Thursday, May 31, 2018

City’s Housing Math Doesn’t Add Up

From the May 31st edition of the Argonaut at:

Build smaller units on less-expensive land, or burn through Prop HHH funds and leave 20,000 homeless on the street

By Mark Ryavec

A former legislative analyst for the city of Los Angeles, Ryavec staffed former L.A. Mayor Tom Bradley’s Citizens Committee on the Redevelopment of the Central Business District and is currently president of the Venice Stakeholders Association.

Despite the heartfelt support of Los Angeles residents to house the homeless through their votes for Proposition HHH and Measure H, the math and housing model underpinning the city’s plans will leave over 20,000 people on Los Angeles’ streets for the next 10 years.

Even though there are roughly 25,000 people on the street every night in the city of Los Angeles, Proposition HHH never purported to produce more than 10,000 units of permanent supportive units (i.e., with services) and affordable housing over 10 years, at a cost of $1.9 billion, counting the interest. On its face, HHH alone would have left 15,000 people on the street for 10 years. And this does not account for the thousands already in temporary shelters or living in vehicles who also need permanent housing.

Since its passage, HHH’s purchasing power has been reduced dramatically by increases in construction costs and other factors. Reports show that the $247 million in HHH funds allocated so far will produce about 1,466 permanent supportive units. Extrapolating this data over the life of Prop. HHH shows the city can only produce about 5,686 units from HHH, not 10,000.

This assumes, however, that tax credits, which account for 20% to 70% of each project’s budget, will be bought by corporate investors. As reported in the LA Times several months ago, corporate investors are walking away from tax credits due to their much lower tax burden under the recent $1.5 trillion federal tax reduction act. They simply don’t need the credits to improve their bottom line. If tax credit underwriting diminishes or disappears as expected, the city will see even those 1,466 approved units at risk of not being built, which is already starting to happen in other states.

To the extent that affordable housing developers and city leaders have to double tap the only local source available, Prop. HHH, the total build out would drop below 5,686 units. For example, using 50% as the average percentage of project funding derived from tax credits, the loss of half of the previously anticipated tax credit funds would lower the total units that could be built by HHH to 4,264.

There are two alternatives to address these gaps. The first is for the state of California to ride to the rescue and provide the funds to cover increased construction costs and to replace all lost tax credit funds. While there is talk in Sacramento of directing some of the state’s current budget surplus to fund homeless housing, it is highly unlikely that these funds, after being spread statewide, will allow Los Angeles to build the full complement of 10,000 units.

The second option is previewed in a recent report by the Los Angeles Homeless Services Authority. It assumes thousands more permanent placements in market-rate housing using local and federal rent subsidies and an expansion of rapid re-housing — i.e., quickly identifying newly homeless individuals through the Coordinated Entry System and marshalling their own resources along with any needed temporary vouchers or rent subsidies to get them off the street as soon as possible. This approach faces two obstacles: a dearth of market-rate housing and the fact that Los Angeles’ attractive weather and now very public commitment to house the homeless has produced an in-flow from other parts of the state and the nation. (For example, the former director of the Teen Project in Venice told me that over 70% of the young people his agency counseled were from out-of-state.)

In any event, if the city continues to largely pursue efficiency units with kitchens and bathrooms (56% of funded units to date under HHH) or 500- to 600-square-foot one-bedroom apartments (32% of funded units), I expect that roughly 20,000 people will be left on the street for the next 10 years. This is not what the voters thought they were getting.

At one time there were 15,000 single room occupancy (SRO) units in hotels in downtown Los Angeles. These were 80- to 120-square-foot apartments that did not have attached bathrooms — shared toilets and showers were down the hall. These SROs were built between 1890 and 1930 to house railroad employees and itinerant workers, only later in the last century becoming the housing of last resort for the indigent. The SRO Housing Corp., a nonprofit set up years ago to restore and operate these buildings, estimates there are 5,500 SRO units left today in and around Skid Row. (The rest were lost years ago when owners decided to demolish them instead of laying out the funds to meet then-new city structural, safety and health codes.)

Another model that is successful in generating far more beds than the model favored by traditional housing providers is the collaborative housing developed by SHARE!, a nonprofit that typically houses four former homeless people at a time in two-bedroom apartments, dormitory-style.

While some city council members engage in surreal proposals to shelter all the homeless by 
December of this year, I believe the city should redirect the bulk of HHH funds to replace the roughly 10,000 SRO that have been lost. It is clear that the city can house many thousands more in SROs than with the traditional one-bedroom, 600-square-foot model or even 350-square-foot efficiency apartments.

The city should also set a limit on what it will pay for land so that the most efficient use is made of every HHH dollar. For example, city officials should abandon plans to put 136 apartments — of which more than half would be 600 square feet or larger — on city-owned land one block from Venice Beach, some of the priciest land in Los Angeles. This land at Venice and Pacific avenues, currently an expansive city parking lot for beach visitors, could fetch maybe $50 million to $90 million if sold, depending on the building entitlements the city allowed a developer. Nonprofits granted these funds could build six times as many SRO units on less-expensive land elsewhere in the city, which would house 816 people instead of just 136.

To honor both those who are languishing on the street and homeowners who voted in good faith to tax themselves in order to house the homeless, city leaders should make an immediate course correction and downsize the footprints of affordable housing units in order to increase the number of homeless who can be housed.