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By Felicia Mello

CalMatters

Luke Johnson and his neighbors thought they had found the perfect solution to avoid being displaced from their fourplex in Los Angeles鈥� Silver Lake neighborhood: A state program was offering $500 million to help tenants, community land trusts and other affordable housing developers buy buildings at risk of foreclosure.

With their longtime landlords set to sell the building, Johnson and his neighbors persuaded them to sell to a community land trust that pledged to keep rents low.

But six months later, the state program has vanished after failing for three years to give out any of the grants and loans it promised. The deal with the fourplex residents鈥� landlords has collapsed. That leaves Johnson, 85, and his husband unsure whether they鈥檒l be able to stay in the rent-controlled two-bedroom apartment where Johnson has lived for nearly half a century.

The sudden disappearance of half a billion dollars of state money meant to help community land trusts has left some housing advocates questioning California鈥檚 commitment to preserving existing affordable housing 鈥� a strategy that鈥檚 less flashy than new construction but can also be less expensive.

鈥淚t鈥檚 a struggle for us and I鈥檓 sure for a lot of other people who counted on getting that grant and didn鈥檛 get it,鈥� Johnson said.

State lawmakers created the Foreclosure Intervention Housing Preservation Program in 2021. It was a watershed moment for community land trusts 鈥� nonprofits that purchase land and preserve it as permanently affordable housing by renting or selling the buildings on it to residents with low or moderate incomes. Residents then manage the property cooperatively.

While community land trusts have聽tripled in number聽in California over the past decade, they often struggle to raise enough money to compete with private developers. Access to a dedicated pot of state money was poised to be a game-changer for both the trusts and cities seeking to prevent displacement of low-income residents, San Francisco Supervisor Dean Preston said.

鈥淲e had hoped the state would help San Francisco and other cities that want to really ramp up these programs,鈥� he said. 鈥�(Community land trusts are) a very effective, quick and permanent way of creating truly affordable housing with resident control.鈥�

The state planned to dole out the $500 million in loans and grants over five years for purchases of financially distressed buildings of up to 25 units.

Three years in, however, the state agency charged with developing the program, the Department of Housing and Community Development, had yet to give out a single dollar.

This past spring, with California facing a projected $56 billion budget deficit, some lawmakers聽began raising concerns.

鈥淚t鈥檚 the kind of thing that you look at and it makes your head explode,鈥� Assemblymember Jesse Gabriel, who chaired the Assembly鈥檚 budget committee, said in an interview. 鈥淭his is something of importance to everyone in California, and yet we鈥檙e sitting here with this tremendous allocation of resources and making zero progress. That is totally unacceptable.鈥�

Lawmakers scrapped the program in June.

It wasn鈥檛 the only state program to suffer such a fate this year. But community land trust advocates complained that the state鈥檚 slow rollout undermined the program before it could get started.

鈥淲e got into the 2021 budget expecting the funds would be available within a year or year and a half,鈥� said Leo Goldberg, co-director of policy at the California Community Land Trust Network. 鈥淚f the program had been rolled out, there would have been successes to point to that would have made it easier to defend.鈥�

Without state support, a plan fizzles

Johnson said he immediately felt at home in the diverse Silver Lake of the 1980s, with its聽vibrant and organized LGBTQ community, Latino families socializing on porches and Russian immigrants filling Orthodox churches. Over the past 40 years, he鈥檚 watched the neighborhood gentrify as well-to-do hipsters moved in.

Johnson鈥檚 now-husband, Osbey, house-sat for him in 1990 and never left. They鈥檝e joined their neighbors 鈥� friends who have all lived in the building for at least a decade 鈥� in hosting community events in the complex鈥檚 back garden.

When their landlord signed a contract to sell the building to a for-profit developer, they feared displacement. Average rent for a two-bedroom in Silver Lake had ballooned over the years to nearly $4,000 per month, according to Zumper.com. That was about four times what Johnson and his husband currently pay.

After Johnson and his neighbors, one of whom had experience organizing with the Los Angeles Tenants Union, launched a phone and email campaign, the private developer backed away from the deal. Then the residents鈥� landlord agreed earlier this year to sell to the Beverly-Vermont Community Land Trust, giving it until this month to raise the $1.5 million purchase price.

That should have worked: California was expected to start distributing the affordable housing preservation funds this year. Land trusts were already having initial conversations with the fund manager selected to run the program about projects that would be eligible.

But by July the expected state support was off the table. The clock was ticking to find a backup plan. The residents started an online crowdfunding campaign and threw a backyard fundraiser. The land trust pitched the endeavor to small banks and credit unions.

Even if the trust got approved for a loan, the interest on a private loan would likely be much higher than using state money, foiling the tenants鈥� plans to keep their rent affordable. Kasey Ventura, an organizer with the land trust who had negotiated similar deals, estimated rents on the units would need to rise to at least $2,000 a month 鈥� still below market rate, but significantly higher than now.

The loss of the state fund was a 鈥渉uge setback鈥� for not only the Silver Lake tenants but community land trusts across the Los Angeles area that had been banking on the support, Ventura said.

鈥淲e have dozens if not hundreds of units that are in this bubble now of 鈥楬ow do we do this?鈥欌�� he said.

A department鈥檚 failure to launch

New government programs often take months, if not years, to roll out. But even by state standards, the glacial pace of the Department of Housing and Community Development鈥檚 launch of the housing preservation program stands out.

The HCD declined to make anyone available for an interview for this story. But in an emailed statement, spokesperson Alicia Murillo said the unprecedented nature of the housing preservation program created a steep learning curve for agency staff.

The program 鈥渨as very different from any other program HCD manages, both in terms of the types of projects (small-scale acquisition/rehab vs. our usual larger-scale new construction) and in terms of the mechanism for fund disbursement (using external nonprofit lenders rather than disbursing funds ourselves),鈥� Murillo wrote.

Another state effort to create housing stability for low-to-moderate-income Californians, created at the same time, launched much more quickly: Lawmakers authorized聽California Dream for All, a down-payment assistance plan that covers up to 20 percent of a home鈥檚 cost for certain first-time homebuyers, with the same 2021 budget bill that created the housing preservation program.

Less than two years later, the California Housing Finance Agency, a different arm of the state bureaucracy, had already given out all $288 million in initial Dream for All funding to eager homebuyers. This year, the agency overhauled Dream for All to serve a more diverse set of buyers; the revamped program survived state budget cuts and awarded $250 million more in no-interest loans.

By contrast, the HCD took a year to draft guidelines for the housing preservation program, then eight more months to turn those into final rules. The plan called for a nonprofit fund manager to run the program, but the state didn鈥檛 award that contract until July 2023, two years into the program鈥檚 five-year timeline.

That鈥檚 unusual, said Ben Metcalf, managing director of UC Berkeley鈥檚 Terner Center for Housing Innovation, who led the HCD from 2015-2019. While it can easily take two years to launch a new program, he said, that timeline can shrink by a year if lawmakers have already appropriated the money, as they had for the housing preservation program. And things can move even faster, he said, 鈥渨hen an agency or director is motivated, or you have the right staff to implement it.鈥�

HCD spokesperson Pablo Espinoza stated in an email that part of the delay stemmed from the need for changes to state law that would allow officials to transfer money to the fund manager and pay its administrative expenses. It took several months for those adjustments to pass the Legislature, he said. California Dream for All didn鈥檛 face those hurdles, he said, because it was administered similarly to the Housing Finance Agency鈥檚 existing loans.

To design the housing preservation program, the HCD did 鈥渁 ton of outreach鈥� to community land trusts and others involved in preserving affordable housing, said Elizabeth Wampler, Bay Area executive director for the Local Initiatives Support Corporation, the fund manager awarded the contract.

Wampler鈥檚 group was drawn to the project after lending money to community land trusts to preserve affordable housing in the Bay Area, she said.

鈥淲e saw those deals had incredible impacts for communities of color,鈥� Wampler said. 鈥淲e know it鈥檚 a huge anti-displacement strategy to keep people in their homes. It helps to increase affordable housing stock 鈥� there are a lot of reasons why it鈥檚 a good strategy.鈥�

Affordable housing groups had identified 162 buildings they hoped to buy and preserve as affordable using the state funds, according to a survey Wampler conducted.

But the state鈥檚 design process took so long that by the time it was complete, the state budget picture had changed, and the HCD never signed a contract with Wampler鈥檚 group. Instead, the HCD paused the program in late 2023 鈥� at least six months before lawmakers officially cut its funding.

鈥淚 think it was hard that the program hadn鈥檛 launched and hadn鈥檛 funded any projects,鈥� Wampler said, adding that it became a target for lawmakers looking to save money.

The HCD did already have some experience with affordable housing preservation through another program designed to help mobile home park residents and nonprofits buy and rehabilitate properties. Like the housing preservation program, the Manufactured Housing Opportunity and Revitalization Program provides loans to purchase existing properties, some with fewer than 25 units. Both aimed to support residents banding together to manage their housing cooperatively.

Between 2013 and 2023, the HCD approved only a single loan application for the mobile home park program,聽CalMatters reported last year. But lawmakers have since redesigned it, and in 2023 the department awarded more than $100 million to indigenous tribes, local governments, resident cooperatives and nonprofits like Habitat for Humanity.

Preservation challenges persist

Last year, while the Foreclosure Intervention Housing Preservation Program languished, more than 31,000 California properties that would have been eligible received a notice of default, according to a California Community Land Trust Network analysis of Property Radar data.

Among the state鈥檚 distressed properties was Oakland鈥檚 Warriors House, a local landmark near Interstate 580 painted in the splashy blue-and-gold color scheme of the Golden State Warriors basketball team and festooned with team memorabilia.

Owned by a local family for more than 50 years, the house needed extensive repairs when the family鈥檚 matriarch died after taking out a reverse mortgage, said Steve King, executive director of the Oakland Community Land Trust. The trust had hoped to tap the state program to buy the home, both preserving the iconic property as affordable housing and preventing the woman鈥檚 son from being displaced, he said.

But without state support, the trust did not raise enough money in time, King said. A bank took possession of the property and sold it to a private buyer last year. The woman鈥檚 son, Lloyd Canamore,聽died shortly before the sale聽after moving to a rental in a different part of the city.

鈥淚t really messed him up,鈥� said Michelle Easley, a neighbor who recalled Canamore as 鈥渁 sweet man鈥� who loved sports, his dogs and taking pictures with fans who would visit the house.

In 2020, concerns about private equity firms buying distressed properties and converting them to market-rate rentals led to the passage of a state law that gave tenants whose foreclosed homes were sold at auction 鈥� or nonprofits working with those tenants 鈥� 45 days to match the winning bid.

But tenants and community land trusts still struggled to secure enough money to take advantage of the law. The housing preservation program aimed to change that.

鈥淭ime will tell whether the agencies can respond fast enough, but the reason I believe the governor agreed to this funding is that no one wants to have homelessness go up due to foreclosures,鈥� Sen. Nancy Skinner, a Berkeley Democrat who championed the auction change,聽told online news outlet Next City聽at the time.

Skinner declined to comment for this story.

Preston, the San Francisco supervisor, said he thought elected officials at the state and federal levels underestimated the importance of preserving affordable housing. Constructing new housing is important, he said, but so is stemming the constant hemorrhage of affordable units as they are purchased and flipped to luxury abodes rented at rates out of reach of many Californians.

鈥淚t鈥檚 not production in terms of building something from the ground up, but it is producing when you take something that would otherwise be renting for $4,000 a month and instead have it renting for a reasonable percentage of someone鈥檚 income who is low-income,鈥� Preston said. 鈥淭hat is creating affordable housing for working-class people who otherwise wouldn鈥檛 be able to afford to live in San Francisco.鈥�

Without state support on the horizon, community land trusts across California are now pooling their efforts to create a joint capital fund, powered by philanthropy and private banks, that could eventually provide low-interest loans to buy buildings like the one in Silver Lake.

They鈥檙e hoping banks will be attracted by the opportunity to fulfill some of their obligations under the federal Community Reinvestment Act, which requires financial institutions to prove they are meeting the credit needs of historically disadvantaged communities.

The goal is to create a one-stop shop for lenders who want to support community ownership, raising $20 million in 2025 and eventually growing that to $100 million that community land trusts could combine with public subsidies to buy properties, said Jazmin Segura of the Common Counsel Foundation, which is hosting the fund.

Johnson and his husband still hope they won鈥檛 have to leave their home. The deadline to put down a deposit on the Silver Lake building came and went, with the land trust unable to come up with a Plan B that would have raised the money any sooner than next year. He and his neighbors are asking their landlords for more time to come up with a solution.

If they don鈥檛 succeed, Johnson fears he and his husband would have to leave Silver Lake.

鈥淲e really don鈥檛 know what the future is,鈥� Johnson said.

Editor鈥檚 note: This story was originally published by聽CalMatters聽and distributed through a partnership with The Associated Press.