Even though they have some problems with the heat, Joanne Dolan and her husband William would like to keep living in their apartment in Clock Towers, a peach structure on the corner of Third and Adams that was designed for low and moderate income families more than 20 years ago. Dolan told the City Council Monday that she may have to move if the building is sold to a Maine-based developer who has struck a deal with the state that would allow rents to be nearly doubled on 34 apartments in the 172 unit building - including the Dolans' - over the next five years."I called HUD [for help] and they told me that there was nothing that could be done and that I should just get out," said Dolan, her voice rising in anger.
The council listened to Dolan's plea during a special session Monday morning to consider a compromise proposal offered by the would-be buyer of the property, the Low Income Housing Corporation, that would allow the Dolans and their neighbors to continue paying about the same rents they pay now.
In exchange, the developer asked for the right to have a reduced tax burden and for the right to collect higher subsidies on the remaining 138 apartments from the federal government than those that would be allowed under the city's rent control law.
In a unanimous 7-0 vote that followed two closed door meetings lasting as long as an hour, the City Council said "no" to the developer's request. (Councilmen Michael Cricco and Tony Soares missed the morning meeting.)
The offer had been placed on the table last Friday, just a few hours before Judge Arthur D'Italia of the Hudson County Superior Court was scheduled to rule on the city's request that the court block the sale since it would leave residents "unprotected" from rent increases.
After Monday's meeting, D'Italia dissolved a temporary injunction he had placed on the sale at the city's request, but he did not clear the way for the Low Income Housing Corporation to execute its deal with the state yet. Instead, he has asked the parties to return to the courtroom Sept. 8 to formally consider what the developer could legally charge his tenants in rent.
Repercussions
The implications of the case could have repercussions on hundreds of families that do not live in Clock Towers. Seventeen other building complexes around town were built using loans from the Department of Housing and Urban Development in the 1970s. Since their construction, rents in these complexes, which include Marine View Plaza and Church Towers, have been regulated by the federal government and can hover around the jaw-dropping rate of $500 for a one-bedroom unit. But now that many of the developers who originally constructed the structures have nearly completed paying off their mortgages, HUD oversight is about to end, and the issue of who sets the rents in the these "project-based" complexes has surfaced.
While city officials would like to see every unit in each property be placed under the city's rent control law - thereby ensuring that the building's tenants face no more than a two to three percent increase in rent annually - the state has another view.
Officials at the NJ Department of Community Affairs recognize that a number of relatively well-to-do families now live in buildings that were originally built for low- and moderate- income families. Some make as much as $75,000 a year. There is no law forcing them to leave if their income rises above a certain amount.
To rectify the situation, the DCA signed an agreement with the would-be owners of Clock Towers that would allow them to raise rents to "market rates" over the next five years on the 34 families who do not meet federal low- and moderate-income standards. Under the terms of the agreement, no family would be asked to contribute more than 30 percent of its income towards rent.
But city officials strongly object to the state's plan, claiming that many families like the Dolans cannot afford to pay more in rent anyway. "I can't believe that the state government would allow a number of our families and children to become homeless," said Mayor Anthony Russo after the council meeting. "But that would be the final effect of this agreement [reached by the DCA and the Low Income Housing Corporation]."
Earlier this year, the City Council went so far as to pass legislation specifically stating that project-based buildings would come under rent control once federal oversight ceases.
After the meeting, a number of City Council people said that they had decided that the developer's proposal would not be good for the city since it would establish a precedent that allowed the city's rent control law to be skirted by project-based building's owners. The effect of this skirting, they pointed out, would be a gradual reduction in the number of affordable units in town since rents charged in the apartments of subsidized tenants could be moved up to market rates once the current tenants leave.
In rejecting the compromise, the council left the matter of what could be charged in rent in the court's hands.
Pleased by handling
Charlie Gendron, the President of the Low Income Housing Corporation, said that he was pleased with the way D'Italia seemed to be looking at the case. "We were pleased by the judge's reaction and his overall perception of the case," said the mild-mannered Maine native, whose company manages more than 2,000 low income housing units in the northeast U.S. "We are still a little bit down that we were unable to work out something with the city that would be win-win for the tenants and city. But we understand that everything was happening last minute. That may have been a hindrance."
Gendron added that there were a handful of procedural matters that had to be cleared up with the current owners, Jefferson-Adams Rehab Inc., before the transfer of the title could take place. The sale of the six-story building is reported at $12.6 million.
Business Administrator George Crimmins estimated that taxes on the property would bring in just over $300,000 a year to the city and a handful of other governments. If the developer had been allowed to make Payments in Lieu of Taxes (PILOTs) as they were proposing, their tax payments would have been $103,000 a year.
Crimmins said that the city was prepared to bring its case to the courts, too.
"Anything we did here would have set a precedent we did not want to set," he explained Monday. "Now we have to go to court and fight the fight."
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