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The affordable housing Welfare Exemption tax sham
by Lynda Carson ( tenantsrule [at] yahoo.com )
Tuesday Jan 31st, 2012 11:30 PM
Tenants in so-called affordable housing projects in Oakland, Berkeley, Alameda and elsewhere are currently being pressured to fill out and sign a form under the penalty of perjury, that allows the 501c3 charity nonprofit housing developers to receive a Welfare Exemption tax break for their their rental housing units!

The affordable housing welfare exemption tax sham

By Lynda Carson -- January 31, 2012

Oakland -- It's that time of year again for the poverty pimps in the so-called affordable housing industry to pressure the tenants in their so-called affordable housing properties into filling out a form that would allow the developers to become eligible from paying any property taxes on their rental units, through what is called the Welfare Exemption.

The California Legislature has the power to give tax breaks to property owners, and gives a tax break to properties used for religious reasons, hospital or charitable purposes, and for those properties owned or held in trust by nonprofit organizations operating for those purposes. This exemption is known as the Welfare Exemption.

The local so-called 501c3 charity nonprofit affordable housing developers are currently scrambling to meet the February 15, 2012 deadline to complete the welfare exemption claim form, and return it to the county assessor's office, if they want to avoid paying property taxes on their rental units.

As part of an annual ritual to put the squeeze on the tenants, the local nonprofit housing developers have been busy lately and have pounding on the doors of their tenants, demanding that the renters sign and fill out a form allowing them the welfare exemption, for their rental property units. The welfare exemption form is called the "Lower Income Households Family Household Income Reporting Worksheet."

The tenants are being pressured to quickly fill out the forms and are doing so under the penalty of perjury, and face being criminalized if they perjure themselves in the process.

The tenants at 829 E. 19th, St., in Oakland have already been approached twice during the past week by building manager Danny Chen, and are currently being pressured to fill out the welfare exemption form that would make the East Bay Asian Local Development Corporation eligible for tax breaks, at that property. Apparently the tenants did not move fast enough for building manager Chen, who is continuing to pressure the tenants into signing the forms.

At this same location, the same building manager Danny Chen had also improperly failed to provide an instruction form to the tenants that would have legally advised the tenants about the income verification requirements needed for those being told to fill out the welfare exemption form under the penalty of perjury. Building manager Chen failed to respond or hand out any of the needed required instruction sheets to assist the tenants, after being criticized for not doing so in the first place.


The Welfare Exemption


As an example of how the welfare exemption works for nonprofit housing developers, the welfare exemption is applied in cities such as Oakland, Berkeley and the city of Alameda, including throughout Alameda County and the state of California. It is offered to all so-called 501c3 charity nonprofit housing organizations that own, manage or develop so-called affordable housing sites.

To be eligible for the welfare exemption property tax break on their rental units, the nonprofit housing organizations in Alameda County must rent to a tenant that earns $45,500 or less, on an annual basis. In the crazy world of so-called affordable housing, a person earning $45,500 per year, is considered to be a low-income tenant.

As a further example, a person that has an hourly wage of $20.00 per hour, and works 40 hours per week, would earn $41,000 annually, earning much less than the $45,500 welfare exemption limit, in Alameda County.

As another example, farther south down in Ventura County, nonprofit developers apply for the welfare exemption annually, and avoid paying property taxes on their rental units by renting to a person earning less than $49,850 per year. A so-called low-income tenant.

Each county throughout the state may have a different welfare exemption limit for the so-called affordable housing projects, and nonprofit organizations located in each county.

Oddly enough, when considering that no one on welfare in California earns anything close to $45,500 a year, or nearly as much as $49,850 per year, it seems totally inappropriate that the wealthy nonprofit developers are getting tax breaks through the welfare exemption process when they are renting to people that are earning well over $20,000 an hour. People that can afford to pay market rate rents.


Low-income Tenants Face Homelessness And Discrimination


In Alameda County, the maximum cash grant allowable for low-income tenants on welfare per month (General Assistance) is only $336.00, or annually that would amount to only $4,032 per year.

Other low-income tenants on disability (SSI) only receive $830 a month in payments due to California's state budget cuts, amounting to a small income of only $9,960 per year to live on.

Additionally as another example of low-income tenants, in 2008 the average Social Security payment was only $1,015 for retirees in California, amounting to only $12,180 per year to exist on.

Meanwhile, the so-called 501c3 charity nonprofit affordable housing developers in Alameda County are getting a welfare exemption property tax break on their rental units by renting to people that are earning as much as $45,500 per year. Tenants that can afford to pay market rate rents.


Minimum Income Requirements For The Poor


Making matters worse for the poor, the nonprofit housing organizations discriminate against the poor with minimum income requirements.

As an example. At Los Medanos Village in Pittsburg, Resources for Community Development (RCD), a local Berkeley 501c3 charity nonprofit housing developer discriminates against the poor at this affordable housing project and others it has developed, but advertises that there are no "minimum income requirements" for the poor people that have Section 8 vouchers.

As another example on how the poor are discriminated against in so-called affordable housing projects, local Oakland 501c3 charity nonprofit housing developer EBALDC demands that poor people on a fixed income such as social security or a pension, must earn at least 1.6 times the amount of monthly rent being charged in their so-called affordable housing projects. Those with other income must earn 2 times the monthly rent, and there is no minimum income requirement for those with Section 8 vouchers or similiar subsidies.

Another 501c3 charity nonprofit housing developer called "EAH" in Marin County, demands that a single person that wants to move into it's so-called affordable housing development called Farley Place, must earn a minimum of $31,000, but advertises that there is no minimum income requirement for poor people with Section 8 vouchers.

Bridge Housing Corporation, is one of California's largest so-called nonprofit housing developers. During 2010, at their housing development project called Ironhorse Central Station, Bridge Housing demanded that a single tenant must have a minimum income stretching between $15,326 - $18,750 annually, and in another instance in Tier 5 of the same project, Bridge Housing was demanding that an individual must have a minimum income of $26,091 - $31,250.

The web archives reveal that nonprofit housing developer Affordable Housing Associates (AHA), also has minimum income requirements at their properties. In recent years AHA has been demanding that the poor must earn as much as $8,400 - $14,895 annually to reside in their so-called affordable housing units, however current figures may be much higher at this point in time, and are not available on their website any longer.

During 2008, the John Stewart Company was involved in a major lawsuit filed by the residents of the California Hotel in Oakland, after the John Stewart Company and Oakland Community Housing, Inc. (OCHI), threatened to unlawfully cut off their water and utilities in an attempt to unlawfully evict the poor from the historic hotel, and force them from their housing.

A judge had to grant a restraining order to stop these two so-called 501c3 charity nonprofit housing organizations from unlawfully dumping the poor onto the cold streets of Oakland. At the time, OCHI wanted to dump the poor from their housing in the California Hotel, so that OCHI could replace them with higher income tenants that would be subsidized by the City of Oakland, and some homeless programs.


Welfare Exemption Tax Break Incentives Needed To Really Help The Poor


As a real incentive to get poor and homeless people off of the streets and into some real so-called affordable housing sites throughout the state of California, the welfare exemption tax breaks and the public at large would be much better served if these same tax breaks were only given when the nonprofit organizations actually rented to people on welfare (Including those receiving General Assistance, SSI, CalWorks, Social Security), or other similar programs including real low-income people.

This would go a long way to alleviate and help solve California's homelessness problems, and would help to bring an end to the affordable housing sham thats been taking place throughout the state of California, for these many past years.


Educating Affordable Housing Tenants


Additionally, under state law the funds being saved through the welfare exemption process that would have been used to pay property taxes are specifically required to be used to maintain the affordability of the tenants housing, or to reduce the rents for the rental units occupied by lower-income households.

The major problem with this welfare exemption tax sham requirement, is that there is no oversight in the program to ensure that the so-called nonprofit affordable housing developers do not use the tax funds being saved, from being used for salaries, perks, and wage compensation of the employees and executives working for the nonprofit housing organizations. There is no oversight.

Information blackout. Making matters worse is the lack of information being provided to the tenants that are residing in the so-called affordable housing sites when the landlords are demanding that the tenants fill out the welfare exemption forms for the nonprofit organizations benefit. The tenants are not being advised that the tax savings are supposed to be used to reduce their rents.

There is no transparency in the welfare exemption process. The tenants are not being informed, nor are they receiving statements from the nonprofit organizations as to the amount of funds being saved annually because the nonprofit developer is not paying any taxes on the rental units they reside in.

Additionally, the tenants should be informed as to what those welfare exemption funds are supposed to be used for such as reducing their rents, and they should be able to tell if the funds are being gobbled up by the excessive salaries and wage compensation being grabbed by the top executives, of the nonprofit housing organizations.

As a result of the way the nonprofit landlords are abusing the tenants and withholding information from the tenants that they are supposed to be serving, the tenants fail to understand that they have the right to demand a rent reduction every year, because the landlords are using the tenants in the affordable housing sites, to avoid paying taxes on their rental units.

Lynda Carson may be reached at tenantsrule [at] yahoo.com


Comments  (Hide Comments)

by Anon
Thursday Feb 2nd, 2012 11:03 AM
In light of the elimination of redevelopment in the state, I have been reading some of Ms. Carson's articles on affordable housing with some interest. Unfortunately, while I do not doubt her sincerity and passion for advocating for tenant rights, I do think that her analysis of affordable housing and some of the nuances is incorrect. In this article, there are some fundamental flaws in her reasoning for indicting the welfare exemption for affordable housing projects.

In fairness, owners of affordable developments should not be attempting to do their annual recertifications at the last minute; however, the form is a one page document that typically takes only a couple minutes to complete. It is not particularly onerous, and the underlying perjury that they would be committing is if they are living in an affordable unit and they are overincome. If their income is within the required guidelines, then they have nothing to fear.

What are those guidelines? What you need to understand is that if these are tax credit financed properties, then there is a set rent structure and unit targets that must be met in order for the developer to not risk recapture of tax credits due to a resident that is overincome. And that while the maximum income for welfare exemption purposes is 80% AMI based on household size, on a tax credit property it is generally 60% AMI or less, and in many cases at 50% AMI or less. Furthermore, it is not as if the revenue freed up by not paying the ad valorem property tax goes into the developer's pockets. Instead, what it means is that the project can support more conventional debt to finance it, instead of needing more public subsidy.

You do raise an excellent point in discussing educating tenants on the process and why it is important, and I definitely believe that a dialogue between the tenants and developer/property management would be helpful!
by Anon
Thursday Feb 2nd, 2012 11:18 AM
In reading Ms. Carson's past articles, it is clear that she has a major objection with the compensation that staff at affordable housing developers earn, as well as her perception that affordable housing assets are generating cash flow to pay for their compensation. What people need to understand is that outside of a couple specific scenarios that are a fraction of tax credit financed projects, the vast majority of these projects are so highly leveraged that there is minimal cash flow. In addition to a conventional debt payment (no different than a mortgage payment a homeowner makes), there is frequently a number of public lenders involved in the financing of a project. Each of these gets a percentage of the remaining cash flow after the payment of the conventional mortgage and operating expenses. By the time a developer sees any annual cash flow from a project, it is typically de minimis and/or the payment for asset management functions.

The typical affordable housing development is not the cash cow Ms. Carson seems to believe they are. The economic windfall a developer receives for an affordable housing project is the developer fee earned for doing the work necessary to get the project built and leased up. This developer fee is capped by the state Tax Credit Allocation Committee's regulations, which govern the tax credit process in the state.