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Homelessness Solutions

Rendering of Cumulus luxury apartment project at Jefferson and La Cienega, near the Expo light rail line.

We do not have a worsening homeless crisis because some supernatural being is hurling lightning bolts at us. Instead, the current housing crisis, including homelessness, overcrowding, out-migration, and rent-gouging, has very real lessons about it causes and solutions.

When Albert Einstein famously observed, “God does not play dice with the universe,” his insight about universal laws of physics also applies to human affairs. 

The most important lesson is to end supposed solutions that visibly make the housing crisis worse. In specific, I am referring to proposals from the California state legislature in Sacramento and City Hall in Los Angeles. They endlessly advance legislation whose beneficiaries are their campaign donors: extensive and un-planned up-zoning on privately owned parcels. When this happens, they claim real estate developers will build more housing, and this expanded supply will end the housing crisis. This application of Reaganomics to the urban housing crisis is based on two frequently repeated but totally bogus contentions: 

  • Homelessness results from too few houses. Therefore, if there were more houses, the price per housing unit would decline, and the housing crisis would disappear on its own. The homeless, over-crowded, and rent-gouged could simply move into low priced, vacant housing units created by a private sector building boom. 
  • The way to solve the supply problem is to impose new up-zoning laws on California cities and counties. If it were easier for developers to build taller, larger, higher-density building, the ever-worsening housing crisis would finally vanish. In other words, the deregulation of zoning laws will unleash the private sector, which can then solve an appalling social problem.

But as I have explained in previous Planning Watch columns, this explanation for the housing crisis is totally wrong.

First, the housing shortage only applies to low priced housing units, not housing units in general. There is no shortage of expensive housing, as well documented, including data from the Los Angeles Department of City Planning. 

Second, up-zoning has not and will not produce low-priced housing. Private investors have a non-negotiable agenda, to make a hefty profit. They make a handsome profit from luxury housing, and they can sometimes eek out an acceptable rate of profit from middle income housing. But no matter how many times the State Legislature or the City Council jimmies with the zoning code to increase permitted housing densities, developers can never make a profit from low-priced housing without sizable public subsidies. 

Third, building expensive housing does not, through some magical process, create inexpensive housing. As we can see in many LA neighborhoods, investors will either keep vacant units empty or make small concession, like a month of free rent or six months of free parking. But they will never slash their rents to fill vacant apartments with homeless people. In some cases, they even opt for bankruptcy as their preferred way out, as happened during the Savings and Loan crisis of 1986 to 1995. 

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Fourth, up-zoning, in fact, makes the housing crisis worse, not better. Up-zoned properties become more valuable because investors can extract more profit from the same parcel. For example, California State Senator Toni Atkins’ proposed state legislation to permit by-right duplexes on lots currently zoned for single family homes illustrates this process. Up-zoning increases the cost of acquiring an in-fill site to demolish an existing single-family house and replace it with a new duplex.

In most cases the demolished houses are old, while the replacement duplexes will be modern. Depending on the Los Angeles neighborhood, the old house would have rented for $5,000 to $7,000 per month, while the new duplexes will rent for $5,000 or more per month. Unlike a small old duplex, buyers and renters will pay a premium for more space, modern appliances, kitchens, bathrooms, electrical systems, and on-site parking. As a result, the same lot will produce more income for investors, which is why they will pay more for it after up-zoning. Of course, once the original owners discover their house has suddenly become more valuable, some will quietly sell off to a real estate speculator, and then take the money and run.

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Furthermore, if the State Legislature approves statewide legislation (Senate Bill 50) to allow fourplexes on single-family lots, the amount of income flowing from a former R1 lots could quadruple. New, modern fourplexes rent for as much as $7,000 per month. 

Fifth, when up-zoning results in more people and buildings in the same neighborhood, the consumption of water, electricity, and other municipal services also rises. Since up-zoning does not increase investment in public infrastructure and services, up-zoning imposes expanded user demand on old, fixed infrastructure systems. What does not soon break will certainly give way when the “Big One,” a certain massive earthquake, eventually strikes Los Angeles. 

But there are many alternatives to up-zoning, some of which the State Senate and Assembly in Sacramento will consider. 

Foremost is greater public investment in housing because one cause of the current housing crisis is the incremental elimination of the Federal Government’s public housing programs. Any credible efforts to solve the housing crisis must restore these slashed Federal housing programs. Furthermore, cutbacks in public sector housing programs were compounded by the 2011 dissolution of Community Redevelopment Agencies in California. They were required to spend 20 percent of their budgets on subsidies for low-income housing, and this funding source needs to be replaced

The other major cause for the housing crisis is the increase of inequality in the United States. As the cost of housing went up, incomes for many Americans have been flat or declining since the 1970s. Declining real wages at a time of increases housing costs means many families can no longer afford the rent. Some become homeless, and once living on the streets, shelters, or cars, their physical and mental health declines. 

But there is a policy approach to reducing economic inequality - raising the minimum wage. In fact, some cities and states have already raised the minimum wage to $15/ hour, while progressive economist have concluded that to keep up with the cost of housing and inflation, the minimum wage should be raised to $24 per hour.

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A country as wealthy as the United States does not need to accept widespread homelessness as normal. This is the time to pursue policies, such as those outlined above, that could make a real difference.

Dick Platkin
CityWatch