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Don’t be Fooled: Councilman Trying to Score Billions for His Developer Buddies and You are Paying for It

HOMELESSNESS POLITICS--Councilmember Huizar’s call to give $1 billion to real estate developers should surprise no one. As reported here and elsewhere, the City has manufactured a homeless crisis for one purpose: to justify giving those billions to their developer buddies. 

The Bond Ploy--Don’t be fooled into thinking that the taxpayer is not paying for the bonds. The money has to be repaid. That’s the nature of a bond. Wall Street banks lend the City a billion bucks and we repay them $1.25 Billion. Sweet deal for the developers and sweeter deal for Wall Street. Not so good for taxpayers. The City is already floating hundreds of millions of dollars in bonds through its HCIDLA department to give to the real estate developers to construct apartments for the homeless. Gee, I guess that just slipped Huizar’s mind. 

Each billion we borrow for developers to build apartments for the homeless uses up the City’s credit. When we borrow too much, Wall Street raises our interest rate. We still have to pay for the $1 billion lawsuit which is forcing us to fix out sidewalks. We have billions of dollars of unfunded liability for the pension funds. The DWP just raised everyone’s rates and they will raise those rates for the next four years.   

Why So Many Homeless Now?--How did we get so many homeless? The city tore down their homes, throwing thousands of people onto the streets. 

Why did the City tear down their homes? The apartments constructed during the last decade have a 12% vacancy rate. Five percent is equilibrium. Thus, developers are in a financial squeeze. They are “building into a glut.” Also, 2015 was the top year for millennials to move to urban areas. Twenty-five years ago the birth rate for millennials peaked and ever since then it has been downhill. The demand for new apartments is steadily dropping which means each new apartment the developers build will be vacant. With that type of future market, lenders do not want to loan money to the developers, but if they do, the interest rate is a very high to reflect the escalating risk. 

The Future Looks Bad for Real Estate Developers--Things are bleak for developers. The millennials are moving away from urban areas and away from apartments. The millennials have entered the child rearing age, and like all prior American generations, they prefer single family homes with yards. Thus, they pack up and they leave their urban apartments. If you’re going to move, the time to do it is when you’re starting a family. In 2016, there is a plethora of great jobs all over the country with a rapid diminishing number of decent jobs in LA. That’s why our middle class is exiting. 

New people are not moving to LA. One reason is the migration of millennials away from all urban areas; they are the largest group on the move. We are not attracting foreign immigrants so there is no immigrant demand for apartments. Each person or family who leaves Los Angeles creates another vacancy. Thus, our housing stock increases with each departure. 

This demographic trends means financial disaster for developers. They have over-built apartments and are beyond the saturation point. 

LA Apartments at the Saturation Point--The City never tells you about the “saturation point.” We have saturation points for a variety of things like sugar in coffee, traffic congestion and housing. There comes a point when coffee can hold no more sugar and we can tolerate no more sugar. So too with traffic. When traffic congestion mounts, fear of terrible schools dooming your child’s future, the prospect of your employer moving elsewhere, and the deterioration of the city’s infrastructure and the constant threat of more taxes all find our emotional saturation point. Something’s got to give. That’s been happening to a lot of Angelenos lately. The people who can afford to leave LA move elsewhere. This is particularly true for families. 

With the 12% vacancy rate, developers realized that the saturation point has been reached. But they are powerless to prevent people from moving away; they cannot prevent employers from relocating to other states. They do, however have one group of people for whom they can construct apartments: the homeless! 

Huizar’s Plan to Bail out his Developer Buddies--The problem is that the homeless have no money. But, the taxpayers have an endless supply of cash. After all, we gave Wall Street over $3 trillion to rescue the bankers from the Crash of 2008. 

So now the people are being duped into thinking that we have to build new apartments for the homeless. Huizar is silent about immediate solutions which would eliminate the need to construct more apartments, such as: 

(1) Stop tearing down rent controlled apartments. 

(2) House the homeless in the 12% vacant apartments. That’s thousands of units into which we could move them. 

The reality of the homeless population is that some are easier to house than others. There are the mentally disabled, the drug addicted and the alcoholics. While they merit help, it is not as simple as providing a decent place to live. However, those whom the City intentionally made homeless by tearing down rent controlled apartments can have their problem solved overnight. Just give them a key to a home, and after that, provide follow-up services if needed. 

Why Huizar Wants Taxpayers to Borrow Billions--Why build more apartments when we already have more than enough vacancies? Because the purpose of the City Council is to transfer tax dollars from us to the developers. By housing the homeless in the available apartments, we would give no money to the developers. 

Thus, this entire Affordable Housing matter is a giant scam to transfer your money to the billionaire developers rather than housing the homeless in places that are vacant. In many instances, we have already given the developer millions of dollars in subsidies. 

Let’s see a City Council motion that calls for the homeless to be housed at the high rise at 5929 Sunset Boulevard. (Photo above.) It is vacant and we’ve given the developer over $20 million. The developer owes us.

 

(Richard Lee Abrams is a Los Angeles attorney. He can be reached at: Rickleeabrams@Gmail.com. Abrams views are his own and do not necessarily reflect the views of CityWatch.) Prepped for CityWatch by Linda Abrams.