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LA Loses Much More Affordable Housing Than It Gains

Stock housing
Construction of a new luxury housing development in Little Tokyo.
(Chava Sanchez
/
LAist)
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Despite Herculean efforts, the city of Los Angeles has lost eight times more housing than it has gained for its lowest income residents, an LAist review of city records shows.

From 2010 to 2019, the city lost about 111,000 homes that were considered affordable for low-income households. According to government standards, housing that is affordable costs no more than 30% of a household’s gross income, leaving the balance for other must-haves such as food and transportation.

Over the same period, about 13,000 new homes affordable to such households were built.

That left the city with a previously unreported net loss of 98,000 homes affordable to low-income households, and helped preserve L.A.'s reputation as an American capital of unaffordable housing.

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Stuart Gabriel, director of the UCLA’s Ziman Center for Real Estate, said these figures illustrate the difficulties the city faces as it tries to build its way out of a “deeply worrisome” shortage of housing that is affordable to low-income residents. He characterized the city’s efforts as similar to “pouring a glass of water into the Santa Monica Bay and then looking for a change.”

Over several decades, city officials have mainly relied on relatively scarce federal government subsidies to finance housing projects built by private developers, in return for their promises to rent to lower-income residents at prices they can afford. The city has supplemented this by granting developers of new market-rate housing permission to build more units if they agree to rent some at prices low-income residents can afford.

But as city planners have acknowledged, these efforts, Gabriel said, have been wholly inadequate.

City planners — public employees who ultimately report to the mayor and city council and are tasked with mapping out how to meet the city's projected housing needs — recently described the crisis this way: “Angelenos pay more of their income on housing, live in more overcrowded conditions, and have the highest rates of unsheltered homelessness of any city in the country.”

What Can Be Done?

The city’s mayoral candidates have each cast themselves as potential heroes in the city’s uphill fight to end the housing crisis, but neither has explained in detail how they will accomplish what they promise.

Their housing strategies remain “something of a mystery,” Gabriel said.

U.S. Rep. Karen Bass has promised in advertisements that she will “keep Angelenos from losing their homes by building and protecting affordable housing.”

Developer Rick Caruso, former chair of USC’s board of trustees, and a billionaire builder of upscale shopping malls and luxury housing, has been bolder. In TV commercials, he’s promised, “I will build hundreds of thousands of affordable homes.”

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City planners aren’t expecting miracles. They say they expect the city to do better, perhaps building as many as 62,000 units of housing affordable to low- or moderate-income households over eight years. However, they say that would still leave three quarters of the city’s affordable housing needs unmet — roughly 198,000 families. They explained in a recent report to the state that “existing financial resources and incentives” are not enough to do more.

The city has plans to amp up its reliance on incentives intended to get developers of market-rate housing to include a smattering of discounted units affordable to low- or moderate-income tenants in their projects. Developers who do this get to build more units than the city would otherwise allow.

But the city also plans to continue to rely mainly on federal, state, and local subsidies to finance construction of projects in which all units are rented at discounts to low-income, or, in a few cases, moderate-income households.

David Garcia, policy director at UC Berkeley’s Terner Center for Housing Innovation, says this won’t be enough to make up for losses in the city’s existing stock of unsubsidized, “naturally occurring affordable housing,” like the 111,000 homes lost to higher prices from 2010 to 2019.

A Crisis More Than A Decade In The Making

In calculating these losses in the city’s existing stock of affordable homes during that period, planners relied on Census data about dwellings that rented for up to $1,035, adjusted for inflation.

In 2010, Census data showed there were about 320,000 of these dwellings, considered affordable to many low-income households making up to $42,000 per year, which equates to a wage of about $20 per hour for someone working full time.

By 2019, about 110,000 of these dwellings had left that price range.

Planners suspected that gentrification pressures helped explain the loss. Amid the city’s housing shortage, residents with lower incomes have increasingly found themselves competing with more middle class residents willing and able to pay more. The competition has driven prices up and increased temptations for owners to take advantage of exceptions to rent controls that allow them to charge market rates.

“That’s a tremendous economic force to try to push back against,” Garcia said.

Owners can legally charge market rates whenever tenants voluntarily move out or are paid to leave. Before a COVID-19 emergency was declared, owners could also evict tenants easily if the owners promised to take their rental units off the market for a specified period.

From 2010 to 2019, the city’s housing department reported that owners of more than 9,000 rental properties took advantage of this provision.

Additionally, more than 4,000 affordable, subsidized units fell off the rolls when owners’ promises to keep rents low expired. Owners of properties such as the Westlake Apartments, a 14-unit building near MacArthur Park, and Rosetta Apartments, a 55-unit building in Koreatown, became free to charge market rents, according to the California Housing Partnership.

Could Housing For Middle-Income Earners Be Part Of The Solution?

Gary Painter, a USC professor who studies housing economics, says a necessary first step toward solving the city’s housing crisis is finding a way to build more new housing, including duplexes and fourplexes, for people of moderate means.

Not much of this is being built now. From 2014 through 2021, the city reported granting 118,000 building permits for housing that would be considered affordable only by relatively well-to-do households — those earning more than $96,000 per year as of 2021.

It reported granting building permits for only about 13,000 housing units that would be considered affordable for lower-income households earning less than $64,000 per year.

But the biggest losers in terms of new construction were households whose incomes were considered moderate, falling somewhere between $64,000 and $96,000 per year as of 2021. The city reported granting fewer than 1,000 permits for housing affordable for these households.

Planners call the dearth of new housing built for households earning moderate incomes “the missing middle.”

Painter, who directs a USC-United Way partnership called the Homelessness Policy Research Institute, said a necessary first step to solving the housing crunch in L.A. is building more housing aimed at these residents. This would reduce competition between lower-income and moderate-income residents for available housing, and relieve gentrification pressures that are pricing some residents out of their neighborhoods.

Garcia, the policy director at UC Berkeley’s Terner Center for Housing Innovation, said more housing needs to be built at all levels but agreed that creating additional new housing for moderate-income households is critical. He said that, left without alternatives, moderate-income renters –—who can’t afford the higher-priced housing that dominates new construction — will continue driving up costs in already existing housing to levels that lower-income households cannot afford.

The Mayoral Candidates Respond

Neither of the city’s mayoral candidates has addressed the “missing middle” quandary.

Each declined an interview request on how they would deliver on their promises, but responded to written questions.

Asked how he would fulfill his pledge to build hundreds of thousands of affordable homes, Caruso said he would first vet “300 parcels deemed surplus by the city … the majority … in commercial areas” as potential sites.

He also said the city needs to permit denser construction than it now allows in “highly urbanized and transit-rich communities” and streamline planning reviews and appeals “so projects that meet our housing needs are not denied.”

“I won’t accept mediocre results as the baseline for what we can and can’t accomplish,” he said.

Caruso has never built a home that would be considered affordable by a low- or moderate-income household.

However, in 2017, the city granted him incentives to include 14 discounted apartments that would meet government affordability standards in a building that would also include 131 luxury dwellings near the Beverly Center. The city relied on an incentive that granted Caruso permission to build more apartments on a lot than it would ordinarily allow. The building has yet to be built.

Asked how she would fulfill her pledge to build and protect affordable housing, Bass said through her housing policy advisor that she too would speed construction by streamlining approvals.

She said she would also secure “bridge loans from the private sector to get projects underway while financing is being finalized” and advocate in Sacramento for a “more seamless financing system to get projects built faster and cheaper.” She added she would establish a new city fund to purchase apartments in 100% affordable projects as their long-term promises to maintain affordability expire.

What questions do you have about housing in Southern California?

Corrected October 20, 2022 at 12:19 PM PDT
A previous version of this story misstated the number of building permits that the city of Los Angeles reported granting that would be considered affordable for lower-income households earning less than $64,000 per year. LAist regrets the error.