City code enforcement suit may eliminate affordable units

For weeks, tenants at Orchard Plaza apartments in Windsor Park have been evacuating the premises following a contempt order against the owners for substandard housing conditions. Meanwhile, the question of whether the property will continue to provide affordable housing is still up in the air.

Owners Walter Olenick and Rae Nadler-Olenick declined to comment, but friend Steve Speir told the Austin Monitor that the couple has been unjustly harassed by the city. He commended them for supplying housing to people who had nowhere else to go. “They planted 23 fruit trees there; that’s where the apartments get their name from,” he said. “No one gives them any credit for what they’ve created.”

As the litigation is still ongoing, the parties involved are saying very little until the next court date in June, but court records reveal a heated battle over the fate of the property.

The Court Case

The city, led by Assistant City Attorney Michael Siegel, first filed a civil suit in district court against the Olenicks in June 2013, seeking temporary and permanent injunctive relief to cease operation of the multifamily complexes at 1127 E. 52nd St. and 1205 E. 52nd St. and to charge the defendants up to $1,000 per day for code violations discovered on the property.

In response, the Olenicks challenged the city’s right to sue in a plea to the jurisdiction, claiming that they did not share a commercial nexus with the city. “(The city of Austin) is fronting for the developers who want to compel The Olenicks to sell (for an artificially reduced value),” the plea reads, “and that’s just simply never going to work.”

In a response to the plea, the city asserted its right under state law. “The City is authorized to bring a civil action for the enforcement of its ordinances related to the preservation of public safety, fire safety, and public health pursuant to Chapter 54, Texas Local Government Code,” the response reads.

Nevertheless, the court granted the Olenicks’ plea, and although the city continued to send notices about the multiple code violations (14 in total) over the next three years, amounting to $800,000 in fines, the defendants did not respond nor did they bring the structures up to code.

It was not until Dec. 21 that the court made a judgment requiring the Olenicks to make immediate repairs to the buildings, foundations, supporting structures, stairways and walkways within 90 days.

When the deadline approached and the defendants had not provided any proof of rehabilitation, the city made a motion for contempt, which the court granted, giving the Olenicks until April 14 to comply with the December order or face jail time.

In an unexpected twist, the Olenicks filed a motion for abatement, claiming that they were in the process of closing a sale on the property. The court granted their motion, setting the next compliance hearing for June 15.

Alicia Dean, a senior public information specialist speaking for the city, told the Monitor in an email that the city was optimistic about the property possibly switching hands. “While the sale of the property has not been finalized, the City is open to working with the potential buyer,” Dean said. “Our priority is to reach a resolution on this matter that results in a property that is a safe and affordable place to live.”

The future?

Glen Coleman with South Llano Strategies and Jonathan Saad with Danly Properties are representing the buyer but declined to reveal the buyer’s identity. In an interview with the Monitor, Coleman emphasized the good intentions of his client.

“The buyer is exploring working with the city to make the relocation process go smoothly,” Coleman said, “and would like to rebuild a large enough project to preserve the tent of affordability (established by) the existing units.”

Before the contempt order forced them to stop collecting rent, the Olenicks charged their renters between $440 and $660 a month, making their rooms some of the most affordable in the city.

“Unfortunately, this affordability and livability has been under threat because of extreme gentrification through the redevelopment and remodeling of existing housing,” Council Member Greg Casar told the Monitor in an email, “and also landlords who have refused to keep their housing up to safety and health standards.”

City Fixes?

During its April 13 meeting, City Council approved a recommendation for Council action appropriating an amount up to $600,000 to aid Orchard Plaza tenants in their relocation. During discussion of the item, Council Member Pio Renteria asked if the relocation assistance expenditure could be added to the $800,000 already fined to the Olenicks.

“The state law that requires us to fund the relocation does not authorize us to seek reimbursement,” said Assistant City Attorney Patricia Link at the meeting. “If the Council wanted to redirect those monies (when they are collected), we could address that at that time.”

In the past, the city has come under fire for its propensity to issue notices of code violations without following through on any legal action. In recent years, however, the city has taken some significant first steps to reversing its bad reputation concerning substandard housing cases.

In 2013, the city instituted its Repeat Offender Program, tallying a list of rental properties that had received numerous safety complaints (1127 E. 52nd St. is on that list). Also in that year, the city collected $220,000 in fines from the owner of Wood Ridge apartments, where code inspectors had discovered 760 violations.

The amount owed by Wood Ridge owner David Andrews dropped from $465,000 after negotiations with the city, on the condition that the buyer, Flats On Burton LLC, would make the necessary repairs to the 15 buildings.

In the case of Orchard Plaza, that sort of arrangement would be impossible, as Casar explained during the April 13 Council meeting. “One of my first questions was whether or not we could do (rehabilitation),” he said, “but unfortunately what (the fire marshal) has told us is that (the buildings) have deteriorated to the point where it’s dangerous and potentially even deadly for folks to be living there.”

If the Building and Standards Commission votes to assign the code violation fees in full at its July meeting, then any prospective buyer of the Olenicks’ two properties will have to pay an extra $800,000 for the land (a price tag nearly the same as the combined 2017 appraised value for the two properties according to Travis County records).

Typically, as was the case with Wood Ridge, developers have leverage in negotiating with the city over a property so weighed down by fines that the owner wants to wash their hands of it as soon as possible. But despite the Olenicks saying they want to sell, it’s possible that they won’t have to.

In addition to running the multifamily complexes on site, the Olenicks also live in a dwelling on one of the properties, which they declared as their homestead in 1998 according to Travis County public records. If the tenants are all moved out before the June court date, and the Olenicks were to take additional measures to secure the safety of the property (board up the buildings, demolish stairways, etc.), then the court proceedings could be dragged out even longer and they could maintain control of the property.

The city’s lawsuit, which has been ongoing for about four years already, will not be deterred by another setback, but the city’s ambitious affordable housing goals would take a hit if the Olenicks don’t sell. The Strategic Housing Blueprint (adopted by Council the same day the Orchard Plaza relocation funds were authorized) sets the goal of 60,000 units at 80 percent of the median family income or below in the next 10 years, with 22,000 of those units being at 30 percent MFI or below.

At the March 28 meeting of the Planning Commission, Commissioner Nuria Zaragoza questioned whether the blueprint accounted for the current gap of 48,000 deeply affordable units identified in the 2014 Comprehensive Housing Market Analysis. “I assume that (gap) is going to grow as the population grows,” she said at the meeting.

In response, Erica Leak with the Neighborhood Housing and Community Development Department explained that the housing stock at those income levels is often dependent on federal and state subsidies. “Funding (those units) would be incredibly difficult,” she said.

If successful in its suit against the Olenicks, the city would further establish a policy of code enforcement that has been lacking historically, but it could be at the expense of low-income tenants in Austin who are running out of places to live.

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This story has been corrected. The name of the complex is “Orchard Plaza,” not place.