LOS ANGELES – In politics the phrase “follow the money” is uttered when questionable situations arise when millions in taxpayer dollars are shelled out with little to nothing to show for it.
In 2016, Los Angeles taxpayers overwhelmingly approved Measure HHH, a $1.2 billion bond, to address the rising homeless numbers produced through annual “homeless count” surveys.
The media got on board with providing nonstop coverage of nonprofits seeking to “perform the work”, and in those photo ops, they stood proudly next to elected officials, spearheading the measure’s passage.
Measure HHH was championed by Mayor Eric Garcetti, and co-written by LA Councilmembers Jose Huizar and Marqueece Harris-Dawson.
Harris-Dawson described HHH as:
“A measure on the L.A. city ballot to fund a bond to build 10,000 units of permanent supportive housing and provide several million dollars for affordable housing in the city of Los Angeles. “
The measure proposed to house 13,000 people, despite data released six months before the November vote by the Los Angeles Homeless Services Authority, the homeless population rose by 6 percent in L.A. County to 46, 874. The same census also found that the number of homeless women increased by 55 percent between 2013 and 2016.
How was $1.2 billion enough?
In fact, data shows that between 2010 to 2019, the number of homeless increased by 39%, while pay to executives/directors of nonprofits charged with performing the work, increased by 104%.
According to the City of Los Angeles, in 2016, the cost of one of the housing units is about $350,000. On average the City will finance about a third of each unit. Also, once the tenant has moved in, the Housing Authority of the City of Los Angeles (HACLA) provides vouchers to help with rent and some operating costs. When able, the tenant pays 30 to 40 percent of their gross monthly income on rent.
The costs per door rose to a staggering $800,000 per door, with a new housing complex set to open in Venice, if approved, with costs of up to $1 million per door.
Then Supervisor Mark Ridley-Thomas took $250,000 from his Mark Ridley-Thomas Committee for a Better L.A., to put towards the measure passing. This is the same campaign account used to make a dubious contribution to USC on behalf of his son Sebastian.
In return, Ridley-Thomas received $84,343, which was from contractors, for profit and nonprofit, and the contractors’ employees, who received money from Measure H.
The “homeless industrial complex” involves over a 100 nonprofits, and contractors, who are raising their salaries faster than the housing they are supposed to be building, and the shelters they are to be providing.
Next up?
A closer look at the salaries and objectives of the nonprofits charged with addressing the homeless crisis, on behalf of LA County under Measure H.
6 Comments
Yes indeed “following the money” is usually the best way to see who is really benefiting…hint….not usually the group being celebrated as the beneficiaries.
The causes of homelessnss are many and yet we seem to only hear when the money is being given away it is to consultants/developers that tell us it costs them more than to build each low income housing unit than the average housing with out grant money costs.
.Let’s get real often those Grant receiving units are placed in low income areas on land which has laid vacant for years due to the land banking of redevelopment perhaps as early as the 1980’s when minimum wage as $3.10 per hour…NO ONE WENT BACK AND PAID THOSE FORMER PROPERTY OWNERS OR EVICTED TENANTS DISPLACED BY EMINENT DOMAIN A NEWER UPGRADED RATE….those “acquisition fees” were by today’s standards are insignificant, the myriad of consultants and attorneys and specialists are often paid far more in compensation than the building supplies and actual laborers involved in the construction.
To suggest that these new affordable units are held to a (music in the background) “higher standard” is simply laughable….Are we seriously to believe that the HHH funded units will have “HIGHER END” TOILETS AND KITCHEN SINKS than the new condos being sold for over a million..
uuhuh… and the flooring paint and electrical wires cost more also because…? what the component parts vendor says oh look affordable unit contracts let’s charge more for that 2×4…..right ……all because the “now homeless person” couldn’t possibly maintain life in the housing most first time or senior owners do…..? We wouldn’t want the homeless to live as poorly as those paying for New none “sustainable homes” would we?
Until we get campaign contributors out of the mix (ie not allow any consultants/contractor connected to receiving tax payer money in the near future 5/10 years from donating to political campaigns) we will continue to pay dearly for TAJ MAHAL priced edifices that would never be so costly if not for the expectations that tax-payers are footing the construction bill, and paying future rental subsidies.
Anyone think this is an exaggeration look back at the Wendy Gruel audit of Housing Authority of City Los Angeles – those guilty of lavish spending of tax dollars and compromised favoritisms may not be in HACLA…, but many did not stop living well off of tax payers- they simply changed cities and took their corrupt ways with them.
Similar to the original editorial, your comments are rife with generalizations about affordable housing that are incorrect. For example, the idea that consultants and developers are necessarily the direct recipients of these monies is incorrect. Most special needs projects such as those funded by HHH are awarded Federal LIHTCs from the state tax credit allocation committee. The regulations limit the developer fee that can be earned by a developer/sponsor. Admittedly, this does not necessarily limit fees paid to consultants; however, as any developer will tell you – they would rather be paid to get units built rather than overpay consultants and never get the units built. It’s just common sense. There is no question that there are many units developed in areas that are needy in terms of capital investment. But with the enhanced enforcement of the Surplus Land Act (see recent Anaheim Angels case), jurisdictions are required to offer land assets for affordable development before other uses. Capitalized costs for land are limited to what they appraise for (without a waiver), and by purchasing land at a value higher than it is worth makes it more difficult to get a project awarded tax credits. Again – it would make no sense.
The biggest variable in any development project is not soft costs for consultants etc. It is construction costs. The statement that consultants are making more than the prevailing wage increase (or the cost of construction) on projects is simply false. For example, a recent project had a construction budget of over $17 million. Assuming a 20% premium for payment of prevailing wages, this is about $3.4MM. Developing an affordable project (or any development project) will require the services of a myriad of specialized design engineering and other professionals. For this particular project of 70 units located in Southern California, the costs for these services was less than $2.7MM.
To the average person, the idea that affordable units are held to a higher standard is “laughable.” Again, I don’t disagree – but that does not change the fact that it is true. It is not that the fixtures and finishes are more costly, it is that things like increased insulation in wall assemblies or architectural features that achieve passive shading to hit elevated Title 24 requirements that cost more money. Again, not necessarily things the public could see or appreciate; however, they are present in affordable developments. Your flippant comment about a 2×4 costing more because it is in an affordable deal is sadly not far off the truth in one respect – subs do charge a markup due to the nuisance that the compliance requirements of a prevailing wage job adds. Remember, many public sources require the payment of prevailing wages. It has nothing to do with the population being housed and everything to do with the imposition and requirements of prevailing wage programs. See my previous comments about politicians and special interests.
All of that said, I agree with your premise that we need campaign finance reform. In that, we can both agree. Money does move politics in the current political system, which affects the affordable housing industry. Without speaking to the qualifications of Rick Caruso, his personal fortune has allowed him unprecedented media coverage in the City of LA mayoral race. Looking back at the original premise of the editorial- I guess I don’t object too much to that premise. My objection is to incorrect assertions about an industry that I love. Affordable housing marries the economic interests of private industry with housing goals/needs of local communities and advocates. Developers are paid a fee to construct affordable projects that allows them to cover their costs and earn a profit. On an IRR basis, it is well short of what their market rate peers would earn. Coupled with the guarantees that a developer must provide should a project have operating deficits or are not capitalized such that they can complete the construction, these are some of the other reasons a developer is paid a fee to produce what is without question, an asset in the community. There is a reason the larger, institutional developers don’t play in this sandbox – there are easier ways to make a buck!
The statement questioning CEO compensation does not ask the relevant question: what is their compensation relative to their industry peers in multifamily development? Having also worked for a multifamily REIT in my career, I can tell you that the executives from affordable developers are earning less than their for profit, market rate counterparts. This is proved out b/c executive compensation at the nonprofits cited in the editorial are limited by a salary survey, or risk losing their tax exempt, IRS status. Another prohibition is these nonprofits are prohibited from making political donations by the IRS – though admittedly individuals working at an organization are allowed to make personal donations, and I know many do.
In my over 20 years in the affordable industry, I have seen developers as generally a pragmatic lot. The imposition of prevailing wages and elevated sustainability requirements are seen as policy goals for affordable housing to advance, which drives up costs. Do you think a developer would voluntarily ask for things that make projects harder to finance? The project cited in Venice further underscores that when projects are located in higher income areas as the current tax credit program advantages, then land costs are elevated vis-a-vis other market rate projects. And citing an audit of a public agency is not an indictment of affordable developers, rather of entrenched bureaucracies with a lack of transparency and oversight.
The affordable housing industry is far from perfect. I will be the first to acknowledge that. However, any discussion should be based on facts and not gross generalizations.
In summary:
1) It is not developers and consultants that are driving up the $/unit to develop affordable housing. It is other special interests that have a larger impact on the costs to produce affordable housing.
2) It does not make sense for developers to add costs and requirements that would make it more difficult to build affordable housing.
3) Larger policy goals such as location, sustainability, or prevailing wages do increase the cost to produce affordable housing (their intrinsic positives notwithstanding)
4) Affordable housing developers make less and and deal with more regulations and other headaches than their market rate peers
*mic drop*
City’s with their own charter are NOT required to contract with companies paying prevailing wage on construction projects.
That is true – however, the State or County sources of funding require payment of prevailing wages.
Truely its all a scam!!! I currently reside in PRK and have witnessed the way people suit up come to work and dont get dirty. Taxpayer monies get doled out at an astounding rate but none of those funds go to the intended the beneficiaries get no service the bring in peoe with one foot in tbe grave and believe the ambulance and fire dept. Are here daily i can not say how many bodies are removed but for every one removed means they can validate more funding this is known as double dipping like a revolving door on Taxpayer mo ies this crestes an excessof funds that wind up spent erroneously. That is just the tip of the iceberg as a fiduciary the salvation Army working through lasha do not properly train its administrative personnel in a way that they understand the scope of thier authority. Meaning the clients ( PAITIENTS BENEFISCIARYS WHATEVER) are being short changed due to the lack of training. I have also witnessed the poor system of handling property beloning to those exited from tbe program items are taken willy nilly as rooms are entered without supervision and at the descretion oc the unsupervised usurper removed or consumed by that floor worker even the cleaning personel have taken items from rooms they are charged to clean. I have a friend who was remanded to county while attempting to do the right thing in an effort to get her life back on track and when she was released all ber personal belongings had allegedly been donated this i find hard to believe they (PRK) was informed of her situation yet made no effirt to hile her prioerty or as a nationwuxe organization stand for her to say this is one of our flocj and ask she be placed in our custody. Upon her release the administration would not stand up fir her after thier poor handling of her personal property they turned this woman in her fifties. Out to the streets. But the are helping the homeless. Everybody is making a profit off the taxpayers while lying to all of us saying they are here to help. Its laughable to the point of crying all of those we have elected are selling out “we the people” its time the people take back the power placed in the hands of the elected set up and iversite co .ity to check those that monies are entrusted to and make sure those earmarked for those funds get the benefit they have been allotted.
Full disclosure: I work in the affordable housing sector and have been involved in the development of nearly 12,000 rental units in my career. While I don’t disagree that money moves politics, what I do not agree with is the simplistic terms with which this editorial characterizes the development of affordable housing. What is not considered in this overly simplified math is the myriad of policy priorities that are advanced using the affordable housing program both statewide as well as locally. For example, did you know that affordable housing developments must meet more strict sustainability guidelines than market rate developments. Some might argue that sustainability creates cost savings over the term of ownership – and they would not be wrong. However, those sustainability measures must be paid for upfront, driving up costs that must be capitalized now, not in the future. Of course, labor has to get involved in any public program so accepting funds from State HCD or CalHFA typically involves the payment of prevailing wages and adds 20% or more to the construction costs of a project. Surprise, surprise! HHH funded projects have a prevailing wage requirement! These are two examples of politicians carrying water for special interests that would otherwise challenge affordable housing funding and/or projects. Elevated costs are not solely due to politicians and entities that line their pockets; a current policy goal is to place affordable development in areas with higher resources. That is to say a project is advantaged if it is located in an area that has higher socioeconomics than those that are not, with the premise being that the residents will benefit from the schools and other community amenities that might be lacking in lower income areas. Naturally, the land cost in these areas is also higher and thereby artificially making the $/unit for these developments higher vs their market rate peers that are unrestricted in their site selection. Bottom line: editorials such as this provide sensational numbers without any depth of analysis. The affordable housing industry is far from perfect; however, it is a remarkable intersection of public and private interests that leads to the production of housing that can transform communities and the lives of residents who live there.