The Puyallup City Council isn’t sure what to do with 68 apartments at the Terrace on Meridian.
In November 2012, EWA Investments, LLC, the owner of the apartments, approached the state Housing Commission to request the removal of a land use restriction agreement on its title.
The LURA, on the title since the Pierce County Housing Authority once owned the property, requires that 68 of its units be rented at affordable housing rates. Residents who rent the units either have incomes no more than 50 percent of the median income, or no more than 65 percent of the median income. The apartment complex is located at South Meridian and 23rd Avenue.
As part of a buyout offer the housing commission said it would consider, EWA will pay $468,852 to Puyallup to support continued affordable housing in the area. But city council members have stopped short, wondering if it’s really smart to accept the money.
“I suggest we table this,” Council member Steve Vermillion said during the Aug. 27 study session. “Otherwise, we have the potential to walk into a legal minefield.”
Katie Baker, an associate planner for the city, said the buyout money could be accepted and put toward housing vouchers used for 56 families in one year — or 28 families for two years — or it could be put toward a new affordable housing development.
Baker said the alternative would be to retain the LURA and for the housing commission to work with EWA Investments to bring the property into compliance. The 68 units would then be maintained for qualifying low-income households for the remaining 19 years of the LURA.
“The main concern is making sure that people who qualify receive this service,” said Paul Fitzgerald, director of asset management and compliance for the housing commission.
Fitzgerald said EWA’s request to remove the LURA came to the housing commission on the basis that the property was in such poor shape it couldn’t function as its intended use as affordable housing.
“The problem was they had substantial improvements made to the property,” Fitzgerald said. “They can request termination of the LURA if there is damage to the property and can’t be rented out. But since they already made improvements, that argument would not be able to hold water.”
Kathryn Dobler, the managing member of EWA Investments, said when EWA purchased the property in 2011, it had two years of life left. A construction loan was financed, and renovations were completed at the end of 2012. EWA Investments would like to be able to rent the units at market rates.
“(The LURA) is a cloud on the title that is extremely old,” Dobler said. “This is a title issue. We brought in over 70 units that were completely off the market. The quality and condition are superior.”
Dobler said the removal of the LURA would not force any current residents out of their apartments.
“This is not about moving people out,” she said.
Dobler said the LURA causes financial implications to EWA’s bottom line, but it doesn’t allow for increases in cost. So, if water rates go up, those rates can’t be passed on to residents.
With the LURA, Dobler said the company is losing money that could be reinvested at the property. She said there is about a $40 to $50 loss per unit.
City council members were reluctant to accept a buyout last week. Many said there were too many unknowns. And others, like John Hopkins, believed the money wasn’t enough to make a difference.
“I think it’s a bit of a con job,” Hopkins said. “Can we replace 68 units for 19 years? How do we do that with $468,852?”
In the next two weeks, Fitzgerald said the housing commission will decide whether to view the buyout as an option or proceed with enforcing the LURA.
Reporter Andrew Fickes can be reached at 253-552-7001 or by email at email@example.com. Follow him on Twitter, @herald_andrew.