Make Invsetments that Transform Lives

Recommendations 10

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  The County of Los Angeles Board of Supervisors should formally declare the Los Angeles County housing shortage a crisis.
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  The City of Los Angeles Mayor and City Council, should formally declare that the Los Angeles City housing shortage is a crisis.
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  (=> apartments) to R1 (=> single family residences). Mission Impossible: Meeting California’s Housing Challenge, Southern California Association of Governments (SCAG), October 2016-Foreword-Illustration2. Housing in the Los Angeles Sustainability Plan. Bloomberg Associates, August 13, 2014, p.7-8. Mission Impossible: Meeting California’s Housing Challenge, SCAG, October 2016-Foreword-Illustration2. 11 https://www.lahsa.org/homeless-count/reports 2 2016-2017 LOS ANGELES COUNTY CIVIL GRAND JURY FINAL REPORT Current Provisions for Housing in Los Angeles County The Southern California Housing Marketplace The most significant factor for the lack of sufficient housing is the lack of private investment in affordable housing.12 The majority of County housing has been provided by private, for-profit investments. The housing shortage causes the market price of housing to rise. As the market price rises, it sends a signal to investors/developers that there is an attractive profit to be made in producing more housing.13 To some extent this has happened. However, most of the new housing has targeted the highest price part of the housing market where profits are more assured.14 The market mechanism has failed to produce affordable housing in the quantity required. If the lower priced end of the housing market cannot generate competing profits in comparison to the higher priced end, the market system should not be expected to correct the affordable housing shortage. The above analysis is supported by recently published investor oriented market research.15 The expectation is that rents and, therefore, rental property valuations which are based on rental cash flows, will continue to rise in the near future. As an example, the year-to-year prices for homes has risen year-to-year by 7.9% as of February 2017.16 The current housing shortage has caused the following: high housing prices and high rents. This “pumps” more wealth from rent payers, typically the less wealthy, to investors, typically the more wealthy, in a reverse trickle-down effect. An increased housing supply would mitigate this effect. Renters would have more expendable money which they are likely to spend on other, non-housing necessities.17 And, in that spending, renters are likely to increase non-housing business revenues. Public Housing Programs Given the County’s affordable housing shortage and the inability of the private housing marketplace to correct the situation, the CGJ examined public programs intended to increase the affordable housing supply. There are an assortment of such programs. For example, the City of Los Angeles has passed Measure HHH which will sell $1.2B in bonds to finance housing for homeless prople.18 This is estimated to produce 10,000 units over a 5-year period. So called 12 www.scanph.org/node/3863 13 www.noradarealestate.com/blog/how-real-estate-markets-work/ 14 losangeles.cbslocal.com/.../socal-may-buck-trend-of-more-affordable-luxury-apartme... 15 ibid 16 http://www.latimes.com/business/la-fi-home-prices-20170321-story.html 17 Note: Lower income families, by necessity, will spend income freed from rent on other necessities. The money freed and spent will generate increased economic activity. 18 www.laweekly.com/.../la-passes-ballot-measures-to-build-transit-and-fight-homelessne... 2016-2017 LOS ANGELES COUNTY CIVIL GRAND JURY FINAL REPORT 3 “wraparound services”19 are to paid for by an increase in sales tax in Los Angeles County from passage of Measure H in March 2017.20 The County of Los Angeles has affordable housing programs, administered by the Community Development Commission/Housing Authority. Generally, the programs offer a public subsidy for housing construction which is leveraged by a developer to produce units. The selection of developers is by a competitive bidding process which is always oversubscribed.21 In return for the subsidy, the developer is required to maintain “affordable” rents on the resulting units for up to 55 years (55 years is the current requirement; earlier programs were commonly set at 30 years). The County near-term subsidy programs are basically planned to continue at about the same level as the recent past.22 While these programs are to be applauded, they have been insufficient to correct the affordable housing shortage. Loss of Affordable Housing Stock Almost every large municipality in the United States faces the situation of a persistent affordable housing shortage; there is a simultaneous loss of existing affordable housing.23 Units that were rent restricted or that had rented at affordable rates, are converted to market rate properties or redeveloped out of existence. This applies to the County of Los Angeles. The chief defense against market rate conversions is the contractual commitment, currently for 55 years, to restrict rents on subsidized affordable housing. After this period, conversions to current market rate rents may occur. Beside the increased income from raised rents there is typically a large increase in market value for converted properties. These are powerful motivations to private owners to convert.24 For redevelopments there are legal constraints that mitigate the impact to displaced residents.25 Generally, they may require that displaced people be compensated for vacating their residences. Unrepresented Housing Compression The statistics used to evaluate housing stock sufficiency leave out a common occurrence in Los Angeles County housing. People who cannot afford “normal” housing situations compress into units not designed for that purpose.26 Because this is often forbidden by regulations, official records are not kept. Therefore, the statistics under represent the actual housing need. Note: “Wraparound Services” are the set of medical and social services prescribed for treating a previously homeless person. This definition was supplied by an official of the County’s Department of Health Services during a presentation to the CGJ. 20 votersedge.org/ca/en/ballot/election/area/48/measures/measure/2959?election... Interview with Community Housing Development Commission 22 Interview with Community Housing Development Commission 23 www.latimes.com/local/california/la-me-apartments-demolished-20160402-story.html 24 Note: Some subsidized housing is owned by “mission-driven organizations” who tend to maintain low rents as a part of their “mission”. 25 https://www.hud.gov/offices/cpd/affordablehousing/library/tenadisp.pdf 26 https://planning.lacity.org/HousingInitiatives/HousingElement/Text/Ch1.pdf 4 2016-2017 LOS ANGELES COUNTY CIVIL GRAND JURY FINAL REPORT The Housing Shortage Crisis The CGJ has evidence that supports the conclusion that the affordable housing shortfall is a crisis for the County. Many authorities have pointed out that the affordable housing shortfall compromises economic performance in the County.27 A large portion of the citizens of the County are experiencing negative effects from the housing affordability crisis.28 The Homeless Housing Shortfall The homeless are at the extreme edge of the unaffordable housing spectrum with no housing at all. The universal appearance of the homeless throughout the County has motivated recent actions to deal with the issues that create homelessness and to adopt more robust corrective policies.29 The County has adopted a policy, yet to be fully implemented, of “housing first.”30 This seeks to combine permanent housing with comprehensive “wraparound services” that address the personal issues that have kept the homeless on the street. There may be a need for a parallel approach to “housing first”31 that is complementary, easier to implement, and which deals effectively with a less afflicted cohort of the homeless. Our proposal is described in the Increased Housing Supply Approaches section as “Shelter First/Housing Next.” The Logical Housing Prescription The treatment of the Los Angeles County affordable housing crisis has a simple prescription: create a sufficient supply of appropriately-priced housing. Further, in expanding housing supply, the initial focus would be on the most affordable part of the shortage, giving first aid to the most affected of County residents. Filling this simple prescription will require multiple, coordinated steps: 1. Providing funding 2. Finding sites 3. Performing planning 4. Designing affordable housing 5. Issuing permits 6. Coordinating with the community 7. Achieving construction 27 www.lao.ca.gov/reports/2015/finance/housing-costs/housing-costs.aspx! 28 Public Policy Institute of California-“Confronting Los Angeles County’s Rent and Poverty Crisis: A Call for Reinvestment in Affordable Homes”. 29 www.latimes.com/local/.../la-ol-tent-city-homelessness-crisis-updates-htmlstory.html 30 www.latimes.com/nation/la-oe-0603-lowery-homeless-utah-la-20150603-story.html 31 Note: The notion of “Housing First” as described by a County Health Official means providing housing as the first step in treating homeless people with various illnesses. The housing provided needs to be supported by subsequent health services which could not be delivered to a patient without the provision of housing. 2016-2017 LOS ANGELES COUNTY CIVIL GRAND JURY FINAL REPORT 5 8. Awarding occupancy The first and most challenging action is funding. Increasing housing supply to the need, even exploiting lower cost approaches, will be expensive. Only by accepting the afordable housing situation as a crisis can the funding be considered. Increased Housing Supply Approaches Here the CGJ addresses some specific features that would optimize the expansion of affordable housing. “Shelter First/Housing Next” Concept for the Homeless32 This idea is to provide immediate, temporary shelter for any person in need of it in the County of Los Angeles. Shelter means a place of safety and comfort that provides nutrition, secure individual storage, resting places, and access to a clean bathroom. This is similar to the role filled by the “missions” of Skid Row. But this is not to be considered a charity; it is an obligation of society to supply shelter to any person in need as required. The supply of such shelter should be sufficient to accommodate the total demand. Some residents may supply maintenance functions for a facility. This can provide a way to “pay for” their stay and help make the facility self-sustaining. Some residents might become facility “associates.” Some associates might become employees providing a step into the less supportive world. A corps of such “shelter graduates” may develop useful insights on homelessness and sympathy for the homeless that they may come to serve. Location, Location, Location Functionally, the best location for new affordable housing should be near efficient transit, close to points of employment, where available land is at “reasonable” cost, and where the existing surrounding community can be convinced to accept its presence. Near Transit Paralleling the need for more housing is the need for new levels of sustainability in housing. A key to providing sustainability through housing is decreasing dependence on personal automobiles.33 Placing the housing near a public transit terminal that is well-connected to a dense public transit system seems the best approach to not requiring personal cars. This is a well- recognized goal for sustainable housing.34 While some developments are meeting this criteria, they are not generally affordable. The CGJ believes that this concept is at least partially original to this report and, thus, represents our opinions. 33 https://en.wikipedia.org/wiki/Car-free_movement 34 Entrepreneurs have suggested that on demand dispatched autonomous electric cars could provide a similar benefit; whether this is reasonable for residents of affordable housing in the near term is questionable. 6 2016-2017 LOS ANGELES COUNTY CIVIL GRAND JURY FINAL REPORT Near Employment Being close to employment avoids long daily commutes. It saves personal time and decreases resource usage for the commute. However, the long term stability of employment at a single location, whether it is nearby or not, is doubtful. A more realistic approach is connection into a dense, efficient transit system. Mixed use developments attempt to provide combined employment and housing. The CGJ is not aware of any success achieved in mixed developments. Another popular alternative vision employs internet connectivity; work is performed in the home on a connected computer. Wider use of the “work-at-home” paradigm can be expected. All affordable housing should have quality internet access. Land Available at a Reasonable Price The following sections discuss specific strategies for dealing with the land cost issues near developed areas. Reasonable cost for available land in the County has traditionally meant remoteness from developed areas. This can destroy the ability to be well-connected. An alternative is building remote communities specifically connected by links to a central, dense transit system. A poor example of this is the Palmdale/Lancaster communities. These communities connect with downtown Los Angeles via CA Highway 14 and Metrolink trains.35 The commute can be over two hours, with much traffic and the creation of abundant GHGs.36 37 Other remote county communities are currently being proposed (e.g. the Tejon Ranch development).38 The commonly missing links in such proposals are efficient transportation to the developed areas of Los Angeles. Near Acceptance Any proposed project, including housing, near the developed parts of Los Angeles County usually arouses opposition from local residents who feel they may be negatively affected. This reaction has been somewhat derisively referred to as “Not in My Backyard” or by the acronym, “NIMBY.” These reactions may be well-founded. Developers’ exploitations of communities are not unknown. Contributions to elected officials create the appearance that development policy is shaped to benefit the contributors.39 Early Purchase and Reservation for Housing This is a possible long term approach to securing housing sites advantageously. When a transportation authority (e.g.METRO) defines a major expansion of its transport network, 35 https://www.nerdwallet.com/blog/.../worst-commutes-los-angeles-insurance-gas-time/ 36 There is a more efficient Metrolink alternative to commute by personal automobile. Transit time is still long, however. There is a more efficient Metrolink alternative to commute by personal automobile; however, transit time is long. 38 tejonranch.com/the-company/the-ranch/real-estate-development/ 39 http://www.citywatchla.com/...la.../12194-koreatown-skyscraper-another-pay-to-play-deal-a... 2016-2017 LOS ANGELES COUNTY CIVIL GRAND JURY FINAL REPORT 7 adjoining properties become more valuable.40 While this can work against siting low cost housing near an existing transit terminal, the preemptive acquisition of nearby property can reserve it for affordable housing at a lower purchase price. If the purchase is made very early with respect to the eventual transport facility development, the land may be temporarily leased for low value usage until the housing is developed.41 There are many ways of leveraging the increasing value of an acquired site to underwrite subsequent low cost housing development. As an example, some part of the site could be sold at increased market prices for development with the funds used to pay for the affordable housing in the remainder of the site. Infill Infill is the creation of increased housing density by building new housing in available spaces in previously developed areas. Targeted spaces for infill include additions on existing single family residence lots. These are referred to as Auxiliary Dwelling Units (ADUs),42 informally known as “granny flats.” There is also the conversion of larger lots to multiple single family residences lots (small lot residences).43 Infill is recognized as a valuable approach to increasing affordable housing in developed, desirable areas. However, estimates show that the quantity of potential new residences is limited.44 Infill alone cannot totally overcome the affordable housing crisis. The State of California has acted in support of ADUs, by passing a recent law making them easier to approve in communities throughout the state.45 The law says that for all cities in the State that have not adopted local ordinances about ADUs, an ADU proposal must be accepted “ministerially” by the local building department. The proposed ADU must meet all applicable building codes and there are some limits as to size. The ADU cannot be a separate residence or be sold separately from the main structures on the hosting lot. The communities of the County can exploit the ADU law in increasing affordable housing. The City of Los Angeles has proposed a “small lot” ordinance.46 If this is adopted it will permit the placement of several single family residences on what had been a single property lot. The ordinance recognizes that some standard requirements for single family residences on normal lots should be eased to enable the compactness of the resulting homes. No significant building code/safety issues may be compromised in the structures. 40 www.reconnectingamerica.org/assets/Uploads/cpatransport2.pdf 41 Note: This is similar to the real estate investment approach called “land banking”. 42 https://accessorydwellings.org/what-adus-are-and-why-people-build-them/ 43 http://la.curbed.com/2016/10/21/13361926/small-lot-subdivision-mid-city-for-sale 44 www.mckinsey.com/.../mckinsey/.../closing%20californias%20housing%20gap/mgi-c... 45 https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id... 46 planning.lacity.org/ordinances/docs/smalllot/CodeAmendment/SummarySheet.pdf 8 2016-2017 LOS ANGELES COUNTY CIVIL GRAND JURY FINAL REPORT High Density Housing developed with increased density, more units within a given footprint, decreases the per unit land costs which is key in desirable locations. Higher density also encourages efficiency both at the time of construction and in use.47 Common methods for achieving high density are well understood. Smaller units allow more units in any size structure. Multi-story structures increase density. Building code requirements for excessive parking space per unit work against higher densities.48 Achieving higher density housing requires support by the necessary infrastructure. Water, sewer, electrical power, waste management, and safety systems all have to be sized for higher density. Financial Approaches to Increased Affordable Housing There are a set of approaches to increasing affordable housing that leverage private housing financing with publicly sourced funding. Public subsidies for privately developed projects in exchange for restricted rents are one example.49 There are provisions to avoid taxes by donating to projects dedicated to affordable development.50 Another financial approach is providing publicly insured, lower interest loans and lower down payment requirements to families that cannot afford a “normal” mortgage.51 For renters, Section 8 programs provide recurring rent subsidies to qualified low income families or individuals.52 This subsidy pays the portion of rent that is over 30% of family income. These financially-based approaches have been employed for some time but have not decreased the affordable housing shortage. They could be expanded, given the necessary funding. By participating in the housing marketplace these approaches support, not control, increasing housing costs. A Section 8 rental is still rented at market rates; a lower cost mortgage still pays market rates for the property it is used to buy53. Alternative Lower Cost New Housing Approaches There are many ideas for producing lower cost housing. The CGJ has investigated several of these. The CGJ observed one approach in detail that was being built during our investigation; a container-based, multi-unit facility which is described in
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  The County of Los Angeles Board of Supervisors should adopt a “shelter first/housing next” extension to “housing first” paradigm to speed eliminating street homelessness. 14 2016-2017 LOS ANGELES COUNTY CIVIL GRAND JURY FINAL REPORT
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  The City of Los Angeles Mayor and City Council should adopt a “shelter first/housing next” extension to the “housing first” paradigm to speed eliminating street homelessness.
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  The County of Los Angeles Board of Supervisors should develop a plan to educate/incentivize against “NIMBY – ism.”
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  The County of Los Angeles Board of Supervisors should consider early purchase of land around proposed transport facilities, as defined by METRO, to reserve it for affordable housing.
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  The County of Los Angeles Board of Supervisors should lobby the California State Governor and Legislature to prevent the misuse of CEQA to delay and kill projects beyond its legitimate purpose.
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  The County of Los Angeles Board of Supervisors should restrict, by law, conversion of housing to short term rentals.
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  The City of Los Angeles should restrict, by law, conversion of housing to short term rentals. VI REQUIRED RESPONSES California Penal Code Sections 933(c) and 933.05 require a written response to all recommendations contained in this report. Responses shall be made no later than ninety (90) days after the Civil Grand Jury publishes its report and files it with the Clerk of the Court. Responses shall be made in accord with Penal Code Sections 933.05 (a) and (b). All responses to the recommendations of the 2016-2017 Civil Grand Jury must be submitted on or before September 30, 2017, to: Presiding Judge Los Angeles County Superior Court Clara Shortridge Foltz Criminal Justice Center 210 West Temple Street Eleventh Floor-Room 11-506 Los Angeles, CA 90012 Responses to the recommendations above are requested from the following: Responding Agency Recommendations The County of Los Angeles Board of Supervisors 1.1, 1.3, 1.4, 1.6, 1.7, 1.8, 1.9 City of Los Angeles Mayor 1.2, 1.5, 1.10 Los Angeles City Council 1.2, 1.5, 1.10 2016-2017 LOS ANGELES COUNTY CIVIL GRAND JURY FINAL REPORT 15 VII ACRONYMS AHCJPA Affordable Housing Crisis Joint Powers Authority AIRBnB™ AIRBnB™, Inc. the company BOS County of Los Angeles Board of Supervisors CEQA California Environmental Quality Act GHGs Greenhouse Gases NIMBY “Not in My BackYard” SCAG Southern California Association of Governments TEU Twenty-Foot Equivalent Unit VIII COMMITTEE MEMBERS Douglas Benedict Chair Alice Beener Gerard Duiker Faramarz Taheri 16 2016-2017 LOS ANGELES COUNTY CIVIL GRAND JURY FINAL REPORT