Housing Nonprofit in LA Says It Faces Financial Collapse

The largest provider of housing for formerly homeless residents in Los Angeles’ Skid Row area has warned city officials it is running out of money and will collapse unless it receives more public funding or other assistance.

That’s according to a report by Politico.

Anita Nelson, CEO of SRO Housing Corp., which operates 2,500 units of affordable housing in nearly three dozen buildings, said the city has not responded with sufficient urgency to the nonprofit’s “dire” financial situation.

“The handwriting is on the wall,” Nelson told Politico.

The potential financial failure of the nonprofit puts thousands of the city’s most vulnerable tenants at risk. And it creates a major new problem for Los Angeles Mayor Karen Bass and other local political leaders.

Politico noted that the news comes at a fraught time for the city and county, which have faced criticism in recent months from the Trump administration and Republicans in Congress over allegations of widespread waste and corruption in the city’s effort to address homelessness.

HUD Tries to Withhold Funds

The Department of Housing and Urban Development is attempting to withhold nearly $250 million in funding from the region, while a House Oversight subcommittee is expected to zero in on Los Angeles during a hearing Tuesday on “fraud and failure in federally funded homelessness services.”

Citing scheduling conflicts, Bass declined an invitation to testify and told MS NOW that the hearing was an attempt to intimidate the region.

According to the latest survey, more than 73,000 people are homeless in Los Angeles County, and the potential financial collapse of SRO Housing would add substantial humanitarian and financial stress to the region’s response.

The organization’s precarious finances have been known for years, Politico noted.

For example, the disintegration in 2023 of another major nonprofit landlord, Skid Row Housing Trust, revealed systemic funding problems for groups trying to provide permanent housing in a neighborhood with overwhelming homelessness, drug addiction, and mental illness. The city of Los Angeles pushed the trust’s 29 properties into a receivership and spent $30 million keeping them afloat for nearly two years before transferring the buildings to other owners, Politico reported.

At that time, Nelson and Los Angeles city housing officials raised alarm bells that SRO Housing could be next.

Financial Footing More Perilous

In May, a meeting between SRO Housing leaders and the city housing department revealed that the SRO’s financial footing had become more perilous, according to an internal department memo obtained by POLITICO that summarized the conversation.

The memo said SRO Housing needed “immediate assistance,” was facing “severe financial distress,” and anticipated roughly six months of solvency. It said SRO would shut down without help.

Nelson told POLITICO that she never told the city that SRO Housing expected to close in six months — which would have meant November — and that the organization isn’t currently planning to do so.

But Nelson said that she communicated the nonprofit’s growing crisis to the housing department.

“They’re not feeling our sense of urgency,” Nelson said. “The sense of urgency for me is real.”

Politico reported that roughly 500 units, about 20% of SRO Housing’s portfolio, are vacant. SRO Housing has lost money every year since 2022, according to the nonprofit’s public financial reports, with the shortfall rising to a cumulative $27.8 million, Politico noted. The nonprofit’s debts and other liabilities exceed its assets by nearly $70 million, the most recent financial report said.

Politico noted that Sharon Sandow, a housing department spokesperson, did not answer a list of questions from the website, including why the department’s account of the May meeting differed from Nelson’s on SRO Housing’s timeline for dissolution.

“The memo speaks for itself,” Sandow said in a statement. “The department is very focused on preservation and is making that a top priority to come up with creative strategies to preserve struggling portfolios.”

Politico reported that both SRO Housing and the former Skid Row Housing Trust were formed in the 1980s to rehabilitate 1920s-era residential hotels and apartment complexes in downtown Los Angeles to serve as permanent housing. It said that many of the buildings have tiny individual living quarters and shared bathrooms, and these properties remain SRO Housing’s core portfolio.

Costly Building Maintenance

Politico said problems began compounding roughly a decade ago as housing subsidies fell behind the cost of operations. It reported that costly breakdowns of plumbing, heating, and electrical systems have accelerated as the properties have aged. And, Politico noted, changes in leasing practices to prioritize housing residents with severe mental health and drug addiction issues left providers complaining that bureaucratic delays left rooms vacant for too long and, once filled, concentrated too many disorderly people in their buildings.

Nelson commissioned a study that found in 2019 almost half of SRO Housing’s buildings were operating at a loss, Politico noted.

During the subsequent Covid-19 pandemic, Nelson said, rent collections dwindled while property damage and insurance costs rose sharply.

When the trust failed in 2023, city officials told the Los Angeles Times that they worried SRO Housing’s situation was no longer sustainable and pledged to help. Nelson said over the past three years she’s continued to warn the city about the organization’s worsening condition.