“People are going to move or suffer a big rent increase,” said Denis Marting, 61, who has lived in Lakewoods since January 2013. “Somebody’s making a ton of money on this building, but don’t do it on the backs of people who don’t have squat.”
A subsidiary of Millennia Housing Management in Cleveland plans to purchase the building and pay off a U.S. Department of Housing and Urban Development mortgage that originated in 1964. Millennia also plans to spend more than $6 million in capital improvements on the 12-story structure.
Current tenants at Lakewoods, which includes 417 units, do not receive rental assistance. But they have benefited from years of low rents set by HUD and the original owner, the AFL-CIO Senior Housing Foundation.
“There was a use agreement the (original) owners signed to keep rents affordable,” HUD spokesman Brian Sullivan said. “What’s happening is these mortgages are nearing the end of their life.”
By paying off the mortgage, Millennia won’t be bound by HUD rate restrictions. Millennia president Jack Bonnette wrote in a letter to HUD dated Feb. 7 that he anticipates the building sale will close in August. He also acknowledged that rents will increase.
Many tenants will get a boost from a HUD-awarded Senior Preservation Rental Assistance Contract (SPRAC), which should offset the impact from the rent hikes. Some may even see decreases, according to Christine Robertson, Millennia’s vice president for development.
The new program requires tenants to pay up to 30 percent of their income toward rent. If that total doesn’t cover the rent, the new subsidy takes care of the balance.
“From the city’s perspective, we do not want to see 417 affordable units come offline,” said Aaron Sorrell, Director of Planning and Community Development for the City of Dayton. “It’s an iconic building. If that building went dark, it would be a tremendous eyesore for years to come. It would be close to a million bucks to take something like that down.”
Residents complain
Some residents who fall outside the SPRAC guidelines are moving. Marting pays $388 a month for a tidy studio unit. Thirty percent of his income — $1,923 a month from Social Security disability — would be $577, a price he says he cannot afford.
Millennia says tenants with medical issues — Marting says he suffers from congenital heart failure — might be eligible for rent reductions.
“We know a lot of residents are calling HUD and we totally get it; it’s a new world for them,” said Robertson. “But we think, based on their incomes, the majority will benefit from SPRAC and some will even see their rents decrease.”
The building will remain a senior housing unit but income guidelines will change. After the sale is complete, a new tenant making less than $21,100 a year can qualify for SPRAC and the program could cover a large portion of their rent. There will be no minimum income requirement.
Current tenants who have an annual income of $33,750 will be eligible for the program, but they will not receive rental assistance if 30 percent of their income exceeds the cost of rent. In those cases, tenants would pay the entire cost.
“There’s always a concern, especially from a resident’s standpoint, when rents are increased,” Sorrell said. “But I don’t think that building could manage for the long-term with the rent structure the way it’s been over the last 25 years.”
Aging building
The Lakewoods was built between 1964 and 1968. For years, the building thrived and the AFL-CIO nonprofit kept rents low. But as the building began to show its age, the foundation became concerned about costs.
A few years ago the AFL-CIO began interviewing potential buyers. Secretary/treasurer Marcia Knox said the board was most impressed by Millennia CEO Frank Sinito and his vision for the property.
“We transferred everything to Millennia because we really didn’t have anyone to manage it,” said Knox. “There were things that needed to be fixed and we didn’t have the money.”
The sale of the property was completed in July 2012 and a Millennia subsidiary — The Lakewoods I, Ltd. — assumed the $818,778 that remained on the original 1964 HUD mortgage of $3 million.
The complex’s assessed value, according to the Montgomery County Auditor, is $3.2 million. Its yearly tax tab is $127,000.
Millennia began managing the building in 2011 — prior to the sale — and helped facilitate improvements funded through federal stimulus dollars and weatherization funds, as well as a $500,000 HUD grant through the city of Dayton. The complex now features new windows, new heating and air conditioning systems and new boilers.
“It’s getting toward 50 years old. Roofs, boilers, windows, HVAC systems were all patch-worked together. They were starting to hit the end of their useful life,” Millennia’s Robertson said. “That’s where the owner ended up in the position of not knowing what to do about these looming capital needs.”
‘Mission-driven’
Lakewoods residents were notified in January of the pending changes. SPRAC is designed to help low-income tenants and the money stays with the units, not residents. The number of eligible units will be determined upon the sale of the complex; unoccupied units will not be eligible.
The building currently operates under a HUD program known as Section 202, which provided capital to help build Lakewoods. Once the mortgage is paid off and the SPRAC kicks in, taxpayers will be subsidizing rents and improvements planned by the private company, which also will seek low-income housing tax credits.
Robertson says Millennia is committed to keeping Lakewoods vibrant and filled with responsible tenants. Millennia manages 78 properties in Ohio, including Hunters Run in Lebanon. Of its 10,192 units nationwide, 9,419 are subsidized.
“We’re a for-profit company and in business to make money, but we’re also a mission-driven company,” she said. “Our focus is affordable housing, and making sure it’s not just affordable but provides good homes for people.”
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