Healdsburg set to buy pair of housing complexes to preserve more affordable units

The city of Healdsburg is poised to spend $3.1 million on two small apartment complexes in another bid to snap up below-market rate units and preserve affordable housing for the local workforce.

The agreement, which is up for approval at the City Council meeting Monday, follows closed-door discussions that began last month for the pair of eight-unit complexes about a mile from the downtown plaza. City officials were able to negotiate $200,000 off the original asking price for the properties at 531/535 University St. and nearby 500 Piper St.

Given a go-ahead from the council, the city would tap $550,000 in park retrofit money for the for housing purchase and agree to pay back the park dollars at a later date, according to City Manager David Mickaelian.

Nonprofit Burbank Housing, which owns low-income housing in all nine Sonoma County cities, is set to take over ownership and management of the properties and is seeking financing for the remainder of the sale price.

The purchase would mark the second time this year the city has partnered with the Santa Rosa-based nonprofit to prevent existing low-income units from hitting the open market, averting potential displacement for the tenants.

In a separate deal set to close in June, the city spent $1 million to help buy a 23-unit apartment complex at 1302 Prentice Drive. That $5 million acquisition - mostly covered by Burbank Housing - drained the current balance of a city housing fund supported by a voter-approved tax hike on hotel stays.

“We’re not going to be able to buy every unit that comes up. Where we can we will,” said Mickaelian. “We wouldn’t be doing our job if we weren’t exploring these opportunities as they come up. Hopefully this one works out.”

City Council endorsement would open a real estate inspection period to explore the condition of the buildings, each of which date back to the 1950s. Both complexes will require renovations, and Burbank will want a better idea of how substantial those would be to understand if it can continue current rental rates before applying for a bank loan.

“Neither the city nor us want to inherit a property that needs such a significant amount of work that we couldn’t afford to maintain and run it so that it’s beneficial to the residents who are there,” said Larry Florin, CEO of Burbank Housing.

“Maintaining the rent is a critical part of the affordability, but we also don’t want people living in substandard conditions.”

Word spread in March among residents at both complexes that the owner may sell after an appraiser came through. Two weeks later, each of the primarily one-bedroom unit complexes went up for sale, with the University Street property listing for $1.8 million and the Piper Street site going for ?$1.5 million.

To the relief of the tenants, the city quickly stepped in to broker a deal and buy both. Seniors live in five of the units at the University property.

That demographic, living mostly on fixed incomes, has been among the most impacted by the region’s housing market, with few vacancies and skyrocketing rents in recent years.

“The thought of going someplace else had everyone kind of traumatized,” said Russell Hatcher, 65, who was born and raised in Healdsburg and has lived in the complex for 31 years. “They’re small, but I’ve been able to raise my three sons and live there ... comfortably. It’s my stable place.”

Francis Critchlow, 61, has lived in his one-bedroom ?unit at the Piper Street complex for nearly 17 years. The hotel worker was worried that if his rent got much higher than the $795 per month he now pays, he and the other low-income residents would have to leave the community.

“We’re kind of poster children for low rent,” said Critchlow, voicing his hope the city’s purchase moves forward. “It’s so rare that there’s good news these days and that sounds like some of it. It’s very encouraging.”

Healdsburg has some of the highest-cost housing in Sonoma County and it has been a hotbed of concern for low-income renters who’ve seen investors scoop up several apartment buildings to renovate them and lease them at higher rates, displacing existing residents.

In 2016, the city’s voters approved a tax on hotel visitors to increase the city’s affordable housing supply and set aside units for low-income families.

The city plans to continue pursuing other avenues to create and preserve affordable housing. A proposed fund to help relocate displaced tenants is set to return to the council in the coming months.

The City Council earlier this month also voted to relax size limits on granny units as well as drastically cut development fees for such secondary units on existing residential properties.

Including the Prentice Drive complex, Burbank Housing now owns and operates more than 200 units in Healdsburg and more than 3,300 units in 68 properties countywide.

“In general, our principal focus has been new construction,” said Florin, the chief executive.

The approach in Healdsburg “is a new strategy in the sense that (the apartments) were at-risk by going to market and being purchased by speculators and the individuals being thrown out. It speaks to an overheated market, where people are willing to overpay with the intention of buying them and raising the rents. I think it’s fair to say it’s preservation of affordable housing.”

You can reach Staff Writer Kevin Fixler at 707-521-5336 or kevin.fixler@pressdemocrat.com. On Twitter @kfixler.