One of the biggest obstacles to L.A.’s continued economic expansion a lack of affordable housing could be on the brink of being at least partially overcome.

A new law allowing neighboring cities to pool redevelopment money earmarked for the creation of affordable housing is expected to free up hundreds of millions of dollars statewide for affordable housing and encourage more creative approaches to financing the construction of desperately needed units.

“There are gobs of money available through redevelopment agencies that, for whatever reasons, go from year to year unused,” said Tim Coyle, senior vice president of the California Building Industry Association. “There’s a lot of money out there at a time when we have a terrific need.”

For years, cities have been required to set aside a percentage of tax increments generated through redevelopment and spend it on affordable housing projects within their borders. But such projects often were never built because residents of cities with successful redevelopment areas have viewed affordable housing projects as detrimental to their gentrified quality of life, as well as to their property values.

Also, finding large enough tracts of land to develop such projects is often hard to come by in such cities. As a result, such cities have accumulated large amounts of money earmarked for affordable housing, and they have no incentive to spend it.

Meanwhile, many cities that would welcome affordable housing projects have very little tax increment money, due to their relatively meager redevelopment areas.

As a result of this disconnect, some $580 million is now stockpiled throughout the state, waiting to be spent on affordable housing, according to Assemblyman John Dutra, D-Fremont, who sponsored the new law to allow cities to pool their funds.

In L.A. County, there could be more than $130 million of unspent money, according to the state Department of Housing and Community Development.

Dutra said his bill is intended to provide creative options for cities to put that money to work. “We’re trying to introduce maximum flexibility in regions working together,” he said.

It remains unclear how quickly or how many L.A. cities will make use of the law, which calls for the creation of a joint powers authority between cities.

“Now the burden shifts to developers, to go and identify those sources of funds and get (cities) to think in different terms,” Coyle said. “This means you can go to places you haven’t been able to go to get funding to help these projects pencil out. It could be very significant. The burden is on developers, for-profits and nonprofits, to determine where funding opportunities exist.”

Fears of ‘ghetto-izing’

Some observers fear that suddenly giving cities freedom to earmark money for projects outside their borders had the potential to create pockets of affordable housing in already depressed areas.

But the bill should be able to achieve its goals without “ghetto-izing” new housing in undesirable locations, said Jan Breidenbach, executive director of the Southern California Association of Non-Profit Housing.

Breidenbach said the law appears to have adequate safety measures in place to prevent upscale cities from dumping their affordable-housing responsibilities onto other communities. For example, cities can only transfer affordable housing funds to contiguous cities, and they can not transfer more than 50 percent of such funds.

“This bill does not open the flood gates to jurisdictions moving their money someplace else,” Breidenbach said. “It’s probably a good step.”

Not everyone is convinced the new law will be a windfall for L.A. County developers. Syed Rushdy, director of housing development and preservation for the Community Development Commission of L.A. County, disputed the assertion that there are gobs of unused money out there.

“Just because money is sitting there doesn’t mean the money hasn’t been obligated,” Rushdy said. “They have been obligated to projects.”

Dutra’s measure is far from the only effort being directed at solving the affordable housing crisis. Just this year, Gov. Davis allocated some $570 million to affordable housing construction, one-third of which is expected to make its way to L.A. County, according to Breidenbach.

Still, Stephen Cauley, a professor at the Center for Real Estate Research at UCLA’s Anderson School, believes measures like Dutra’s are the key to solving the affordable housing crisis.

Cauley said the possible negative effects of allowing cities to build affordable housing in designated areas is outweighed by the sheer need for low-priced housing.

“Anything which increases flexibility is going to increase the likelihood of housing actually being built,” Cauley said. “It’s very hard to get people to build that type of thing.”

Benefiting a range of cities

Along with helping cities with little money for affordable housing, the new law is expected to aid municipalities with an abundance of funds.

Thanks to a special state law passed earlier in the decade, the City of Industry, which has very little residentially zoned property to begin with, was allowed to pass along $8 million a year in tax increment money from its redevelopment agency to county housing officials.

The county then used the money for affordable housing projects in other areas.

But other redevelopment agencies don’t have that option, and many amass large tax increment pools, which can create problems.

In Cerritos, for example, the city expects to have an adequate supply of new affordable housing built by 2003, after which millions of dollars from its redevelopment agency will remain money that by law must be spent on affordable housing, City Manager Art Gallucci said.

But thanks to the new state law, city policymakers can now team up with other municipalities to meet regional goals.

“We have the money, so the City Council has that choice,” said Gallucci.

Another city that may be impacted by the new law is El Segundo, where city officials are seeking a way to finance new, seismically sound military facilities for the Los Angeles Air Force Base as a way to keep the base open.

Options on the table include creating a redevelopment agency, but some officials have expressed concern that such agencies have too many strings attached, not the least of which is the requirement to use 20 percent of the tax increment revenues for affordable housing.

If city leaders decide to further study the creation of a redevelopment agency, the change in the law may very well make a difference, according to City Manager Mary Strenn.