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As you know, BIA-LAV has been working with the community and public officials to let them know that LA’s proposed Linkage Fee is wrong for LA and will worsen the affordability crisis, stifle development, and push more people into poverty at the expense of helping only 0.01%.
This week, The L.A. Times Editorial Board expressed support of the proposed fee. The decision seemed to be based on missing information or incorrect assumptions. In an effort to change this dialogue and set the record straight, BIA-LAV has submitted the below editorial to The Times. We’ll continue fighting for you and this City.
LA Needs to Lead Not Follow on Housing Crisis Solutions
California is the hardest state in the nation for people to buy their first home. The average house costs more than nine times average earnings in Los Angeles County – an all-time high.
We know Los Angeles is working hard to house the homeless, but more Angelenos are falling into homelessness because of unaffordable rents. Angelenos need help and rolling out the same well-intentioned solutions that have not worked in other jurisdictions is not the answer. Los Angeles needs to lead not follow.
Housing production at all levels of affordability is falling far short of the assessed need. Particularly glaring and troublesome are the number of units approved at the moderate-income level, households making approximately $40,000 to $60,000 a year in the City of LA. The City of Los Angeles only approved 132 units from 2013-2015. Market-rate developers are unable to make these affordable projects financially feasible due to the high regulatory cost burden and the lack of government funding that subsidized affordable-housing developers receive for development targeted at households making under $40,000.
This greatly impacts our workforce (especially teachers, firefighters and law enforcement professionals), since many of them make too much to receive subsidized housing but not enough to comfortably afford market-rate housing. For example, in Los Angeles, teachers spend as much as 42% of their income on rent, with experienced teachers being the most cost-burdened of all. However, most LAUSD teachers earn above the threshold to qualify for below market-rate housing.
Rather than viewing this problem simply through the lens of “units needed versus units produced,” it would be informative to analyze whether the most hard-hit families are getting the help they need. Consider these statistics:
- In 2015, the median City of Los Angeles income was $50,205.
- There are 652,879 households in Los Angeles that make less than $50,000 per year, but only 52,834 of these households live in subsidized units. Thus, only 8% of lower-income households secured subsidized housing.
- Along with teachers, public safety professionals, and nurses, the remaining 600,045 lower-income households – 92% – compete against other households with more financial resources for market-rate housing.
The City of LA’s proposed answer is to follow other large urban jurisdictions across the country, such as Boston, Chicago and San Francisco that have adopted a linkage fee. The proposed linkage fee would levy a $12 per square foot fee on new homes and a $5 per square foot fee on commercial properties. The City’s analysis estimates that the linkage fee will produce up to $92 million annually, which could pay for about 700 units of affordable housing if combined with existing tax credits and grants. These are bold estimates considering that none of the aforementioned cities averaged more than 100 units per year with their programs, the tax credits and grants are in danger, due to Trump policies, of being phased out and the total development cost to build a subsidized affordable housing unit in Los Angeles is approximately $500,000. Assuming the tax credits and grants will be phased out, the actual number of affordable units potentially produced would be only about 184.
Even if we assume an ideal situation and the Linkage Fee produced 700 units annually, it would only help 0.1% of the 600,045 lower-income households in Los Angeles living in non-subsidized housing.
Conversely, the remaining households that can least afford to have more expensive housing will likely see higher rents due to the increased cost on market-rate housing to compensate for the increased subsidy of the very few that will receive the benefit of the linkage fee program. Furthermore, the added fee will make it more financially unfeasible to build workforce housing, thus exacerbating the already abysmal workforce housing production numbers.
These are desperate times that require bold leadership and real solutions. This is not the time for taking the easy road and recycling old ineffective ideas. Now is the time for innovative thinking that promotes broad-based affordable-housing funding mechanisms that do not further increase housing costs for those that can least afford it.
It is time to promote the production of workforce housing by bringing down the cost to develop and build. The City needs to be innovative and provide incentives and eliminate or reduce regulatory hurdles that make a project financially infeasible or stall projects for years.
If the City of LA decides to follow and not lead, we can expect more of the same, with increased rents on 99.9% of already struggling households and virtually no new workforce housing.
Home prices in Los Angeles have never been higher, and rents are increasingly unaffordable for many residents. Sadly, a new report from the UCLA Anderson School of Management predicts the situation is unlikely to change in the near future. The report finds that three of the six most unaffordable cities for homebuyers nationwide are in Southern California and that Los Angeles is the single most unaffordable city for both renters and buyers. Though the cost of housing is higher in other cities, median income in LA is low enough that more residents will struggle to make monthly rental payments or save to buy a home.Read Full Article
Full-time workers who make minimum wage can’t afford a two-bedroom rental home in any state in the U.S. without spending more than the recommended 30 percent of their income, according to a report from the National Low Income Housing Coalition. The group’s annual “Out of Reach” report compares minimum wages and housing costs in states, metropolitan areas and counties across the country. This year’s results show the hourly wage rate needed for a “modest” two-bedroom rental is more than double the federal minimum wage of $7.25 per hour in all but four states.Read Full Article
Following the lead of other California cities, Mayor Eric Garcetti two years ago proposed charging a fee on construction and using those funds to build affordable housing in Los Angeles. The so-called linkage fee — a financing tool already in use in San Francisco, San Diego and Oakland — would raise $100 million a year, city officials say. But amid mounting questions, a City Council committee last week put off a vote on Garcetti’s plan until late July or beyond.Read Full Article
For millions of Americans, housing costs are perversely mismatched to hourly wages. In 2017, the average U.S. worker would need to bring in a whopping $21.21 per hour to reasonably afford a modest two-bedroom apartment. That’s nearly three times the federal minimum wage of $7.25, and roughly 30 percent more than the $16.38 hourly wage that the average U.S. renter brings home. These stark numbers come from the National Low Income Housing Coalition’s latest Out of Reach report, which maps the minimum hourly wage required to afford a modest rental based on federal Fair Market Rent (FMR) estimates. The report defines “affordable” as housing and utilities that cost no more than 30 percent of a person’s annual income—also the basic standard used by the feds. NLIHC has run these reports since 2005, and this minimum “housing wage” is rising year over year.Read Full Article
In times like the Great Recession, when the economy grinds to a halt, entrepreneurs like Michael Altheimer can’t help but start thinking: What if?
“Before the crash, we were doing mostly for-sale housing, but during the crash, we started learning about underwriting rental housing,” Altheimer says. “Market values came down tremendously, a few buildings came up. We thought to ourselves, ‘hey we could take this on,’ and we came up with a vision of becoming a major provider of affordable rental housing.” Fast-forward to today and Altheimer’s company, Miro Development, owns and manages 330 units of affordable housing across more than 20 multifamily buildings, mostly on the South Side of Chicago. With HUD facing the prospect of continued cuts to funding to build and operate low-income housing, affordable housing developers like Altheimer may become even more crucial than they already are — because they don’t use any subsidies.Read Full Article
Caught amid California’s housing crunch, Senate Bill 35’s passage comes as a potential boon to the state’s future affordable housing stock. And it jives with California Gov. Jerry Brown’s call for legislation that would cut red tape for residential developers, including streamlining the permitting process and incentivizing local governments to meet housing development goals. California State Sen. Scott Wiener, who introduced the bill in December 2016, has echoed that request, saying that market-rate housing should be incorporated into the push for more low- and middle-income properties so as to encourage developers to participate.Read Full Article
Wilk, R-Santa Clarita, released his weekly “A Look Ahead” — a report from the senator’s office that lists selected significant bills from the June 5th Daily File that are scheduled to be heard next week — on Friday. The report detailed various bills that address concerns in agriculture, business, elections, energy, environment, governance & finance, health, insurance & banking, judiciary, natural resources, public safety, transportation and housing. Included in this list is Assemblyman Dante Acosta’s driver and motorcycle license bill, AB 1027. This policy would allow experienced riders applying for a motorcycle license to complete an abbreviated, intermediate training course instead of the novice course, for purposes of waiving the driving test.Read Full Article
Lawmakers in Sacramento are eyeing two prospective laws by Bay Area reps, one that would pour billions into affordable housing but also demand that cities start buckling down to build more—or else the state will do it for them. SB 35, San Francisco senator Scott Wiener’s proposal that would hold city government’s feet to the coals to meet state housing requirements, passed on a 25-12 vote, with three lawmakers not voting. If it were to become law, Wiener’s bill would automatically speed up development in cities that fall too far behind on the number of units California expects them to produce each year.Read Full Article
California state senators passed a package of housing legislation Thursday, a bid to spend more on low-income housing as well as make it easier for developers to build. The two marquee measures — Senate Bill 35 from Sen. Scott Wiener (D-San Francisco) and Senate Bill 3 from Sen. Jim Beall (D-San Jose) — would force cities that have fallen behind on their state housing production goals to reduce some of the hoops they put in place to approve developments and would authorize a $3-billion bond to spend on low-income housing on the 2018 statewide ballot.Read Full Article