square foot for apartments themselves.

The new standards mean landlords are forking over a lot of cash – nearly $30,000 per porch, Max says.

The credit crunch isn't helping. Owners need loans to help them do the renovations needed, and banks aren't giving any, says Max. Lack of access to credit and soaring costs mean a lot of landlords are getting out of the business.

Max says he wants to keep his units affordable for low-income families, it often means making a risky bet.

"Low-income can often mean not as good credit, not as good employment. We try to give that family a chance, or a second chance," says Max.

And a lot of Chicago families can't afford market rate rents. Three-quarters of Chicagoans make less than the area median income of $75,000, according to numbers from the Chicago Rehab Network.

With the huge push for homeownership in the last few years, Levey says rental housing has been ignored and even looked down upon. But not everybody can afford to own a home, she says, as the record number of foreclosures and subprime loans have demonstrated.

"They have to rent," says Levey. "They cannot afford to buy a home, to make repairs on homes."

In fact, statistics from the Preservation Compact show increasing demand for rental housing as more and more units are at risk of falling out of the market. They estimate the number of low-income rental households will increase about seven percent, while the supply of housing for these families will stagnate or even decrease.

Organizations around the city, including the Preservation Compact, are trying to help get property owners the resources they need to keep rents affordable and take care of low-income renters. One of the Preservation Compact's initiatives is the Energy Savers Program, which helps owners get low-interest loans for energy efficient upgrades for their buildings.

But the problem is a big one, Young says, and while the housing market slowdown has bought the Compact some time to address the problem, it isn't an easy one to fix.

"The public resources are far more scarce than the need," says Young, who is working on identifying which buildings in Cook County are most at risk.

Many building owners are finding it tough to stay in the business. Max says he's selling a building because of the situation. He says it is only the second building he's ever had to sell.

"Most landlords would like to keep doing it," says Max. "But we're not really getting any help whatsoever."