Advocates Find New Way To Preserve Subsidized Housing

Attorneys from the Sargent Shriver National Center on Poverty Law last fall spearheaded a class action lawsuit against the Moody Bible Institute (MBI) to challenge the school’s unlawful conversion of subsidized senior housing into student dormitories. Katherine E. Walz of the Shriver Center was joined by Jack Cann of the Minneapolis Housing Preservation Project and pro bono attorneys Max Stein, James Rolfes, and Casey Westover of Sachnoff & Weaver Ltd. Together they filed suit on behalf of current residents, applicants on the waiting list, and the Jane Addams Senior Caucus (JASC), a 30-year-old Chicago nonprofit organization.

The threatened property, Morningside I, is located just west of Chicago’s Magnificent Mile and originally provided 201 units of affordable housing for low-income seniors. Because Morningside is a project-based Section 8 property, government subsidies were attached to Morningside’s units rather than to the tenants. The Section 8 subsidy stays with the property when tenants move out so that affordable units would be available for future residents.

In 1993 MBI purchased Morningside and initially followed its obligations under the Section 8 contract. But since the late 1990s, after receiving approval from the Illinois Housing Development Authority (IHDA), MBI instead gradually converted the property into a student dormitory. Around the time the lawsuit was filed, about 160 students and their spouses resided at Morningside, where they enjoyed Internet access in well-maintained rooms. Disabled and elderly residents complained that they were denied similar upgrades in their rooms and even parking spaces in the building’s lot, forcing them to walk across four-lane streets to reach their homes. Eligible applicants were told that the building was no longer intended for disabled and elderly residents.

Shortly after the lawsuit was initiated, the parties, IHDA, and the U.S. Department of Housing and Urban Development (HUD) entered into settlement discussions. Those talks brought forth an innovative settlement agreement which will preserve all 201 units of subsidized housing, extend the Section 8 contract for several more years, and allow MBI to use a portion of the property to house students. Pursuant to Section 8(bb) of the U.S. Housing Act, HUD will permit MBI to split the Section 8 contract into two contracts. The second contract, comprising a little over half of the units, will be transferred to Maple Pointe Apartments, a senior-designated Low-Income Housing Tax Credit apartment complex located just down the street. Residents who elect to remain at Morningside are guaranteed project-basing until 2018. Residents who volunteer to move to Maple Pointe will have project-based Section 8 housing until 2033. This agreement should allow other low-income seniors access to affordable housing for decades to come.
In this pioneering agreement, the parties successfully used a new approach to housing preservation. Morningside is one of the first cases in which advocates were able to persuade HUD to split a Section 8 contract to maintain the same number of subsidized units. As affordable housing becomes ever more scarce, we must uncover new ways of saving these vital units. Morningside thus opens up important possibilities for preserving affordable housing, both in Illinois and nationwide.

This article was also published in the 2007 edition of Inside Housing.