A primer on affordable housing in California.

Most of the shitshow that we're in is because of the affordable housing shortage, as I've written at length. I'm going to use this part of this housing series to discuss just what affordable housing means, and to clarify just why it's so damned hard to build more of it.

There's four kinds of affordable housing.

  1. Cheap market-rate housing.
  2. Privately-subsidized housing in for-profit developments.
  3. Publicly-funded housing.
  4. Public housing.

1: Market rate housing which happens to be cheap.

When you, a normal Angeleno, talk about "affordable housing," you probably are talking about an apartment that you can afford to live in. You know, a dingbat in the Valley; one of those 1920s apartment buildings on the Eastside; an ADU converted from a garage. The vast majority of the middle classes and the poor live in these types of apartments, and while they may have rent control, the stock of these is dwindling.

You also can't build more of these buildings today, due to the zoning law. The zoning law sets aside 3/4 of LA's residential land for suburban-style houses, so most of the Valley and the Westside is off limits - and don't even get me started on the suburbs. Not to mention, if you build a new building, you're almost certainly required to provide private outdoor space for each apartment, a big concrete garage, and sad-looking landscaping which kinda just sits there and does fuck-all..

It's the law.

2: Below-market-rate, rent-controlled apartments, funded by private money.

The second type of affordable housing is the most contentious, and arguably the focus of a lot of the trench warfare around new apartment buildings.

When a new building goes up, there's invariable demands from the neighbors that a certain number of the new apartments be set aside for rent-controlled, below-market-rate housing - i.e., apartments reserved for people making less than $90k, for a family of four.

There's a couple standard ways you can get developers to build this, because for-profit businesses are loath to leave money on the table. After all: why would you rent an apartment in Hollywood for $1000 when the market rent is double that?

The first way to do that is to pass a law saying that every new apartment building has to include a percentage of below-market-rate apartments, restricted by income. (WeHo, for example, requires 20 per cent of all new apartments to be below-market-rate.)

I am not a fan of this approach because this tends to deter new construction. Santa Monica tried to impose a 20% mandatory affordable requirement on large-scale downtown development a few years ago. In response, many developers decided to build smaller buildings with fewer below-market apartments, because otherwise it wasn't financially viable. The same thing happened in San Francisco, as well; San Francisco actually had to reduce its affordability requirements because it killed off so many new apartment buildings. (Twenty per cent of zero is still zero, after all.)

Not surprisingly, the never-build-anything crowd LOVES high affordability requirements, because makes it so much harder to build new apartments while simultaneously allowing you to keep your liberal street cred. To illustrate, from a City of Santa Monica report: if you require even 7 1/2 per cent of new apartments to be below-market, most of the city is out. South Pasadena is currently trying to do the same thing.

The second way to get private developers to build below-market-rate housing is called the density bonus law. That is, if you build a new apartment building and you include a certain number of below-market-rate apartments, you get to build more market rate apartments than the law allows. The most familiar one you might know is LA City's Transit Oriented Communities law, which has been a massive success at building new apartments. It's up there with the new ADU laws with getting new apartments through the bureaucracy. (There's also a similar, but less aggressive state program which does the same thing.)

I like density bonuses this way everyone wins: developers make more money, more apartments get built, and they go near Metro, instead of out in Indio or Palmdale or whatever. The program really should be expanded, because Transit Oriented Communities only applies in LA City, and it only applies if apartments are legal there in the first place. Even if you wanted to, you couldn't put a new apartment building in Cheviot Hills next to the Expo Line, or the Valley next to the Orange Line. You'd have to rezone.

3: Nonprofit apartment buildings, funded with government or nonprofit money.

The government stopped building public housing long ago, and in its place, the government created the Low Income Housing Tax Credit, which gives investors tax breaks if they finance below-market-rate apartments. The major drawback of this system is that the bureaucracy is incredibly slow and difficult to work with, and susceptible to political meddling by nosy neighbors, and city councilmen. It's depressingly common for nosy neighbors and meddling city councilmen to freak out that (heaven forbid!) teachers and grocery workers might live in their neighborhood, and kill these projects. A pretty typical example is this one from Palo Alto up north. There, a nonprofit developer wanted to build 60 apartments of senior housing for seniors making $118,000 or less (!!), and 12 single-family homes. Of course, the NIMBYs declared war, and won - instead of 60 below-market apartments and 12 single-family homes, they got 14 McMansions instead.

And because of this shitty bureaucracy, building with government and nonprofit money is expensive. A apartment of publicly-funded affordable housing runs $425,000 a pop, which is twice what it costs to build market-rate housing in Philadelphia or Houston.

4: Public housing.

Some of these projects still exist but they're few and far between. These gov made the mistake (or the active decision, depending on your political view) to use public housing to crowd poor people, minorities, and poor minorities together. So, when things fell apart and white flight happened during the great post-WW2 suburbanization, these pockets of concentrated poverty really were a clusterfuck.

There's a new proposal in the Legislature, AB 387, which would establish a new public housing authority, but with one critical difference from the bad old days. A majority of new apartments would be sold at market rate under 99-year leases, and for use as a primary residence only. The state would build apartments the way UC and Cal State build dorms, and to use the money from selling market-rate apartments to finance the below-market rate apartments.

After the initial layout of money, the new public housing authority would be financially self-sufficient from rents and mortgage payments.

There's only one problem with this: it's currently unconstitutional. Article 34 of the California Constitution - passed in 1950 - requires that a city's electorate vote to approve any new public housing on its land, and you can bet your socks that Beverly Hills, San Marino, and Palos Verdes will want nothing to do with this. Until it's repealed, any new public housing would be limited to cities which have city pre-approval in place. (Article 34, by the way, is why Dodger Stadium takes up most of Chavez Ravine, and not apartments.)


All of this is why we're in the clusterfuck we're in today. It's not legal to build basic apartments anymore, so you can't get reasonably-priced market rate apartments. Developers are loath to build below-market rate units unless there's a financial benefit to them. The affordable housing bureaucracy is sclerotic and slow, making it hard to build new rent-controlled apartments. And the government can't build public housing anymore because it would require taking public votes every single time.

These things are fixable, of course. But to do that, you actually have to change the law to allow housing for normal people to get built.

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