L.A. residents are being squeezed by one of the country’s most unforgiving housing markets. A majority of the city’s lowest-income residents pay more than half of their income toward rent, live in severely inadequate conditions, or both, according to a new federal study. Many are one rent increase away from homelessness.
Angelenos are looking for answers. One proposal is a linkage fee, a new surcharge on development. At a maximum of $12 a square foot on residential projects of more than five units, the fee would add $9,000 to the cost of a 750-square-foot apartment, and more when you factor in common areas.
The proposal amounts to a surcharge that belies basic economic logic: You can’t make something more affordable by slapping a fee on it.
San Francisco charges linkage fees that are far greater than those proposed in our city, yet the fees have resulted in just 86 units annually, according to BAE Urban Economics study, which our city contracted to study the effects of the fees.
Most working Angelenos live in unsubsidized housing, where they’re squeezed by rising demand and stagnant supply. Even the BAE study concedes that the linkage fee would provide no more than a few hundred subsidized units at best in a city that needs more than 100,000 market-rate homes by 2021 to keep up with our population growth.
Without a significant increase in housing supply, all but L.A.’s wealthier residents will continue to be driven out of their homes, and the city. Policies that make it harder and more expensive to build do not benefit potential renters and buyers, and would disproportionately harm neighborhoods where most residents earn less than the median income.
On Aug. 22, the City Council’s planning committee appeared to agree. By creating a system of tiered development fees based on neighborhood, council members seemed to recognize that a one-size-fits-all approach to fees only harms development in communities that need it most.
As we move forward, Los Angeles needs to adopt more policies to encourage development at every price point and meet the needs of all of our residents.
Cut red tape
First, we must cut red tape and reduce delays that act as barriers to building housing. Los Angeles has taken some steps to expedite permits for certain projects. We must continue on the path of common-sense reforms while thinking even more creatively.
Second, California lawmakers need to take a closer look at reforming the California Environmental Quality Act, which comes with provisions that have allowed special interests to entangle projects in litigation for years.
Third, policymakers should reform existing incentives such as our density bonus program, which encourages builders to add affordable units to market-rate projects by relieving certain limits on the number of units. This program has created only 329 additional affordable-housing units in the past nine years, according to my recent audit. I’ve proposed broadening the program to incentivize microunits and allow developers to build market-rate units off-site or contribute to an affordable-housing trust fund in lieu of building additional units.
As we debate the best policies to promote affordable housing, it’s important to remember we all share the same goal. Los Angeles didn’t become one of the toughest housing markets overnight. It’s going to take hard work and creativity by all of us to solve the problem.
Ron Galperin is the Los Angeles city controller.