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The Ellington, a 264-unit apartment complex in Northeast Portland's Rose City neighborhood, had been affordable housing until it was sold and converted to market-rate units in 2006.

(The Oregonian)

A long-running legal fight to preserve an affordable-housing complex in Northeast Portland will end next year with an unusual compromise to pay low-income renters $7,500 if they're evicted.

Lawyers on both sides praised the deal, which secures the fate of the 264-unit apartment complex initially designated for low-income renters.

The settlement locks in cheap rents for 30 years for 44 units. But it allows the owners - led by Guardian Real Estate Services, a proponent of affordable housing - to eventually kick out low-income tenants and rent remaining units at market rates.

"We both figured that this was a win-win deal," Guardian's attorney, John DiLorenzo, said Wednesday.

"Were there times when I dreamed of better settlement? Yes," said attorney Ed Johnson, who sued on behalf of low-income renters. "But I'm really happy with this. And I think it's going to give people an affordable place to live for a long time."

The convoluted history of the Rose City Village apartments stretches to 1991, when a developer secured more than $2 million from the federal Low-Income Housing Tax Credit program mandating that the project stay affordable for 30 years. But shoddy record-keeping and a change in ownership prompted state officials to try to lift those restrictions in 2005 after just 14 years.

An investment group including Portland-based Guardian bought the complex in 2006 expecting to rent out units at market rates. Guardian proceeded to evict tenants, renovate the apartments and raise rent for anyone wanting to return to the sprawling complex, at Northeast 66th Avenue and Halsey Street.

Johnson, director of litigation for the Oregon Law Center, filed a lawsuit in 2007 fighting to preserve the units for low-income Portlanders. Four years later, Johnson secured a major victory from the Oregon Court of Appeals and low-income renters began moving back in.

But Guardian kept fighting.

This summer, the Oregon Court of Appeals reversed course and vacated the decision on a technicality. Then a Multnomah County judge delivered a blow to a second lawsuit, deciding that even if Johnson won, none of the units would have to be affordable beyond January 2021, the end of the original 30-year period.

That's about the same time settlement talks heated up, DiLorenzo said.

Instead of pushing to make all 264 units affordable for five years, the Oregon Law Center negotiated for an equivalent deal that preserves 44 units for 30 years. Rent for a two-bedroom affordable unit currently runs about $1,000 a month.

"It's a victory," Johnson said. "There will be 44 units of affordable housing out there for a long time."

But the compromise means most of the 184 apartments currently rented by low-income residents will be lost over the next five years. Many are expected to move out through normal turnover, but Guardian also will be allowed to offer financial incentives to encourage low-income renters to leave more quickly.

After four years, Guardian can provide one-year eviction notices to any remaining low-income renters above the 44-unit requirement. Tenants of each affected unit will receive $7,500 upon eviction. They'll also have an option to stay but will be required to pay market rates.

Guardian is a prominent owner and manager of Portland projects, including the 21-story Yard tower being built at the east side of the Burnside Bridge. The company is owned by Tom Brenneke, who earlier this year advocated more affordable housing in Portland.

DiLorenzo said Guardian is not the majority owner of the Northeast Portland project, now renamed The Ellington apartments. But Guardian has a fiduciary responsibility to seek more money for investors, he said.

"This doesn't in any way diminish Tom's commitment to low-income housing," DiLorenzo said. "In fact, he thinks we need more low-income housing. On this deal, he's stuck."

Broadreach Capital Partners, a California-based investment management company, owns an undisclosed share of the project. Investors in the company "are largely education endowments and private foundations," according to its website.

"There is a huge delta between the value of low-income housing units versus the value of market units. It's gigantic," DiLorenzo said. Guardian has "an obligation to their investors to at least deliver most of what their investors' expectations were."

Expectations mean little to Cedar Binder, 40, one of three plaintiffs to file the most recent lawsuit. Binder lived at the apartments for two years, leaving in 2006 along with almost everyone else who was evicted.

Binder hoped the lawsuit would ensure all 264 units would be affordable for 30 years. She is somewhat disappointed by the outcome, which will be approved by a judge next spring, although she's pleased at least some of the units will be protected.

She hoped her efforts would secure cheap housing "in a decent neighborhood" that she remembers fondly, one she'd consider moving back to someday.

"Those 44 apartments," she said, "are going to stay full."

-- Brad Schmidt

503-294-7628

@cityhallwatch