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City Hall’s Great Conundrum: Getting Developers to Build Affordable Housing … Like Getting Blood from a Stone

LOS ANGELES

PLATKIN ON PLANNING-We have all heard the expression “getting blood from a stone.” That is the conundrum facing City Hall’s efforts to solve LA’s housing crisis through private investment. It isn’t really working, and the City’s half-hearted efforts have been further complicated by two upcoming ballot initiatives. The Building Better LA initiative, on the November 2016 ballot, would require affordable housing built through municipal programs to utilize unionized labor. 

Then, in March 2017, LA voters will weigh in on a second, more comprehensive initiative, the Neighborhood Integrity Initiative. If approved, this ordinance would impose a two year ban on City Council legislative actions that spot-zoned and/or spot-planned high-rise luxury housing projects. During this hiatus, the City would be required to begin the update of LA’s legally required but outdated General Plan, eventually including the city’s 35 Community Plans. 

While these updates would identify locations that had the greatest need and potential for affordable housing construction, the Initiative also permits the construction of 100 percent affordable housing projects through City Council zone changes and/or General Plan Amendments. 

In response to these two initiatives and an undeniable crisis in LA’s supply of affordable housing, the City Council directed the Department of City Planning to investigate a value capture approach to increase the production of affordable housing. If adopted, the City would attach a condition to all residential discretionary actions: each project must include a specific amount of affordable housing. 

The City Council made their bed, and now they must sleep in it. 

On one hand, the Council and their planners are fully committed to neo-liberal economics, which means slashing as many public housing programs and governmental regulations on private investment as possible, replacing them with harsh policing paired with government incentives for developers. As intended, this approach has fanned the flames of real estate speculation. And, driven by the economic imperative to maximize profit, this feeding frenzy has resulted in a glut of financially lucrative luxury housing, but virtually no affordable housing. 

In the face of these unwelcome trends, the luxury housing crowd has spun two whoppers about LA’s housing crisis that I have previously debunked: 1) Luxury housing produces affordable housing by pulling down the rents of middle and low income housing. 2) Luxury housing transmutes into affordable housing, a type or reverse alchemy called filtering. When pressed, however, the tellers of these tall tales cannot cite any addresses or neighborhoods in LA where these supposed miracles have actually taken place. 

On the other hand, as hinted at in the value capture report, LA’s amalgam of existing housing programs barely produces any net gain in affordable housing. This is because many market housing projects have extensively eliminated existing affordable housing through relentless demolitions and evictions. The value capture report, however, did not mention a third factor that has shrunk the supply of affordable housing. As reported by John Schwada in CityWatch  the City of LA does such a poor job at inventorying and monitoring affordable housing that many landlords surreptitiously rent out these units at market prices, sometimes even as short-term rentals.  

This is why the City Council has uncomfortably moved down the path of increased regulation of discretionary residential land use actions through a value capture ordinance. It is their silent admission that their old programs and old justifications (the whoppers) have run out of gas. Even though the value capture option conflicts with their devotion to classical neo-liberal hocus-pocus, they don’t have a better option until such time that the Federal government restores many slashed public housing programs of yore. 

The Value Capture report describes existing affordable housing programs in LA, such as the poorly performing Density Bonus/SB 1818 option. It also inventories more dynamic programs from other cities, such as NYC. In the Big Apple, Mayor de Blasio has successfully championed inclusionary zoning (i.e., mandatory affordable housing requirements.) 

The report also outlines potential value capture approaches that LA should consider, largely imposing an affordable housing requirement on residential projects built through discretionary actions. Depending on the City Council’s eventual ordinance, LA’s likely value capture ordinance will include on-site affordable housing requirements for most discretionary actions, including the General Plan Amendments, Zone Changes, and Height District Changes targeted by the Neighborhood Integrity Initiative. Two other provisions, allowing developers to meet their affordable housing requirement through off-site construction or in lieu payments could also be folded into the final ordinance. 

But, regardless of what the final value capture ordinance will look like, I wish the City Council the best of luck, because their ordinance will have little impact on LA’s affordable housing crisis. This is primarily because the Council and its value capture ordinance cannot avoid the essence of their conundrum: the need of developers to maximize profits from their real estate investments. The greater the City’s affordable housing requirement, the lower the resulting private investment and number of affordable units. The smaller the City’s affordable housing requirement, the greater the resulting private investment in luxury housing. There really is no escape from this affordable housing dilemma. 

As far as I can tell, wide-scale up-zoning and up-planning is not proposed in the value capture ordinance, although this will certainly happen through Community Plan Updates and re:codeLA ordinances. But, if the City Council did eventually attach a mandatory affordable housing requirement to every Community Plan Update or re:codeLA ordinance containing up-zoning and up-planning, it would be a New York City-style sea change for Los Angeles. But, given the grip that real estate interests have on LA City’s elected officials and policy wonks, this outcome is now a flight of fancy. 

Furthermore, if the eventual value capture ordinance adopted an SB 1818 approach of automatically approving economic incentives for all zone changes and General Plan amendments that include an affordable housing component, it would be an extraordinary windfall for property owners. After their entitlements, with only token City surveillance, some of these new “affordable” units could be quietly rented out at market rates or the real money-maker: Air BnB’s. 

When this happens, the City Council’s self-imposed conundrum may finally reach its breaking point. They would have to admit that no private market approach, even value capture, can successfully address LA’s – or for that matter the entire country’s – housing crisis. The public sector could then either resume the construction and management of affordable housing or face levels of overcrowding, homelessness, and civil disturbances unseen in the United States for many decades and again beyond the capacity of the LAPD to contain

(Dick Platkin is a former LA city planner who reports on local planning issues for CityWatch. He also serves on the boards of the Beverly Wilshire Homes Association and the East Hollywood NC Planning Committee. Please send any comments or corrections to [email protected].) Prepped for CityWatch by Linda Abrams.

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