Editors note: This is the second of a two-day series. Click here to read the first story.
JOHNSON CITY, Tenn. (WJHL) — Standifer Capital is an L.A.-based real estate investment company that paid $6 million for Blue Ridge Apartments in March. Three months later, Standifer plunked down $8.3 million for Stoneybrook Apartments barely a stone’s throw away.
Standifer, which also lists two other Johnson City complexes and one in Kingsport in its 16-complex portfolio (all in the Southeast) is among a number of outside companies that have been snatching up multi-family properties around the Tri-Cities amid a fast-rising rental market.
Now — unless something changes — a number of residents who live at the complexes and have federal rental assistance through the Section 8 program have about a year to find another place to live in a tight housing market.
That’s left Johnson City Housing Authority (JCHA) Executive Director Sam Edwards and others who work with low- and moderate-income renters hustling to find options, including the 52 Section 8 tenants who live in Blue Ridge and Stoneybrook. Edwards reached out to Standifer’s property management group after tenants whose Section 8 JCHA manages began coming with letters notifying them of the pending change.
Both complexes were required to participate in Section 8 because they were built using Low Income Housing Tax Credits. But that state program, which helps with a builder’s initial financing, lapses after 20 years and leaves the original owner free to sell and new buyers under no obligation to continue participating in the rental assistance program.
“We’ve tried to work closely with those two properties and do anything that we can to convince them to continue to accept vouchers,” Edwards told News Channel 11.
“They are somewhat receptive to that and we’re trying to explain the benefits explain the rental amounts that they could achieve in certain conditions.”
He may have an uphill battle. Section 8 carries an administrative burden, because the federal government makes up the difference between a tenant’s income-based obligation and the “fair market rent.”
Additionally, those fair market rent amounts become less attractive in an inflationary rental environment. Right now in Johnson City they are $866 for a one-bedroom, $1,047 for a two bedroom and $1,325 for a three-bedroom apartment or house.
It appears that things are only going to get tighter
In addition to Edwards, News Channel 11 discussed the current rental market with both a Legal Aid attorney who tries to help tenants facing eviction and the director of an organization that aids families who are homeless or facing that prospect. All three had similar dire assessments of the near-term future.
“Four or five years ago you could find a place to live for 500 bucks if you needed to,” Legal Aid of East Tennessee (LAET) Staff Attorney Jack Inman said. “You could find one for $450 if you needed to. Nowadays you’re going to be hard pressed to find anything less than really $750 or so if you want a habitable, decent place to live.”
Inman said those recent numbers could easily head higher.
“It’s gone up exponentially since COVID and we really haven’t seen a slowdown in rent,” he said.
“It seems to be increasing and increasing, so naturally, people are buying up homes that are rental properties and are trying to get what’s now market rent. And what’s market rent is unaffordable for a lot of the tenants that are currently in these properties.”
Families are coping with a slew of multi-family real estate purchases followed by rental increases that sometimes exceed 100%.
“People’s incomes have not kept up with that pace,” Inman said. “Inflation’s gone up but the rental market has outpaced inflation, and incomes quite frankly haven’t even kept up with inflation, so it’s very hard right now for people to find a place to live.”
Those recent changes have presented Family Promise of Johnson City (FPJC) with a new set of challenges, Executive Director Bob Hall said. The non-profit, part of a national network, provides shelter to homeless families while helping them address some of the challenges that contributed to them being unable to afford shelter.
Until the past couple years, Hall said, “I could get up in front of a church or in front of another organization and say, ‘if a family successfully makes it through our program, they’ve got a place to live every time.'”
Since COVID-19, he said “that’s not the case anymore.”
“Unfortunately, there are folks who make it through our program and they have no place to go. Families with kids and they’ve got no place to go.”
The rental market has also brought a new and different client to Family Promise’s doors. People whose income was sufficient to pay their rent and bills are being hit with massive increases, often after a change in ownership.
“‘We were doing fine and the landlord sold our building and we’ve got to leave,'” Hall said he and his co-workers have been told. “And so that’s happened in the last year or two several times. That’s not anything we ever heard in the past.”
It’s also not a problem the standard FPJC stay, which involves families being housed for free while they work a plan, can necessarily fix. Family Promise does have a new “prevention and diversion” grant that allows for short-term help to families who’ve had an acute crisis.
If a family has an affordable rental option but not enough for a deposit and first month’s rent, for instance, the grant can help. That’s also the case if someone isn’t leaving their current housing but had an unexpected health care or car expense, for instance.
“They’ve got a plan,” Hall said. “There’s a path forward.”
He said that’s not the case for people who are on fixed incomes or working-class wages and see their rent increase dramatically.
“There’s no solution for this problem as long as this area is popular and as long as people want to move here,” Hall said. “We’ve got … all those things that draw people to us, but it’s going to get to a point where a lot of us wouldn’t be able to afford to live in the town we work in.”
Hall said one single mom stayed in the shelter program for many weeks while FPJC tried desperately to help find a place she could afford. Finally, they agreed to help supplement her rent in a 480-square-foot apartment.
“$900 a month,” Hall said of the “solution” they settled for. “I mean, that’s crazy. That’s Northeast prices.”
It’s actually Northeast Tennessee prices. Another Standifer-owned property on South Roan Street, “Axis on Roan,” lists a 575-square-foot one-bedroom, one-bath apartment for $950, albeit in a complex that was built just two years ago.
JCHA’s Edwards said he doesn’t see a change in trajectory.
“It appears that things are only going to get tighter, things are only going to get more expensive,” he said. “They’re not going the opposite way, and it’s going to be more complex for individuals that need that assistance or need a specific rent bracket to be able to live. It’s only going to get more difficult is is our projection.”
‘There’s not a lot of recourse the tenant has’
While profit-taking that involves displacing tenants who haven’t done anything to violate their leases may seem questionable to some people, there’s usually nothing the tenants can do about it, LAET’s Inman said.
He said Tennessee and other Southern states may be proving particularly attractive to investors because of their laws governing landlords and tenants.
“Tennessee kind of tracks most of the other states in the South in that it’s more landlord-friendly. We’re big right-to-contract. You can contract away a lot of rights that you would not be able to contract away in some other states.”
That includes a number of states out west or up north. “Those states are going to be a lot more tenant friendly, they’re going to have a lot more protections – it’s going to be harder to terminate a tenancy especially when a tenant’s paying on time.”
Whether it’s Section 8 tenants being told their landlord is quitting the program or market-rate tenants being told they’ve got to leave and can reapply for a different unit at hundreds of dollars more a month, “there’s not a lot of recourse the tenant has,” Inman said.
“We want to help people in these situations. We see that there may or may not be things that are wrong morally speaking, but if the law says that it is legally correct there’s little we can do besides attempting to stall the inevitable.
“There’s very little remedy at law and so they’re just going to have to find a new place to live, and that can be challenging right now.”
Are there any realistic solutions?
On the assisted housing front, Edwards said involved organizations like his aren’t sitting on their hands as they deal with waiting lists “full of thousands of people.”
He said the U.S. Department of Housing and Urban Development is changing some rent calculation metrics that might help local entities recruit more landlords. Local affordable housing advocates and housing authorities are applying for a grant that would fund “navigators” to help families who are trying to find an affordable housing option.
And JCHA has begun a “landlord education and outreach” program to try and entice more landlords.
“We want to be on the forefront of approaching those landlords and trying to get them involved,” Edwards said. “We also want to produce our own units. We have property and we’re going to guarantee that our units are going to stay affordable. That is a real passion of ours and we just need the funds to do it.”
Inman said the private sector holds most of the cards — but he’d like to see these companies step forward with some substantive compensation for displaced tenants in these types of situations.
“They have tons of resources, tons of money,” he said of the Real Estate Investment Trusts (REITS) that typically transact these deals. “I mean the power and balance between a REIT and a tenant on fixed income is incredible. It’s hard to even fathom.
“So for them, they could give the housing equivalent of a severance package, money to find substitute housing. Would that have an impact on their bottom line? Sure, but probably not nearly as significant as the impact that it has on a tenant.”
For his part, Inman said he wouldn’t mind seeing such protection written into law if owners refuse to do it on their own — though he’s not holding his breath.
“Whether that’s money for a security deposit, money for first and last month’s rent, something to get them out the door in a manner that’s not kicking them out on the street. And I think that most of these owners are in a position financially to do that.”
The current reality has Inman taking his work home with him some days.
“Some of these tenants are going through situations that you can’t even imagine, and it really puts things in perspective when I’m having a bad day at home,” he said. “You know, well I’m not being thrown out in the street. So it can be hard not to take that home, but that is something that you have to work on if you’re working in this line of work.”
Standifer Capital’s website says it improves properties “to achieve above-market performance for all stakeholders while also improving the lives of residents and community members” and that one pillar of “The Standifer Way” is that it is “socially conscious.”
Edwards said the Johnson City Section 8 situation seems to present an opportunity for the company a chance to back that up.
“If they can work with us to try to retain those clients so people don’t have to go through the frustration of moving or trying to find somewhere that’s probably not going to be available right now, that would be a great example of them trying to work with the community,” Edwards said.
“And I hope that that comes through.”
Standifer’s Michael Vaysman responded to a News Channel 11 email inquiry shortly after our broadcast story ran at 6 p.m. and said the company is interested in providing its perspective on the Johnson City situation. This would be part of a follow up story.