New Strategy on Housing for Poor Is Proposed : Rehabilitation: Officials want to use federal funds to help investors and nonprofit groups. They would buy and renovate properties now available at bargain prices.

As part of a new campaign to save neighborhoods and house more poor people, the Los Angeles Housing Department wants to help buyers take advantage of today’s cheap prices for apartment buildings to acquire and rehabilitate some of the city’s worst slum properties.

The department is proposing to lend private investors and nonprofit groups money to buy graffiti-scarred buildings taken over by drug pushers, boarded-up hulks occupied by transients and properties given up by owners who bailed out on their debts.

Although the city has loaned money for a few such projects, housing officials now want to spend $20 million or more in federal funds annually on the strategy, making it a key element of efforts to close the gap between supply and demand for low-income housing. It is estimated that 100,000 Los Angeles families have to share quarters with others and an additional 150,000 spend more than half their income on rent.

In the past, market conditions have made it more economical to build new buildings to close that gap. But the current bust in the long boom for rental housing has caused foreclosures in growing numbers and sent values tumbling as much as 50%, making it possible to snap up bargains all over the city, but especially in low-income neighborhoods.

A City Council committee will review the shift in strategy today as part of an update of the city’s housing affordability policy. The full council’s endorsement is necessary to borrow federal housing funds.

“What we’re looking at is an opportunity to do more” with less money, said Housing Department General Manager Gary Squier. Buying and fixing a run-down building now can cost a third or even less than building one from scratch, he said.

A Community of Friends, a nonprofit group that specializes in housing for the mentally ill, took out a city loan recently to buy and convert a long-abandoned bathhouse in Boyle Heights to apartments. The building sold for about $800,000, about half the asking price of two years earlier.

In another case, the nonprofit Hollywood Community Housing Corp. used a city loan and other sources of financing to purchase a building at 1934 N. Argyle Ave. where drug dealers had openly peddled their wares and where a drive-by shooting in January killed one and wounded another. Fear had driven many tenants away from the street, driving at least five buildings into foreclosure.

“It was a jungle, you have no idea how bad it was,” said Enrique Noguera, president of the community housing group. By next summer the building will be remodeled and its 21 studio and one-bedroom apartments rented to low-income senior citizens. The total purchase and rehab cost will be about $1 million.

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A total of 160 units in four buildings are being rebuilt under the proposed strategy. The rent for those apartments will be below market averages because their owners got financing at discounted interest rates and favorable repayment terms. For example, a family of four with an income of $24,150, or half the county median, is expected to pay $513 in rent.

Not all housing experts agree on how much money the strategy shift would save. And other agencies that produce low-income housing, such as the Community Redevelopment Agency, are not immediately falling in line with it.

Some also question whether acquisition and rehab makes sense as a citywide strategy because apartment buildings vary greatly in quality and quantity from area to area.

Councilman Mark Ridley-Thomas, who chairs the Housing and Community Development Committee that will review the proposal today, said “it is not a done deal at this point.”

He said he favored a “balanced approach that would . . . maybe accelerate the rehab but pay close attention to how we get new units built.”

But all agree that the housing stock in a growing number of neighborhoods is decaying, even in some formerly stable areas such as North Hills, Van Nuys and Hollywood.

“Some multifamily neighborhoods are in a real tailspin because of the impact of gangs and drugs and the increasing numbers of bankrupt properties and lost cash flow,” Squier said. “All of these factors are converging simultaneously in some neighborhoods . . . sometimes in the middle of otherwise good neighborhoods.”

Worried that such trends will worsen the city’s shortage of low-income housing, Squier created a Neighborhood Recovery Program this past summer. The program is aimed at organizing city services to attack blatant drug selling, mount a crackdown on slumlords, and try to create jobs for residents. In addition, program workers will try to enlist tenants and owners in the cause of neighborhood improvement.

“We’re willing to be the department that takes the lead in renewing these neighborhoods even if we get out of our traditional role of just doing housing, because it’s just that important,” said Sam Luna, who heads the new Neighborhood Recovery Program. “We’re at war against decline.”

The department is targeting parts of Boyle Heights, Pico-Union, Mid-Wilshire, South-Central, Venice, Van Nuys, Sun Valley, Northridge and Hollywood for recovery.

Tony Swan, whose property management firm handles buildings in several low-income areas of the San Fernando Valley, has been pushing the city to begin such efforts for nearly a year. He also has argued for the shift to fixing up existing buildings.

But he disagreed with the need to find new owners for troubled properties. Swan said the city or banks or both should give current owners a financial break. “If you reduced their mortgages, owners would reduce their rents and instantly provide affordable housing,” he said.

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Sherri Franklin, program director for the Concerned Citizens of South Central Los Angeles, a nonprofit group that has built or rehabilitated nearly 100 apartments with city financing, said that part of the city needs at least some new construction. Without it, she said, the city would not be able to provide enough large apartments for families.

Whatever the elements of neighborhood recovery efforts, the stakes, as well as the odds against success, are high.

That can be seen in the dilapidated brick buildings near West 11th Street and South Lake Street in the Pico-Union area. One owner, expressing the sense of hopelessness rife in the area, painted in neat blue and white block letters on a back wall: “U.S. Government and City of L.A. Have Abandoned This Area.”

The area has one of the highest crime rates in the city, with assaults occurring at a rate of nearly one a day. Raw sewage flows in the gutter. Although apartments can be rented for less than $400 a month, some buildings are more than half vacant. Meanwhile, homeless people have set up elaborate quarters in alleys.

Although plans are preliminary, Luna said the city might become partners with a private developer to buy and renovate 10 or more buildings. But he said the city also must work to make the streets safer and attract jobs.

Unless the problems of such areas are addressed, many areas of Los Angeles, once insulated from blight by a buoyant economy and escalating real estate values, could soon look like the urban ghost towns of the South Bronx and parts of Newark, Detroit and other Rust Belt cities, some experts said.

UCLA Urban Planning Professor Allan Heskin said much of the housing in those cities was abandoned when middle-class residents moved away and the percentage of poor people increased. The same thing could happen in Los Angeles, he said, adding: “It’s real scary.”