Los Angeles-Based Pilot Stabilizes Small Landlords in Vulnerable Neighborhoods

Los Angeles-Based Pilot Stabilizes Small Landlords in Vulnerable Neighborhoods

The Chan Zuckerberg Initiative is piloting the Local Rental Owners Collaborative program in four Los Angeles neighborhoods to help mom-and-pop landlords of naturally occurring affordable housing and their tenants. Photo credit: shutterstock.com/Gabriele Maltinti

A coalition of philanthropic and nonprofit partners are piloting a new initiative in select neighborhoods in Los Angeles that is intended to stabilize small landlords whose tenants have been disproportionately impacted by the coronavirus pandemic. Over the long term, program partners seek to support wealth-building for participating landlords, particularly those who are black, indigenous, and people of color (BIPOC). Called the Local Rental Owners Collaborative (LROC), the program combines the resources and expertise of the Chan Zuckerberg Initiative (CZI), the Roy + Patricia Disney Family Foundation (RPDFF), the Coalition for Responsible Community Development (CRCD), Avail, and Enterprise Community Partners.

LROC neighborhoods were selected based on residents’ vulnerability to pandemic-related income loss; the prevalence of BIPOC landlords owning between 2 and 20 units of naturally occurring affordable housing; and the presence of a network of local businesses and contractors to conduct maintenance, repairs, and other improvements. The neighborhoods participating in the pilot — Wilshire, San Fernando Valley, East Los Angeles, and Long Beach — represent a range of neighborhood archetypes, including urban and suburban areas. Phase 1 of LROC launched in April 2021 with the primary aim of enrolling clients and stabilizing their income by paying up to 80 percent of tenants’ rental arrears. Participating landlords are required to forgive the balance, mirroring the design of the federal Emergency Rental Assistance Program. Landlords are able to take advantage of Avail’s online rental and property management tool and the network of local service providers (currently being assembled), enabling a coordinated and collective approach to property care. Together, the effect of these program components will reduce operations and maintenance costs and preserve local BIPOC ownership in the long term.

The Challenge

Most housing that is affordable to households earning at or below 80 percent of the area median income lacks subsidies or income restrictions; instead, it occurs “naturally” through the effect of market forces. In Los Angeles, more than 500,000 unsubsidized units are affordable to renters earning no more than 80 percent of the area median income, 76 percent of which are owned by local, independent landlords. These units are particularly vulnerable to market shocks. According to Ruby Bolaria Shifrin, director of housing affordability at CZI, the experience of the foreclosure crisis and the Great Recession — during which many small landlords sold their properties to institutional investors — lent urgency to the task of developing a program to avoid a pandemic-induced repetition of that experience. Assisting small landlords encourages the wealth-building efforts of owners but also aids their low- and middle-income renters. In particular, research from the Urban Institute has shown that despite difficulties disproportionately faced by Black and Hispanic landlords during the pandemic as tenants’ loss of income made mortgage payments a challenge, they were more likely to offer struggling tenants rent repayment plans, helping to keep people in their housing.

The Partnership

The five organizations leading LROC collaborate in varying capacities. CZI and RPDFF fund LROC, and RPDFF also serves as its philanthropic partner. CZI and Enterprise Community Partners designed the program. Enterprise oversees the program’s financial management and will work with CRCD, the primary administrator, on implementation. In addition, Enterprise and CRCD will conduct program evaluations with the goal of scaling up the LROC program for communities throughout the United States. Finally, Avail, LROC’s technology partner, is providing participating landlords with a year of free access to their online platform, which will enable them to list available units, screen prospective tenants, and collect rent. Avail’s platform should reduce the burdensome time commitment required of landlords that can influence their decision to sell their properties.

The Process

The initial phase of LROC is focused on stabilizing owners and preventing a wave of both evictions of tenants and foreclosures on small landlords in target neighborhoods, where a higher risk of displacement and gentrification exists. LROC will help participating landlords by paying up to 80 percent of rental arrears for missed rental payments occurring after March 1, 2020. Landlords agree not to evict tenants, but if eviction becomes necessary, landlords and tenants must first engage in mediation through CRCD.

LROC is also building out a network of high-quality, lower-cost professional service providers and contractors that landlords can access, including those offering repair work, energy retrofits, and legal assistance. This network will allow small landlords to take advantage of economies of scale that typically are available only to large or corporate landlords. The designers of LROC’s program found that operations costs, which cut into landlords’ income, and the time required for property maintenance were the most significant pain points for small landlords. These difficulties are significant and lead many to sell their rental properties; LROC estimates that lowering maintenance costs can increase landlords’ profits by 20 percent. Data collection and evaluation in the first year will set the stage for the next phase of the initiative. Phase 2 will explore wealth-building opportunities for landlords, such as creating accessory dwelling units or finding other investment opportunities, building on collective purchasing efforts to reduce costs, creating a certification process for potential partner programs, and standardizing and scaling the initiative.

As LROC continues to roll out, Margie Francia, senior director of capital solutions and partnerships at Enterprise Community Partners, reports success in enrolling BIPOC landlords. Even as the rate of enrollment has so far met LROC’s benchmarks, Francia describes an ongoing need for mindful outreach that promotes equitable access to this new resource. Ultimately, the partnership’s goal for LROC is to use best practices developed through the pilot to build a nationwide network of small landlord collaboratives that supports naturally occurring affordable housing, promotes wealth building in historically marginalized communities, and increases housing stability for vulnerable renters.

Preliminary results from LROC’s first 90 days show that of the 29 initial landlords to join LROC — whose members collectively own 75 units across 36 buildings — 93 percent identify as BIPOC, 59 percent are women, and 83 percent own 5 units or fewer. Over this period, LROC distributed grants covering $641,884 in rental arrears, and landlords forgave another $160,470. Program evaluators so far have found a high number of units with 4 or 5 bedrooms, meaning that LROC is helping preserve family-sized units that are less commonly built today. The most commonly expressed need has been for maintenance and repairs, a key component of LROC’s strategy of preserving ownership and stability over the long term. Finally, LROC identified ongoing skepticism among potential participants and is exploring peer-to-peer groups that can help build relationships and trust while also demonstrating the value of pilot projects that can adapt their approaches as best practices emerge. The ultimate goal of this initiative is to provide a proven, scalable model for others to replicate, helping to preserve intergenerational wealth in BIPOC communities while protecting an important source of affordable, stable, and safe housing for low-income renter households.