Taxpayer bailout of Skid Row’s biggest landlord is approaching $40 million

(Irfan Khan/Los Angeles Times)

Taxpayer bailout of Skid Row’s biggest landlord is approaching $40 million

California Politics

Liam Dillon

Dec. 4, 2023

The cost to Los Angeles taxpayers of bailing out failed nonprofit Skid Row Housing Trust is now expected to approach $40 million, with officials warning that more dollars will be needed by mid-2024.

The price tag stems from the trust’s financial collapse earlier this year, which led to the city petitioning the court for a receivership to oversee the charity’s 29 buildings and more than 1,000 formerly homeless tenants.

The city assumed the trust’s operating and repair costs in hopes of stabilizing the properties and transferring them to other nonprofit housing providers. The alternative to abandoning Skid Row’s largest landlord, city officials say, would destroy affordable housing, devastate the community and force dozens of people onto the streets.

We are trying to prevent a humanitarian catastrophe, City Councilman Bob Blumenfield said in an interview.

Last Wednesday


the city’s Housing and Homelessness Commission has approved $15 million in spending, mainly to cover expenses through June. The amount, which must be approved by the full council, is in addition to the $22.7 million allocated earlier this year to deal with the trust’s demise.

Other landlords have already taken over seven trust properties, with a further ten expected to be transferred out of receivership in the coming months. That leaves a dozen of the oldest and most problematic buildings, which will then be redeveloped. usually as studio apartment complexes for the same cohort of tenants. The city’s expenditure does not include last June’s expenditure on the 12 properties, nor the city’s contribution to their reconstruction. Initial estimates of the cost of urban redevelopment are $70 million, while it will take years to complete.

So far, the city’s rescue efforts have been plagued by mistakes, bloated budgets and a reliance on the same flawed financial structure that had contributed to the trusts’ problems.

Some council members are frustrated, with Blumenfield calling the situation a money pit in a black hole in a previous committee meeting.

We were guilty, Councilmember Monica Rodriguez said during last week’s hearing


. At this stage I don’t know how to save myself.

The trust was once seen as a model for operating permanent housing with supportive services, but in February its leaders announced the nonprofit would go bankrupt after years of unstable leadership and mismanagement. Compounding the trust problems, government support programs were not keeping pace with the costs of running the properties, which were mostly single-room hotels consisting of small units with shared bathrooms.

The result was dangerous and dilapidated conditions. In the final months before a judge appointed the curator in April, one building was declared uninhabitable due to arson and three more residents died of a drug overdose on the same day. The council in March approved $700,000 to pay for security at the properties.

While public dollars were always expected to help stabilize the portfolio, City Atty. Hydee Feldstein Soto pushed for a receivership, in part as a way to insulate taxpayers. The trustee, who would report to an LA Superior Court judge and not the city, would finance operations, repairs and his own fees by borrowing money on the private market and be repaid once the assets were transferred to new owners.

But the trustee Feldstein Soto chose, Mark Adams, struggled to raise money and manage the properties and resigned under pressure in June. Adams is one of the state’s most experienced receivers, but Feldstein Soto, Mayor Karen Bass and other city officials did not fully vet him beforehand and were unaware of his verified history on previous assignments involving low-income tenants. Adams had been a major donor to Feldstein Soto’s campaign.

After Adam’s resignation, the city began financing the receivership, approving $10 million that would last at least four months. Instead, the money ran out in threes, with a new recipient, Kevin Singer, going over budget due to higher-than-expected security and cleaning costs. The city signed up for another $12 million to cover the rest of the year.

The city expects some of the $37.7 million will be repaid if properties go into receivership and their new owners will bear some of the costs.

The curator has no more money partly because the buildings generate little rental income. Ann Sewill, general manager of the Los Angeles Housing Department, estimated at Wednesday’s hearing that the properties cost about $1,000 per unit each month, while monthly rental income, largely from federal subsidies, averages $700 per unit.

About 30% of the 1,500 units in the 22 buildings still under receivership are vacant, according to the housing department. Four properties are less than half full, while another, the 43-unit Dewey Hotel, is closed indefinitely due to the February arson.

The financial problems have hurt rehabilitation efforts. Singer largely halted repairs in October and resumed them after the city’s recent cash infusion. Singer has resolved a quarter of the more than 900 city code violations that existed when he took over, according to the housing department.

In addition to covering operations through the first half of next year, the $15 million approved at Wednesday’s hearing also includes $4.2 million for unpaid costs from Adam’s tenure.

The city negotiated with the former trustee over the money allocated to vendors and his firm’s fees, which totaled more than $800,000.

Feldstein Soto’s office hired a forensic accountant to review Adams’ billings and has challenged some of them in lawsuits, including his interactions with the media after his firing. Adams’ invoices show a charge of $93 for an email he wrote to Loyola Law School professor Jessica Levinson complaining about her quotes in a July Times story, and another $93 for an email -email about a full-page advertisement he placed in the Los Angeles Daily News titled An Open Letter to the People of Los Angeles

where in

he defended his tenure.

The city


asked the court to request the court

disallowing some of Adams’s cited expenses for security, tenant listening sessions, financing and other areas totaling $95,000.

However, the city did not object to other billing, including $1,800 for a May interview with Times reporters about his background and $1,300 appearing


It was Adam’s interactions in the spring with a lobbyist he hired to advocate on his behalf to City Council members.

Karen Richardson, a spokesperson for Feldstein Soto, declined to answer a list of questions from The Times about Adams’ spending


or provide the name and cost of the forensic accountant hired to audit his accounts. The city attorney’s office declined to release the auditor’s contract under a public records request, citing the active receivership case.

Adams said in a statement to The Times that it would be inappropriate to comment on his accounts because the judge had not yet determined what he should be paid.

Lawyers for the city and Adams said this during a court hearing last week


that they hope to resolve their differences by mid-December.

Citing the costs, the city wants to end the receivership in the spring. The residential committee last Wednesday


signed the housing department’s proposal to try to take over the remaining dozens of properties at that time.

Should the city succeed, officials would begin a complex process of contracting with the city’s housing authority to manage the buildings, asking the federal government to increase tenants’ monthly housing subsidies and requesting proposals from homeless housing developers to to purchase and redevelop the portfolio.

The plans likely include rehabilitating or demolishing most of the single-room hotels and replacing them with new developments consisting largely of studio apartments, Sewill said in a memo to the council. The projects would receive funding from the city, estimated at $70 million, and like other affordable housing complexes would require additional support from the federal and state governments.

Sewill predicted it could take until 2031 for the effort to be completed.


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