THE VIEW FROM HERE - LA City Hall wants Angelenos to believe that the Homeless Crisis is something that happened to us like a tsunami from an off-shore mega earthquake. Instead, the Homeless Crisis was intentionally created as a by-product of the Densification Mania, aka, Manhattanization of Los Angeles. Another result of densification is the flight of Family Millennials because LA has become a financial disaster zone.
February 27, 2023's CityWatch, L.A.’s Homeless, The Waste Product of Density, discussed the role of monetization in the dehumanization of homeless people to the status of industrial sludge, where the developers’ sole concern was that homelessness have zero cost to them. The city council did not ask what happened to all the evicted tenants, because it knew the answer.
Proof that the City Council Knew that it was Creating A Homeless Crisis
When one reviews the actual data, one sees that by February 2013, the city was rapidly destroying rent controlled unit (RSO units) and not building replacement housing for the poor, but they already had a surplus of high end housing.
The 2010 Census showed that the city’s Smart Planning, i.e., densification, was based on corruption as CityWatch wrote on March 1, 2012 in Hollywood Becomes Fraudywood and as Judge Allan Goodman ruled in January 2014, i.e., the city intentionally used fatally flawed data and wishful thinking to the extent that it subverted the law. By 2010, the relationship between Hollywood’s densification and its decline was undeniable. Hollywood’s population dropped from 213,858 ppl in 1990 to only 198,228 ppl in 2010, which was a loss of 15,630 ppl as densification took hold after 2000. Because the corruptor-in-chief Eric Garcetti was councilmember for Hollywood’s CD 13, the devastation of Manhattanization was most evident in CD 13. By 2010, Garcetti’s CD 13 had lost so many people, that it ceased to be a legal council district and it had to steal sections of LaBonge’s CD 4 and Koreatown. But for the 1925 law requiring 15 council districts, the wiser approach would have been to distribute CD 13 among its contiguous council districts, leaving LA with only fourteen council districts. Such a move would also have significantly dampen the passion for Upzoning, Spot Zoning, and densification in the other districts. But, that did not happen and Los Angeles continued to decline to the point that the city as a whole is losing population, has a huge homeless crisis, and is facing economic ruin, while continuing to construct more density.
If the city council had not already become a crimogenic institution by 2015, The November 17, 2015, Report from the City’s Housing Community Investment Department (HCID) would have shocked the city back to reality. The Report showed that the city had to impose a moratorium on destruction of RSO units. Its replacing poor people’s homes with high end apartments was creating homelessness while building into a gut. When one understands the oblique legalese of the HCID Report, one sees that the professionals knew what was happening and the disasters which were impending.
(1) On page 3, the Report states: “The significant urban renewal taking place in many of the city's traditional lower income and diverse neighborhoods is further exacerbating the high housing costs.” Translation “Destruction of rent controlled housing increases the cost of housing.”
(2) Also on page 3, the report states: “However, revitalization can also have a devastating impact for low-income renters who are least able to withstand increasing housing costs.” Translation. “Constructing new projects raises rents, thereby increasing homelessness.”
(3) Then, the report makes the most important statement: new apartments built in the preceding ten years . . . have a 12 percent vacancy rate; a 5 percent vacancy rate indicates that supply and demand are in balance.” Translation. By 2013, the city already had glut of new housing.
Wall Street Does Not Like To Lose Money
If GM told its bankers that its dealerships were piling up unsold Ford trucks, and GM wanted a loan to double production of trucks, Wall Street would say, “Get lost.” Wall Street is in business to make money and building more of something for which the market is beyond the saturation point will not generate enough profits to repay the loans.
The city council tried to compensate for the lack of developer income by letting CRA (Community Redevelopment Agency) projects off the hook for repaying city loans and by allowing the projects to get the business and sales taxes generated by their projects. In other words, the city took tax revenues which should have gone to fund the LAPD, the LAFP, street repairs, libraries, etc. and gave the money to developers because they could not find enough tenants for their high-end projects.
That plan was a failure for the obvious reason it was based upon the projects having tenants, and the CRA was having trouble finding residential and business tenants. Thus, giving developers the sales taxes generated by non-existent businesses did not help developers pay their mortgages.
Aside: The Fallacy of Supply and Demand
If economists had a Neuralyzer from Men in Black, they could make no better use of it than to wipe the words “Supply and Demand” from the minds of every lay person on the planet. If Supply and Demand had anything to do with housing construction in Los Angeles, developers would have stopped with the densification between 2000 and 2005. As the HCID Report showed, the demand for low end housing was sky high and the demand for the new apartments was in the sub-basement. Yet, the Manhattanization Mania continued with its destruction of RSO units and with the construction into the glut.The Reports’ objective was to find new ways to finance more construction of unwanted high end housing, while ignoring the gathering Homeless Crisis. Of course, they used weasel words to obfuscate their goal. The Report stated its purpose as to “identify potential local permanent funding sources for affordable housing financing.” (HCID Report pp 1-2) Will Sunnyslope Bankruptcy Case Put the Brakes on LA’s Affordable Housing? describes the scam behind such funding Measures as HHH and JJJ. It was to subsidize more high-end units on the ruse of building affordable units.
The bogus nature of the stated purpose of a “permanent funding source” is shown by the fact that the obvious way to protect RSO units was to stop destroying them. With a total moratorium on destruction of RSO units, no new homeless people would have been manufactured. Over time, the system could have re-absorbed most of the homeless back into the housed population. Hence, there would have been no need to find new ways to fund the construction of Affordable Housing. Because the city wanted a “permanent funding source,” however, it clearly anticipated continued destruction of RSO units and more homelessness.
The Report’s Ill-Fated Solution
The Report proposed that all new construction be subject to a new tax to subsidize construction of Affordable Housing. “Affordable Housing Benefit Fee Program . . . a one-time monetary charge levied on new developments to assist the City with financing affordable housing activities.” (HCID Report pp 1-2)
Notice the words “one-time monetary charge” instead of “tax” on construction. In other words, the HCID was suggesting an indirect cost on the disposal of the waste product of densification, i.e. the creation of homeless people. That was contrary to the developers’ desire to monetize that cost at Zero Dollars. However, when one looks at the resulting Affordable Housing Benefit Fee Program’s Oct 6, 2022, Report (AHBF Report), one sees that the tax is not imposed on the destruction of RSO units. Thus, cost to destroy RSO units remained Zero Dollars.
Who ended up paying the lion’s share this new tax? “One or two family dwellings constitute 88% of all projects subject to the Linkage Fee. . . . 7% are multifamily developments.” “Council Districts 5 and 11 paid 52% of the fees.” (Oct 6, 2022 AHBF Report p 4) In other words, homeowners in CD 5 & 11 were paying the linkage tax to subsidize developers of multi-unit projects in CD 13.
Things Are About To Get Much Worse
Anyone who thinks that the new Progressives on the City Council will improve matters do not realize that Progressives are not advocates for the poor, but rather for the developers. Progressives and Developers are the Tweedle Dee and Tweedle Dumber of LA’s decline. The labor unions, who are Councilmember Soto-Martinez’ actual constituency, and the developers have a unity of interest, i.e., to build more. Their new target for densification is Los Angeles’ single family neighborhoods. They operate under the delusion that if multi-unit poverty projects are ensconced in predominately R-1 areas, then Family Millennials will opt for small apartments rather than move to some suburb or exurb in Texas or the Carolinas.
The Result of Staying in Los Angeles
Family Millennials, who remain renters in Los Angeles, will retire with Social Security and Medicare and zero equity. They will have given up between 30% to 50% of their income to Wall Street which not only seriously limits disposable income for the families; needs, but also makes certain the parents have no private pension. Moreover, their post-retirement rent will continue to increase as their income decreases.
Angelenos, who move out of state now, will face retirement with Social Security and Medicare, a portable employment related pension, 100% equity in their home, and significantly more assets. They will not have spent $20,942 per year per student on private high schools. $21K is the average for the state of California. Thus, the average for Los Angeles tuition has to be higher. Many Millennials pay for private school starting with K-8. The cost of schooling is a significant motivation for Millennials to move to areas with higher quality public schools. An LA family with two children will spend $168,000.00 just for private high school ($21K x 8 yrs). If they cannot afford the tuition, they reduce their kids’ chances for admission to a high quality college. If they do pay the high schools’ $168K tuition, the family won’t be able to afford college. UCLA costs $37,448 if the student lives on campus and $29,092 if the student lives at home.
Destruction of Los Angeles For Millennials was Intentional
Just as the city knew that it was manufacturing a homeless crisis to divert billions of dollars to developers, it knows that it is destroying Los Angeles for the Family Millennials. There may be a gigantic crash, but any realignment, if it comes, will be decades too late for Family Millennials.
(Richard Lee Abrams has been an attorney, a Realtor and community relations consultant as well as a CityWatch contributor. You may email him at [email protected]. The opinions expressed by Mr. Abrams are not necessarily those of CityWatchLA.com.)