Plan to Increase City’s Affordable Housing Includes Developer Fee
The Los Angeles City Council on Tuesday approved in concept a sweeping set of plans to create badly needed affordable housing, including a fee to be paid by commercial developers into a housing fund.
The watershed package of programs--ideas borrowed from several cities that are well ahead of Los Angeles in responding to skyrocketing housing costs--was approved 13 to 0 after some of its aspects were strengthened by the council.
Show of Support
The complex set of proposals received a surprising show of support, not only from council members but also from a wide range of advocates for the poor, housing experts, corporate leaders and commercial development representatives who spoke. It was applauded by Mayor Tom Bradley, who released a statement saying that he will “eagerly sign these proposals into law.”
City officials have estimated that one-third of the city’s renters--300,000 families--pay more than 30% of their earnings for rent, an amount considered unaffordable by the federal government. Another 40,000 families live in garages and 30,000 to 35,000 people are believed to be homeless.
Each proposal will be drawn up as an ordinance and returned to the council for final votes. How much the programs will cost the city, and how many new units of housing they will generate, are yet to be determined.
Among the key provisions are:
* A “linkage” fee of between $2.50 and $7.50 per square foot on large commercial construction, which will go into a special housing fund. In San Francisco, Boston, Seattle and elsewhere such a fee is already raising tens of millions of dollars, and has helped create thousands of permanent low-cost apartments renting for less than $450 a month.
* Funding for programs that will bring new clout to the city’s nonprofit housing developers, who are widely viewed as crucial to the creation of permanent low-rent housing. Nonprofit developers will be awarded special financing and technical assistance not now available.
* Creation of a Housing Partnership, an approach that has worked in other cities. Such partnerships encourage corporations and nonprofit housing groups to raise and share funds for affordable housing.
* Establishment of a Housing Commission to oversee the tangled and sometimes duplicative efforts of 11 city departments that have a say in low-cost housing issues.
* Strengthening of a long-existing city ordinance that requires new residential buildings to include 15% affordable housing, contingent upon the developers receiving subsidies. The ordinance has created little low-rent housing because of lack of government funds.
* An increase in the document transfer tax charged on real estate transactions and other document transactions, a provision that would require changes in state law. The money would be paid into an affordable housing fund.
* Allowing expenditures of up to $10 million from the city’s reserve fund to shore up aging brick buildings that must comply with city earthquake strengthening laws or be torn down. Currently such buildings contain more than 40,000 low-rent apartments, and city officials believe that losing that housing would be devastating.
* Placement of a $100-million bond issue on the June, 1990, ballot to provide low-cost loans and other assistance to owners of aging brick buildings who must comply with city earthquake standards.
* Creation of a special city unit to negotiate with owners of 22,000 affordable rental units, whose rents could skyrocket to market level in a few years as federal restrictions on their rental limits expire. Most apartments would also be placed under city rent control.
* Development of a plan to control the demolition of affordable housing, a problem that is reaching huge proportions as the city’s development boom continues. City officials estimate that more than 4,000 units of affordable housing, much of it in sturdy condition, falls to the wrecking ball each year.
Gary Squier, the acting city Housing Authority director, told the council that in the year it has taken the proposals to reach the council, “6,000 additional new families moved to Los Angeles who now have inadequate housing” and 5,000 affordable units were torn down to make way for developments and luxury apartments.
Has Major Backers
Among those backing the proposals were Arco President Robert Wykoff; developer representative George Mihlsten; Ann Reiss Lane, president of the Shelter Partnership, a homeless organization, and Sister Diane Donohue, of the South-Central Organizing Committee. All four were on a blue-ribbon committee that spent nearly a year drafting the plans. Developers on the panel had opposed aspects of the linkage fee, but supported it Tuesday.
Most of the council debate Tuesday centered on the linkage fee.
Councilwoman Gloria Molina questioned a proposal to set the fee at $2.50 per square feet, saying it was too low. The debate was quelled when Councilman Marvin Braude suggested an initial fee ranging from $2.50 to $7.50, which was adopted.
“I want something that is not a lip service figure but a realistic figure,” Molina said. “I am worried about locking ourselves into such a low fee.”
Donohue told the council, for example, that 10 million to 12 million square feet of commercial development is created downtown each year, and if each developer were paying $2.50 per square foot, “that would create $25 million a year for housing. Even though that isn’t enough, it’s a start.”
Need Special Study
Under federal law, the city must complete a special study before making developers pay such linkage fees. The study report, due this fall, will show how much housing demand is created each time a developer erects a commercial building that attracts workers, who then must find housing.
Permanent fees will be based on the study. Studies in other West Coast cities have set the fees at $5 to $8 per square foot.
To provide affordable housing for all who need it, especially given the huge influx of immigrants and low-paid workers entering the city each day, city officials have estimated that Los Angeles will need several billion dollars.
