American Can's Affordable Units Are Expiring Now, But Thousands More Will Follow City-Wide

Jan 24, 2017

Late last year, the American Can Apartments delivered eviction notices to many low-income tenants. The 268-unit complex near Bayou St. John had dozens of affordable units set aside for low-income people when it opened, 15 years ago. That was part of an agreement with the city. But that agreement has now expired. And as Nina Feldman reports for WWNO, the American Can evictions are not an isolated thing. Thousands of affordably priced housing units, owned by private developers, are set to expire in coming years.

Michael Esnault is a Vietnam Veteran on a fixed income. He has a seizure disorder, and suffers from PTSD. Soon after Katrina, Esnault’s landlord kicked him out of his house in the Bywater to make room for the landlord’s own family. Esnault stayed with friends, and for a while in an apartment in Metaire. Then he heard he could use his housing voucher from the VA at the American Can Apartments. The old factory, recently converted to high end apartments, came with what Esnault described as a friendly staff. It’s gated, and has a pool, a gym and outdoor community space. He fell in love with it.

“Everybody here knows one another,” said Esnault. “And you feel safe.”

Esnault’s lived in “The Can” – as people call it – for close to six years. His VA voucher pays $789 a month. As he’s watched rents rise around the city, Esnault has felt lucky. Because right now, the market rate for a 1-bedroom in New Orleans is $1270.

But he found an eviction notice posted on his door in October. He was disappointed but not surprised. He met with the management - he said if they were going to evict him anyway, he didn’t have anything to lose.

“I told them, I’m fighting this! I’m not gonna lay down.”

Esnault and 52 other low-income tenants got some media attention for their possible eviction. Lawyers for the tenants spoke with “The Can’s” management firm and Esnault’s lease has been extended until March. But he hasn’t found a place to go after that. He hopes he’ll be able to stay in the area, but his voucher won’t cover the rent for a 1-bedroom in Mid-City.

Esnault got into the American Can in the first place because of a $45 million real estate deal made back in 2000. New Orleans developer HRI got $29 million in tax-exempt bonds to turn the old factory into high-end apartments. In exchange, HRI agreed to rent a portion of those apartments to low-income tenants – for 15 years. After that, the rent could be set to whatever the owners wanted.

HRI sold the American Can apartments in 2013. Now, it’s managed by Audubon Communities, based in Atlanta. And now, the 15 years are up. For Esnault to stay, he’d be looking at $1500 a month, more than double his VA voucher. Esnault says it’s not fair for people who’ve lived here their whole lives to be priced out.

“Here, these investment companies, yeah they got a legal right to put people out-- but what about the moral right?”

Marla Nelson runs the Masters program for Urban Planning at the University of New Orleans. She says Audubon Communities is within its rights in raising rents. Keeping more than 50 units at the low-income level would mean losing hundreds of thousands of dollars. The developers are looking at their bottom line. But she says the American Can predicament shows a lack of foresight.  

“I think that when this program was created, 15 years, that was sort of far away for people, and then it came up fast.”

But real estate deals like this are common. Developers agree to make a few units affordable for a set number of years, as part of a bigger housing development. The City of New Orleans estimates that in the next fifteen years, close to 5000 affordable units will expire. They were funded using Low Income Housing Tax Credits, or LIHTC.

One component of the federal resources that New Orleans received after Hurricane Katrina, were extra LIHTC allocations, part of why it’s so popular here. There are over 11,000 LIHTC units in Orleans Parish – more than the traditional, and now defunct, public housing projects. In fact, many former public housing complexes like the Iberville and St. Bernard have been replaced with mixed income developments that are financed, in part, by LIHTC.

In most mixed income developments, one-third of spots go to people who qualify for public housing. Another third is set aside for market-rate tenants. And, in-between, are those LIHTC units for low-income residents. They carry that label for 15 years, or in some cases 30 years.  

Breonne DeDecker is with Jane Place Neighborhood Sustainability Initiative, focused on Mid-City. She says the American Can has benefitted from its low-income tenants.

“It’s not as though they haven’t been collecting money for these units.”

Audubon Communities declined comment for this story, but DeDecker sees those city bonds as a sticking point. She says if public money goes in, a public service should come out-- one that lasts longer than 15 years.

“What you end up sort of seeing is the public supporting the development of ultimately luxury housing.”

Marla Nelson at UNO says tax credit programs like LIHTC are part of a national trend. Affordable housing has moved away from government-run – and government-built – public housing, toward subsidies for private landlords.

“It becomes an incentive for private developers to produce affordable rental housing…The federal government isn’t going to build affordable housing, so what needs to be done to encourage private developers to do that?”

The answer has been tax credits. And, she says, if we don’t want developers to convert affordable units to market rate once their agreements are up, the public must demand that. Some places set much longer term limits for developers to qualify for LIHTC tax credits, like 50 years. In others, affordable units are permanent.  DeDecker says that, equipped with a strong real estate market, it’s time for New Orleans to demand more, not to be afraid developers will get scared off.

“It’s very possible to build market rate housing alongside affordable units mixed in and still make enough money to actually fund the development of that project.”

Ellen Lee heads the office of Community development at the City. She’s been thinking about how to approach developers as their obligations to provide affordable housing expire.

“What can we offer them to say, ‘Is there another investment that we can provide to make enhancements to you development and then in exchange for that, you have to agree to extend the affordability period.’”

The city is working on a Smart Housing Mix Policy. Lee says it would balance the city’s long-term need for affordable housing with the types of rewards private developers expect. Such a policy would answer questions like how many affordable units should be required, per project? And of course, how long should they last?

The City’s Smart Housing Mix Policy is open for public comment until February 13th.