The city of Los Angeles is spending more taxpayer money than expected to build fewer apartments for the homeless. That's the conclusion of a new audit of Proposition HHH, the 2016 bond measure that was intended to fund 10,000 new units of supportive housing for people experiencing homelessness.
The audit -- released Monday by City Controller Ron Galperin, L.A.'s paymaster and chief fiscal watchdog -- paints a grim picture of the city's ability to build enough homes with the $1.2 billion in Prop HHH bond funds to keep up with rising homelessness.
"The length of time needed to complete these projects does not meet the level of urgency needed to match the magnitude of our homelessness crisis," the audit reads.
But it's not all doom and gloom. The audit includes a series of recommendations for lowering costs and picking up the building pace.
Here are five takeaways from the audit:
1. About building those 10,000 units...
Proposition HHH was sold to L.A. voters as a funding mechanism to get at least 10,000 Angelenos, and likely more, off the street and into permanent housing. That housing is supposed to come with accompanying services, like counseling, to help people stay housed -- it's called "supportive housing."
Mayor Eric Garcetti's Prop HHH tracking website still states the goal of building 10,000 units of supportive housing, although it's been known for a while that the money would almost surely fall short.
Now, Galperin's audit says we're likely to get 7,640 units, even though nearly all of the bond money has been allocated. And that's only if all the projects in the pipeline are actually completed.
Also, only 5,873 of the 7,640 expected units will be supportive housing. The rest will be affordable housing and manager units.
2. Costs have soared, but for reasons you might not expect.
The city estimated in 2016 that it would cost between $350,000 to $414,000 to build a unit of supportive housing (in other words, one apartment), depending on the number of bedrooms. Now, more than three years after that estimate, the median cost per unit of housing in the Prop HHH pipeline is $531,373, according to the audit.
One project, a 41-unit building in Koreatown/Pico-Union, is estimated to cost more than $700,000 per unit.
You might think high-priced land is to blame, but the audit pointed to rising construction costs as the main culprit. Galperin focuses particular scrutiny on what are called "soft costs," including consultant fees, permitting and financing.
The audit found that developers are spending "an unusually high" 35% to 40% of their construction budgets on these soft costs (around 30% is more typical). "Actual land costs" meanwhile are at 11%, Galperin said.
But not all those financial setbacks have come from construction costs. Galperin said that the city jumped the gun, selling many of its HHH bonds "long before the proceeds would be used to build homeless housing." That decision led to at least $5.2 million in "unnecessary interest payments" through June of this year, the audit found -- a bill footed by taxpayers.
3. Projects are taking too long to build to make a dent in homelessness.
Pop quiz:
Q: Nearly three years after L.A. voters passed Proposition HHH, how many supportive housing units have opened?
A: Zero.
That's right, zero.
Two projects are scheduled to open by the end of the year, with a total of 117 units (74 of them supportive units.) And 19 total projects are under construction.
This apparently slow timeline is not unusual. Supportive housing typically takes three to six years to complete. But Galperin says, given L.A.'s "homelessness crisis," city leaders should figure out a way to speed it up. More than 36,000 people are experiencing homelessness in L.A., according to a January count.
"The performance of the program to date indicates that a course correction is required, before it is too late," Galperin said in the report.
So what can we do? Here comes the solutions part.
4. Support innovative housing solutions and emergency measures.
Already concerned about falling short on goals, the citizens oversight committee for Proposition set aside a $120 million challenge fund in January with the aim of speeding up housing production and cutting costs. They solicited the best ideas for producing 1,000 new units of supportive housing in less than two years.
Recently, the city picked six projects to test out, including one using modular construction, a shared housing model and a project with simplified financing. The audit notes that the projects "have the potential to significantly lower costs and shorten development timelines" but it's too soon for a final verdict.
Still, Galperin recommends exploring the possibility of reallocating funds from higher-cost to lower-cost projects.
He also recommends using any available funds to pay for emergency measures, like temporary shelters, storage and showers for people living on the streets.
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5. Cut the red tape.
Thanks to a recent $1.5 million grant from United Way of Greater Los Angeles, the city now has an "HHH Concierge." The job of the concierge (technically called the Affordable Housing
Production Manager) is to escort supportive housing projects through the pipeline -- as quickly as possible.
The controller recommends supporting the concierge's efforts, and possibly dedicating more staff to help streamline permitting.
A bill recently signed by Governor Gavin Newsom (AB 1197) may also help, Galperin notes, by exempting supportive housing and homeless shelters from some state environmental requirements.
City officials hope the new law will help it fend off several lawsuits from community groups aimed at blocking the city's efforts to build housing.
Reached by email, Andrea Garcia, a spokeswoman for Mayor Eric Garcetti, supplied the following statement:
"Our goal is to build 10,000 units of high-quality, long-lasting supportive housing by 2026 with the help of Prop. HHH and other resources. The Controller's report is a thoughtful look at a generational challenge, and it rightfully acknowledges the deep complexity of the task before us. We are on track to meet our goals -- and Mayor Garcetti is as committed as ever to reaching the objectives of Prop. HHH, and accelerating the work of connecting homeless Angelenos to the housing and healing they need to rebuild their lives."
The audit said LAHSA's current strategy in the city is misguided, and has an underwhelming track record when it comes to moving people from the street into permanent housing.
Jill Replogle and Ryan Fonseca contributed to this story.
