Housing cost is at the very core of the inequities in our society. As state and local governments face record budget shortfalls brought about by COVID-19, we have an opportunity to reset priorities and stay tightly focused on our communities’ greatest needs. Affordable and supportive housing for homeless Californians should be near the top of the list.
Our approach to these issues is simply not bold enough. For the past three years I have been a member, then chair, of the City of Los Angeles’ oversight committee for Proposition HHH, the $1.2-billion bond measure passed in 2016 to finance the construction of 10,000 units of supportive housing. Most of these funds have already been allocated. To date, Proposition HHH money has been earmarked for 111 different projects that are expected to generate 7,000 new homes. However, only one of those projects has opened, and the impacts of COVID-19 have delayed many which are now under construction. Even more daunting is the fact that beyond the Proposition HHH developments, we need at least another 20,000 additional supportive housing units to serve our most vulnerable Angelenos.
At the same time, L.A. County faces an avalanche of need for subsidized affordable housing to prevent more of its residents from falling into homelessness, especially in the wake of record job losses and economic stress. Here in L.A. we do not have a problem building housing. We have a problem building affordable housing. Between 2013 and 2017 we have produced 88,000 units of housing, more than almost any other city in California relative to our population growth. The issue is only about 9 percent of the new units have been affordable.
The County’s most recent housing needs assessment says that we will need to build roughly 800,000 residential units by the end of 2029, and nearly 350,000 of those need to be affordable to households who make 80% or less than the County’s median income - $54,000. (Affordable rent—30% of income—would be about $1350 per month for a family making $54,000.). It could take $130 billion in public subsidies to generate that much housing, according to a 2019 report by McKinsey Global Institute titled Affordable housing in Los Angeles: Delivering more—and doing it faster.
Based on the lessons I have learned by shepherding Proposition HHH funds, I believe there are several lessons our lawmakers must learn to move forward during this crisis.
First, the litmus test for every housing bill should be: will this bill produce affordable housing at scale? There are good proposals being tabled right now in Sacramento that streamline approvals, open up commercial corridors for affordable housing development, and increase density bonuses. Of course, we should do all these things. But let’s not delude ourselves into thinking that this would be enough. To meet the 350,000 unit goal in L.A. County we would have to increase annual production of affordable housing sevenfold. If we care at all about our working-class and middle-class neighbors we need to use every tool available.
Second, our lawmakers need to understand though that existing models are incapable of delivering what we need. Instead of forcing developers to cobble together disparate subsidies, why not create a real market incentive for once? The state could do this by establishing a direct rental subsidy program or by purchasing developments directly at set price points. A state rental subsidy program that established a baseline rent of $1,500 per month for a studio apartment used for permanent supportive housing would subsidize over 100,000 units at a cost of $2 billion per year. If you can lower the price points of new housing to under $350,000 per unit – as the winners of the Proposition HHH Housing Innovation Challenge have done - we would no longer need tax credits to make these projects viable.
The Governor’s budget proposal to use $600 million for buying motels and hotels for supportive housing is a great step forward. Lawmakers should consider expanding this proposal to include the purchase of newly constructed housing developments. By establishing an aggressive price qualification—say $350,000 per unit—the state could shake up the market and add fuel to the excitement and innovation that programs like Proposition HHH have brought forth. At the same time, it could provide the kick start that the modular construction industry has always needed. If lawmakers mandate that the units must be produced in California, not only will we get badly-needed housing, but we will also lay the groundwork for a new industry with thousands of well-compensated jobs.
In this moment when we are resetting our social and budget priorities, we have a chance to think differently about making affordable housing accessible again. What we do about this today will determine who we are as a region tomorrow.