Tag Archive for: affordable housing scam

California’s Progressive War on Suburbia

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For three years in a row, California’s progressive lawmakers have attempted to legislate higher density housing by taking away the ability of cities and counties to enforce local zoning laws. And for the third year in a row, the proposed law, Senate Bill 50, was narrowly defeated. But eventually, inevitably, something like SB 50 is going to passed into law.

In opposition were homeowners who understandably don’t want their single family home neighborhoods subjected to random demolitions in order to replace single family homes with construction subsidized fourplexes to be filled with rent subsidized tenants. These homeowners, and the local elected officials who represent them, were joined by “housing justice advocates” who claimed the law didn’t adequately address the gentrification effect, whereby higher density developments often displace existing residents to construct luxury condominiums that only the wealthy can afford.

There’s a lot going on here, and it seems that very little in the way of analysis can support a dogmatic ideological perspective. For example, from a property rights perspective, you can argue that people who purchase homes have a right to expect the zoning density of the neighborhood to be respected, since that’s what they relied on when they invested their life savings and lifetime earnings. But a property rights perspective might also have one argue that each individual home owner has the right to do whatever they wish with their property, even if that means demolishing the home to construct a multi-story apartment building. These unresolved and conflicting interpretations of property rights prevent consensus and delay action.

And if some ideological dogmas lend themselves to contradictory interpretations, others simply defy reality entirely. Some of the housing justice advocates believe that providing shelter is a human right. For them, mandating taxpayer subsidized “affordable housing” construction, and taxpayer subsidized rent, is the only solution to California’s housing shortage and affordability crisis, and the sooner we get busy, the better. This unrealistic extension of human rights attracts opposition, if not ridicule, and in any case is impossibly expensive.

But perhaps the worst of the ideological dogmas that prevents rapid solutions to the housing challenges facing Californians is environmentalist values taken to extremes. The practical impact of regulations attendant to environmentalist values – from CEQA reporting requirements and CEQA lawsuits to burdensome and expensive building codes – is to make housing construction unprofitable for anything that might be considered affordable to the average Californian.

Environmentalist ideology hasn’t just made construction costs unaffordable, it has made land costs unaffordable as well, by passage of environmentalist inspired laws that strictly limit the amount of raw land that can get approved for new home construction. Around every city in California, with varying degrees of enforcement, “urban containment” boundaries have been established. Sometimes these boundaries serve important goals; to protect prime farmland, or to preserve important ecosystems such as wetlands for migratory birds. But it seems that almost all open land, everywhere within California’s vastness, is off limits to developers because of environmentalists.

California’s Regulations Destroyed Affordability

The problem with SB 50, or any eventual legislation that mandates higher housing density, is that without reforms to the laws that have made construction of affordable housing unprofitable, the only housing that will ever get built will be high-end homes by private investors, or housing that will require government subsidies both to construct and for the renters to be able to afford to live in them. This is not sustainable. It costs too much, and it takes too long. And it sets up a dangerous bifurcated society, where forcibly integrated into residential single family neighborhoods, randomly situated pretty much anywhere, are apartment buildings populated by residents receiving taxpayer funded rent subsidies.

There’s no doubt that some legislation may have to occur to selectively increase housing density. When a bill like SB 50 returns, which could be any day, certain modifications could help. In particular, SB 50 specified where state law could preempt local zoning, and included in “job-rich, good schools areas.” This is “inclusionary zoning” at its ostensibly high-minded, vindictive worst. The bill’s authors made this provision without any reference to whether or not “job-rich, good schools areas” are in parts of town that ought to naturally convert to higher density. Instead, the message seems to be “you’ve managed to maintain a prosperous and stable community with good schools and jobs, so into that community, we’re going to subsidize the entrance of predatory investors, who will purchase and demolish homes that come onto the market, replace them with apartments, and fill those apartments with people who never had to face down the astronomical mortgages that all you residents shouldered in order to have the right to live here.”

This is wrong. It destroys the incentive for anyone to ever want to pay extra to live in a decent neighborhood. Equally important, it destroys the incentive for low income individuals to work hard and aspire to move to a better neighborhood. And to be clear: this provision would never impact truly wealthy neighborhoods. Those people can afford attorneys to tie development proposals up in knots for years, SB 50 or not. This provision attacks California’s middle class. As usual. Delete it.

On the other hand, within the urban core and on properties with frontage along major boulevards, it is an unfortunate reality for anyone still living there in single family homes that their property is doomed to transition. In the past, that would be accomplished because the value of a few of these properties, consolidated and rezoned for a large multi-family building, would make it a lucrative deal for the sellers. Now, however, the business model is broken. Not only has the impact of CEQA and overdone building codes raised costs, but the resultant entrance of public financing into the equation has made project labor agreements elevate the total project cost still further. The relatively recent entrance of powerful “nonprofit” corporations into the subsidized housing market has padded total project budgets and increased costs even more.

For these reasons, mandating densification, however better tuned the rules eventually turn out, is not enough. The entire economic landscape requires revision.

Rewriting SB 50 to Recognize Economic Reality

It is possible to increase the supply of affordable market rate housing without involving the government and taxpayers in the actual construction funding. It is possible as well to increase the supply of housing in a manner that allows the developers and landlords to earn a decent return on investment without involving the government and taxpayers in funding rent subsidies. Therefore, the next version of SB 50 might recognize and account for the following factors:

  • Abandon “inclusive zoning” aimed at integrating subsidized low income residents into middle class neighborhoods via massive taxpayer expenditures.
  • Restrict mandated higher density zoning to the core urban areas in California and along major traffic arteries. One absolute set of governing criteria should apply everywhere.
  • Treat every county and city exactly the same, instead of allowing select counties and cities to take longer to come up with their own plans.
  • Repeal or significantly reform the California Environmental Quality Act.
  • Repeal energy neutral mandates and assorted other unwarranted environmentalist inspired building code regulations that add costs to home construction.
  • Set a maximum period of time within which building permits can be granted, and set a maximum building fee at $10,000 per home/unit (or less).
  • Streamline the building permit process to make it easier, not harder, for developers to acquire permits. Look to Texas for guidance.
  • Ban project labor agreements and require open bidding processes for public works projects.
  • Restore public funding to streets and connector roads instead of charging developer fees which are then reflected in much higher home prices.
  • Repeal laws designed to prevent reasonable expansion of the urban footprint. Allow housing developments again on open land.

These and other changes would make it possible again for private homebuilders to profitably construct affordable housing. Redirecting public money into constructing enabling infrastructure would take additional financial pressure off of home builders as well as home buyers. That worked in the 1960s and 1970s in California, and it still works in other states. The overall cost of increased public investment in infrastructure is less, perhaps far less, than the cost of taxpayers subsidizing the construction, and then subsidizing the rent in perpetuity, for literally millions of units of housing.

There is a war on suburbia being waged in California. This ideological battle, where suburbanites are stigmatized as classist, privileged, and environmentally destructive, is utterly unfounded. Suburbs are where a majority of Americans prefer to raise their families. And not these new suburbs with a dozen “single family dwellings” per acre. Spacious, beautiful suburbs where homes sit on lots of at least 6,000 square feet; suburbs where the homes themselves might actually be smaller and more affordable, once the economic hindrances to building them are removed via legislative reforms.

The arrogance of environmentalists who believe suburbs to be a planetary abomination must be called out for what it is – extremism completely unjustified by reality. Everything, from cars to energy to building materials, are becoming clean and sustainable. And there’s plenty of open land in California to spare a few thousand more square miles for new human settlement. At the least, if environmentalists are serious about saving California’s ecosystems, they might stop making common cause with the open borders lobby, and they might endorse nuclear power. Until then, they are transparently hypocritical.

This article originally appeared in the California Globe.

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The Boondoggle Archipelago

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Across California, there is a growing string of islands, exquisite gems in the urban ocean. Dredged from the pockets of taxpayers, constructed by elite artisans, these pristine islands have been created at stupefying expense. But their beauty is seductive. Spend more!

Each time an island is completed, or even proposed, glowing reports are logged across the land. So fortunate are those who shall live on these islands! So wonderful are those who shall build these islands, and care for their inhabitants! What a magnificent, marvelous thing we have done!

Or have we? From deep within the ocean a seismic wave is building, triggered by reality and propelled by common sense. Because these islands, more properly referred to as homeless shelters, supportive housing, and “low income housing,” are far too small, and far too precious, to ever, ever accommodate every castaway that needs a roof over their heads. They will never offer the required land mass to solve the problem. Instead, history shall know them as California’s Boondoggle Archipelago.

The builders of the Boondoggle Archipelago hide behind laws they won’t try to change, and behind court rulings they won’t challenge, and happily follow the rules. Happily, because the rules are rigged to ensure that the vast majority of California’s homeless and low-income families shall remain forever adrift, and so long as there are castaways, there’s money for the builders.

A short cruise across the urban ocean from north to south, visiting various typical islands in California’s Boondoggle Archipelago, should offer ample evidence that no amount of money will ever solve the problem, and therefore billions and billions of dollars, year after year, shall continue to line the pockets of the builders.

In Oakland, the “Estrella Vista” project, at a cost of $64 million, offered 87 units of affordable housing. That’s $736,000 per unit. An analysis of the project costs debunks the misleading notion that the only public money invested in these units came from Alameda County’s Measure A1, passed in 2016 to allocate $580 million to “affordable housing.”

While Alameda County’s Measure A1 Bond only contributed 3 percent to the cost of Estrella Vista, matching loans from the City of Emeryville (7.2%), the City of Oakland (3.2%), plus other federal and state sources (17.6%) constituted much of the remainder. The biggest source of funds, “LIHTC Equity,” at 42.9 percent, bears further explanation.

LIHTC stands for “Low-Income Housing Tax Credit,” and these tax credits, which can be bought, sold, and traded, represent a one-to-one reduction of a corporate tax bill. They are not a tax deduction, they are a tax credit, meaning that for any profitable corporation that pays taxes, their face value is equivalent to that same amount of cash in the bank. Who pays for tax credits? Taxpayers, since whenever taxes are avoided in one place, the resulting shortfall in tax revenues has to be covered by other taxpayers.

This is typical.

San Jose’s Measure A, approved by voters in 2016, allocated $950 million to construct affordable housing. Supposedly this beast of a bond will fund the construction of 4,800 units of affordable housing. That would come out to a supposedly reasonable average per unit cost of $198,000 (“supposedly reasonable,” because the national average cost to construct an apartment unit is only around $75,000). But not so fast. Courtesy of the County of Santa Clara Office of Supportive Housing, let’s examine this island chain.

The “Veranda” will offer 19 units at a total development cost of $11.9 million; that’s $626,000 per unit. The “Villas on the Park,” 84 units for $476,000 per unit. The “Gateway,” 75 units for $406,000 per unit. The “Crossings,” 39 units for $586,000 per unit. “Quetzal Gardens,” $706,000 per unit. “Leigh Avenue,” $780,000 per unit. Wading through the 15 new housing projects that have disclosed funding details, San Jose’s Measure A is part of a larger funding package – nearly all of the money coming from taxpayers – that will construct 1,357 units at a cost of $748 million. That’s $552,000 per unit.

On November 5th, San Franciscans approved Prop. A, which means their home owners will be paying principal and interest on another $600 million to build “affordable” housing. A careful review of the actual text of the ordinance indicates this money may not actually construct a single unit of new housing. Instead, the terms of this bond could be fulfilled merely by rehabilitating existing housing.

An October 7th, 2019 report in the San Jose Mercury offers a vivid example what “rehabilitation” accomplishes in the real world. The article describes how an apartment building in Antioch was converted to affordable housing, but when the renovations were completed, the tenants actually ended up paying more in monthly rent. To stay in their homes, they had to win the subsidies lottery, and rely on ongoing government assistance. Most moved out, replaced by the lucky few.

How is this helping anyone?

Rehabilitation of existing units brings us to our first island in the southern seas of California’s Boondoggle Archipelago. On October 24, Curbed LA reported that the Los Angeles City Council unanimously voted to provide an additional $24 million in homeless housing bonds to “repurpose a building on the Veterans Affairs campus in West Los Angeles for housing for veterans.” According to the article, the rehabilitated building would provide 59 units of permanent supportive housing for homeless and chronically homeless senior Veterans.

According to Ryan Thompson, writing for VeniceUpdate.com, the developer’s budget for this rehab project is $54.6 million, which equates to a per unit cost of $926,000. In his write-up, Thompson not only questions the astronomical per unit price tag, but the entire process whereby these contracts were awarded and how the designated developers were selected. It warrants close reading.

Political patronage to the well connected builders who are generous with their campaign donations. Nonprofits exploiting their tax exempt status and hiding behind their benevolent public image while they rake in hundreds of millions. Endlessly growing flotillas of public bureaucrats. A lottery to anoint the lucky occupants of the few, but spectacularly expensive, island refuges. Market rate builders setting sail for new, more competitive oceans, far, far away. Millions of castaways remaining adrift in the urban ocean. These are the consequences of the Boondoggle Archipelago.

Spending up to one million dollars per unit to not even create new housing, but to upgrade an existing structure, is not an outlier. These astronomical costs are common. In Venice Beach, a new structure being proposed to accommodate homeless and low income residents is budgeted, including the value of the land, at over $200 million, in order to create 140 new apartment units. That’s a cost of $1.4 million per unit.

In order to assist the homeless, in 2016, Los Angeles voters approved Prop. HHH, authorizing $1.2 billion to construct “supportive housing.” As reported by the Los Angeles Times, the total project cost, on average, for the few thousand units that will eventually get built is $550,000 each.

What’s really going on here? Are the builders who take taxpayer money to build these island paradises smooth sailors or brazen pirates? And with tens of thousands of homeless and literally millions of “low income” Californians, who do they think they’re kidding? After all, at a price tag of $500,000 each, and evidence suggests that is on the low side, it would cost $65 billion just to house California’s existing homeless. It would cost orders of magnitude more than that to build “affordable housing” for all of California’s qualifying low income families. And are these actually island paradises, or state administered wards?

The most evocative use of the word “archipelago” in the 20th century was not used in a benign context. It was “The Gulag Archipelago,” the title of a book by Alexander Solzhenitsyn that called the world’s attention to the network of prisons and labor camps that absorbed millions of Russians during the Soviet era. And during the second half of the 20th century when Solzhenitsyn was writing his book, across America we built our first Boondoggle Archipelago – housing projects. They were built, they were occupied, they demonstrably failed to alleviate poverty in the inner city, and now they’re being demolished.

What did we learn? Apparently, all we learned was spend more. Do it again.

The Boondoggle Archipelago is defined primarily by the corrupt patronage it exemplifies. But it’s worth stepping back and asking the question – are we not only wasting hundreds of billions of taxpayers money, but also condemning hundreds of thousands of Californians to dependency?

If the builders and supporters of the Boondoggle Archipelago are sincere in their desire to help the homeless and the needy, they would first try the following solutions: Overturn the court settlements that prevent arrests for vagrancy, and repeal Prop. 47 so users of hard drugs and petty thieves will again face jail time after repeat offenses. Do that, and see how many “urban refugees” suddenly find shelter again with their relatives or their friends.

Then construct tent cities, taking advantage of the knowledge the U.S. Military has gained in setting up these compounds all over the world. Round up the homeless and put them into the appropriate facility – one type for substance abusers, one for petty thieves and other minor offenders, one for mentally ill, and one for families and individuals who are genuinely down on their luck. Over time, if appropriate, move these people into better shelters – but put a cap on the costs.

At the same time, to make housing affordable for low income Californians, end the environmentalist war on land development. Repeal the California Environmental Quality Act, since federal law provides ample protection. Repeal SB 375 and similar laws that have made it nearly impossible to develop open land. Start using public money to build more enabling infrastructure. Quit forcing developers to spend more money preparing permit applications and paying fees than they spend in actual construction. Then turn private investors loose to again build market housing at affordable prices. Today, developers either turn crony, or move to other states. They have no choice. The laws are rigged.

Or just stay the course on the urban seas, filling your drift nets with billions in taxpayer cash.

California’s policymakers, state and local alike, can keep throwing money into the Boondoggle Archipelago. But recognize what these facilities really are. They’re housing projects; a failed model.  When people are drowning, you don’t build them an island. It takes too long. It costs too much. You throw them a life preserver.

This article originally appeared on the website California Globe.

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