As affordable housing deed restrictions expire in Sonoma, seniors fear being hit with market rates

John Brians opened his apartment door to find out what the ruckus was as he meandered with his cane into the hallway, furrowing his bushy eyebrows to the noise upstairs.

A maintenance worker was adding new carpeting to the apartment upstairs, and a sign out front offered a 1-bedroom apartment for $1,175 per month. If that number seems low for an apartment in Sonoma, it’s because it is.

Setzer Senior Apartments, a small, eight-unit complex, is deed-restricted for low-income seniors. But come June 2023, the affordability restriction will end. After seven years of residency, Brians and the other tenants are not sure what comes next.

“I have no choice,” Brians said. “I’ll have to see if I can make ends meet … luckily, I know people who have money so I hang in there.”

According to a city housing outlook for 2023-31, Setzer Senior Apartments was considered high-risk of being converted to market-rate units “that would not provide assistance to lower-income residents.”

Sonoma has 399 properties with limits. Eighteen are at risk of conversion from low-income housing to market rate by 2035, and four of them have restrictions that will expire by 2025.

Ben Hernandez, a Realtor for the Setzer complex, said the owner, Donovan Family Trust, “wants to be reasonable” when the affordable deed-restriction ends in June and rents can be raised.

However, that will depend on whether the city of Sonoma chooses to buy the property, he said.

In ‘deed’ of housing

After decades of building affordable housing projects as part of the New Deal, in 1968 the federal government found a new way to create low-income units, according to Elizabeth Elia, an associate professor of property law at the University of New Mexico School of Law.

Elia wrote “Perpetual Affordability Covenants: Can These Land Use Tools Solve the Affordable Housing Crisis?” a research paper for the Pennsylvania State Law Review, which showed how affordable deed-restrictions play into the larger housing market.

In exchange for shifting the burden of low-income housing to private landlords, Elia said, the government subsidized private owners through low-cost mortgages, grants or operating benefits.

“The federal government did a sharp turn away from government-owned housing and toward the private market as the providers of affordable housing for low-income Americans,” Elia said.

The government needed to guarantee a property would remain affordable — and not be sold off to shed its affordable status. So an affordability restriction was written into the deed of homes, Elia said, typically for the length of a 30-year mortgage.

At the Setzer Senior Apartments, erected in 1993, that 30-year limit is almost up, leaving residents wondering what happens next.

Farm boy financing

Brians grew up as a farm boy in Penngrove as a fourth-generation Sonoma County resident. Looking through a collection of old newspaper clippings and photographs, he produced a photo of a dirt intersection taken in 1948.

“You know where this is? East Cotati Avenue and Snyder Lane,” Brians said. “Can you imagine that? In 1953, we had a square mile and my dad sold it for $300,000. It was money back then.”

The intersection today is lined with coniferous trees, lawns and subdivisions of single family homes, many of which are now valued at an average of nearly $1.3 million and have risen 30% since July 2020, according to Zillow.com.

The $971 a month Brians receives from Social Security does not cover his rent of $1,175 per month, which was raised nearly $100 this year but is still far less than Sonoma’s average of $2,100 per month.

As a result, Annie Falandes, the founder of Homeless Action Sonoma, has provided monthly financial assistance for Brians.

“It depends on how he's doing that month, but usually I pay at least a couple hundred dollars,” Falandes said. “But if it's going to go to fair market value, John is going to be out of luck. I can't cover that.”

Brians is sensitive to the rising costs for the owner of Setzer Senior Apartments, too.

“Look at the price of turkey for Thanksgiving,” Brians said. “So it’s not just me, it’s not just rent, it’s the whole environment.”

Still, Brians received notice in the past year that the affordable deed restriction on his home would expire in June.

“I might not be alive in June,” Brians said. “I’ll see how it plays out.”

The silver tsunami

Brians tells stories about his life after graduating from the University of California, Davis, crossing the Atlantic and hitchhiking through Europe in a sport coat.

Sport coat not withstanding, Brians lived a Bohemian lifestyle, he said, and for three years he stayed in Casablanca, Morocco where he met and fell in love with his partner Alex. The two would eventually resettle in Sonoma and open the Frame Factory, a custom picture frame shop located on East Napa Street.

“Everyone had their own viewpoint for how it’s going to look in their environment that they created at home,” Brians said. “And there are times when the pricing dictated what was going to be chosen.”

The cost of living in Sonoma Valley has caused many essential workers and residents on fixed incomes to leave for more affordable communities. As the June deadline approaches, Brians hopes to find an economical option that keeps him in Sonoma.

“I have the names of several places in the area where I could stay for about $400 per month,” Brians said. “But they have such a long list, it might be a couple of years before it’s available.”

Brians has applied to local affordable housing groups. But low-income senior housing is in short supply said Efren Carillo, vice president of Burbank Housing, a nonprofit affordable housing developer in Sonoma County.

When it comes to population, Sonoma is one of the oldest cities in the county with an average age of 54.5 years old — 15 years older than the average Sonoma County resident — according to the U.S. Census Bureau.

This older population presents unique challenges for an already difficult housing market as Baby Boomers have begun to retire in greater numbers, Carillo said.

“You've seen this silver tsunami that has also come with a direct nexus to us not being able to match the housing affordability that's needed to safely and securely house our elderly population,” Carillo said.

Burbank Housing is building a housing complex at 3575 Mendocino Ave. in Santa Rosa, which will provide 163 affordable units for seniors 55 and older.

As more deed-restricted properties are converted from affordable to market rate housing, communities are facing a “major challenge” to protect the affordability of their communities for low-income residents, Carillo said.

But finding a place that provides the same qualities that Brians loves at Setzer Senior Apartments — walking distance to the Plaza, the post office and CVS pharmacy — may be difficult to find.

“I enjoy the location, I enjoy being in the back because it so quiet,” Brians said. “I better be able to stay here.”

And he may. If the city of Sonoma has anything to say about it.

First right of refusal

All hope is not lost.

The original deed for the apartment complex states, “The owner/landlord shall give the city, or its designee, the first right of refusal to purchase the unit(s) in order to prolong the period of affordability.”

It would cost the city more than $1 million to purchase the complex, which was assessed for $1.035 million in January, according to the Sonoma County Assesor’s Office.

Sonoma Associate Planner Kristina Tierney said the city does not “anticipate … getting into the real estate,” but may follow the examples of other cities that have facilitated agreements with housing developers.

Carillo sees the expiration of the affordability restriction as an opportunity to protect low-income residents in perpetuity. Headlsburg, Cotati and Santa Rosa have all purchased buildings at risk of losing their affordability in recent years.

“A couple of years ago, we partnered with (Santa Rosa) on the Parkwood Apartments, 56 units that were effectively on the market to go to a market developer,” Carillo said. “And the city stepped up through their housing authority and partnered with Burbank to preserve those units.”

The deal protects affordability on the project for the next 55 years.

But property law expert Elia said cities like Sonoma, which hope to address the turnover of deed-restricted units, may need to adopt a “private market thinking cap.”

If the original deal between cities and private landlords is expiring and putting low-income residents at-risk of losing their homes, cities must revisit the terms of the deed-restriction agreement to protect those residents.

“You're asking private property owners to participate in this kind of public benefit of creating affordable housing stock for low-income people,” Elia said. “The rules of private property say if you want to change that, you need to go back to the negotiating table and try to work out a new deal.”

‘Then you blink’

Tierney said expiring deed-restricted apartments have been on the city’s radar for several years now, and the city is taking steps as affordability restrictions end.

“I don't think anybody envisioned 30 years ago that we would be in this position of these sensitive populations potentially being displaced, especially given the current housing crisis that we have,” Tierney said. “Then you blink, and here we are 30 years later.”

The city updated its housing ordinance in 2021 to protect affordable deed-restricted units in perpetuity, Tierney said, but said there is still room for improvement to address displacement.

One part of the city’s effort in the past few years has been to hire Rise Housing Solutions President Matt Warner to be a consultant to the city to address the conversion of affordable units to market rates. Warner has been tasked with drafting a multiyear plan to preserve affordable units throughout the city.

“One of the beauties of the city of Sonoma is all of our problems are at a very manageable scale,” Tierney said. “This is not Santa Rosa or Los Angeles.”

The majority of affordable housing built in the last 20 years in the United States has been through an IRS program called the Low Income Housing Tax Credit.

Three LIHTC projects exist in the city of Sonoma — Firehouse Village, Valley Oak Homes and Alta Madrone Apartments — each with 55-year affordable deed-restrictions. The nearest expiration of them is 2056. But LIHTC project present risk for the tenants who live in them, Elia said.

“(LIHTC) doesn't have any sort of program or voucher that would automatically kick in, and that tenants would receive at the end of a LIHTC project,” Elia said.

However, most affordable housing projects in Sonoma, such as Setzer Senior Apartments, are part of the city’s inclusionary housing program which is managed between the city of Sonoma and Rise Housing Solutions.

“Since 2001, any new units will be required to be protected by deed restriction forever … The good news is that the bleeding has been stopped,” Tiernet said. “It is of the utmost importance that the city work with the property owner and the tenants to find a solution that works for everybody.”

The city of Sonoma and Rise Housing Solutions have gathered information about deed-restricted properties and tenants to create a centralized waiting list for affordable housing resources, Tierney said.

At his apartment, Brians was pensive.

“A friend of mine who turned 95 thinks I'm gonna get to 95 also, I said ‘oh f---,’” Brians said. “I got to start making a list … of what I have and who I would like to see get it.”

Contact Chase Hunter at chase.hunter@sonomanews.com and follow @Chase_HunterB on Twitter.