When L.A. opted to fund city services over housing, did it help fuel a crisis?
Los Angeles Mayor Eric Garcetti has repeatedly pointed to the state’s elimination of redevelopment agencies seven years ago as one reason homelessness has surged across the city.
Redevelopment agencies were supposed to set aside at least 20% of their property tax revenues for affordable housing projects. In L.A., that once yielded roughly $50 million annually, according to the housing department.
“With the end of redevelopment, we lost almost 100% of our affordable housing funds” from that source, the mayor told reporters in February.
But while Garcetti laments budget decisions made in Sacramento, others argue that Los Angeles missed a critical opportunity to invest in affordable housing after redevelopment ended.
Although redevelopment agencies disappeared, the money has not. Some of the funds that used to go to agencies now flow to cities, counties, special districts and schools. Los Angeles has received more than $394 million in former redevelopment dollars — also known as “boomerang funds” — since redevelopment ended.
And while some jurisdictions decided to spend some of the boomerang funds each year on affordable housing, Los Angeles opted not to.
Instead, Garcetti and the City Council put the new revenue into the day-to-day budget to help cover spending on police, firefighters and other city services, along with growing costs for retired employees.
Garcetti said the boomerang funds kept “police officers on the street and firefighters in the firehouse” in the years following the recession.
“I would have done it in a split second again,” the mayor said in a recent interview. “It was the right thing to do to preserve critical city services.”
Garcetti has helped secure new sources of funding to house the poor in the last year and a half: A bond for homeless housing is bringing in more than $75 million this budget year, according to city officials. A new “linkage fee,” which charges developers for new construction, could yield as much as $100 million annually for affordable housing after it goes into full effect next year.
But as Los Angeles struggles with rising numbers of people bedding down on its streets, some argue that boomerang funds could have helped ease the housing crisis.
Housing advocates urged the city in 2014 to set aside some of the boomerang money for affordable housing, warning that federal funding for housing had been plunging and the city was becoming increasingly unaffordable for renters.
A housing department report four years ago called it “imperative” that the city reserve some of the boomerang money to deal with the “acute affordable housing need.” Another report from its economic development department released that year recommended that city leaders dedicate some of the funds “to address the city’s housing and jobs crisis.”
“All you had to do was look outside — the crisis was very real,” said Joe Donlin, associate director of the nonprofit Strategic Actions for a Just Economy. “We were making that case in our testimony at City Hall, saying, ‘We need this now.’ ”
Councilmen Mitch O’Farrell and Gil Cedillo also proposed setting aside some of the funds. But budget officials warned that if boomerang funds were used for affordable housing, the city would need to pare back other spending.
O’Farrell now says the city missed a key window to take action as rising rents squeezed residents. “We lost ground,” he said.
Before redevelopment ended, federal funds and redevelopment money generated $100 million or more in some years for the production of affordable housing in the city of Los Angeles. Last budget year, there was $27 million, most of it from the federal government, for the city to rely on. That sum did not include the value of city properties set aside for affordable housing development.
Under Mayor Antonio Villaraigosa, who was in office when redevelopment was eliminated, the city cushioned some of the blow to affordable housing with more than $16 million from its general fund — the day-to-day budget that pays for city services.
But in the years that followed, the city put little of its general fund toward producing affordable housing. Like other California cities, Los Angeles had historically relied on both redevelopment and federal money to fund such construction.
Redevelopment agencies were first authorized by the state in 1945 as a way to revitalize downtrodden neighborhoods. Under the program, cities declared a neighborhood “blighted,” allowing a portion of property taxes collected within that zone to subsidize development and affordable housing in that area. Cities, counties and other government entities would otherwise have received that money.
Brown ended the program amid the financial crisis and mounting concerns over reported abuses of the redevelopment money.
Today, some of the property tax money that once flowed to redevelopment agencies is still being used to repay debt on redevelopment projects, and the rest has been redirected to cities, counties and school districts.
Some jurisdictions, including Oakland and Emeryville, dedicated a similar percentage of boomerang funds to housing or helping the poor after redevelopment ended. However, many California cities and counties were reluctant to do the same, facing pressure to spend money to restore services and increase salaries for government employees in the aftermath of the recession.
Los Angeles City Councilman Paul Krekorian, who heads a council committee focused on the budget, said the city would have been short on money for police, firefighters and restoring basic services such as street repairs if it had spent boomerang funds on affordable housing. “It’s not like there was money sitting around that we just hadn’t gotten around to spending,” Krekorian said.
Garcetti questioned whether setting aside boomerang funds had made a difference in homelessness in other cities. He touted other steps he took to address the crisis, including pushing for the homeless housing bond and linkage fee, setting aside city properties for affordable housing development, and advocating for new state funding.
“All combined, these efforts will unlock billions of dollars of housing investment,” Garcetti spokesman Alex Comisar said in a statement.
Alan Greenlee, executive director of the Southern California Assn. of Nonprofit Housing, who pushed unsuccessfully for the city to dedicate some of the boomerang funds for affordable housing, said that “the city has done some extraordinary things to make sure we’re back in the construction business.”
But Tony Salazar, principal of the real estate development company McCormack Baron Salazar, said that although Los Angeles has found new money for affordable housing, years of slashed funding will have lingering effects.
“We’re talking years of delay that occurred as a result of not having had that investment,” Salazar said. In addition, “the cost of construction for affordable housing has gone up enormously.”
With boomerang funds still flowing into the city, O’Farrell and Cedillo want budget officials to again look at using a portion for affordable housing.
Cedillo said that as city finances have stabilized, “it is time that we consider reinvesting boomerang funds” into a city fund for affordable housing.
“We have starved this fund, exacerbating our housing shortage and affordability crisis,” the councilman said in a statement.
Garcetti said he was open to the idea, but cautioned that there would be trade-offs. “I’d be happy to see what they want to cut in the city budget to do that,” he said, “but it’s a zero-sum game.”
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