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after refusing to accept the housing authority'spayment standard as the maximum rent. Thecity negotiated a settlement in which it acquiredthe property with state and local funds.Ownership was eventually transferred to anational nonprofit organization.In Denver, Colorado, after the owner of EastVillage Apartments opted out of a 160-unit project-basedSection 8 contract, the city and theproject’s tenants sued to acquire the propertyunder eminent domain. A purchase, whichincluded substantial state and local funding,was ultimately negotiated with the DenverHousing Authority. Tenants are negotiating furtherwith the housing authority to ensure thatthe Section 8 contract is renewed on a longtermbasis.Both Denver and Portland now have ordinancesthat explicitly authorize the locality to use eminentdomain to preserve affordable housing.Other Legal ClaimsA variety of other legal claims have been usedby residents and advocates to challenge conversionsof federally subsidized housing. 33 Forexample, the conversion may constitute abreach of existing local use restrictions (seeabove). The owner may have violated federal,state, or local notice requirements. Or theremay be a basis for fair-housing claims if theconversion will adversely or disproportionatelyaffect members of minority groups, perpetuateracial segregation, or if HUD has failed to promoteother fair-housing opportunities.Federal PreemptionMany state and local preservation initiativeshave been subject to legal challenge based onfederal preemption claims. Specifically, Section232 of LIHPRHA preempts state and local lawsto the extent that they restrict the owner's abilityto prepay, are incompatible with LIHPRHA, orare otherwise targeted exclusively to Section236 and Section 221(d)(3) BMIR projects thatare eligible to prepay. At the same time, laws of"general applicability," which also include prepayment-eligiblehousing, are not preempted.Accordingly, state and local ordinances shouldbe drafted broadly enough to fall under the protectionof the general applicability exception.2. FINANCIAL/ TAX INCENTIVESState and local governments have developed anarray of financial and tax incentives to help preservethe subsidized housing stock. In designingsuch programs, especially in view of thescarcity of state and local funds, a primary considerationis how to target incentives to achievethe highest impact. For example:Eligible Property. Should incentives be targetedto properties with the highest and mostimmediate risk, or should they be more generallyavailable? Should incentives be limited toproperties at risk of market-rate conversion, orshould they also be available to properties atrisk of disinvestment, default, and foreclosure?Eligible Recipients. Should incentives be availableonly to nonprofit purchasers, or also toexisting owners and/or for-profit purchasers?Broadening the scope of potential beneficiariesmay be necessary to garner political support, orto ensure that the maximum number of propertiescan be preserved. A possible compromisecould require any existing owner to provide aright of first refusal and/or option to a qualifiednonprofit with respect to any future sale.Long-Term Affordability. What type of userestriction should be imposed? How longshould it last—20, 30, or 50 years? The remaininguseful life of the housing?These issues are subject to tradeoffs whicheach jurisdiction will value differently. Findingthe appropriate balance—for example, whetherto curtail the number of eligible recipients andproperties in order to boost long-term affordability—ispart of the challenge of developing asuccessful preservation strategy.Preservation Housing ElementIn California, localities are required to prepare a10-year analysis of their at-risk subsidizedinventories as a component of their localHousing Element and General Plan. The locality24 chapter three: State and Local Preservation Tools and Strategies