Why is $177M in LA tenant aid being held up? City officials disagree on the reason

Los Angeles city housing officials are pushing back on allegations from the outgoing city attorney, who claims that a legal aid provider has failed to comply with its taxpayer-funded contract to help tenants avoid eviction.

At stake in the dispute is $177 million — approved months ago by the mayor and City Council but still awaiting the city attorney’s signature — to help renters stay housed.

For more than a year, City Attorney Hydee Feldstein Soto has refused to authorize new long-term funding for the Legal Aid Foundation of Los Angeles, or LAFLA. On Thursday, she told LAist the delay was due to the nonprofit’s alleged failure to account for how it spends city funds.

“They didn't comply with the monthly reporting that they were supposed to do,” Feldstein Soto said. “They still haven't done so.”

LAFLA leaders strongly disputed those claims, saying they have provided detailed accountings of their caseloads and tenant outcomes. Barbara Schultz, LAFLA’s housing director, told LAist her organization has fully complied with the terms of its contract.

“After months of highly unusual investigations, document requests and audits that extend well beyond the scope of [the city attorney’s] office, she has failed to identify any misconduct — because there isn't any,” Schultz said.

Officials with the L.A. Housing Department also told LAist the contract monitoring and reporting requirements have been upheld.

“LAFLA has complied with every request for information put forth by LAHD,” said department spokesperson Sharon Sandow. “Like all new programs, tracking and information systems have been improved as the program has matured over the past five years. LAFLA provided the information requested.”

City attorney’s dispute with legal aid group runs deeps

Feldstein Soto has frequently clashed with LAFLA. Separate from its tenant defense work, the organization has joined lawsuits against the city over its homelessness policies.

Feldstein Soto has objected to giving LAFLA city funds, telling council members in a confidential memo earlier this year that the city should “reconsider the award of such a large contract to a frequent litigant against the city.”

Since the early days of the COVID-19 pandemic, LAFLA has led Stay Housed L.A., a city- and county-funded effort to provide eviction defense, rent relief and other aid to tenants at risk of losing their housing.

The city has also tasked LAFLA with scaling up the city’s “Right To Counsel” ordinance, which provides free attorneys to qualified low-income renters facing eviction. Statistics show that landlords almost always have attorneys in eviction proceedings, but renters rarely come to court with lawyers of their own.

Last year, Feldstein Soto rejected a new five-year contract with the organization, saying any further funding should have gone through a competitive bidding process. The city responded by opening up a new call for submissions. Officials ultimately selected the Legal Aid Foundation to continue eviction defense services. The City Council and mayor approved that contract in April.

But Feldstein Soto has continued to withhold her signature. On Monday, she issued a report detailing why she has delayed the contract with LAFLA, as well as contracts with other tenant aid groups slated to receive funding for rent relief programs, enforcement of the city’s ordinance against tenant harassment and tenant rights education programs.

Feldstein Soto’s report included a series of audits of LAFLA from the Harrington Group, an independent accounting firm. When LAist asked if she had identified any evidence of impropriety in those audits, representatives for her office did not respond.

Data on tenant outcomes

Feldstein Soto said she believes information provided by LAFLA is insufficient to determine how many eviction cases involving city funding went to court, what the outcomes were or the average cost per case.

“The funds that we provided have not been accounted for properly in any way, shape or form,” Feldstein Soto said.

On Wednesday, the city’s housing department published a report saying Stay Housed L.A. has assisted tenants in 27,273 eviction cases, including 6,522 cases in which tenants were fully represented by a lawyer throughout their legal proceedings.

Over the last four years, 53% of fully represented tenants stayed in their homes, according to the report. Another 41% were able to negotiate agreements in which their landlords gave them more time to move out, forgave their overdue rent or sealed their eviction record. Less than 3% of tenants lost their case in court.

Much of the funding for the tenant aid contracts comes from the city’s so-called “mansion tax,” which could soon be scaled back by the city’s voters in a potential November ballot measure.

What comes next? 

Schultz said if city leaders are not satisfied with the accounting, they could ask for a formal audit through the City Controller’s Office. Feldstein Soto launched an audit of LAFLA last year, but has not released any findings so far. She told LAist more information could be coming soon.

“I am likely to file both a public report and a confidential report with my client, because you can't just gift away public funds without an audit trail and without transparency and accountability,” Feldstein Soto said.

Meanwhile, tenant advocates say smaller legal aid nonprofits that receive city funding as subcontractors are in danger of running out of money soon. Lawyers could be laid off and tenants could become homeless if funding is not approved quickly, they argue.

Schultz said the City Council may need to look for ways to approve the funding without the involvement of Feldstein Soto, who recently came in third place in the June primary election. She will not advance to the general election for a second term.

“I think that the council should definitely look at — if they had a rogue city attorney that refused to follow their directions — what other avenues they could explore,” Schultz said.

City Council members have introduced a motion calling on the city attorney’s office to explain the delay. That request was supposed to come up for a vote in a housing committee meeting this week, but it was ultimately canceled due to an earlier meeting of the full City Council that ran hours over schedule.