NEWS ANALYSIS : Fund Drive Brings Investment, Hope to Housing Crisis
An emotional Mayor Tom Bradley joined leaders of banking and commerce Wednesday in the South-Central neighborhood where he was raised to unveil an unprecedented plan by California corporations to invest $125 million in low-income housing.
Noting that Los Angeles will get the bulk of the 4,000 units to be built statewide, including a complex developed by Concerned Citizens of South Central, Bradley spoke of the city’s widening housing affordability crisis and said, “We are grateful that this city has been singled out.”
But can 4,000 new dwelling units for the poor, financed by private investors over the next five years, really make a difference in the region’s crisis?
The state has an estimated shortfall of 502,000 low-cost units. Meanwhile, the poor and low-income continue to spill daily into California from other states, Mexico and Central America, and government funding for housing construction and renovation stagnates or grows in tiny spurts.
Studies show that developers are building plenty of housing--but mostly $700- to $1,500-a-month luxury units priced far beyond what many families can afford. And despite local efforts, Los Angeles is in worse shape than any other city in the state, falling behind by an additional 11,000 apartment units each year as demand for low-cost housing increasingly outstrips supply.
Yet Wednesday’s announcement of a major drive by California corporations to raise millions to invest in low-cost housing seems to confirm the arrival of a new era--one in which the private sector will play a critical role.
“It takes a (public and private) partnership if we are going to tackle a problem of this size,” Bradley said. He noted that after the $125-million fund drive was proposed to him last fall by a nonprofit group, Local Initiatives Support Corp., it was quickly backed by a $10-million investment from Great Western Bank.
And although the housing crisis continues to grow, experts say there is hope that it will not permanently settle over California like so much urban smog.
They see the current pioneering steps to meld private and public backing as a good start.
“This is the only way this crisis is going to get resolved,” said Michael Bodaken, Bradley’s housing coordinator. “There’s a lot of opportunity to catch up very fast, because if there’s one thing people here in the West understand, it’s private investment and new opportunity.”
Backers of the new program hope to collect $125 million over five years. So far, about two-fifths of that has been raised.
The money will pay for housing to be built by small neighborhood-based nonprofit developers. Corporate investors will act as arms-length limited partners. Investors, who already include the giant Federal Home Loan Mortgage Co. and Security Pacific Bank, as well as Great Western, will have no say over development but will reap returns of 10% to 15% from federal and state tax credits granted for financing low-cost housing.
Earlier this month, the story of such private initiative focused on Nehemiah West, a plan by another community-based nonprofit group to build 116 townhouses selling for just $62,000 in a long-neglected corner of South-Central Los Angeles--the first homeownership project there in a generation.
With Nehemiah West, it was not corporations but churches that invested millions. The public help came from the city of Los Angeles, which offered a piece of public land at well below market price to clinch the deal.
Christine Minnehan, a consultant to state Senate President Pro Tem David A. Roberti (D-Los Angeles), a housing advocate who is among the sponsors of the homeless housing initiative, Proposition 107, on the June ballot, said of the public-private push:
“This is essentially important to resolving the housing crisis in California. The state government cannot possibly do it alone. It takes an enlightened business and corporate community. . . . They have to be partners.”
Paul Grogan, president of the Local Initiatives Support Corp., a Ford Foundation spinoff that has created 20,000 units of affordable housing nationwide since 1980, is masterminding the $125-million investment drive.
Grogan said that persuading corporations that know nothing of residential development to invest in low-cost housing “is a stretch for them.”
But, he added, “this is what the new housing movement in this country is all about--adapting new ideas to a pressing need.”
