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The Way Los Angeles Is Trying to Solve Homelessness Is ‘Absolutely Insane’

Details: Category: City News; Published on Saturday, 29 October 2022 16:21; Written by EZRA KLEIN NEW YORK TIMES

OPINION PIECE PUBLISHED IN THE NY TIMES OCT. 23

EZRA KLEIN

In 2016 the people of Los Angeles overwhelmingly passed Proposition HHH, a ballot measure that raised $1.2 billion through a higher property tax to create 10,000 new apartments for the homeless. “The voters of Los Angeles have radically reshaped our future,” Mayor Eric Garcetti said, “giving us a mandate to end street homelessness over the next decade.”

Six years later, neither the mandate nor the money has proved to be nearly enough. In 2016, Los Angeles had about 28,000 homeless residents, of whom around 21,000 were unsheltered (that is, living on the street). The current count is closer to 42,000 homeless residents, with 28,000 unsheltered. Prop HHH has built units, but slowly, and at eye-popping cost. The city says that 3,357 units have been built, and the most recent audit found the average cost was $596,846 for units under construction — more than the median sale price for a home in Denver. Some units under construction have cost more than $700,000 to build.

Karen Bass and Rick Caruso, the candidates vying to replace Garcetti, don’t tend to agree on much, but they agree that HHH hasn’t lived up to its promise. “To spend that kind of money per unit makes no basic common sense if you know anything about building,” Caruso told me.

Bass wasn’t much kinder. “If I’m elected as mayor, I want to go in and deal with homelessness like it’s a hurricane,” she said. “I want to say: In ordinary times we have all these requirements, but this is a hurricane — we need to get people off the streets immediately. A lot of the rules and regulations that are there in ordinary times need to be relaxed.”

But it’s not as if Garcetti wanted his signature effort to go down as an object lesson in government fecklessness. Listen to him now and there’s an unmistakable air of fatalism, of fights lost and limits learned. “Most of the causes into homelessness and most of the solutions out of homelessness are beyond the jurisdiction of the mayor,” he told KCRW, a local radio station.

That kind of quote is catnip to an outsider candidate like Caruso. “We have all these elected officials who will give you every excuse in the world why things can’t get done,” he told me. “That to me is a real attitude problem. It wouldn’t last very long in my company.” But finding a solution requires clarity on what the problem is. And the problem here is wicked.

Yasmin Tong is the founder of CTY Housing, a consultancy on affordable housing projects. She’s participated in more than $1 billion worth of affordable housing development. In 2015, she won the Southern California Association of Nonprofit Housing’s Unsung Hero Award. Here, she explained, is how affordable housing gets built, when everything goes well.

First, it takes a year to find a place to build. You need land that’s available. Given the population you’re housing, you need proximity to transit and groceries and pharmacies. You need to have reason to believe you can get the support of the community or overcome its opposition. You need to be able to outbid other developers who can pay more or who can line up their financing faster.

If you find that land, you move on to step two: Get the entitlements (local approval) and permits. That, too, takes a year or so, if all goes well. But often all does not go well. The neighbors fight you, and frequently they sue you. In Venice — home of the legendary boardwalk — the Venice Dell Community project is trying to turn a parking lot owned by the city into a 140-unit building for homeless residents, low-income artists and families, all of it designed by a star architect. The development is being fought and even sued by a collection of local homeowners who charge, among other things, that “Venice desperately needs this parcel to address our chronic parking shortage,” that the new housing would be “an eyesore completely divorced from sound architectural principles” and that it is being developed “with no environmental review in a designated tsunami zone and FEMA Special Flood Hazard Zone.” (When do Angelenos want affordable housing? Now! Where do they want it? Not here!)

Surviving the gantlet of local opposition often means agreeing to a range of concessions that send costs ballooning. To try to neutralize local attacks, developers hire pricey architects, redo plans repeatedly, make all kinds of aesthetic and architectural concessions or additions, hire extra lawyers and auditors, and on and on. Even if a project does survive all this, it does so at a higher per-unit cost, which then, of course, becomes one more data point that gets wielded in opposition to the next project.

This is a place where Caruso’s anger at Los Angeles’s slow pace and high cost of development collided, in our interview, with his sympathy toward (or his need to win votes from) angry homeowners. Caruso is a developer known for classy megaprojects like the mall at The Grove and Palisades Village, and he leaned heavily on the lessons of those efforts. “There’s always community concerns,” he told me. “You always take enough time to listen to the community, take in their comments, and find common ground. I’ve gotten every one of my projects proposed around the L.A. area approved, and approved quickly.”

When I suggested to him that communities may have a different response to housing the homeless than hosting upscale movie theaters and chain stores, he didn’t buy it. “When you go into neighborhoods like Venice, what I hear is they’re very supportive of having affordable housing, of having housing for the homeless in the area. They just want the project designed and operated in a way reflective of their neighborhood. I don’t think developers or the city should be arguing with that. It’s the right thing to do.”

Listening to residents, he went on, means recognizing that “scale matters. Consistency with the community matters. Architecture matters.” And all that may be true. But as everyone who builds affordable housing told me, once you agree to everything that local homeowners want in those domains, you end up with small, expensive projects. Caruso wants to build more homes, more cheaply. He’s very excited about low-cost, prefabricated projects. He also wants to listen more to local homeowners and honor their preferences more fully in these projects. There’s a tension between these two visions that he has not resolved.

Bass, however, didn’t have radically different answers. She was quicker to emphasize the need to use land the city already owns, but as the Venice Dell Community project shows, that only gets you so far. In the end, she said, “you have to do the work with the neighborhood.”

What neither candidate suggested to me was any change to the power local homeowners have to slow or stop these projects. And fair enough — the politics of trying to cut communities out of the permitting process would be hellish, and it’s not something the mayor of Los Angeles has obvious control over, anyway. But the fact that neither candidate is proposing something radically different speaks to the difficulty they’re going to have getting radically different outcomes.

Still, solving the problem of relentless community opposition matters because receiving entitlements and permits is often a precondition to lining up financing — the next step in the building process, and one that Tong again estimates can take about a year if you’re lucky, and much more if you’re not.

Financing is where the structure of Prop. HHH proved to be penny-wise and pound-foolish. HHH is designed to provide some, but not all, of the money for developments. Defenders of HHH are quick to point out that the average $596,000 cost per unit only includes around $134,000 of HHH funds. The program is designed to seed projects that can find other financing, too. That sounds good: By leveraging outside money, the taxpayer’s dollar can go further. In reality, it means affordable housing projects need to line up four or five or six different funders, cobbling together tax credits and philanthropic donations and state and local incentives.

“Everyone wants to be able to say we spent only $50,000 on this apartment — that means I have to go through the process four or five times,” Tong told me. “I’ve seen projects with as many as 10 funding sources. It takes time to do that.”

This isn’t housing being developed to turn a profit. So the different financing sources come with different demands, all of which make the project more complex. “The developer has to hopscotch from one funding source to another to another,” Tong said. “So you start by saying we’ll serve low-income families at this development. But the funding falls through. So you put in veterans’ units. Or try to house domestic violence survivors in here. There’s this constant restructuring of the project as the funding sources come and go.”

Ron Galperin is the Los Angeles city controller. It’s his office that is responsible for auditing HHH. It’s his office that tracks how much each unit costs and where the money comes from, and whether the program is achieving its aims. You might expect him to praise HHH’s effort to match each dollar with five dollars from other funders. You’d be wrong.

“If you look at the inflated cost that comes along with all of the regulation and rules and restrictions and limitations,” Galperin said, “then basically all of this money is going to feed the beast of covering the cost of the regulations. Yes, they get $134,000 on average from the city, but the hoops that have to be jumped through to get it very well may exceed the $134,000. We’ve created an absolutely insane system.”

Heidi Marston led the Los Angeles Homeless Services Authority until April, when she resigned in frustration. “There’s tons of money that goes into homelessness, particularly in Los Angeles,” she told me. “My budget was almost a billion dollars. But the money comes with such confined requirements that it’s almost impossible to spend. If you give me a billion dollars and the ability to spend it, it would be a different story.”

Bass is sympathetic. “This is what happens when policymakers are trying to design programs and they want multiple outcomes,” she told me. “I saw this being a nonprofit executive. Funders don’t want to give you general operating costs. They want you to solve their pet issue. What I always wanted was money for general operating costs.”

But her sympathy doesn’t carry an obvious solution. She talked about the possibility of public bridge loans so developers could move forward on projects while assembling their full financing. Both she and Caruso mentioned vague plans to call in more private financing. Neither of them has a plan to dramatically change how affordable housing is financed.

And some of their impulses might make things worse. On her campaign website, Bass promises “accountability, transparency and proper oversight” for HHH funding. Caruso, similarly, told me he plans on hiring an independent firm to audit HHH to figure out “where the money has gone, is there any fraud, the levels of inefficiency.”

Transparency, oversight and efficiency sound good and poll well. But affordable housing developers are buckling under the existing transparency, oversight and efficiency requirements. “We had 38 unique funding sources coming in when I was there,” Marston told me, “and each of those had annual or biannual audits of not just us but the nonprofits we were funding.”

If the land is found and the titles are granted and the financing is assembled, construction can begin. Labor costs are already high in Los Angeles. But they’re higher for HHH projects, which need to pay prevailing wages, which I’m told adds around 20 percent on top of what market-rate housing pays for labor. There are even more restrictive labor agreements for HHH projects above 65 units. A RAND study found those agreements led developers to disproportionately propose developments that are smaller than 65 units, and when they didn’t, “per-unit construction costs were approximately $43,000 higher.”

Then there are California’s extensive green building codes. “The standards in California are higher than anywhere else in the country,” Tong told me. “You’re not just required to build to the standard. You also need to hire a consultant to confirm you’ve built to the standard. That adds costs.”

And then there are the bespoke deals that get cut with planning boards and local opponents. Tong told me about a particular affordable housing development that was near a freeway; in order to build it, the planning department insisted that the developers install much higher quality air ventilation systems than was the norm.

Individually, a lot of these standards and concessions and add-ons sound good, and even are good. Who would be against cleaner air? Who doesn’t want high wages for construction workers? But cumulatively, it amounts to a staggering failure to prioritize building affordable housing affordably and quickly, given that the alternative is often people sleeping in tents or on street corners. Market-rate developers are “building brand-new units at $250,000 a door,” Galperin said. “That is less than half of what these units are costing.”

Galperin believes that Los Angeles’s political class erred in focusing so tightly on using HHH funds for permanent housing tied to these standards. “We want the best possible housing for everybody,” he said. “But let’s stop making the perfect the enemy of the good, or the good enough. How do we create more micro units or shared units? What about dormitory-style units, where maybe you don’t have your own kitchen but you have a place to eat in the building?” Galperin has also argued that more of the money should be spent on shelter beds and interim housing. “These aren’t perfect approaches, but with so many people dying every day, there has to be a sense of urgency.”

This is one of the thorniest fights in Los Angeles’s housing debate: One side says permanent housing is the only real solution and everything else is a Band-Aid. Here’s the Los Angeles Times editorial board: “The North Star should not be getting enough shelter beds so the city can sweep people off the streets. It should be about getting enough housing so people can move off the streets for good.” The other side says Band-Aids are needed when you’re bleeding. Los Angeles needs more of every kind of housing solution, but it particularly needs many more of the solutions that can be built at the highest speed, for the lowest cost.

But the more time I spent talking to people involved in permitting and building housing of any sort, the less important this divide came to look. Yes, micro units and dormitories and prefabricated homes can be cheaper, but if anything, they face heavier community opposition. That’s even truer for large shelter developments, which communities go to war to stop. On the margin, the choice of what to build matters. But the inability to build cheaply or swiftly is endemic. A world in which Los Angeles could build lots of dormitory-style developments quickly is a world in which it could build any kind of affordable housing quickly.

I wish I could tell you that, in reporting this story, I came across easy solutions. I didn’t. Authority is fractured in the Los Angeles political system. The mayor is relatively weak, and the City Council is currently in chaos, as Nury Martinez, its former president, resigned after recordings of racist comments she made emerged, and Kevin de León, another member of the council and a participant in those recordings, is hanging on by his fingernails. Power is further fractured between the City Council and the County Board of Supervisors, and neither side works well with the other.

Both Bass and Caruso thought they could build better working relationships across the overlapping zones of power. Both were vague about how. “Job No. 1, No. 2 and No. 3 is intergovernmental relations,” Bass told me, mentioning her long relationships with Los Angeles’s various power centers. Caruso pointed to his success getting City Council support for various projects and his work on the Los Angeles Police Commission (though his actual attendance record in that job is spottier than he lets on — The Los Angeles Times reports that he missed almost 40 percent of the meetings).

Perhaps Bass or Caruso will have the interpersonal finesse Garcetti lacked, but it’s hard to put much stock in their answers. Garcetti, who served on the Los Angeles City Council from 2001 to 2013, had deeper relationships across the city than either of the candidates running to replace him.

The closest thing to a reason for optimism is that Mayor Bass or Mayor Caruso would have something Mayor Garcetti lacked: statewide support. Much affordable housing has been exempted from the California Environmental Quality Act. It’s been given the right to greater density and lighter parking requirements. Governor Gavin Newsom has decided this issue will define his legacy, and now he and the Legislature are passing housing bills in such a flurry that no one I spoke to for this story was confident that they understood the full scope of what had been changed. The state is also stepping up enforcement of the laws it has passed. California used to see housing development as a problem for cities to solve. No longer.

Despite the deep differences in the vibes of their campaigns, my conversations with Bass and Caruso weren’t all that different. Both candidates say homelessness is an emergency and needs to be treated as such. They both say vast swaths of regulations and standards have to be sliced out of the system. They both think the money meant for affordable housing should be easy to spend.

And they both face the same political challenges: to make good on their intentions will mean brutal fights with everyone from unions to greens, NIMBYs, the City Council and regulators. Nobody likes the outcomes Los Angeles is getting. But many benefit from the system as it stands. Many want solutions, just not that solution, situated near them or their child’s school. And no, not that one either; it’s hideous. Or that one: Haven’t you seen the parking problems this neighborhood already has?

This is the paradox of housing development in Los Angeles and so many other cities. The politics of the affordable housing crisis are terrible. The politics of what you’d need to do to solve it are even worse.

Additional research by Rollin Hu.

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