Solutions and goals for solving the housing crisis in Los Angeles.

There is no debating that there is a housing crisis in Los Angeles (LA). For LA to remain competitive in attracting and retaining jobs, we must build homes for employees at all income levels. We are not succeeding in this effort. As prominent executive search professional Gary Kaplan, President, Gary Kaplan and Associates, recently commented: "The resistance to moving to California has been a consistent problem, but it's reached a magnitude of the likes I've never seen. We're not building houses fast enough for the people who are coming into the state."

Currently, 84 percent of the Southern California population cannot afford to own their own home (SCAG, 2005). Since July 2002, the median home price in LA County has risen a staggering 77 percent, from $269,000 to $476,000 (California Association of Realtors, 2005). At the same time, real household incomes in LA County have decreased 13.40 percent (UCLA Anderson Forecast, 2005). For a family earning the median California state income of $55,000, a $500,000 home is simply unaffordable.

Population growth is increasing faster than housing unit construction, income growth and salaries. The shortage of housing and rapidly rising rents require families to double up or rent homes that are too small, resulting in approximately 273,700 overcrowded households in 1999, and making LA the most overcrowded metropolitan area in the United States. As of 2003, approximately 18.5 percent of the SCAG region was overcrowded (which includes the counties of Imperial, LA, Orange, Riverside, San Bernardino, and Ventura). SCAG predicts the regional population will approach 23 million people by 2030 (SCAG, 2004).

Homeowners are not the only group affected by the housing crisis. Today, income spent on rent in the LA region is the highest in the nation.

Income spent on rent

SCAG Region     43%
New York City   40%
Dallas          33%

Source: SCAG, Housing Demands and Production
Issues in So Cal (March 13th, 2003)

City governments lack adequate funding and resources to create and support housing production. These funding constraints, combined with increasing construction and real estate costs have created noncompetitive returns throughout the housing market. In addition, the state Department of Housing and Community Development recently delayed preparation of the Regional Housing Need Assessments (RHNA) process from 2006 to 2008 (California Planning & Development Report, 2005). Using 1990 United States (US) Census data, the 2001 RHNA numbers projected a need of approximately 60,280 housing units over four years (SCAG & UCLA School of Regional Studies, 2000). However, without updated projections that RHNA supplies, local city governments do not have the numbers they need to: 1) project local housing needs and 2) allocate city funding accordingly.

Solutions and Goals

As an advocate for the business community, the Los Angeles Business Council (LABC) serves as a link between the public and private sectors through advocacy and educational events, such as the Annual LABC Mayoral Housing Summit.

Since 2002, the LABC Mayoral Housing Summit has sought to address the housing crisis by bringing together government officials, business leaders, and community members to discuss housing issues and engage in solutions. Previous summits have focused on the importance of workforce housing in creating a stronger economy, on implementing the City of Los Angeles's first $100 million Housing Trust Fund, model practices for housing development, and financial and regulatory incentives for workforce housing construction. In addition, the summits have emphasized the importance of community plans and neighborhood councils as partners in the development process.

This year's Summit, taking place on October 26 at UCLA's Korn Hall, will feature national best practices shared by policy makers and business leaders who have helped to promote workable solutions to the housing crises of other major metropolitan cities in our nation.

The LABC believes that the business community should be treated as a partner in solving the housing crisis. Our challenge is to have a truly comprehensive housing policy that satisfies a broad spectrum of housing needs and types. The private, public and non-profit sectors must work together to assure that the necessary quantity and quality of housing, from shelter beds for the homeless to greater opportunity for home ownership, is provided.

The LABC's diverse base of stakeholders has identified the following policies that can help to solve LA's housing crisis:

Update the City's General Plan and Housing Element

The General Plan needs to be updated to incentive mixed-use housing, housing near transit centers and new types of housing that reflect the needs of a diverse population. California state law requires a General Plan to be drafted for every city and county (LA Department of City Planning, 2005). Every General Plan includes a Housing Element, which, according to state law, must be updated and amended every four years. The Housing Element for the City of LA was last updated in 2001 (LA Department of City Planning, 2005). Despite beginning consultation and delineation of the Regional Housing Needs Assessment (RHNA) this November 1 and May 1,2006, respectively, the next Housing Element update for the region is not scheduled until June 30, 2008 (California Department of Housing and Community Development, 2005). The LABC supports financing the RHNA projections by using the $5,000,000 of funding in the governor's Blue Print Fund that the state government has provided for housing, land use and transportation planning to estimate our housing needs. The LABC is also reviewing the RHNA proposed formula change that would require the region to provide a 20-year supply of land and set performance targets in five-year increments. The framework of this policy will allow cities, working with community support, to entitle land and possibly reduce housing costs by approximately 25-40 percent (Pisano, 2005). The City of LA should immediately begin updating the General Plan, the Community Plans and the Housing Element as part of this process and set a firm timeline for their completion and implementation.

Expand Residential Development Opportunities

The City's Planning Department must expand residential development opportunities as an economic stimulus on par with business tax reform. Likewise, zoning ordinances must be rewritten so that development regulations are understandable and comprehensive. Additionally, the level of staffing must be increased in order to adequately take on the work that increased development will bring. Unless the capacity to provide entitlements is expanded, the rate of housing development will not achieve the levels needed to accommodate our new economy. Without the changes in underlying regulations and procedures, density bonuses and other incentives will be inadequate to encourage new housing construction in LA.

Introduce a Bond to Fund Workforce Housing

Business and community leaders must initiate a campaign supporting a city and/or countywide bond to fund workforce housing in LA. LA should have at least $100 million in affordable housing subsidy funding available for a minimum of 10 years. This could be accomplished by dedicating a substantial source of taxes to housing or via passage of a $1 billion affordable housing bond.

The LABC's solutions also include more transit oriented development, which will reduce sprawl, increase housing construction, improve the environment, increase employment, reduce commute times and improve regional travel. With all these policies, focus should begin at the neighborhood level through the community planning process. Community Plans should include development and infrastructure standards mutually agreed upon by developers, neighborhood associations, and local government.

Conclusions

Our ability to house current and future residents of Southern California is critical for our region to maintain a thriving economy and an acceptable quality of life for all residents. The Los Angeles region has the resources it needs to solve our housing crisis, but employing them will require political leadership and community support. We are encouraged by Mayor Villaraigosa's commitment to solving the regional housing problem and look forward to working together to improve the housing outlook of the region.