Marquez Pursues Ambitious Agenda at L.A. Housing Dept.

When you assumed the leadership of LAHD in 2004, you immediately embarked on a "comprehensive assessment of the department." What did you find?

That's true, we launched in right away. The first thing I asked was whether the Housing Department was working as part of the housing market-as a public sector entrepreneur – or just reacting to the market. Were we leveraging dollars and building momentum through our development projects? Were we adequately assessing community needs and are we assessing our programs to best meet those needs? Are we providing excellent customer service? And I was also very interested in the balance between the production of affordable rentals and the creation of new home ownership opportunities.

I would say that at the base of those questions is an acknowledgement that we cannot simply build our way out of the housing crisis, so in order to meet that head-on, we were going to have to create synergies between housing development and preservation programs. So that's why we're working aggressively to increase real rental and home ownership opportunities while at the same time working to preserve, through diligent code enforcement and targeted rehab programs, our existing housing stock.

We found that many staff members are diligent and deeply committed to the mission of the housing department, but the goals and program objectives were not always clearly defined. It was also clear to me that the Housing Department had not done a very good job of speaking to the public or to elected officials about what they actually did that was working well. People didn't know about a lot of things. Also, we felt that there was no real interdepartmental coordination, which resulted in missed opportunities and a lot of duplicated effort. Also, the lack of a system of data integration undermined our effectiveness.

What initiatives and conclusions resulted from these meetings?

We brought in a lot of our customers, and as we were looking at the production and rehabilitation programs, for instance, we conducted 15 one-hour meetings to get their views. Through that, we have ended up redesigning every single rehab program and home ownership program and created a couple of new rehab programs. We also went into the Affordable Housing Trust Fund and tightened up the underwriting criteria, made sure that they were clearly defined and transparent, published business policies and stuck to them.

We initiated something called "Project Clean House," which we applied both to ourselves and to folks with whom we do business. We looked at the most under-performing loans and went through them and brought everybody in to assess the problems. For many, this discussion moved them back on the road to construction. And for others it became clear to them and us that they were just not going to be able to move forward. So we were able to get loans repaid and de-obligate other dollars, and as a result, we recovered $20 million, which we then used to help launch the Mayor's permanent supportive housing program.

We also applied that to ourselves, so we did a real scrubbing of our different accounts, and recently that led to moving dollars into the Affordable Housing Trust Fund, which are being committed right now. On the side of Rent and Code Enforcement, 5 percent of the really bad cases take up most of our time, so we created a compliance division that did not exist before. The really tough cases now go there, rather than clog the system of the cases that are moving.

Let's take a half-step back. When you say you met with your clients, share who this client list includes.

They were folks like the Enterprise Foundation, SCANPH, Bank of America, Wells Fargo, Fannie Mae, some of our home ownership education providers, developers, lawyers – pretty much everybody.

One of LAHD's recent initiatives has been to identify under-used city land that might support more housing. Tell us about that initiative, and about what these parcels look like. What neighborhoods are they in? Who will develop them?

We started an initiative called Housing Development Central when I arrived. It's the first time that the Housing Department has had a unit that focuses on land development and analysis. So in addition to having folks here who understand pro formas and do finance, we also were able to have the City Council and mayor agree to give us a couple planning positions, so we could work together to analyze the possibilities for different parcels.

We have reviewed more than 600 surplus city-owned sites, and we have reviewed more than 250 tax-defaulted sites. For most of those sites, we find that they are slivers – some little piece of land next to someone's home, or a very small right of way, or a very steep hillside – nothing really build-able. But of all of that, we did set aside about 70 parcels that are now being considered for development. Let me give you an example. We found a site of over an acre in the Valley that was landlocked but right near an entrance, and we've ended up working that through and got approval from the city, and we bought some adjacent property so that we can now create an entrance and make that land valuable. In the end it will be nearly two acres, and we're going to work to make it appropriate for townhouse development. We will soon put that out in an RFP, and it will be available to developers for a home ownership project.

You are aware, as is everyone else in metro L.A., of dramatically rising housing prices and the concomittant lack of workforce housing in the city. What's the policy consequence of such challenges and what can the Housing Department do to mitigate some of the demand for workforce housing?

There's no question that we're the biggest city in the state and are facing the biggest challenges. We're a perfect storm in many ways. Here we are with 469 square miles and more residents than any other city in the state, and our median incomes are also lower.

We established the first moderate-income homebuyer programs that the city has ever had, being the first city in the state to define moderate-income homebuyers as folks who are up to 150 percent of area median income – which, for a family of four in L.A. is around $100,000. And we're attempting to target those areas in the city where there are townhomes, condos and homes available at prices a moderate-income family could afford.

And instead of just blanketing the city, we really looked at all those listings and then started contacting all of the realtors and banks that are lending in those neighborhoods to make them aware of our moderate-income program and also to reach out to developers that are building condos and townhomes to see if they would be willing to do a forward commitment program, in which we would essentially provide them with a type of guarantee that would eventually translate into soft seconds for families so that we're part of the process from the start.

Just two weeks ago the City Council agreed to lift the cap on those programs. We were capped at $2 million per commitment. We're finding that developments are getting larger, and developers want to set aside more units per development for the program, so we have eliminated the cap.

In addition, as the city moves forward on a smart growth plan and working more in transit corridors, we're going to have to work all together in the city to define those corridors, to define the rail lines, to look at what neighborhoods we're going to attempt to reinvigorate. For instance, the mayor has a huge interest in South L.A.

That means that the Housing Department, as well as other agencies that do housing, such as the CRA and Housing Authority, must work on a comprehensive strategy for development and acquisition so that we're moving away from passive development to directed development, with of course the right mix of the government being a catalytic force and then knowing when to step aside.

In that vein, what's the role of mezzanine financing entities? TPR recently interviewed Phoenix Realty, which has a $100 million L.A. fund for financing workforce housing. How do they, and others like them, collaborate with the city to accomplish the ambitious public agenda that you are advancing?

There are many opportunities for those types of investors, and I would include pension funds in that. Their need for certain levels of return are such that investing directly in affordable housing won't work for them. However, as we're defining these other areas for development, there is a huge need for mixed-use and mixed-income housing, and once the city makes a few decisions, I see the opportunities coming where we will start to work with others.

There are other entities in this city – including national organizations, such as Century Housing, LISC, the Enterprise Foundation, or Fannie Mae – that have also all targeted specific neighborhoods. We have begun discussions on how and where we're going to make an impact and how we're going to identify neighborhoods. And when we do that, pension funds and mezzanine financiers will have the opportunity to work on those mixed-use projects and perhaps make things available such as air rights to the city for affordable housing.

You mention some decisions the city must make. Elaborate on what must be decided to realize the mayor's and the department's goals?

Priorities have to be agreed to, and that's already in progress. The mayor's office is leading the way for agencies that perhaps have not had the best coordination to understand what all of our assets are, what our opportunities are, and what the restrictions on funding are. The mayor's office is helping us work together to understand how we can create scale and make an impact if we focus together on some priority areas. There's no question that the issue of smart growth and transit oriented development – I don't mean just rail; I also mean key arteries – are being selected and are going to be worked on by the mayor's office and the City Council to finally develop a broader housing policy.

Mayor Villaraigosa has selected Gail Goldberg as the new city planning director and Gloria Jeff as the new transportation director. What's the prospect of a GM cabinet coming together to work collaboratively to achieve broader housing policy for L.A.?

I've already had a long meeting with Gail Goldberg, and I am enormously excited and optimistic about her arrival and her commitment to making the city a much better place. She and I share similar views and values, and we share the mayor's values. And I am thrilled to see the selection of the new director of transportation. I know we will be working side-by-side in a collegial way. We all understand that our issues overlap and that we will bump into one another, and that's good. If we don't bump into one another, we're not doing our jobs properly, because all of these issues overlap.

In its interview of Steve Soboroff of Playa Vista in February, TPR asked whether it would be appropriate for Playa Vista to move away from its commercial/office plans and substitute more housing given the jobs-housing imbalance on the Westside, the mayor's desire for elegant density, and Councilman Rosendahl's desire for development along Jefferson Blvd. He said he'd only do so if 1) he was specifically asked by the city, and 2) if there was a process to do so. Do such requests ever happen? Does the city reconsider the entitlements for large-scale projects in light of changing demographics and demands?

I believe that they do. They do because business respects leadership, and I think we have a strong leader in this city. I see no reason why they wouldn't reconsider it given different needs. What he's saying is that there has to be a process so that everyone's needs are heard.

Harvard University recently awarded LAHD with an "Innovation in Government" award for its Systematic Code Enforcement Program, a five-year inspection of every rental unit in the city. What did that effort produce, and what was so innovative about it?

The Code Enforcement Program is the only systematic code enforcement program in the country. We're the only city that inspects every single multifamily rental unit in its boundaries. That means not just the external parts of the buildings, but every unit. What is innovative about it is that it has minimized the problem of a complaint-driven system. With a complaint-driven system, you are forcing a confrontation between landlords and tenants, and it leaves room for fear, whether it is real or imagined, and it fosters argument. It also means that you address only a very small percentage-people actually calling to complain. We still have a complaint program; we receive about 15,000 complaints per year, and we inspect all of them. But also, we're moving to a four-year program, and we'll be inspecting about 200,000 units per year. So you see the difference – 200,000 well-scheduled and well-planned with outreach and real education, versus 15,000.

It has produced in the first five-year cycle approximately 1.6 million citations for which the LAHD was able to gain 99 percent compliance on its own. So only 1 percent of cases were sent to the City Attorney for criminal prosecution. We had cost estimators take a look, and they concluded that it has amounted to about $1.5 billion of private re-investment in the city's housing stock. All this was achieved without government funding, because it is a fee-based program. The tenants pay for the code inspection in the city of L.A. As a result of that we have what you could call a mandatory-minimum maintenance program.

We also have reached out both to the tenant community and to the landlord community, and we work very well with both. When this program was initiated by the City Council, the landlord association sued the city and eventually lost in the state Supreme Court. Now we work very well together, and we actually do apartment management programs together and we team-teach it.

One of the most pleasant things about this last year was when Harvard sent a team out to evaluate our program once it had become a finalist for the award, they met with everyone. When the team left the city, one of the landlords asked, "When do we find out if we won?" And I can tell you that we have come a long way, because now block-by-block everyone in the neighborhoods can see the difference.

From your knowledge of L.A.'s housing markets, what's the status and priority of green building in the Housing Department and City Hall?

It is a very important value, and we're starting to work on a citywide housing policy, and the issue of green building will be included. So whether it's looking at how we help developers move to different materials, whether it's making sure that we're helping the environment with the appropriate level of landscaping, we're going to get there.

But it is difficult, because often those who build housing-particularly affordable housing-are not the same people that end up managing it, and when you are first building you are looking at a certain level of cost, and when you both build and manage, you look at cost differently. We're going to work with them so that we're thinking about the long-term issues and the environment, even if they are not going to manage the building in the long term.

Inclusionary zoning continues to be discussed as a potential solution to the affordable housing crisis. Does this proffered solution have merit? What are the politics involved when considering it?

Right now, everyone is focused on making sure that any state infrastructure bond includes money for housing. Once we see how that plays out, it will be time to take a look at these other strategies. Inclusionary zoning could play an important role, but I am a pragmatic person, and I would say that anything we do in that regard has to really build the housing. So if we're going to go there, that's fine as long as it actually works as an incentive to build housing and is not slowing down the production of the housing we need.

Let's close with reaction to the mayor's plans to advocate a $1 billion affordable housing bond. Where does idea that stand; what should that bond include; and how would LAHD spend it?

I'd have to say that same thing that I just said. Right now we're focused on the state efforts and trying to ensure that as much money for housing is included in that state bond. Once that is done, it will then be appropriate to see what gaps we have and how we would approach them. But no question that we'll look to leverage local with state money.