A new federal program to aid low-and moderate-income renters faced with condominium conversion will be tried out in Montgomery County, where county officials say conversions are creating serious problems for tenants.
Subsides will be available to help tenants buy their apartments when condominium conversion is initiated. The program's success or failure in Montgomery will partly determine whether it will be extended throughout the United States.
County officials perceive that conversion problems are especially acute in Montgomery because of a shortage of replacement rental housing.
"We're very concerned about the displacement problem and affordability problem for people in multifamily buildings whose apartments are going condo," said Lawrence Simons assistant secretary of Housing and Urban Development, at a press conference yesterday, "Montgomery County has developed a strategy to take care of the problem and it's important for us at the federal level to help them."
County officials tried to stem the displacement problem by enacting a moratorium on condominium conversions. But the 120-day moratorium ended in November, leading county officials to device other ways to help tenants and to apply to HUD for additional help.
According to county housing figures, 2,559 units were converted in Montgomery County between January and July of 1979. A privately financed national market survey published last year estimated that more apartments would be converted to condominiums in the District of Columbia and its suburbs than anywhere else in the country except New York and Chicago.
Under the program announced yesterday, HUD will:
Subsidize interest rates on condominium mortgages for moderate-income tenants whose apartments were being converted. A family of four with an annual income less than $21,400 would qualify. Tenants will have to pay interest of 4 percent and HUD will pay the difference between that rate and the bank's mortgage rate. "Right now, it's a saving of about 7 1/2 percent," Simon said. The savings for a family is estimated at about $2,800 a year.
Subsidize, with some help from the county, the difference between 25 percent of a tenant's income and the monthly condominium payments.
Insure condominium mortgages jointly with Montgomery County to make it easier for low- and moderate-income tenants to secure loans.
The county has proposed legislation to the Maryland General Assembly that would impose a 4 percent transfer tax on apartments that are converted to condominiums. Money from the tax would be used to expand the county's rent-subsidy program.