PEORIA, Ariz. — For five years, Lilli Lanser has called Quail Run Apartments in Peoria home.
Pictures of her family hang on the wall, magnets from her travels cover the front of the white fridge and family heirlooms fill the one-bedroom apartment.
“It’s my home, and these are my neighbors,” Lanser said.
But come March 2024, Quail Run Apartments, will switch from affordable units to market-rate apartments.
The property was built through the Low Income Housing Tax Credit Program, where the government helps pay for the development if the property is kept affordable for 30 years.
However, a loophole in the federal tax code can mean the property can move to market rates as early as 15 years. More than two dozen other complexes in Arizona are currently transitioning to market rates.
Quail Run was awarded Low Income Housing Tax Credits in 2004, according to the Arizona Department of Housing. The complex should have been kept affordable for 30 years, until 2034. But in 2019 Quail Run took advantage of the federal tax code loophole that allows them to go to market rates early. That switch will come in March 2024.
Often the complexes charge rent based on tenants’ income, not what the apartments across the street are renting for.
“I can live, I can eat, I can afford my medications, I can afford to go to the doctor, I can put gas in my car,” Lanser said.
‘Was that legal?’
Lanswer said she had heard rumors about the complex switching from affordable to market-rates, but didn’t find out for sure until 12News reported on the loophole.
“We received zero notice that this was happening,” Lanser said.
Looking back at recent happenings at the complex, Lanser said she and other residents were switched from yearly to month-to-month leases.
“All of a sudden, I was told, ‘No, we’re not signing any more yearly leases. There’s a clause in your lease that says we can go month-to-month at any time and we’re going month-to-month now,” Lanser said.
That’s what Irene Cloyd, a nearly 10-year resident of the complex, said happened to her too.
“We were on year or two-year leases, which was good, you felt safe. But month-to-month – you know any little thing – they can just kick you out practically,” Cloyd said.
Lanser also believes as new tenants move out, others move in at market rates.
"Was that legal? I don’t know,” Lanser said.
‘It’s a best practice, we encourage it, but there’s no enforcement mechanism’
Complexes that are working through the deregulation period are not required to let residents know that they are working to switch from affordable rates to market rates, according to Arizona Department of Housing Deputy Director Ruby Dhillon-Williams.
“It is a best practice, we encourage it, but there's no enforcement mechanism, that is a state law or federal law that would require it,” Dhillon-Williams said.
New tenants moving in at market rates can also be done during the deregulation period, and existing tenants can be moved to month-to-month at the end of their current affordable lease terms.
“At that point in time, yes, they could change the lease, to a month-to-month, again, to start moving toward that market rate community that it will be after the deregulation period,” Dhillon-Williams said.
Dhillon-Williams said communities not telling residents about the move to market rates isn’t what the state typically sees with these complexes.
Still, Dhillon said Arizona started trying to address the loophole to market rates back in 2010 by modifying a point system to help decide who gets the competitive tax credit. Since then, developers are offered more points if they waive the right to become affordable after 15 years.
“We hope that it's just that affordable housing stock, the older affordable housing stock, that will be affected. And again, that doesn't make it right. But we feel like we're moving in the right direction so that this doesn't happen in the future,” Dhillon said.
What’s worrying Cloyd and Lanser now is the future for tenants at Quail Run.
“How would they like it if their rent was up in the air? And they didn’t know any answers?” Cloyd said.
“There’s legal, and then there’s right,” Lanser said. “This may be legal, but it’s not right. Not by a longshot.”
12News made multiple attempts to reach Quail Run and its property management company, Winn Residential, but have not received a statement in response to this reporting.
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