Caltrans Tenants Seek Moratorium on Rent Hike

Caltrans says it’s unconstitutional to keep rents below market rate.

By Nancy Martinez, EGP Staff Writer

Residents of El Sereno and South Pasadena who live in Caltrans-owned properties gathered last week to voice their outrage over recent rent increases imposed by the state transportation department.

Caltrans, responding to a recent audit, has said the increases are needed to bring the rents for the homes purchased decades ago for the long stalled 710 Freeway expansion project up to fair-market rate.

Hugo Garcia, a long-time Caltrans tenant, spoke at the United Caltrans Tenant Assembly held in El Sereno on March 14 about the rent increases most tenants are facing. (EGP photo by Nancy Martinez)

During a March 14 public meeting hosted by the United Caltrans Tenants (UCT) at All Saints Catholic Church in El Sereno, tenants and their supporters questioned the need for the 10 percent rent increase that became effective this month, with additional increases scheduled down the line.

“The amount is a little ridiculous for a low-income community,” said a tenant who identified herself only as Lisa A because she says she fears retaliation by her landlord, Caltrans.

Hugo Garcia has lived in a Caltrans-owned property for over 20 years. He and other tenants at the meeting said they want Caltrans to place an immediate moratorium on rent hikes until their concerns are addressed, not the least of which is proof that the rate increases levied are actually based on the fair market rental rates for similar properties in their neighborhoods.

“This is what UCT is standing and fighting for,” said Garcia, who told EGP that Caltrans was invited to attend the meeting.

On Tuesday, Lauren Wonder, Chief, Public Affairs and Media Relations for Caltrans, told EGP that the invitation was received two days prior to the meeting, too late for them to schedule anyone to attend. On Wednesday, in an email to EGP, Wonder and Caltrans Public Information Office spokesperson Maria Raptis said  “Caltrans representatives continue to offer to meet with tenants to answer questions.”

According to the California State Auditor’s August 2012 report, the state missed out on $22 million in rent revenue from July 2007 to December 2011 due to Caltrans “poor management” of the properties.

The audit also stated that it is unconstitutional to charge tenants rents below fair-market rate unless the tenant is in the eligible for the Affordable Rent Program.

“Rental of these properties at below-market values constitutes a prohibited gift of public funds, unless such rentals serve a public purpose,” the audit stated.

In a letter dated Dec. 28, 2012, Caltrans informed tenants that due to the report’s findings the agency was going to increase rents in 10% increments until they reached fair-market value.

Tenants’ whose rents are 25% below fair-market value would have an annual increase of 10% until it reaches what Caltrans had calculated to be the fair market value. Tenants whose rents are more than 25% below the fair market rate would see their rent go up 10% every six months until it reaches the 25% below fair market rate threshold, at which time the increases would decrease to 10% per year until they reach market rate.

According to the audit, Caltrans has also failed to verify the incomes of some tenants in the affordable rent program, which on average reduced rents to 26% of the market rate value set by the agency in 2008. Auditors recommended that Caltrans verify tenants’ eligibility for the department’s Affordable Rent Program, which Caltrans says it encouraged tenants to apply for in order to avoid the rent increases that became effective March 1.

But many tenants at the meeting voiced frustration over what they called a lack of clarity in the program. Some tenants said that even though they were informed they qualify for the affordable rent program, they still had to pay the rate increase.

While Caltrans did not specifically address those concerns, according to Wonder and Raptis, Caltrans is by law required to charge fair market rent, and said the has expanded the Affordable Rent Program to 128 more households: “The prior Affordable Rent Program served 46 households; today’s new program has added an additional 128 households, for a total of 174,” they said.

They said Caltrans follows Los Angeles’ Housing and Community Development guidelines to determine eligibility for the Affordable Rent Program.

The state’s audit found that a majority of the rents for Caltrans’ 404 properties along the 710 Freeway were below the fair-market rate, with 354 on average being charged only 57% of the 2008 fair market rental rate, which auditors said is probably higher today.

Tenants, however, question the validity of the fair-market rate now being used by Caltrans. They said the letters notifying tenants of the rent increases did not state what the fair-market rate is for their dwelling, so they have no idea how high their rent could go.

Garcia said he obtained some of the appraisals used by Caltrans from the office of Assemblyman Jimmy Gomez. He says there are big discrepancies between the properties used for comparison by Caltrans and the properties the agency owns, such as the age and location of the property.

In one case, according to Garcia, a home on Maycrest Avenue in El Sereno built in 1917 was compared to homes built in 1932, 1957 and even a condo built in 2009. Another Caltrans-owned home in El Sereno was comparison to properties located in Alhambra, where home values tend to be higher.

“We can see the pattern, they’re doing this throughout. There’s no accuracy,” Garcia said.

“Caltrans follows industry standards, including using comparable properties in the market area. This is based on various factors including but not limited to square footage, bedroom/bathroom count, and location,” according to Caltrans. “Each tenant can obtain a statement of fair-market rental rates for the property he/she is renting,” they added.

Also at issue is what tenants lament is Caltrans’ poor record on maintenance and repairs, which they claim are not done in a timely manner.

Myra, a Caltrans tenant of 26 years told the audience that she has been on the waiting list for repairs for years.

“If they’re going to raise my rent I’d like it to be worth it,” she said.

“Along the way Caltrans became something that they weren’t prepared to become, long-term property managers,” said Garcia.

But according to the audit, while Caltrans only received a $12.8 million net income from rents between July 2008 and December 2011, it spent $22.5 million on repairs, an average of $6.4 million per year. Some of the repairs may not have been reasonable or necessary, according to the report.

In some cases, authorized repairs exceeded the properties potential rental income, according to the audit which found that in 20 of the 30 projects reviewed, three years of rents were needed to cover the state’s costs for using General Services to make the repairs.

Annual inspections were also lax, the report said.

Caltrans began purchasing residential, commercial and vacant land in 1954 to use for the project to connect the 710 and 210 Freeways, which has been in the planning stages since 1953.

Until the agency decides on whether it will move forward with a freeway, tunnel or a no build option, the properties will continue to be managed by Caltrans local district office.

Caltrans hopes the direction of the 710-freeway expansion project will be decided by 2014, at which time it will determine which properties to keep and which to sell off. In March 2012, Caltrans estimated that the market value of the properties to be $279 million. State legislation however, would require Caltrans to sell the surplus property to current tenants who have low or moderate income at potentially 80% of the estimated market value by making them exclusively affordable housing.

Assemblyman Jimmy Gomez, Councilman Jose Huizar and Sen. Ed Hernandez, who represent the area, have been supportive of the group’s effort to come to an amicable agreement with Caltrans over the rent hike. Representatives of the officials attended the meeting to document the concerns raised by the group. Some of the tenants said they felt Caltrans failure to attend was disrespectful to them and public officials, despite at letter from Caltrans Director Malcolm Dougherty explaining no one from the agency was available to attend.

“We have two senators, two assembly members and our city councilmember all requesting that Caltrans show up to our tenant’s assembly tonight and all we get is Mr. Dougherty lame refusal,” Garcia told the crowd.

Angela Flores, an El Sereno resident whose family lives in Caltrans-owned homes, told EGP she hopes Caltrans, public officials and tenants can eventually come together to keep the El Sereno community in place and not force them to look for more affordable housing somewhere else.

“It hasn’t just been us, there has been generations before us who have been forced to leave our community, and I want to put a halt to it for the generations to come.”

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March 21, 2013  Copyright © 2012 Eastern Group Publications, Inc.


3 Responses to “Caltrans Tenants Seek Moratorium on Rent Hike”

  1. John on March 22nd, 2013 1:19 pm

    They should pay up or get out.

  2. Joe on March 23rd, 2013 8:33 am

    They should increase the rents for sure. They own so many properties in the area it drops the value of all the other rental properties because these are all so underpriced.

  3. joe cano on March 27th, 2013 6:57 am

    This Caltrans renters issue is more complex than the simplistic responses so far. Caltrans has properties mismaneged to the the point of criminality. The state audit also found them guilty of more wrong doing. 10% rent hike every six months until they reach market value? The market value price cannot be determined because their comparisons are wrong & these properties are in need of repair. Intimidation,retaliation, questionable & illegal evictions. Not as simple as one would think.

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