Looming SRO Closure Sets Off Another Round of Soul-Searching Over Housing’s Bottom Rung - Voice of San Diego

Government UNVEILING THE UNSEEN

Looming SRO Closure Sets Off Another Round of Soul-Searching Over Housing’s Bottom Rung

City housing officials are rushing to aid residents who will soon be booted from the downtown Plaza Hotel, the latest historic single-room occupancy hotel set to shut down in anticipation of a redevelopment project. It’s renewed the debate over how to preserve SROs – a conversation that tends to only ramp up in the face of a high-profile closure.

Greg Florey, a desk clerk at the Plaza Hotel who is also a resident, stands in a vacant room. The rent for the single room is $748 a month. / Photo by Megan Wood

City housing officials are rushing to aid dozens of residents who will soon be booted from the downtown Plaza Hotel, the latest historic single-room occupancy hotel set to shut down in anticipation of a redevelopment project.

For the first time, the Housing Commission board earlier this month voted to sink up to $500,000 into relocation assistance for low-income San Diegans who must move out within weeks – a move that a top official there described as “the right thing to do” amid a regionwide affordable-housing shortage.

Despite that assistance, the closure follows a familiar pattern: Low-income San Diegans paying meager rents – in this case, $635 to 780 a month – will be left to find new homes as their small units are demolished or converted into more lucrative hotel rooms or apartments.

As they have in the past, city officials are mulling regulatory reforms and other options to protect SROs and tenants that could come with significant price tags.

Whatever they decide, it will be too late for hundreds more caught in the middle of historic redevelopment decisions that many advocates say has exacerbated San Diego’s homelessness crisis.

The most dramatic losses came years ago, and the stage has already been set for others. The Housing Commission now estimates more than 3,000 SRO units – small rooms that typically lack their own bathrooms or kitchens – have already been destroyed over the years. The figure is based on a comprehensive 2015 Housing Commission-funded review of the city’s SRO stock.

Today the Housing Commission reports there are about 100 SRO properties citywide with more than 5,000 rooms.

There were once nearly 5,000 of those units downtown alone, according to a 1988 report produced by the city’s planning department.

Homeless advocates believe at least some of those who once lived in SROs that were destroyed or converted are now living on San Diego streets and that the losses of those units have crippled efforts to address the homelessness crisis.

Two decades ago, Paul Downey of nonprofit Serving Seniors said the city’s SROs provided a quick landing place for seniors who fell into homelessness.

“There was a surplus of SRO units,” Downey said. “In those days, a senior could get a unit for $250 to $300 a month.”

The ability to rent out SROs for as little as a night or a week and without background or credit checks made the units accessible to those who struggled to secure other housing.

Now, Downey and others say, many who once landed in SROs can be forced onto the street or remain in temporary housing for months while homeless service providers struggle to help them find permanent homes.

Plaza Hotel resident Donald England, 70, is hoping for the best. He’s lived at the Plaza Hotel since 1999 and acknowledges it hasn’t always been an ideal home. He’s repeatedly battled bed bugs.

His $665 monthly rent eats up nearly two-thirds of his monthly income.

“I’m trying to look around and see if I can find another place (that’s) livable,” England said.

So far, he hasn’t found one. England said he may be forced to move out of state.

Willard Stroud Jr., who has lived at the Plaza Hotel with his girlfriend for the past five months, is trying to stay positive. For now, the 55-year-old said he is more worried about his neighbors who have lived at the property for years.

“People don’t have anywhere else to go,” Stroud said.

Housing Commission officials fear what could come next for Plaza Hotel tenants too.

Most of the city’s SROs are required to replace the low-income units they plan to destroy or contribute to a city fund meant to support other developments.

But nearly two dozen downtown SROs – including the Plaza Hotel – weren’t mandated to provide replacement housing thanks to a 2003 state law that allowed owners to seek exemptions. The Plaza Hotel is one of only about a dozen exempt SROs that remain open.

So earlier this month, Housing Commission officials hurried to supply more aid for Plaza Hotel residents after tenants approached the agency about eviction notices they received in February. That notice has since been pulled while the Housing Commission reviews the Plaza Hotel’s conversion application. The commission has yet to confirm when the building can shutter but has moved quickly to help tenants before that happens.

“These 180 families or so will have 60 days to try to relocate to another unit with not nearly enough from the property owner to do that,” Housing Commission Executive Vice President Jeff Davis told housing commissioners earlier this month as he explained the request to offer Plaza Hotel residents up to $500,000 in assistance. “We have a housing crisis, a homelessness crisis and it seems like the right thing to do.”

♦♦♦

City leaders have grappled with losses of aging single-room occupancy hotels for decades. Their responses have come in fits and starts often spurred by dramatic announcements of closures or conversions. Their efforts to track the status of SRO properties have also been inconsistent.

Today, San Diego is home to the nation’s fourth-largest homeless population and advocates often pan city boosters’ pursuit of luxury high-rises and hotels over housing within reach of its most vulnerable.

Faced with similar issues in the 1980s, the city responded with dramatic action – and for a time was touted as a model for its approach to the problem.

In 1985, the City Council enacted an emergency mortarium on SRO demolitions and conversions to try to stem the side effects of a wave of downtown redevelopment. Planners estimated the city had lost a third of its SRO inventory during the previous decade.

The city later ended the moratorium and added requirements that owners of closing SROs provide relocation assistance to tenants and replace – or help fund replacements of – lost SRO units.

City bureaucrats also assembled a task force to study how the city could encourage SRO developments. They changed city codes and added incentives for SRO developers, including reduced water and sewer connection costs and fire-code mandates. The city also offered low-interest loans.

City officials often cited addressing and preventing homelessness as a prime motivation for those actions.

“When you lose the bottom rung of your housing ladder, you will find more homeless people in your city,” city planners wrote in a 1988 report on their efforts. “This then was our problem.”

The SRO reforms initially seemed to work.

The city permitted more than 2,000 new SROs and won a coveted award from the Ford Foundation and Harvard University that led to glowing national news coverage about the city’s success in producing housing that was both profitable and affordable to the lowest-income San Diegans.

Many of those stories highlighted the Baltic Inn, the first SRO to be built in the city in more than 70 years.

The four-story Baltic Inn opened in April 1987 and was quickly filled with tenants who paid about $275 a month for rooms averaging 135 square feet.

Bud Fischer, a Baltic Inn partner, told the New York Times in 1988 that what he had dubbed a demonstration project to show SROs could thrive had been such a success that he planned to pursue additional developments.

Three decades later, the Baltic Inn is history. It transformed from a 221-unit SRO into the Hotel Z, a pineapple-themed boutique hotel that serves up daily pineapple cupcakes and access to complimentary yellow beach cruisers.

Howard Greenberg of Trilogy Real Estate Management, which once managed the Baltic Inn, said the owners sold the property in 2014 after it was targeted by hotel developers.

“It was significantly more valuable to sell or convert than it would have been to continue to maintain it as an SRO project,” Greenberg said.

Greenberg said his team approached the Housing Commission about buying the Baltic Inn, which at the time was about 85 percent occupied, before pursuing other options.

Housing Commission Senior Vice President Emily Jacobs said the agency doesn’t have any record of conversations about a potential purchase.

Bottom line: The deal never came together.

SRO owners and those who have worked say they pose many dilemmas. Many SROs buildings are falling apart and even considered substandard. Yet the rents they pull in aren’t enough to cover substantive repairs and upgrades.

Meanwhile, the demand for the low-cost rooms in prime locations remains, and prospectors with higher-dollar ideas often loom – as do arguments that SRO owners are being asked to provide a public service that may not economically pencil or that preserving decaying SROs may not be the best use of limited city resources.

“It’s not really realistic to expect property owners who have owned their property a long time to maintain them when all downtown should be redeveloped,” said Ruben Andrews, who led a group of SRO owners who pushed back against proposed reforms in the early 2000s. “There needs to be other programs to house these people.”

Mike Stepner, a former city planner who served on the 1980s SRO task force, said the city was able to encourage more SRO production in the 1980s because it could prove their economic viability.

Explosions in downtown redevelopment changed the equation.

As downtown transformed, city officials didn’t closely monitor the impact to the city’s low-income housing stock.

Susan Riggs, a former Housing Commission policy chief who worked extensively on SRO issues, said oversight was often lacking. She said the conflicting missions of the city’s former downtown redevelopment agency, which permitted downtown projects and the housing agency – and strained relations between the two – especially complicated matters.

“(Centre City Development Corporation’s) mission was to create economic development, to create more tax increments, and affordable housing didn’t do that,” Riggs said. “These SRO properties were just goldmines waiting to happen.”

♦♦♦

City leaders and advocates have repeatedly grappled with how to preserve SROs.

But pushes for regulatory changes – some successful, some not – have often only happened following high-profile announcements of demolitions and conversions.

The latest example is the crumbling Plaza Hotel, which has an elevator with broken buttons that bounces at every floor, among other aging amenities. The building’s new owners plan to turn the decaying Fourth Avenue hotel into a hostel.

The city’s current SRO laws hold the Housing Commission responsible for reviewing SRO owners’ plans to demolish or convert their properties and ensuring they follow city rules.

Like other SROs that are set to shutter, the Plaza Hotel’s owners must pay residents who have lived in the SRO for at least 90 days the equivalent of two months of rent, as well as up to $210 in rent rebates.

Greg Florey, who lives and works at the hotel, said just under 160 people were living in the building as of last week. In the months before residents learned of the new owners’ plans, Florey said the Plaza Hotel had typically hovered around 98 percent occupancy.

Plaza Hotel residents who remain are poised to receive up to $500,000 in additional aid following the March 8 Housing Commission vote, an accommodation Housing Commission officials pushed due to the hotel’s exemption from replacement housing requirements most other SROs must follow.

A vacant room at the Plaza Hotel Downtown / Photo by Megan Wood

When they approved that assistance, commissioners called for the agency to also study how Plaza Hotel residents respond to both their eventual evictions and help from the Housing Commission.

Officials acknowledge they haven’t analyzed what happened to former SRO residents following past closures – information that could bolster or refute advocates’ claims that the closures contribute to the homelessness crisis. They aim to do so now.

“This is not a good situation, but it also seems like there’s an opportunity to try to learn what happens here with respect to the residents and where they end up,” Housing Commissioner Ryan Clumpner said.

Housing Commission leaders and City Council members are also weighing reforms.

Wendy DeWitt, the commission’s vice president of real estate programs and special initiatives, said the agency is looking at an array of rehabilitation, preservation and tenant protection options, as well as ways it might spur more SRO development. She expects regulatory proposals to come forward later this year.

City Council President Georgette Gómez has said she wants to pursue anti-displacement policies, particularly for residents forced out of affordable housing. City Councilman Chris Ward is also interested in policy prescriptions.

Preservation efforts won’t come cheap.

The commission and other agencies spent more than $20 million upgrading the Hotel Churchill to accommodate 72 homeless residents, and the commission and the city’s downtown development agency dropped about $12 million in 2010 to purchase and rehabilitate the Hotel Sandford. Last fall, the commission approved another $3.8 million in upgrades.

And in September, the City Council approved a $2.75 million loan to ensure the 200-unit Island Inn in East Village can continue to offer affordable rents.

The Housing Commission confirmed it is now negotiating an arrangement with J Street Inn, a similarly sized SRO owned by the same group in an effort to ensure it continues to house low-income tenants, and has separately reached out to Golden West, a 325-unit SRO downtown. Both SROs are among the properties exempt from the city mandate to replace their units if they close down.

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