For 11 years, the Palacios, a family of five, lived in a below market rate unit in the Tiffany Gardens development in La Lengua – a mixed-use building completed in 2004 with 35 residential units, three of them rented out as affordable housing.
Then, in April of last year, they received a notice that they had six months to leave or put in an offer to buy the two-bedroom apartment they rented for $1,268 a month – rent set by an income formula for affordable housing.
The roughly $150,000 sales price also reflected an affordable housing formula based on their income.
Luis Palacios, the father of three children, called it “a once in a lifetime opportunity” – one that meant housing stability in one of the most explosive housing markets in the country.
Now, more than a year later – despite the best of intentions of all of the services in place to help low income families secure housing – the Palacios could be forced out of their home and, by extension, out of the city.
By all appearances, the Palacios were just the kind of family meant to benefit from affordable housing legislation.
Brenda Palacios, the original leaseholder of the home, works full-time night shifts from 11 p.m. to 5 a.m. packaging pastries. When she returns home to her three children – 7, 9 and 18 – she gets the younger ones ready for school and out the door. One of the younger children attends a school for children with special needs.
Her husband Luis works more than 70 hours a week making pizza deliveries and working at a restaurant in the Presidio, pulling in minimum wage at one job and $16 an hour at the other.
“This family is wonderful people, who contributed to this community,” said Flor Monteza, a friend of the Palacios family, at a rally outside Tiffany Gardens.
What went wrong is a story of a missed opportunities. Delays in paperwork and communication breakdowns between three agencies working to help the Palacios stay in place meant the Palacios ran out of time to secure their unit for themselves.
The Housing Association at Tiffany Gardens kept its three below market rate units as rentals for more than ten years, as required by the city. The other 32 units in the house were sold when it opened in 2004 for prices that ranged from $333,000 to $382,000 and for prices up to $900,000 in more recent years, according to realty sites.
The situation of the tenants in the affordable housing units changed after a city-mandated 10-year rental period expired. At that point, the Homeowners Association at Tiffany Gardens opted to convert the three rental homes to “owned” units.
The association needed extra cash for roof, plumbing and other repairs related to what they allege was botched construction, according to Andrew Baugh, a lawyer representing the home owners. This kind of change of use is a rare proceeding but one that the Mayor’s Office of Housing allows as long as the unit remains affordable.
Existing rental tenants have the “right of first refusal,” the right to buy their home, in this case at the same level of affordability they were renting at. For the Palacios, who qualified for a rate for families making 60 percent of the Area Medium Income, this meant they would be able to buy the two-bedroom unit for $150,000.
The trouble began when the Palacios tried to get a mortgage. Income wasn’t the problem. It was the fact that they couldn’t find a bank both sanctioned by the Mayor’s office and willing to lend to an immigrant family with Social Security identities issued in just 2013 — Brenda and Luis Palacio are both from Guatemala.
“It’s an embarrassment that the city did not have an alternative lender on their list able to work with immigrant Latino families,” said Mattias Kraemer, the director of asset building programs at the Mission Economic Development Agency, known as MEDA. Kraemer began handling the Palacios’ case in February.
Both the city and MEDA promised to help the family find a lender, and the city agreed to temporarily approve a lender not on their list.
MEDA found one in the Community Trust Bank, whose local branch is the Self Help Credit Union.
But delays in paperwork, disagreements about lender fees charged by the housing office and snags in communication on the part of all three agencies delayed the city’s approval of the bank.
The homeowner’s association granted a three-month extension, but when that ran out in January, the Palacios still had no loan.
MEDA resolved an initial glitch – the bank’s request from the mayor’s office for information on the unit. The bank, however, balked at the $822 participation fee the mayor’s office imposes on lenders that participate in the below market rate program. The bank requested a fee waiver, which the city offers to nonprofit lenders and those with small budgets, but never submitted the required budgetary information, according to the Mayor’s office.
Finally, in January, the extension ended and the law firm representing the Home Owners Association notified the family that they had ‘chosen not to exercise’ their right to buy their unit. They had to leave.
Maria Benjamin, Director of Homeownership and Below Market Rate Programs at the Mayor’s Office of Housing and Community Development, said she couldn’t comment on specific cases out of privacy concerns. Nonetheless, she too voiced some disappointment.
“We rely heavily on our housing counselor agencies to help folks like this family and other families that we refer to them to make sure that they don’t skip a beat and that they move as quickly as possible,” Benjamin said. “…And when that doesn’t happen then the circumstances can be detrimental for the family.”
One other family renting a below market rate unit in the complex had succeeded in buying its unit, according to Baugh, the lawyer for the HOA. A third unit was empty and also sold.
“We worked with and did everything that the HOA was required to do … We even extended that period three more months,” Baugh said. Benjamin noted that the association also didn’t have to offer the unit at only 60 percent Area Median Income.
With the Palacios’ eviction imminent, the Tiffany Gardens HOA is hoping to sell their unit for the whole Area Median Income price. That means the price jumped from $150,000 to around $300,000, and the HOA is waiting anxiously for the income to make their repairs.
“They had known that they needed to vacate that property, we’ve provided all of the resources they needed to do that,” said Baugh. The first half of roughly $19,000 in relocation fees was delivered along with notice of their eviction, though Baugh said he wasn’t sure if the family had cashed it yet.
MEDA and the mayor’s housing office came together to see what could be done, but even those efforts have failed to produce a solution.
MEDA’s Kraemer said the mayor’s office promised the tenants what he called three “golden tickets,” certificates of preference that would get each holder first in line for other below market rate units offered in the city in the next five years.
If they couldn’t stay in their home, each adult family member would now at least have the chance to find stable affordable housing elsewhere in the city. But the certificates, too, dissolved.
Benjamin at the Mayor’s Office of Housing said such certificates are not currently available to people in the Palacios’ situation, though there is legislation in the works to change that.
“We let them know that we hope to do this and then found out that we didn’t have the right to,” Benjamin said.
Kraemer and an activist from the Alliance of Californians for Community Empowerment (ACCE) appealed to the Tiffany Gardens HOA.
They went to a meeting to make their case, asking the homeowners to stay the Palacio eviction. Kraemer said a few of the homeowners, which MEDA and ACCE had approached beforehand, spoke on the family’s behalf.
Both the homeowners association and the activists passed out fact sheets detailing the situation from their perspectives. Then, Kraemer said, a resident brought up a concern about garage doors failing to close and that was that – the conversation moved on.
Soon after, MEDA and ACCE sought public support for the family at a small protest against the Palacios’ eviction.
“Tell the HOA No Way! We want the Palacios To Stay,” clamored a pamphlet activists passed around outside Tiffany Gardens.
So far they have been given several notices to leave, but no court summons.
Kraemer at MEDA wants to advocate for a blanket ban on no-fault evictions from below market rate units. He’s also pushing the homeowner’s association to give the Palacios another chance.
The mayor’s office did ultimately receive the bank’s paperwork, the Palacios were at one point pre-approved for a loan, and the mayor’s office would have covered what the loan didn’t. But now that the price for the unit has gone up, it’s unclear if any bank – approved or not – would loan the new required amount to the Palacios.
Emails between MEDA and the Mayor’s Office of Housing provided by Kraemer indicate that the mayor’s office found the bank and MEDA to be unresponsive at key moments. For their part, MEDA representatives felt kept in the dark about a communication breakdown between the mayor’s office and the bank. The homeowners association blamed MEDA and ACCE.
“Where was MEDA and ACCE when they could have helped them get that done during that time frame instead of not?” Baugh wanted to know.
He was outraged at the protest they had organized outside Tiffany Gardens. “Do those people know that the Palacios had all that time to purchase the building? I think it’s completely unfair and outrageous that they would treat us like slumlords to evict them out of the property…I don’t understand why [the Palacios] think they’re special.”
For his part, Luis Palacio said he wishes he would have known more about why there were so many delays.
“What would have been useful would have been knowing why nothing was moving along – knowing what had failed,” he said at the rally for his family. “Everyone in the process was throwing blame on everyone else.”
Kraemer is still trying to find a solution for the family that keeps them in the city.
“We had assumed that a city that cares about helping BMR homeowners would be able to get it right with a bank that serves low-income people,” he said. “Does that point the finger at MEDA? Yeah, sure. We all had to learn a hard lesson, and the Palacios paid the price.”