Committee Report CR-2
The Housing Committee held a public meeting on May 9, 2011 beginning at 1:10 P.M. in the Ackermann Room for the purpose of receiving information regarding plans to sell Craigie Arms (also known as Chapman Arms) and the City's options to preserve affordability.
Present at the hearing were Councillor Marjorie C. Decker, Chair, Councillor Sam Seidel, and D. Margaret Drury, City Clerk. Also present were Brian Murphy, Assistant City Manager for Community Development, Christopher Cotter, Housing Director, Community Development Department (CDD), Cassie Arnaud, Housing Planner, CDD, Gregory Russ, Executive Director, Cambridge Housing Authority (CHA), Michael Johnston, Deputy Director, CHA, Terry Dumas, Director of Planning (CHA), Michael Haran, Executive Director, CASCAP and member of the Affordable Housing Trust (AHT), Peter Daly, Executive Director, Homeowners' Rehab, Inc. (HRI), member of the AHT, Elaine DeRosa, Executive Director, CEOC, Ann Allosso, tenant, Craigie Arms, Sharra Connor, Senior Property Manager, Chapman Arms, Joseph Modica, Tenant, Craigie Arms, Susan Hegel, Attorney, Cambridge and Somerville Legal Services (CASLS), Cheryl-Ann Pizza-Zeoli, Association of Cambridge Tenants (ACT), Brad Seawell, tenant, Craigie Arms, Victoria Hickey, tenant, Craigie Arms, and Lillian Greeley, tenant, Craigie Arms Victoria Harris, Aide to Councillor Seidel and Leo Gayne, Mayor's Office.
Councillor Decker convened the meeting and explained the purpose. She invited CDD to provide background information. Mr. Murphy said that Craigie Arms is very important to the City. The 50-unit building is located right in the middle of Harvard Square. In the late ‘70's and early 80's, Harvard University, the owner of the property, began leaving units vacant with the intention of having a vacant building to renovate. The tenants filed suit at the Rent Control Board alleging violation of the Removal Permit Ordinance, which required landlords to obtain a permit before removing rental units from the market.
The case was ultimately settled, and the 1985 settlement agreement included a requirement that 25 units would be affordable for 30 years. Harvard retained ownership of the land but sold the building to a partnership which included Robert Kuehn, the developer for the renovation project. Mr. Kuehn, who developed several mixed income and affordable housing projects during his career, died recently, and his estate holds one of larger interests in the partnership. Under the terms of the ground lease held by Harvard, which has 29 years remaining, Harvard also has an interest in the income from the property.
Mr. Cotter said that CDD has been watching this property for quite a while, particularly since there are not many affordable units in Harvard Square. Three weeks ago they found out that the property had been listed with a broker. This listing was determined to be in violation of MGL Chapter 40T, which requires that the owner of a property with certain expiring affordable housing restrictions provide the Commonwealth, the City, and tenants with notice of their intent to sell. In addition, under MGL 40T, to provide an opportunity to preserve affordability, the Commonwealth has the option to make the first offer during an 90-day period, before the owner can accept offers from other buyers, as well as the right to match offers submitted by other buyers after the 90-period ends. The law also requires notice to tenants, which was not received prior to the listing.
The Commonwealth may also designate a delegate to act in its stead. The City requested that the state Department of Housing and Community Development (DHCD) exercise its rights under MGL 40T and designate HRI so that efforts to effect a sale to HRI which would preserve affordability might be undertaken before other buyers might purchase the property. At its last meeting, the Affordable Housing Trust committed the funds necessary for the due diligence necessary to assess preservation financing and costs. It is expected that HRI will be designated by DHCD shortly, and will then have the remainder of the 90-day period from the time of the 40T notice to make an offer. HRI could also decide to wait until another offer is accepted and then elect to match that offer.
Councillor Decker said that the City Council will want the affordability of this building protected. Mr. Cotter stated that CDD will be working with HRI on preservation options. He noted that the sale offer is for the building itself with a lease that expires in another 29 years. All funding sources would require a longer term of affordability. The City would ideally like to have 50 years of affordability starting at of the time of closing and other funding sources will require longer affordability periods. Harvard's position will be key. Mr. Murphy added that there would also be a big difference as to whether Harvard offers the same terms to all potential buyers or makes special provisions in case of a preservation sale supported by the City.
Mr. Daly said that thanks are due to all of those involved in drafting MGL Chapter 40T and getting it passed. Cambridge State Representative Alice Wolf worked very hard on this. The State has asked HRI to be its designee. HRI has agreed in principle, but this is the first one, so they need to work out the legal documents of designation, which will involve DHCD and CEDAC. HRI's involvement gives a local presence, but ultimately HRI will be working on behalf of DHCD. Any offer HRI would make would be for all 50 units.
Ms. Greeley said that the tenants were very shocked by the notice from the management. It listed all of the tenants' units and the amount of rent that they paid. Management told them that nothing would change and their rents would not increase because of the sale. Everything would be the same except the owner.
Councillor Decker explained that the affordability agreements that protect the rents for the 25 affordable units will expire in 5 years, and at that time the rents could be raised.
Ms. Hickey asked whether the tenants with Section 8 vouchers could rely on the CHA to find them a new place to live in 5 years. Mr. Russ responded that the CHA would find a way to maintain the subsidies. Mr. Johnston said that right now the subsidies are project-based and are attached to the building. These would be converted to tenant-based subsidies. Mr. Cotter said that it is not clear that the CHA would be in a position to pay the difference between the tenant-based subsidy and the market rent. Thus, even though the tenants may receive tenant-based subsidies, they may have to find another home.
Mr. Murphy stated that the tenants acting together have more power than they now, as individuals, see themselves as having in this situation.
Councillor Decker said that she is concerned about what channels the tenants will have for communicating and strategizing. Mr. Cotter has told her that things will be moving very quickly. She wants to be sure that the tenants are getting the information they need. Ms. DeRosa said that CEOC is available to help the tenants. Councillor Decker asked the tenants whether they were interested in working with CEOC, and the tenants present appeared to be in agreement that they would like CEOC to assist them. Ms. DeRosa offered to arrange a meeting of the tenants.
Ms. Greeley asked whether they could envision things becoming adversarial and uncomfortable for the tenants. Councillor Decker said that there are presently several dozen investors which comprise the current ownership partnership. There has been a mixed message about affordability, but they all want full market rates in a sale. From the City Council's point of view, it is best to assume that everyone is going to act in good faith. She noted the presence at the meeting of Attorney Susan Hegel, Cambridge and Somerville Legal Services, who worked on drafting the 40 T legislation.
Councillor Decker urged the tenants present to be sure to get contact information for Elaine DeRosa, CEOC and Peter Daly, HRI. She said that they should also feel free to contact her. She stated that she will be following this issue and that she would be happy to hold another meeting of the Housing Committee.