By Carolyn Gray Anderson
Last March, Los Angeles voters rejected proposed limits on the construction of large-scale buildings, limits that included a two-year moratorium on development of dense, high-rise residential properties. In a city where working-class and middle-income households are increasingly forced to prioritize housing costs over medical care, food and even transportation, it was a decisive defeat for ballot Measure S. But will augmenting the pace and quantity of available dwellings really make living here more affordable for anyone but the super rich?
The UCLA Ziman Center for Real Estate studies the problem of housing affordability as it reaches crisis levels in California. The constraints are especially acute locally because although there is an immense amount of wealth concentrated in L.A. and land values are extremely high, ours is a very expensive city with no real wage growth within the working class.
Ziman partners regularly with the nonprofit Mercy Housing to organize symposia on topics germane to professionals in real estate, government and industry — but with a crucial public education component consistent with the mission of Ziman’s Howard and Irene Levine Program in Housing and Social Responsibility to promote the kind of dialogue that improves society in all economic sectors. Mercy Housing is a national nonprofit organization that provides affordable housing and supportive programs in 41 states to improve the economic status of residents, revitalize neighborhoods and stabilize lives.
The most recent Ziman-Mercy partnership produced a half-day symposium titled Moving Forward: Building Housing for L.A.’S Working Class and Middle Income Residents. Keynote speaker Ben Metcalf, director of California’s Department of Housing and Community Development (HCD), unveiled the Statewide 2025 Housing Assessment, which reveals, among other things, that overall homeownership rates are at their lowest since the 1940s, while at least 30 percent of all California renters are housing constrained. This means they spend minimum one third of their income on rent every month. With land prices alone exceeding what average Angelenos can afford, low- and middle-income housing is built only with large public subsidies.
Ziman board member Kevin Ratner, president of Forest City Residential West, is a for-profit developer who leverages incentives like density bonuses to encourage affordable housing developments. Ratner said the biggest conundrum is in a luxury-level housing market whereby people who can’t afford rents and mortgages face no choice but to earn more and more money, endure distant commutes or leave altogether. “If you cater only to the top of the market,” he said, “affordability cannot be designed into your plan.”
With a regulatory environment that all panelists agreed is restrictive to an extremely counterproductive extent, how can L.A. be intentional about preserving access among existing stakeholders and carve out pockets of affordability in gentrifying neighborhoods?
This is where UCLA’s collaborative research comes in. Professor of Urban Planning, Social Welfare and Asian American Studies Paul Ong of the UCLA Luskin School of Public Affairs brought to the Moving Forward conversation his expertise in the areas of gentrification and displacement. “The extreme ends of the spectrum are increasing at the expense of the middle in terms of household median income, and L.A. is the most expensive city relative to income,” said Ong. The foreclosure crisis that drove the recession alienated first-time home buyers and pushed property owners back into the rental market. With this, Ong said, came a noticeable shift to more expensive homes being built.
Panelist Ann Sewill, VP of housing and economic opportunity at the California Community Foundation, pointed out that new construction can cost $500,000 per unit in the densest areas of L.A. “Cost is what it is irrespective of intention or mandate to provide affordable housing. Nonprofit or for-profit, builders are builders. We need intentional targeted production that takes into account underreported income disparities.”
Experts and public alike are still trying to determine the best post-redevelopment models for subsidized housing. Mercy Housing California’s president, Doug Shoemaker, said, “We try to spend our affordable housing funding to solve multiple problems. We need a move to acquisitions and rehabs.” California is also revisiting ordinances for “non-conforming” apartments and what are classed as accessory dwelling units, broadening regulations and defining them as priced below market for the areas they rent in.
Density and transportation infrastructure cannot be factored out of the equation. Ziman Center Executive Director Tim Kawahara and others believe that L.A. needs more “upzoning” in appropriate locations tied to public transit and areas that promote walkability. “L.A. is updating its badly outdated planning system and 35 community plans that guide neighborhood-level development across the city,” he says. “This process will shape how L.A. will look for at least a generation.” The hope is that the city’s efforts lead to a more thoughtfully planned metropolis with equitable housing options for all residents.
There’s no question that affordable housing is a growth industry; but in the current regulatory environment developers stand to make the best and easiest money in the luxury housing market.
So why should an MBA — let alone an established business mogul — about to embark on a career in lucrative real estate transactions care about middle-income affordability when incentive is greater to encourage luxury housing and commercial starts?
Kawahara says that new constraints on the middle-income tier have far-reaching implications for the economy as a whole. “On a practical level,” he says, “it’s harder for businesses large and small to attract talent for hire if housing is too expensive. Entire companies will decamp to other states as their ability to turn a profit in California declines.” With more accessible housing will come better, higher-paying jobs in real estate acquisitions and property management that require the business acumen of an MBA.
There are health implications, as well, says Professor of Finance Stuart Gabriel, Ziman Center Director and UCLA Anderson Arden Realty Chair. People trying to afford housing in neighborhoods close to their workplaces or to decent schools must often accept environmental dis-amenities like adjacency to major freeways.
Gabriel’s latest research investigates the broad economic effects of the 2009 California Foreclosure Prevention Act and other crisis-period foreclosure prevention laws that attenuated the decline of the California housing market. The annual Mercy collaborations are meant to spark new thinking around widespread access to housing in expensive markets like L.A. Ziman produces research that can inform policy and industry alike. As Gabriel says, “State agencies and nonprofits have neither the staffing nor the resources to undertake fundamental assessment of the causes and broader consequences of the lack of housing affordability.”
Read a longer version of the story on the UCLA Ziman Center blog.
On June 13, 2017, Stuart Gabriel, economists at the UCLA Anderson Forecast and a panel of invited experts examine The New Los Angeles Urban Landscape and the High Price of Housing.
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