Monday, January 07, 2008

How Affordable Housing Can Triumph Over Unaffordable Government!

Can NC's Rescue Affordable Housing from City Hall? Or, It’s the Money Stupid!
By Brady Westwater

Everyone has a wish list for 2008 – but it's useless to speak of new projects for tomorrow when we can't pay today's – much less yesterday's -- bills. Add our city's declining revenue and escalating salary hikes – and we are suffocating with a permanent structural deficit. But there are two types of feasible real world solutions.

First, regarding expenditures: any new project, prior to approval, needs to have an identified revenue stream - as much as possible - along with a business plan which – again, as much as possible – will make the project financially sustainable from earned income, other sources of funding – or from direct or indirect long term benefits from the project. Almost everyone agrees on a need for environmentally self-sustainable projects; now NC's need to also ask for new city projects to have financially sustainable business plans.

We also need to determine the long term financial impacts of all the city's actions and the city needs to find creative ways to provide services that do not involve the expenditure of city funds. We need to find ways to get other entities – public and private - to do their share and we have to stop duplicating services and facilities within the city family and with other governmental agencies.

The city as a whole also needs to examine every existing program (setting aside the sacred cows of political correctness) and honestly debate what services the city should provide and how the city can best accomplish these goals within its existing budget. Then a rigorous – and fully independent - cost benefit analysis also needs to be done for each of these programs.

If this restructuring of the city's budget should to be done through a Little Hoover style commission or through an independent of City Hall citizen's commission, is debatable. It is not debatable that our current system of budgetary priorities is broken.

Second, on the revenue side, politicians are finally realizing we cannot continually raise taxes to cover budget deficits. Businesses – and people – are already fleeing Los Angeles and California due to our unsustainably high tax structure. The only way we can increase tax revenues is by attracting taxpaying businesses, tourists and events. To do that, we need to have people with proven track records in the business world develop a realistic economic growth plan for LA. We also need to work together to change the city's current schizophrenic attitude ( i.e. saying one thing – but then doing the exact opposite) towards business.

But enough about theory; let's look at one set of specifics.

Traffic gridlock, housing the homeless and affordable housing for working class families are among the city's most intractable problems. Systemic solutions proposed for all these problems are always beyond the city's financial capacities and yet are also always totally inadequate to the problems.

So how do we develop a realistic business plan for creating affordable housing - and supportive housing for the homeless – plus also helping middle income and below families – while also addressing rush hour traffic congestion?

First, the city needs to stop spending city money on fully subsidizing a handful of units. The affect on the overall housing market is non-existent. Too few people are rewarded and it is done in such a way that it is inherently unfair. Second, we need to accept what study after study has told us – the more regulated and the harder it is for builders to develop market rate housing – the more expensive all housing becomes for all people.

Third, once we have community approved zoning plans for how much housing will be built in each neighborhood, we need to allow the market to build enough market rate housing to moderate everyone's housing costs.

Only by creating enough new market rate housing can we slow down the gentrification of the vast stock of affordable housing which can never be replaced once lost. Doing that alone will save far more lower cost housing than can ever be built though government action. In addition, we need to stop the inappropriate density bonuses that are destroying many of our already overbuilt neighborhoods.

Finally, we need a vastly larger program of subsidized housing for the homeless and for low and moderate income families. The city and the CRA need to only fund financially sustainable housing projects.

The hundred million dollar trust fund should be buying land from developers who have to sell in the current slump. That land should then be sold to non-profits – or profit-making entities- that will build and operate mixed use projects that combine market rate workforce market with lower income subsidized housing - plus retail and – possibly – some office space when appropriate. These transactions would be no money down with the city receiving a mortgage.

Now the key point is that the number apartments that will be subsidized in each complex will ONLY be determined once it is known exactly how many units need to be sold or rented at market rates to cover the subsidy for the low income units. That will guarantee that each project will be financially self-sustainable. And in supportive services buildings, enough retail or market rate units will be required to fund those services.

Once the construction loan is re-financed, the city gets paid back with interest.

This is what makes it a true revolving fund. Once the model is proven, a billion dollar bond issue can be passed to be paid off, not by taxes, but by the repayment of the mortgages.

There are many questions and seemingly logical objections to a program like this – and all of this needs to be publicly debated – as does how this type of program, when combined with an additional no cost to the city program now in the works - can reduce rush hour traffic.

And, each of these discussions – as well as discussions about how to bring more jobs to Los Angeles and how to deal with the coming budget crunch - will be addressed at a series of citywide meetings hosted by the Economic Development Committee of LA Neighborhood Council Congress, along a wide variety of other city wide and local organizations, starting this spring.

Neighborhood councils can rescue affordable housing from City Hall by providing a positive and workable plan and using their influence to get the plan into the light of day. What a year 2008 could be for NCs. What a perception-changing legacy for councils to achieve.

If you would like to work with the LANCC Economic Development Committee on these projects, please email Brady Westwater at

(Brady Westwater is a community activist and a writer. He chairs the LA Neighborhood Councils Congress Economic Development Committee and is a contributor to CityWatch.) _

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