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Sun, Apr

Homelessness Programs: Echoes of Prohibition-era Corruption in Los Angeles

LA POLITICS

iAUDIT! - In 1919, 46 of the then 48 United States ratified the 18th Amendment to the Constitution, prohibiting alcohol manufacturing and consumption throughout the nation.  Intended to morally uplift the country, Prohibition instead created the structure of modern organized crime. An underground industry of alcohol production, distribution, and sales sprang up virtually overnight, The money made by illegal alcohol sales financed a vast system of corruption, where government officials ignored and often assisted the illegal booze industry.  Respect for the law decreased as the public learned one could break the law with virtually no risk of consequences as long as you had money and connections.  Government agencies poured increasing resources into enforcing Prohibition, even as alcohol sales took place in plain sight. Eventually, reasonable leaders saw the futility of Prohibition, and the 21st Amendment overturned the 18th in 1933.

 

In Los Angeles, homelessness programs are descending into a Prohibition-like morass, where billions of dollars flow into a system that produces few results, taints those involved with corruption, and promotes distrust in government institutions.  In the 1920’s, Prohibition produced different kinds of corruption, from the typical financial type, with officials accepting bribes, to the moral corruption of common citizens who were willing to support a crooked system in exchange for a cheap drink. In 2024 Los Angeles, huge amounts of money trade hands through backroom deals and sole source contracts; advocates and government officials claim the moral high ground by saying they are doing everything they can to solve the homelessness crisis, while supporting systems that exacerbate it.  Regular citizens have become jaded, ignoring the homeless on our streets, and questioning the legitimacy of a government that treats taxpayers differently than those living on the streets.  

 

We can see the corrupting influence of homelessness money in our neighboring county to the south.  Over the past few months, LAist has been publishing investigative reports on Orange County Supervisor Andrew Do, who has steered millions in contracts to a nonprofit that provides meals and services to unhoused and at-risk people.  The nonprofit is supposedly run by Do’s 22-year-old daughter.  Supervisor Do failed to disclose his relationship with his daughter while voting to approve contracts with her organization. The nonprofit has consistently failed to prove it is providing any meaningful services, and charges far more per meal than others.  Do’s daughter’s position with the nonprofit seems to be rather tenuous, since she is a law student at UC Irvine, suggesting the organization is using the connection to her father to steer funding to itself.  Unlike L.A. County, where no-bid contracts are the norm and performance requirements are virtually unknown, Orange County’s Community Resources Department expects its service providers to perform to contract requirements, and sent the nonprofit a notice on noncompliance on February 8.  The organization has since closed.  In another move that would be unheard of in Los Angeles, Orange County may make the nonprofit pay back $4 million it cannot account for, an accountability measure that never seems to cross the minds of LA’s homelessness managers. 

Perhaps the Supervisor and Ms. Do thought they would not have to answer for the actions; had they been in LA County, they would likely have been right. Orange County’s expenditures pale in comparison to L.A.’s, and organizations in Los Angeles are under far more lax scrutiny than in the OC.  Public agencies and nonprofit providers can operate virtually free of any accountability. As federal judge David Carter said in ordering a comprehensive audit of the City’s homelessness programs, “there was absolutely no accounting and no transparency for at least $600 million” the city spent before 2022. Just as during Prohibition a century ago, in modern LA, there is easy money to be made in homelessness programs, and little fear among those profiting from it that there will be a reckoning for poor performance. 

Supervisor Do might be a particularly flagrant example of financial double-dealing, but there are more subtle ways officials benefit from the unending flow of money for homelessness. State Senator Scott Wiener, a vocal proponent of high-density construction as a remedy to the housing shortage, collected more than $830,000 from financial and real estate interests for his campaigns, far more than any other source.  This was perfectly legal, and one could theorize it is a natural fit for building and mortgage businesses to donate to a candidate who supports their industry.  However, one would be naïve at best to believe depending on such a major source of campaign revenue doesn’t color the Senator’s policy stance. He has even sponsored a bill to neuter the Coastal Commission’s authority over seaside development so he can make it easier for his donors to overbuild in coastal areas

Wiener and his cohorts continue to impose new housing requirements on cities despite a demonstrable lack of success, as described by Zelda Bronstein in a 48Hill.com article.  The article shows how few affordable housing units have been built, but reports to the Legislature spin the disappointing news to make the programs look more like a success than the failure that it is.  If that sounds familiar, it should.  The same “failure as success” tactics are used locally to justify the billions spent on failed homelessness programs, such as the claim 21,000 people were sheltered in 2023, when at least a third left and agencies have no idea how many of the others were repeat clients. 

As a public sector auditor trained in fraud recognition and detection, I know corruption is not always financial; it can also be intellectual. It can be an individual act or systemic (or more technically, collusive).  Systemic intellectual corruption has some unique traits.  First, it is a self-validating closed loop. A corporate nonprofit claims it transitioned a given number of shelter clients to permanent housing. LAHSA or some other government agency counts that number as “housed”.  Elected officials boast a certain number of people were housed. Continued or increased funding is then justified based on the nonprofit’s performance.  Except none of the performance is verifiable. The systems used by nonprofits, LAHSA, and other public agencies don’t share the same information, leading to significant discrepancies in numbers, as described in this LAist article.  Double or triple counting the same person is altogether possible, and others can drop out of the system at any point, only to be counted again elsewhere. Nonprofits bill by the contact hour instead of by outcomes, so there really is no way of telling what happens to people who receive services. The same unaccountable cycle repeats time after time because no one in the self-validating closed loop has the intellectual honesty to demand verifiable service statistics and meaningful performance outcomes. And those outside the loop are ignored, written off as NIMBYs or worse, and their inquiries summarily dismissed as being “anti-homeless”. 

In terms of taxpayer costs, the most significant impact of intellectual corruption is housing for homeless people.  Despite numerous professional surveys documenting the role mental illness and substance abuse plays in causing homelessness, most advocates insist housing costs are its  primary cause.  Certainly, the availability of affordable housing is a serious problem in California, but as mentioned in Zelda Bronstein’s article cited above, neither the state nor the City have done much to alleviate the problem.  Nevertheless, leaders say only the infusion of billions of dollars for property acquisition and construction is the answer to homelessness. In 2016, L.A.’s voters approved Measure HHH, issuing $1.2 billion in bonds to build affordable and supportive housing.  As L.A. City Controller Ron Galperin reported in early 2022, “Overall HHH per-unit costs in the primary pipeline continue to climb to staggering heights. For projects in construction, the average per-unit cost increased from $531,000 in 2020 to $596,846 in 2021. Fourteen percent of the units in construction exceed $700,000 per unit, and one project in pre-development is estimated to cost almost $837,000 per unit, $100,000 more per unit than the most expensive project in 2020. Approximately 87 percent [of the] units are studios or one-bedroom apartments”. Originally targeted at 10,000 units, the goal was revised down to about 8,600, or about 18.6 percent of the City’s 46,000 current homeless population. 

To put those numbers in context, when HHH was approved by voters, LAHSA’s 2017 PIT count reported 33,138 homeless people in the City, of whom 10,743 (32 percent) were chronically homeless.  At best, the 10,000 projected units would have housed--fewer than one-third of the homeless population.  The 2023 PIT count reported 46,260 homeless in the City, an increase of 38 percent since 2017. Of those, 21,517 (46.5 percent) are chronically homeless.  Not only has HHH failed to decrease chronic homelessness in the City, its fixation on expensive and time consuming new construction has likely made it worse.  And yet city leaders insist on maintaining the status quo—a prime example of intellectual corruption.

Intellectual corruption is especially pernicious because it demands suspension of logic and mental integrity. Ideas and projects that would be dismissed as preposterous gain political traction because otherwise-rational decision makers subvert reason to ideology.  Intellectual corruption is every bit as dishonest and damaging as any other form of fraud because it is purposeful and represents an affirmative decision to choose what one knows to be wrong. LAHSA’s Commissioners, the County Board of Supervisors, members of the City Council, and the executives who work for them are not ignorant people.  They look at the results of their programs and recognize their failures.  They know what doesn’t work.  Yet most choose to ignore those failures and support programs that do nothing to reduce homelessness or make housing more affordable. They may be so enamored of their own intelligence, so protective of their ego, or so eager to maintain the support of advocacy groups blinded by ideology that they refuse to support change.  Behind all of this, of course, are the monetary interests of developers and corporate nonprofits dependent on a ceaseless flow of revenue.  There is no other way to explain why otherwise intelligent leaders choose the same programs provided by the same organizations and that achieve the same dismal results. 

An uninterrupted stream of money feeding the homelessness machine, combined with virtually no performance expectations is the perfect recipe for corruption, whether its financial, intellectual, or any other form.  As long as the public accepts this level of corruption, leaders will have no incentive change.

(Tim Campbell is a resident of Westchester who spent a career in the public service and managed a municipal performance audit program.  He focuses on outcomes instead of process. Tim is a featured writer for CityWatch.)