State and City Housing Bonds Will Mitigate Workforce Housing Crisis

The city of LA. has placed a $1 billion affordable housing bond, Proposition H, on the November ballot. A similar measure, Prop. 1C, is on the state ballot. What need explains the placement of both a state and local affordable housing bond on our November ballots?

Henry Cisneros: No place in the country has a more severe affordability challenge for housing-both rental and ownership-than California, and Los Angeles is certainly part of that syndrome. Among the most expensive markets in the United States -and the most difficult for working families and individuals to find housing-are San Francisco, San Jose and other parts of the Silicon Valley, various places in Southern California, and, specifically, Los Angeles.

For the last few years, Los Angeles has experienced homelessness, overcrowding, sub-standard conditions, and the out-migration of middle class and younger families who are not able to afford homes in the city proper.

What has become clear is that there needs to be a public role in producing both rental and for-sale housing, as well as other forms of housing such as homeless shelters and supportive housing. The city can play an important role in land assembly, identification of sites, subsidizing entry into the units, production of the units, and otherwise breaking this cycle of unaffordability that will be very grave for Los Angeles' job prospects and economic development.

Having been across the country over the last number of years and studied the homeless problem-I currently serve on the board of the National Alliance to End Homelessness -I think it's fair to say that the Los Angeles homeless problem is the worst of any major city in America. The sort of encampments, health issues, crime, and drugs in downtown Los Angeles at night-Broadway, Spring Street-are unacceptable in a major American city. It cries for a public response.

There aren't enough funds today without this bond to undertake the comprehensive approach to homelessness that Los Angeles needs. San Francisco and New York used to have reputations for the worst homeless problems, but they both have intervened with funds and policies, and they have made substantial strides.

If the voters approve the bonds, how will the proceeds be invested?

AK: At least 35 percent of Prop. H will go for rental housing, with a special set-aside for 60 to 80 percent of median income. That is not available from any other source. $250 million is set aside for first-time homeownership, and $250 million or more is for permanent housing for the formerly homeless. There's also a cap of 5 percent on a fee for tracking, monitoring, and all the other administration necessary to make it all work. And the remainder will be flexible and can go for whatever the need is at any time.

How could this city money be leveraged and magnified by the state bond?

HC: The funds will be available for a combination of strategies. Land assembly is critical for a city like Los Angeles, which is one of the more dense cities. Los Angeles has a reputation for being the result of the automobile and sprawl, but in fact many of its neighborhoods are very dense. So identifying sites for housing has become one of the great challenges.

The city can become involved with land banks, land around transit stations, and writing down the cost so that units can be affordable rentals. Programs on the production side can make it possible for developers to build affordable units, and others can help on the consumer side with mortgage assistance, down payment assistance, and qualification of families who otherwise wouldn't qualify.

The public sector can do a whole range of things that involve leveraging private capital, pension capital, and bank resources with CRA obligations. My estimate is that there ought to be a 4:1 or a 5:1 leveraging of that billion dollars so that we end up with $4 or 5 billion of housing value out of this public approval of $1 billion.

As you both know, TPR has always favored mixed- and joint-use developments in urban neighborhoods. Secretary Cisneros, you advocated HOPE IV housing in Washington, but the Bush administration has not followed your lead. How are the prospects for the integration of this housing into the fabric of the neighborhoods?

AK: There's a great opportunity here because this money can be used for mixed-use and mixed-income developments and matched with public and private funds, and with both nonprofit and for-profit developers.

HC: A strong population and an income mix are crucial for the future of Los Angeles. It is possible to recycle entire neighborhoods that are vestiges of the old economy: industrial sites, transportation sites, and other places that appear to be blight but have immense prospects for recycling as mixed-income neighborhoods.

As Alan has said, these bonds can allow builders to cross-subsidize even within private financing so that that there is a percentage of affordable units at various levels below median income in communities that also have some higher priced housing. That's happening in cities across the country, and it can happen in Los Angeles.

Add to that the demand for housing in Downtown and new commitments to high-rises, with mixed income and rental and ownership in association with the large-scale projects such as Grand Avenue, the Staples area, and Union Station. Add to that the commitment to renovation in older neighborhoods like South Central, East L.A., and Pico-Union, and there's a real eclectic, powerful mix.

One of the most promising prospects is building around transit stations the way San Francisco and Oakland have done so well around the BART stations-the Fruitvale project in Oakland is a perfect example of mixed income and mixed use around transit stations. I think Los Angeles can redefine its future by committing itself to recycling older neighborhoods that are now ready to house the next middle class.

Allan, critics have repeatedly noted the absence of a planning ethic in Los Angeles. State and city regulations have made it difficult to achieve even the vision that Secretary Cisneros has just articulated. What has to change to begin revitalizing inner city and older suburban neighborhoods?

AK: The bond is part of a three-pronged strategy. The bond is the financing part. The second part is regulatory reform, and I know TPR has had a lot of interviews about regulatory reform.

The third part is to look at planning in Los Angeles -the general plan, which hasn't been changed in years, and all the plan revisions that are necessary to allow people to build needed housing in the areas that Henry just talked about. For example, the SCAG Compass report showed that there are opportunities on older commercial/industrial properties, and that we can accommodate all of the growth on 2 percent of the available property.

HC: The City Council, the mayor, and the Planning Commission are more aware of the role that housing can play in the larger planning of Los Angeles than ever before, in part because the affordability crisis now represents a constituency.

People are crying out for the housing, and their personal circumstances can be seen by any causal observer. People are waiting at bus stations late into the evening to travel to the San Gabriel Valley; they are living in overcrowded conditions in Pico-Union; they have no hope of ever owning in Los Angeles or their children have no hope of owning.

This constituency has eluded public officials until now. Other voices -NIMBY voices, environmental obstacles, and others-could not previously be overcome. But today, those in need of housing are a force that public officials have to take into account. And there's almost a mathematical predictability about affordable housing: unless a city is able to produce at affordable prices and unless a city is able to offer subsidies on the buyer's side, affordability cannot be achieved.

Let's turn to the campaign in support of the affordable housing bonds. How large is the coalition that has formed in support of these local and state efforts?

AK: Many nonprofit organizations, both in the housing business and otherwise are involved. Religious institutions are involved, as well as for-profit parties who can't keep people in their jobs in Los Angeles, and we all know that homes are where jobs go to spend the night.

Labor is involved as well, and of course as Henry already mentioned, the mayor, Council President Eric Garcetti, and the City Council, have all supported unanimous votes on at least three occasions to put this on the ballot. It's a broad coalition that recognizes that something has to be done, and I'm sure if we can educate the voters about the benefits of this bond, it will pass.

HC: People from a range of incomes are supporting this. There are people who know that the homeless problem, for example, is serious and understand that a great city can't function with encampments in its downtown streets. There are people who fear that they are on the edge of homelessness; one missed paycheck or rent payment is enough to force them off the edge.

People in neighborhoods like the Westside and the Valley recognize the hardships for their employees. We don't want Los Angeles to get to the point of cities such as Seattle, where businesspeople are decentralizing operations-and costing the city thousands of jobs-because those businesses cannot retain the workforce with those housing prices. Los Angeles is not at that point today, but it's getting there, and it's important that business leaders understand their stake in this.

Lastly, Secretary Cisneros, with strong demand for housing in California, why has housing dropped off the federal government's agenda?

HC: It has dropped off the national agenda because the administration seeks lower government involvement in domestic issues and has found itself, by virtue of expenditures on the war, by tax cuts, and the more uneven economy, in a fiscal bind and decided to cut critical housing programs. I think it's a mistake, and cities across the country are feeling the results.

But because we know that it will be years before revenues are back at the level where the federal government can make a serious commitment to domestic programs-which will also require new politics and an administration that thinks about these things in new ways-cities have to be masters of their own destinies.

Local jurisdictions must recognize and act on this, because funds for housing aren't coming from anyone else. And cities will pay the price at the local level, in homelessness, high prices, job crises, and outmigration of families.

Cities have to take responsibility and recognize that if we don't do it, no one else will.