Housing dilemma: Luxury, affordable residents seek units: City Falls short in meeting lower-income needs.

Shelly Garcia

Despite plans for 339 units of affordable housing in some of the most needy areas of the San Fernando Valley, Los Angeles still falls far short of meeting demand for such types of residences, according to developers and other housing industry officials.

The new units were part of an initial round of proposals presented to the Los Angeles City Council on March 14 to alleviate the affordable housing crisis.

The projects would bring more new housing than some of those areas have seen in years. But the city's population growth is far outpacing its housing stock. While the trend is reaching desperate proportions for all types of housing, it is especially dire for low-income families who are often crammed into small apartmeats or converted garages, sometimes with two or more families sharing the space.

"The affordable housing is the most urgent, only in the sense that the people who can afford less are way more vulnerable," said Jane Blumenfeld, the city's principal planner. "If you make $100,000, even though there's a housing shortage, you can find an apartment. If you make $20,000, there's not many places that you can afford."

Officials point their finger at the scarcity of land and the cost of development, reasoning that lack of supply is driving prices steadily upward, and they have moved to subsidize the cost of building such projects.

But some developers say the blame lies squarely with the city. By holding firm on zoning and density rules, it is perpetuating the supply side dilemma.

"Cities, starting with the city of Los Angeles, have an aversion to approving new housing on available parcels of land," said Bruce Karatz, chairman and chief executive of KB Home. "They talk a good game, but when it comes down to it, they prefer development of commercial uses that will generate sales tax revenues rather than trying to solve the shortage of housing. And that's the fundamental problem."

Two years ago the city of Los Angeles established an Affordable Housing Trust Fund to help finance construction. Expected to reach $100 million over the next three years, the fund will be used to provide subsidies for developers and matching funds to access federal and state financing, including a share of the $2.1 billion established for affordable housing by the state's bond issue, Proposition 46.

But the money is a pittance compared to the amount of housing that's needed, and only one stumbling block to getting the job done.

Land is scarce. Neighborhoods often wage bitter campaigns against the development of multifamily dwellings. Priorities for allocating state and federal subsidies change with the political winds and only a small percentage of subsidy requests are granted. And even when a developer snags the available subsidies, the cost of development compared with the potential returns in rental income that meets affordable housing standards precludes all but not-for-profit developers from building such dwellings.

"Once you lower rents to 30 percent of income, what happens is that you barely get enough money to pay for the maintenance of the building," said Neelura Bell, program director for the L.A. office of Local Initiatives Support Corp., a group that helps builders of affordable housing secure financing.

The federal standard for affordable housing is set at a cost that amounts to 30 percent of income. In 1999, the year studied by a housing task force to examine the crisis, the fair market rent for a two-bedroom apartment in Los Angeles was $766 per month.

Skyrocketing rents

Rents have risen an average of about 5 percent a year since then, and in the greater Valley last year, the average rent had climbed to more than $1,000. But even before those recent increases are factored in, it is estimated that at least 25 percent of households in the city spend more than half their income on rent.

Home ownership is equally out of reach for many. As of 1999, before median home prices in the Valley began climbing at about 15 percent a year and more, a family needed a yearly income of $101,624 to afford the median-priced home in Northridge, $61,953 to own a home in Reseda and $52,598 to own the median priced home in Canoga Park, according to the task force report.

As a result, home ownership in L.A. trails the rest of the nation -- only 39 percent of the city's households own their own homes, compared to 66 percent of households nationwide.

The problem, at its most basic, is supply and demand.

Housing production through the 1990s in California was lower than at any time since World War 11.

Between 1990 and 1999, the population of Los Angeles increased by 300,000, but the number of housing units rose by a meager 30,600.

Even before new migration is factored in, the city needs to generate 60,000 new units of housing between 1998 and 2005, or about 8,000 units a year to accommodate the growth in its population, according to Southern California Association of Governments calculations.

In 2001, a total of 6,836 permits were issued for new home construction throughout L.A., 5,173 of those were for single family dwellings. Last year, another 6,294 permits were issued in the city, with about 5,000 of those for single family dwellings.

In the San Feruando Valley, where much of the new population growth is occurring, about 2,500 permits were issued for new home construction in 2001, with somewhat more than half of those for single family homes. In 2002, 2,228 permits were issued, with 1,382 of those for single family dwellings.

In that same year, no permits were issued for multifamily dwellings in many parts of the Northeast Valley including Arleta, Pacoima and Sunland-Tujunga, where much of the immigrant population growth is taking place. Only nine permits for new single family construction were issued at all in the ArletaPacoima area in 2002.

The city's answer is The Housing Trust, which so far has a balance of about $52 million. The fund is designed to grow to $100 million over the next few years and to be self-sustaining by providing funding to access matching funds from a number of different sources.

On a national level, cities have leveraged about $7 for every $1 in their funds.

"That's just an average," said Sara Dusseault, assistant deputy mayor for economic development. "There are times when we get $1 to $5 and we're thrilled because the product we're getting is a large number of family units. At the other end of the deal, we've done $1 to $10."

Focus on renting

About 60 percent of the housing trust fund will be used for rental housing projects geared to households at or below the median income. Another 20 percent is targeted to create home ownership opportunities for moderate and low income families. Some will be used for emergency housing assistance and some will be kept on hand for use when other opportunities to create housing emerge.

The first round of developments to receive matching Prop. 46 encompasses 13 projects that will generate 694 new apartment units citywide. Over 330 of those will be built in the Valley, including 212 units in Pacoima and Van Nuys and another 127 in Council District 7, which also includes Pacoima.

But that doesn't mean the projects will come on line anytime soon, said Bell at LISC.

Typically, the income these projects generate for the developer pays for about 10 percent or 15 percent of a conventional mortgage. Another 50 percent comes from tax credits and the balance must come from federal, state and other subsidies, according to LISC.

"Only about 25 percent of projects were getting an allocation of tax credits in 2002," said Bell. "So what happens is you have another 75 percent where people are sitting with pipelines and they can't move their projects."

Those like Karatz believe the subsidies don't really address the supply and demand issue that is creating the shortage.

The bigger issue, developers say, is freeing up land now zoned for commercial use and changing density codes to allow more building of all types of housing. With greater supply, the pricing of the units will take care of itself.

But political leaders don't want to wage the necessary battles with communities, and they don't want to give up the tax revenues that commercial developments generate.

"We're not building enough housing, and that means very unacceptable standards of living are going to be more evident " Karatz said. "People will have to double up and do things that we thought are only done in the Third World."