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Los Angeles City Attorney Hydee Feldstein Soto launched an audit this week of a legal aid nonprofit that provides city-funded eviction defense and rental assistance to tenants at risk of losing their housing.

The audit is centered on the Legal Aid Foundation of Los Angeles, or LAFLA, the city’s lead contractor for a program called Stay Housed L.A.

Since the early days of the COVID-19 pandemic, Stay Housed L.A. has received about $54 million in city funds. The organization’s leaders say the money has gone toward representing more than 4,700 tenants in eviction proceedings, providing limited legal assistance to more than 16,000 others, and distributing more than $11 million in rent relief.

In a statement, city attorney spokesperson Karen Richardson said her office “is reviewing this sole source contract to determine the extent to which funds paid by the City to LAFLA have served their intended and stated purposes and benefited tenants of Los Angeles.”

Barbara Schultz, who oversees Stay Housed L.A. in her capacity as the Legal Aid Foundation’s director of housing justice, said her organization has provided monthly reports to the L.A. Housing Department as required under the contract.

“We are extremely proud of the work that we have done,” Schultz said. “And it’s important to know that Stay Housed L.A. is much bigger than LAFLA. It is over 25 non-profit law firms or community based organizations, all doing amazing work for and with tenants.”

How did we get here?

The audit comes after Feldstein Soto refused to sign a new five-year contract with LAFLA in June. She argued that despite approval from the L.A. City Council and Mayor Karen Bass, the contract should have been put through a competitive bidding process.

The city attorney’s decision to reject the contract caught other L.A. officials by surprise, coming just weeks before the Stay Housed L.A. contract was set to expire on July 1. The city’s Housing Department had previously determined that the sole-source contract was appropriate.

In a March 28 internal memo obtained by LAist, housing officials told the City Attorney’s Office a competitive bidding process would be “undesirable, impractical, and impossible.” They noted that Stay Housed L.A. was chosen to roll out L.A.’s new program to give free eviction attorneys to low-income tenants.

That program is seen by city leaders as crucial for stemming the rise of homelessness.

According to the memo: “The City’s commitment to a Right to Counsel program is dependent upon the StayHousedLA Coalition’s continued contracting and implementation.”

The document also noted that L.A. County pays Stay Housed L.A. to provide similar services outside city limits. Choosing a different provider within the city would create additional costs and inefficiencies, housing officials said.

“There are no other providers with the combination of expertise, history, and staffing capacity to compete with StayHousedLA,” the memo states.

Short-term extension, long-term questions

Facing the possibility of new eviction defense work shutting down on July 1, city leaders ultimately decided on a compromise to extend LAFLA’s contract by seven months. The idea was to keep tenant aid going while the city worked to set up a bidding process for the new contract.

Then in August, the City Attorney’s Office emailed the foundation to demand “inspection & audit access” to records regarding Stay Housed L.A. Schultz said three city attorney staffers and one housing staffer arrived on Wednesday at LAFLA’s Westlake offices to inspect documents.

Schultz said LAFLA has provided the city its timesheets, invoices, caseload data, rent relief payment information and redacted case files. But the City Attorney’s Office is now asking for records that Schultz said she believes cannot be disclosed under attorney-client privilege.

“They have asked for retainer agreements, which have client names,” Schultz said. “They’ve asked for court case numbers, which would then identify the tenants. We believe that is all subject to confidentiality and privilege under State Bar ethics rules.”

Audits of city-funded programs are typically handled by the L.A. City Controller’s Office. A spokesperson for Controller Kenneth Mejia told LAist that his office is not involved in this audit.

LAist asked the City Attorney’s Office to provide information about any previous audits it may have carried out, but did not receive a response. LAist also asked Housing Department officials about their involvement in the LAFLA audit, but also received no response.

How does this affect renters?

With the seventh-month contract extension now in place, Stay Housed L.A. is still taking on new eviction defense cases. But Schultz said rent-relief funds have already dried up, and eviction defense lawyers will soon have to turn renters away.

“We have no rental assistance money right now, so tenants are being displaced where they could have been given rental assistance to stay in place,” Schultz said. “We will soon run out of legal services funding before the end of the contract, which means we are going to have to stop accepting new cases in the next couple months.”

Last month, the City Council voted in favor of a new annual spending plan for money raised by Measure ULA, also known as the city’s “mansion tax.” The budget included about $39 million for eviction defense and about $3.8 million for rental assistance. But that funding has not been provided to Stay Housed L.A., and it’s not yet clear how the money will be allocated.

Outside of its work overseeing Stay Housed L.A., LAFLA has found itself opposing the city attorney in cases involving L.A.’s approach to the homelessness crisis.

In one case challenging the destruction of unhoused people’s property during encampment sweeps, LAFLA attorneys found that city employees had altered and fabricated documents about clean-ups.

A judge is expected to decide what sanctions the city will face.

What comes next?

LAFLA leaders said they plan to submit a proposal once the city opens up the bidding process for the new Stay Housed L.A. contract. For now, they said, they’re focused on complying with the city attorney’s audit — without disclosing privileged information.

In a statement, leaders from LAFLA and Stay Housed L.A. said the city attorney’s recent actions “pull the rug out from under tenants, and undermine the intention of policymakers.”

“What we need instead is all hands on deck to sustain and grow this critical program to prevent homelessness across Los Angeles,” they said.

Regarding the future of Stay Housed L.A., officials with the City Attorney’s Office said the city expects to put out a request for proposals “in the very near future.”