Eminent Domain

L.A. Politicians Want To Seize Private Apartment Building to Prevent Rent Increases

Gil Cedillo, city councilmember, has introduced a motion asking the city to study its options for seizing the 124-unit Hillside Villa.

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Los Angeles politicians will make housing affordable, by force if necessary.

On Friday, City Councilmember Gil Cedillo introduced a motion that asks city staff to draft plans for using eminent domain to seize Hillside Villa Apartments, a 124-unit, privately-owned development in the city's Chinatown neighborhood to avoid rent increases at the property.

The property is currently under an affordability covenant that requires its owner to rent out a number of its units at below-market rates. That covenant is set to expire soon, meaning rents on some 59 units will increase to market rates—which means rent hikes of up to $1,000 per unit.

"We think it is important enough that we need to take action to preserve those units. We don't want to generate more homeless people," Conrado Terrazas Cross, Cedillo's communications director, tells Reason, saying that many tenants would not be able to afford the coming rent increases.

"I think it's a brilliant idea but I need to know: Are we in Cuba or Venezuela?" says Tom Botz, the L.A.-area developer who owns the building, about the proposal to seize his property.

Botz tells Reason he purchased the development company that built Hillside Villa roughly 20 years ago. 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 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.

In June 2019, several tenants, with the assistance of the Legal Aid Foundation of Los Angeles and the National Housing Law Project, sued Botz, claiming the eviction notices tenants received did not give them proper notice.

That lawsuit was dropped in July after a compromise was tentatively reached in which Botz agreed to extend the affordability covenant on his property for another 10 years in exchange for the city wiping away the debt he still owed on the redevelopment loan.

Botz eventually decided to not go through with that deal. He says that he had no hope that once the extended affordability requirement expired, activists and the city wouldn't just try to pressure him again into maintaining below-market rents at the building.

The past six months have seen bitter feuding between Botz, tenant organizers, and Cedillo's office. Activists picketed his home, according to The Malibu Times.

Cedillo has accused Botz of reneging on their agreement to not raise rents. Botz contents nothing concrete was ever agreed to. The dispute has now culminated in Cedillo asking the city to seize Botz's property.

Extreme as it might be, this use of eminent domain could well be constitutional says Jim Burling of the Pacific Legal Foundation, a public interest law firm.

"It's theoretically possible for the city to thread the needle to make this work constitutionally," Burling tells Reason, saying the government would probably be within its rights to condemn a property for the purpose of preserving affordable housing.

But the devil is in the details, he says. "If [the city] get[s] sloppy or they get greedy and don't want to pay what this property is actually worth, there could be some serious constitutional challenges."

Regardless of whether this seizure meets constitutional muster, it will certainly erode property rights, says Burling.

"Why are you going to spend 30 years maintaining a property and keeping it in good shape if you know that at the end of the day, the government can basically rip up the agreement?" he says.

Terrazas Cross says that eminent domain could be deployed to seize other properties where affordability covenants are set to expire.

Cedillo's motion asks the city's Bureau of Engineering to consult with the city attorney and then prepare a report on seizing Hillside Villa within 30 days. Botz says he will fight any effort to seize his property in court.

Ideally, tenants currently receiving subsidized rents at Hillside Villa would be able to find adequate market-rate housing, even if rents at their current residence shot up. That they can't is a product of Los Angeles not allowing enough construction of new housing at rates that would keep rents stable over time.

The solution to that, however, would be allowing more private housing construction. Instead, the city is now looking at just taking over the limited number of private developments government regulation has allowed to be built.

In 2019, the Los Angeles City Council voted unanimously to oppose SB 50, a state bill that would have legalized four-unit homes on most residential land and mid-rise apartment buildings near major transit stops and job centers.

Should the city go down the path of seizing private developments to preserve units, it will discourage investment in developing new housing.

The Los Angeles Times reports that Cedillo's motion will now head to the city council's housing committee, which he chairs.

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  1. If nothing else, this threat of eminent domain abuse will lower property values for apartment buildings, thus making the far market value cheaper for the city. Win-win-win! And the owner doesn’t lose because his loss is just from normal market activity.

    1. “Normal market activity.”

      Good chance he bought the place just for the eventual benefit of having that restriction expire. And now it’s all for nothing, thanks to the whims of the collectivists.

  2. I smell a lawsuit where the citizens have to pay up for the loss.

    1. Taxpayers, not ‘citizens’.

      1. Subjects.

    2. Pretty sure the taxpayers elected the thieves stealing his property.

  3. ‘L.A. Politicians Want To Seize Private Apartment Building to Prevent Rent Increases’ . . .
    Sounds like the politicians are doing their public responsible if they open up these apartments to those who cannot afford the rent. But they should not stop with just the one apartment building but start the process of eminent domain on any and all apartment buildings that don’t provide a certain percentage of its apartments below market value. If the apartment owners will not do their public duty then the city (or the state in the absents of the city) should act in public interest.

    1. Is there an amendment where the city council members have to let a homeless person use any empty bedrooms in their own homes?

      1. It’s hard to believe, but the brain-dead mayor of Oakland suggested that people take bums into their homes to help the ‘homeless crisis’.
        When asked how many she was going to invite in, she claimed to not have any space available.
        Really. I am not making that up:
        “As homelessness shows no sign of shrinking in Oakland, Mayor Libby Schaaf asked homeowners Thursday to open their doors to the unsheltered if they have the space to spare.”
        https://www.sfgate.com/bayarea/article/Mayor-Libby-Schaaf-discusses-Oakland-homeless-12328395.php

        1. Stop feeding the bums and they’ll move on.

          1. Get off my lawn!

    2. It’s not capricious if they do it to everybody!
      Call it a tax. Or penaltax, if you will.

    3. Private owners are not charities. What right has the City, or anyone, to demand a percentage of apartments?

      Fifth Amendment of the U.S. Constitution:
      No person shall … nor shall private property be taken for public use, without just compensation.

      1. The “just compensation” part is the problem. It’s not constitutionally prohibited to seize property, they just have to pay fair market value for it.

        And when they have the regulatory power to pass rules that depress property values (by discouraging investment) “fair market value” is a moving target.

    4. The apartment owners don’t have a public duty. They are offering a product to the public, who can take it or leave it at the offered price. There’s this thing called the market which helps capitalists identify when people are demanding more of something. LA should try it.

  4. “I think it’s a brilliant idea but I need to know: Are we in Cuba or Venezuela?” says Tom Botz, the L.A.-area developer who owns the building, about the proposal to seize his property.

    This doesn’t seem quite so clear cut to me, given this property was developed using public money in the first place, “including a $5.4 million loan from Los Angeles’ since-abolished Community Redevelopment Agency in 1986.”

    The Community Redevelopment Agencies were abolished in no small part because of their pattern of using Eminent Domain to seize ‘blighted’ properties and redistribute them to favored developers like Mr. Botz here.

    “Cuba or Venezuela,” indeed, but he sure looks to be a beneficiary of the abuse of power more than a real victim.

    And . . . 1986 and he still hasn’t paid back the loan? Do we know enough about the circumstances here to say this is “Eminent Domain abuse” rather than essentially a foreclosure on a deadbeat borrower?

    But just to lob some hate at the other side – WTF did they think was going to happen to those rents when the 30 years expired?

    1. “WTF did they think was going to happen to those rents when the 30 years expired?”

      They were probably hoping to use Community Redevelopment Agency to seize them as “blighted,” re-redistribute them to a new favored developer, then get another 30 years of below-market rents

    2. yeah, he hasn’t paid off the loan yet, it might be because he’s been forced to sell his rooms for pennies on the dollar. That being said, I don’t really feel that sorry for him, he chose to do this in Cali. If I lay with a clap-ridden whore, I don’t get to complain when I need a penicillin shot.

      1. it might be because he’s been forced to sell his rooms for pennies on the dollar

        Yes – per the agreement he made when he took the public money and the crony-tastic deal in the first place, which goes to illustrate your second point:

        “If I lay with a clap-ridden whore, I don’t get to complain when I need a penicillin shot.”

        It’s sorta like the lady who marries the guy who’s been cheating on his wife with her. Do you really have a right to be surprised when he turns around and cheats on you?

        When Vader comes around with the deal of the century and you grab, don’t be surprised when you hear “pray I don’t change the deal again.”

        1. Like I said, I don’t feel bad for him. He made his choice.

          1. Agree. Lie down with dogs, wake up with fleas.

            1. +1 infestation

      2. That being said, I don’t really feel that sorry for him, he chose to do this in Cali.

        To be fair, Los Angeles in 1986 was quite a bit different than it is now.

        1. When I used to live there, leaded gasoline was still available. Ah, the joys of youth.

  5. rent hikes of up to $1,000 per unit

    Fucking ridiculous. Why would anyone want to live there?

    1. Because all the good street/underpass locations have already been claimed?

    2. I moved out of California over a decade ago and I can rent a 2-bedroom in AZ for less than I saw a dilapidated, literal shack listed in CA… 10 years ago.

  6. Cordlandt homes, anyone?

  7. Sooo, Iowa’s results still aren’t all in… they’re only at 70%. They really are struggling to figure out how to stop Bernie from winning, aren’t they?

    1. The Shadow knows….

    2. They’re trying to stop Warren (ei. Hillary II) from losing.

  8. “Why are you going to spend 30 years maintaining a property and keeping it in good shape if you know that at the end of the day, the government can basically rip up the agreement?”

    IIRC, the government can basically rip up the agreement on *anything*.

    1. As someone said “Political power grows out of the barrel of a gun.”

      1. LMao’sAO!

  9. Is the city going to become the new slumlord or will they in turn sell it?
    The city has no mechanism I know of to collect rents and evict delinquent tenants.

    This could create a brand new city bureaucracy.

    1. DON’T GIVE THE BUREAUCRATS IDEAS

    2. Nah… LA has a public housing authority with existing units.

  10. Fuck that. Put up a notice that you’re fumigating the place to get all the tenants out for a day, then burn the fucker down, collect the insurance and walk away. Let some other sucker have the property.

  11. Should the city go down the path of seizing private developments to preserve units, it will discourage investment in developing new housing.

    Expect this isn’t really a private development. It was financed with government money. Don’t like the government rules, don’t take their (our) money.

    1. You’re right.
      If you sup with the devil, best you have a long enough spoon.

  12. Lets see a story about government seizing an apartment block and another story about government telling a company who to hire and what it can sell and all employees must have diversity training. I see this nation is already full fascist. who needs the Fascist Trump when cities are doing it themselves

  13. “1) Landed proprietorship is abolished forthwith without any compensation.

    (2) The landed estates, as also all crown, monastery, and church lands, with all their livestock, implements, buildings and everything pertaining thereto, shall be placed at the disposal of the volost land committees and the uyezd Soviets of Peasants’ Deputies pending the convocation of the Constituent Assembly.”

    Passed by the Second Congress of Soviets of Workers’, Soldiers’, and Peasants’ Deputies on 8 November 1917.

  14. You didn’t build that housing.

    Liz Warren, Capitalist…

  15. Just let the city build its own housing. That aside, there is no “housing shortage” There’s just too many people, and a culling should be imposed. Hopefully some suicide bomber will infect himself with corona virus and ebola, then blow himself to mist at and airport during rush hour.

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  17. New affordable/low income housing is usually built using tax breaks and low cost government backed loans. The trade off is a percentage of the new units is dedicated to low income renters for 30 years.

    If the City of LA steps in and seizes all low income apartments at the end of the 30 year low income rent cycle, it will have a major ripple effect on low income housing. Other existing low income units will become slums overnight. Why would owners maintain/repair a low income apartment complex for 30 years if the City will seize it? New low income housing construction will stop in a double whammy. Private developers/owners will see new low income housing as a fool’s investment the City government will seize. And, even more important, the low income housing has to get financing, usually via the federal HUD programs with local banks. Both Federal HUD and the local banks won’t finance new construction if the City is going to seize the property.

    1. Killing that goose to try to get more golden eggs…

  18. Just incredible to tell a business they are not allowed to make any money. “Sorry you have to run this at a loss, law says …”

  19. It’s government hard at work to create more slums and less housing.

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  21. You all read Atlas Shrugged … right?

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