L.A. City Council Weighs Inclusionary Zoning Alternatives

Eric, you've been the City Council's leader, along with Ed Reyes, on the issue of inclusionary zoning for the entire city. Last month, the CCA, the BIA and other business groups put forward an alternative plan. What's your reaction to their proposals for how best to meet the City's housing demand?

I was very impressed by the work that they did. It was a diverse, thoughtful group that really took on the toughest questions facing this city. Part of the reason this has been such a painful conversation for so many is that this issue really is a prism that refracts most of the major issues in Los Angeles. And within that group of issues, how the city plans for density and growth may be the biggest and most contentious. When it comes to density, we've been great at putting our heads in the sand in Los Angeles and declaring victory. Communities pat themselves on the back when they're able to halt a project coming into their area. Business groups have often been happy just to bypass the city altogether. And housing advocates have gotten used to not thinking very big. But, people don't stop having kids. People don't stop coming to Los Angeles – that's one of the great economic drivers of this city. The two options are not really between no and growth, but between planning for growth and not planning for growth.

So the CCA and BIA plan got to the heart of the matter. Are communities going to accept and plan for growth in their areas? Secondly, the plan also puts some round numbers to what sort of challenge we face. Thirdly, there are still areas where there is disagreement between housing advocates and the business community, but this alternative got beyond the narrowness of just an inclusionary zoning policy. This plan recognizes inclusionary zoning as one of many tools in an overall reform of how we build housing in Los Angeles.

Councilman, the Los Angeles business community is uncomfortable with a mandatory, one-size-fits-all inclusionary zoning ordinance for a city of 466 sq. miles. They, specifically Ray Pearl of the BIA, prefer incentives rather than a mandatory approach. Could you address their concerns?

The discussion around inclusionary housing has sometimes devolved into slogans. And I've never quite understood the "one size fits all" criticism. If we have a zoning topography in Los Angeles that looks like a mountain range, that has peaks and valleys in different places, this merely takes that same mountain range and equally proposes going up a little bit. It doesn't level off those peaks and impose multi-family housing in areas currently zoned for single family. It actually protects that diversity of the zoning topography, in turn preserving the diversity and character of our neighborhoods.

Mandatory versus voluntary is still a sticking point, but in some ways it became the entire debate rather than one piece of it. I'm not trying to downplay the importance of that difference of opinion, but I see this as flipsides of the same coin. This is based upon saying that the market can make this policy work. If you're pushing a voluntary policy, you're suggesting that incentives will make affordable housing pencil out and developers consequently will build more of it. An advocate of a mandatory policy could say the exact same thing. We can use the exact same language, saying that with the proper mechanisms in place, people will build more affordable housing because they know it will pencil out. If that's the case, why not make it something that everybody has to do?

During a recent debate with Ray Pearl of the BIA, Jan Breidenbach of the Southern California Association for Nonprofit Housing, from the audience, questioned the effectiveness of volunteerism when it comes to resolving social issues. She highlighted hunger as one example. There are many people who go and help feed the country on a volunteer basis. But, volunteerism doesn't get you the volume you need and we haven't yet knocked out hunger.

UCLA recently issued a study documenting the housing gap in Los Angeles and California, which noted that the homeownership rate in the state is now below the national rate, 59% versus 68% respectively. How does Los Angeles begin to address this disparity in a way that maintains the livability of our neighborhoods, but also begin to tackle-through regulation-both affordability and access to homeownership? Will your proposal do either?

I made a speech in March in which I mentioned the median home price in Los Angeles County was $374,000. Two weeks ago it was $457,000. We are still in the midst of one of the most devastating economic and social crises this city has ever faced. Addressing this challenge will require sacrifice by everybody in order not to return to the status quo.

To me, being able to buy a house is the most critical aspect of wealth accumulation in Los Angeles. If you look at the wealth gap in this city-which is greater than any other industrialized city outside of South Africa in the world-the 200 wealthiest people have the wealth of the two million poorest in the city. We need to look at this always as a ladder to homeownership. Even when we get somebody into affordable rental units, we should then start looking at in-between steps to move them towards home ownership. One of the criticisms that some people have had of the homeownership aspects of the inclusionary housing proposal is that the people who are buying those below-market, for-sale units are not able to claim all of the appreciation that they would in the open market place. That's a faulty criticism to have, because those people wouldn't be anywhere close to the homeownership market without something like this. Given the option between either throwing away their rent for ten years and never getting any of that money back, versus getting some of the appreciation, even if not all of the market appreciation-one is clearly an improvement over the other. It puts that family on the road to homeownership, where they can save equity and become financially literate.

Lastly, I'm working very closely with the California Community Foundation and the Fannie Mae foundation on a "homes in trust" idea. We are already implementing this with Concerned Citizens of South Central Los Angeles, where we are going to land bank, either with nonprofits or as a city, land. And then, we will build units that are for-sale, allowing those buyers to accumulate equity on the homes, become financially literate, and then sell off the structure to somebody else who needs an affordable home. It's really the land speculation that drives up homeownership rates and costs throughout the city. So often we will build nice, for-sale, affordable units. But as soon as they are sold off, they become as much a part of the problem as anything else in the neighborhood. They're the nicest houses, people speculate on them, they go way up, and we find ourselves in this vicious cycle.

Some have commented that the City's "$100 Million Housing Trust Fund" has been used by advocates to answer every question about how the city is addressing the challenges of housing in Los Angeles. But few have been able to clearly define what the city's Housing Trust Fund actually is doing and is designed to do. In plain language, describe what the Housing Trust Fund is funding.

Well, it shouldn't be used to answer every question, because we're doing a lot more to address our housing needs beyond the Housing Trust Fund. But, it's probably the most powerful tool to emerge in some time and it's the largest housing trust fund in the country, per capita. We have used the trust fund basically to invest city money in affordable housing-to help developers bridge the gap between the cost of building affordable housing right now and the money that they had available. We have used every dollar in there and leveraged it five or six fold. The bulk of its being used right now for new affordable rental housing construction but we anticipate rolling out the homeownership component of the program in the very near future.

Here is an illustration of the power of the fund. Proposition 46, the statewide housing bond, was approved and we got over 35% of those competitive state dollar funds in the first two rounds, even though we are only 10% of the state's population. Because we put this Housing Trust Fund in order, we will take $100 million and leverage that for the city of Los Angeles to build about $600 million worth of affordable housing. And last year, it helped us for the first time almost meet our goal in the housing element of our general plan of building the amount of housing we need in this city, and the percentage that should be affordable housing. To me that's a significant accomplishment. But, because we fell behind for so many years, even if we just meet our goals, we'll still be behind the curve in fixing this problem.

Let me turn to the role of Los Angeles' neighborhood councils and the development by the Council and Mayor of a citywide housing policy. What is the ideal role for neighborhood councils in designing and implementing the City's housing policy?

There are three legs to this political stool for housing policy around the inclusionary housing discussion: the business community, the advocacy community, and the neighborhoods. I've seen a remarkable conversation emerge among all three-neighborhoods are learning about pro formas and what it takes to build housing, advocates are doing the same, and the business community is understanding the need for affordable housing and how to preserve neighborhood character. There's no question this is the most complex policy discussion happening in Los Angeles right now. We could spend two or three months in neighborhood meetings and not get it all. I've seen neighborhood councils, like the Silver Lake Neighborhood Council, and actually put forward a detailed, complex plan that deals with embracing inclusionary zoning while still preserving their neighborhood character. And they are going to be a critical part of the solution in any policy direction that we follow.

If any two of those three factions gang up on each other, they can defeat the one. If the advocates and the business community come together, they can probably push something through. The neighborhoods can gang up with the business community and probably kill any inclusionary zoning policy all together. However, sacrifice will be required from all involved if a greater good is to be achieved-a more livable and affordable city that enlivens neighborhoods and attracts and retains business.

Let's close with your guesstimate of the timeline you believe is most likely for a decision by the Council on inclusionary zoning.

I'm very optimistic that we can reach agreement on a policy of some sort, but there are a number of conversations that have to occur. Business needs to sit down face-to-face with housing advocates, and each one of them has to sit down face-to-face with our neighborhoods. And based on the conversations I'm having with Ed Reyes and some of my other colleagues, I would expect something to be put back on the table in September or early October. I hope that we would either vote on that proposal in late fall. We may decide that the best direction is to hold off for a bit on an inclusionary zoning policy, or to try a voluntary policy for one or two years. But, if we're not meeting our goals within a specified time frame, we make again look at a mandatory policy.

We are also taking a hard look at a housing bond. If it passes, we may hold off on inclusionary zoning and see how that infusion of funds helps us get closer to our goals. So, there is more than one way to reach our goal. And I think the housing advocates and the business community are not fixated on inclusionary zoning as the only way of getting there. But, if nothing else works, it is one of the few tools remaining. So, I think that if we can't come to an agreement on a different direction by mid-October, we'll probably be ready for a vote on some sort of inclusionary zoning policy by the beginning of November.

Do you have the votes?

Today, I think there are six-to-ten votes. There are six for sure, and then four people have been extremely thoughtful on the subject. And, the Mayor is keeping an open mind with regard to inclusionary. We have come a long way in the last year on this issue and based on all of my discussions with my colleagues, the housing advocates, the business community, and our neighborhoods, I feel we're in a place where the various parties are not very far apart.