Homelessness in LA was up BEFORE Covid-19. It Will Get WORSE Until it Gets Better.

Here’s what you may not know today…

This year’s homeless numbers just came out, and it represents a double-digit increase (13%) for the second consecutive year. They estimate the homeless number to grow another 20% in California according to recent analyses. Between Measure H and Proposition HHH, the county and city of Los Angeles are surpassing $2 billion in spending for housing and other services for the homeless in the last several years. The trend is not encouraging as the facts do not support the mayor’s plan and promise to eliminate homelessness in LA. Here are the relevant background facts:

1. Taxpayers approved Prop HHH in 2016 for $1.2 billion and since then one (1) building for permanent supportive and affordable housing has been completed this year for a total of 60 units. They estimate that each building will take 3–5 years to complete.
2. The goal of Mayor Garcetti in 2016 was 10,000 units in 10 years. He has approved only 118 buildings for funding so far. Currently, 20 buildings are under construction.
3. They assessed the estimated median cost per unit in 2016 to be around $350k. The average median cost is now around $540k per unit.
4. Measure H was approved in 2017 for LA County and it estimated $355 million in funding for housing and other services. There is a five (5) year goal of 45,000 units. Since July 2017, it is reported that 14,241 people have been ‘permanently housed.’ The county approved $460 million in 2019.
5. Only $77.3 million from Measure H is allocated for permanent supportive housing in the latest budget. Over $50 million is allocated for public outreach and prevention.
6. The first building of 60 total units opened earlier this year. It cost around $34 million to complete. Only $9.6 million was used from Prop HHH for this project. Garcetti promised 80%.
7. It is now estimated that approximately $1 billion will go towards ‘soft costs’ under Prop HHH. Soft costs or impact fees are a major source of revenue for the city and state.

There is a story behind all this and the city’s inability to deliver on promises from 4.5 years ago. There are literally billions and billions of dollars in hidden ‘impact’ fees (soft costs) that make building affordable housing nearly impossible in California. Again, nearly $1 billion of Prop HHH funding will go to development fees, financing, consultants, and public outreach. This number will likely be higher with 39 projects yet to report in their numbers.

These impact fees are an enormous source of revenue for the entire state of California including Los Angeles. This is appealing for many politicians as these revenues can be used instead of increasing property taxes. It is also another way to push costs to the developer. These costs include roads, sewers, water, and in California, it also includes policing, firefighting, public health, and schools. It is also appealing to politicians because it does not require voter approval. Please let that sink in for a moment…

California’s impact fees are more than 3x the national average. In 2015, a survey showed that the average impact fees for a single-family home were $23,455. A study in 2018 indicated that impact fees were 18% of the median home price and sometimes higher than $150k for a home. Simply put, these fees force the developers to raise their cost of doing business.

With property taxes being capped from Proposition 13, it faces the state and local government with the task of trying to figure out how to pay for everything and keep their promises to the people. The strategy in the past was to cut services, raise taxes, and borrow money. California’s state income tax is one of the highest in the country. And for the wealthiest, it’s already at 13% which is the highest in the country. California has been sliding by with this strategy because it has ridden the latest boom cycle with the economy. My guess is that this strategy will be met with much more resistance than what has occurred in the past because of the Covid-19 created recession bringing record levels of unemployment. Who wants to pay more in taxes right now for a strategy that is clearly not working?

Collectively, the politicians must agree to reduce and cap these hidden impact fees to make building permanent supportive housing possible. They can also look to add sales tax to goods such as soda. There are many goods/services that aren’t taxed in California, unlike most other states that do this already.

The politicians must also address the local zoning laws that allow municipalities to reject new housing projects by rallying the residents around NIMBYism (not in my backyard) … I’ve sat in on one of these meetings and it is not a pretty sight. People believe that the homeless would prefer to live on the streets or just hang out at the beach. I certainly wouldn’t prefer this as a way to live a decent life. Would you? I have not come across a study yet that shows that this myth is a fact. I am confident in saying that single mothers would prefer to raise their children under permanent housing in a safe environment. Still, the committee rejected SB 50 for the 3rd year in a row as they denounced it as an attack on municipal autonomy.

There could be hope in all of this. There are several pieces of legislation that have just come forward this year that could address these hidden impact fees.

Newly proposed legislature (assembly bills) in the form of a revised AB 3145 and most recently AB 3148 are two bills that are worth mentioning where the fees could at least be capped in some way. Former Governor Brown vetoed AB 3145 that last time it came forward.

Without ‘affordable’ permanent supportive housing that offers longer-term care solutions, the homeless numbers will continue to rise as more people will return to the streets and continue to die. Whether you live in California or somewhere else in this country, I ask you to please write to your local congressperson and bring the issues of these impact fees and local zoning laws to their attention. Everyone deserves an opportunity to live the life worth living. Let’s not dehumanize these people anymore.

Steve