LAHD’s Gary Squier: A Candid Reality Check

As General Manager of the Los Angeles Housing Department (LAHD), give us a perspective on the changes at HUD, and what they mean for housing production in Los Angeles.

Sec. Cisneros was confronted by the White House with the very real potential of dismantling HUD, and he responded with a substantial reform in the way HUD conducts business, a reinvention blueprint - New Relations for the Year 2000 - which takes approximately 140 programs and compresses them into three areas: the privatization of public housing; the consolidation of housing programs into block grants either to the states or localities; and the compression of job training and community development programs into one community development block grant.

If the blueprint becomes a reality it will then be overlaid onto the appropriations process, potentially resulting in 20 to 30 percent in funding cuts. For the City of Los Angeles, which has a number of constituents representing different needs, we'll have increased competition for a smaller pot of funds. Instead of funding different programs such as senior housing or housing for persons with AIDS, all of the funds will come out of a single block grant. Thus, the competition will be extensive and the decision-making will be localized. 

The two fundamental housing impacts are the privatization of Los Angeles' public housing stock, approximately 8,500 units for which residents will receive vouchers for three or four years and then will be on their own, and increasing competition for a smaller pot of housing money. 

In response, we are going to have to reevaluate our housing production priority and look anew at everything LAHD is doing. 

Elaborate on what these new priorities might be, given the available funding sources, and what would be an ideal project for LAHD?

Irrespective of the changes at HUD, my own view of housing priorities is changing. Our recently released 1994 Housing Study points out that the City should be moving from stimulating housing production to match population growth, to addressing our current situation in which we are losing stock to deterioration and abandonment, resulting in neighborhood deterioration. The current challenge is to maintain our housing stock. From my perspective, the ideal project is one that intervenes in the process of neighborhood deterioration and involves a rehabilitation or street revitalization, as opposed to new construction. 

What is your prognosis for LAHD's 1995-1996 funding levels? 

Our regular program budget for 1994 was approximately $98 million dollars, including a one­time $30 million funding advance from the federal government. Our standard operating budget is about $60 million for capital programs and that's a healthy resource with which to address our housing needs. If those funds are cut by 30 percent, we are down to $40 million. If there are other legitimate and competing demands for those funds, it's likely to diminish resources even further. 

In the worst case scenario, the city will have $40 million for capital housing programs. While there is usually a two-year lag time from when Congress makes decisions to funds being allocated, the House Appropriations Committee is threatening a 25 percent rescission of 1995 funds. In summary, there will continue to be resources to address our housing problems, but they are not sufficient and they are not going to be as great as they have been in the past.

Regarding local reforms under Mayor Riordan related to the consolidation of the City's economic development and housing functions, what is the status of the consolidation effort and will there be more or less housing dollars after the consolidation? 

I don't think additional money will be available after the consolidation. Even if we were looking at status quo in Washington, there probably would not be more dollars available by virtue of consolidation. I think there could be more production with our current dollars and I think that is the Mayor's perspective. How can we be more efficient with the resources we have? 

We've responded by expanding our activities from very-low income housing to include home ownership housing, mortgage revenue bonds, tax-exempt financing. These programs don't cost much money but help the city to stimulate private investment. We have negotiated deals with Fannie Mae to bring in additional resources to invest in the city — $3.3 billion in mortgage funds. It's not all new dollars, but it's a substantial investment.

If we approach the problem intelligently, I think we can do more with less - and we have heard that message.

What is the status of the City Council's consolidation discussion? 

An ordinance is currently pending before City Council committees. We've been so busy working on earthquake projects that we really haven't had much time to focus on the consolidation proposals. 

Shifting the focus, it has been over one year since the Northridge Earthquake. How would you gauge LAHD's response? 

I'm very proud of the LAHD staff. As a department, we've focused our efforts on immediate rehousing issues, evaluation of our housing gaps, and working to fill those gaps. Working with HUD and the Mayor's office, we've succeeded in securing over $315 million to finance the reconstruction of damaged buildings that can't be financed by the Small Business Administration (SBA). We have over 20,000 units in the pipeline that have been rejected by the SBA and referred to LAHD. As of the one year anniversary of the earthquake, we've financed 5,383 units. Internally, we have targeted for financing between 800 and 1,000 units per month.

We’ve put together a program that works in the marketplace, is not overly generous and generates some affordable housing. The City will be better off for LAHD’s efforts. It’s not over, we’ve processed 5,000 units and we have at least 15,000 to go.

How does the City’s failure to obtain an empowerment zone designation bear upon LAHD’s efforts?

Clearly, we were very disappointed. 

We saw the empowerment zone as supporting and accelerating our efforts in South Central and East Los Angeles, particularly with regard to home ownership. We view single-family neighborhoods dominated by absentee-ownership as areas which need much work, but where we can be very effective in bringing tougher multiple resources such as Fannie Mae, public safety and public sector investment. We felt that the empowerment zone was an opportunity to leverage our activities. 

Since direct allocation of funds to LAHD was not a major part of the application, we were not impacted financially. But it could have been a real catalyst.

The Rental Housing Study states that the City of Los Angeles can halt the decline of at-risk neighborhoods through a combination of incentives – new construction, community organization, code enforcement, home ownership and private investment. How successful has the department been in organizing itself to provide such incentives? How responsive has the City Council been in providing the resources?

Presently, there are eight or nine motions before City Council attacking the problem from several different directions - drug sales in apartment buildings, building abandonment, nuisance properties, neighborhood deterioration to name a few. Virtually every council member is feeling the impact of neighborhood deterioration. From the perspective of City Council and the Mayor's Office, this is an issue on which we need to focus. 

The next question is mobilizing the various players in the city - LAHD, City Attorney's Office, FALCON, LAPD, and Building & Safety. I think there is a good chance of addressing this problem, it's just a question of organization. 

However, the major caveat in this scenario is federal funding. You can't revitalize a neighborhood simply through code enforcement or getting rid of drugs and gangs; there needs to be some sort of public and private investment. If we have zero dollars for public investment it will be very tough. 

Gary, are these really new problems? What are the mistakes we shouldn't make again if we wish to avoid a South Bronx? 

It's not the first time we've seen this, but it is happening in more and more neighborhoods in Los Angeles. The older East Coast cities experienced an outflow of population, causing a drop­off in the demand for housing, causing further housing abandonment. In Los Angeles, we have a fairly stable population base, so it is a different situation. 

I think we have an easier problem to solve. We are experiencing a decline in livability; so when you fix-up a neighborhood, I think you can bring private investment back into an area. 

Ona related subject, the affordable housing incentives ordinance has been under study for an unusually long time. Where is it in the process and will we ever see it? 

The program ran into resistance at the City Council over density and height. We feel that the primary benefit of the program is parking reductions as opposed to density bonuses. The ordinance provided a parking reduction for affordable units and we have demonstrated through several studies that affordable housing projects have a lesser demand for parking than the market rate projects. 

We were rebuffed and we will be coming back to City Council's Planning and Land Use Management Committee in March with a scaled down yet still effective program. 

The current market is different than the market we were in three or four years ago. When land costs are very high it's a great benefit to increase density and thereby distribute the land costs over more units. As land costs drop, the benefits of density diminish, but in all cases the benefits of reduced parking facilitate the development of affordable housing. 

If we adopt an ordinance which preserves the reduced parking requirements, I think we will have accomplished a lot. 

LAHD was created to be a strong voice for affordable housing in the City's competitive policy-making process. How has the role evolved, especially in light of Los Angeles' changing economy? 

When LAHD was created, affordable housing was probably one of the highest priorities in the City. The issue of homelessness was relatively new, at least in its impact on the city as a whole. There was consensus that housing was critically important to the health of the city. There was also a recognition that the way the City addressed its housing needs was fractionated and not particularly effective. 

Times have changed both politically and economically. The recession has created the new priority of economic recovery. Thus, housing is competing with economic development in the larger competition for resources. In the go-go days of the '80s, the market took care of economic development, but now there is a perceived need for greater public intervention. 

In terms of LAHD as a voice in Los Angeles, we pride ourselves in maintaining a clear picture of Los Angeles' housing market and neighborhoods. When we see changes, we can alert the City's leaders and policy makers. We've become increasingly effective responding to crises and needs. We're also pretty good at finding additional financial resources. 

How should LAHD be evaluated by the City Council and the public? 

On a simple level: How many loans are we making and how effective are those loans? And, what is the related administrative cost? On the other hand, we have a responsibility for understanding the housing market and trying to impact the market beyond public sector investment. It's hard to measure that impact. 

We also have a regulatory impact with the rent stabilization ordinance. I think we should be evaluated on the basis of whether or not the City of Los Angeles understands its housing market and is effectively grappling with problems in the market. 

Lastly, in the past decade, a sizable number of non-profit housing developers have incorporated in the City. From your vantage point, what is the future viability of the non­profit developers in Los Angeles? 

There has been a large growth of non-profit developers in the city; and they have moved into an inner-city niche that private sector investors have left. If you are a private developer, it is much easier to make a living in the Inland Empire. The future of non-profit housing and housing development in general is uncertain. 

In my opinion, the housing market, if unassisted, will not recover for several years. Non-profits are dependent upon the continued availability of federal, state and local funding sources. The extent to which those resources start to disappear brings some uncertainly to the non­profit development world. I think non-profit developers need to face their reality and formulate responses to it.

In my view, there exists an unfilled niche for non-profits. That is in the area of buildings being abandoned and foreclosed; the bank owned real estate market is going to increase substantially. Many buildings are in areas where private sector operators are not particularly interested, and those who do move in might not be the best actors for the city. I see that as an area of opportunity for non-profits which might offset the loss of federal resources.