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Sunday, October 30, 2005

Antonio's Billion Dollar Gamble

Mayor Villaraigosa has proposed a stunning, $1 Billion bond issue for "affordable housing." Watch your wallet!

Housing affordability in Los Angeles is an issue. The issue is, if you can't afford to buy or rent a home in Los Angeles, you can't afford to live in Los Angeles.

I would like to live in New York, but I can't afford it. Therefore, I live in LA.

There is no constitutional guarantee to equal affordability of a given community. Does LA cost too much for you? You might have to live in Palmdale, or Vegas or Arizona. Make yourself more valuable and you can earn the money needed to live in a major city.

Among the reasons for a lack of housing at lower prices in Los Angles are the government regulations and bureaucracy that stand in the way. Its very difficult to create new housing in Los Angeles. Along with the cost of land, with the expense that comes from the excessive regulations, developers can only recoup their costs by building primarily high-end housing.

The free market can solve this problem if it is allowed to. With schemes like affordable housing trust funds, inclusionary zoning and mandating builders to set aside housing for sale at below market/below cost pricing, fewer people will risk their money investing in new housing.

It has always amazed me that we place controls on the buying and selling of housing that we don't on other items - like cars, furniture, vacations, etc. Imagine if the City told GM that 1 out of every 10 Cadillacs sold would have to be sold for 20% of their value. Ridiculous, huh?

In addition to onerous government regulation on the housing industry, the other concerning aspect to this is the addition of more bond debt. Where does the Mayor think the money will come from to pay off $1 billion? With every bond we pass, we wind up paying double the amount of the bond. We've been adding bond debt like crazy every election, homeowners taxes to pay off these bonds keep going up, up, up. With an ever shrinking middle class, who is going to pay the bills for the goodies politicians are giving out to the underclass? The rich? Don't think so, not enough of them to start with and they're moving out of the state at an alarming rate. Industry and business? Same thing, they'll move where its cheaper to do business.

However, a few rich folks like Babs Streisand, David Geffen and presumed gubenatorial candidate Rob "Meathead" Reiner (lets not get started on his tax scheme he plans to run) probably won't give up their Malibu digs to re-located to Mesa, Arizona, so I guess they will get stuck with the bill.

34 Comments:

Blogger Phil Krakover said:

Do you live in LA? All the celeb's you named don't either. Malibu is its own city, and they don't pay for LA bonds.

We do, the fewer and fewer home owners and property owners in Los Angeles.

And, like you said, who is going to be paying for this stuff?

That's what drives the home prices higher and higher.

Something like this will impel another secession movement, if it passes.

I support Antonio, but I think he's wrong on this one.

Call it his first mistake.

October 30, 2005 5:29 AM  

Anonymous Anonymous said:

While I agree with the idea the bond measure is dumb, your rant was quite Republican of you.

"If they can't afford it, they can leave"

So LA becomes a town for nothing more than rich white people who have manipulated the system for everything from housing to gasoline.

Maybe all the poor people, white black and hispanic, will be killed in the next earthquake because they couldn't afford the "free market" price of whatever after a disaster, that might make you happy. Or perhaps we could herd all the poor people into some type of large apartment complex like they do in New York and call them projects... wait we already do.

The Republicans always seem to go on lately about their ties to Jesus and Christianity. Jesus taught us to give our last dime to those in need, not cast them from the town. If you Republicans want to be so god damn market driven, then get the hell off of your morally superior soapbox.

October 30, 2005 6:02 AM  

Anonymous Anonymous said:

Hey 6:02:

You dont get it with your "Marxist thought". Mayor Sam said nothing, nothing, nothing about charitable giving. If a charity group wants to go the rich Hollywood cronies and have them pony up a fund to build houses for the poor no one would care. But people do react to the cost of doing business in an area. Why are so many retirees selling their homes and moving to the tax friendlier confines of Summerlin Las Vegas? Why are so many business tired of the opressive taxes and regulations of California and setting up shop in less opressive states like Texas, Nevada and Arizona? The "free market" that you rant against has created the greatest society and standard of living in the history of humanity but you prefer the sucesses of the failed Soviet Union, Cuba and North Korea as your model of nirvana.

October 30, 2005 7:26 AM  

Blogger Charlie Carnow said:

You make some good points Mayor Sam but I disagree with you majorly on the issue of inclusionary zoning. Remember inclusionary zoning not only says that for example 1 out of every 10 apartments must be affordable- but also increases the supply of housing that can built by providing developers with a density bonus. So your analogy of GM being force to sell cadillacs at 20% of their market value would only be true if the government also that instead of GM only being able to sell 100 cars at market price they can sell let's say sell 15 cars at below market prices and 135 cars at market price. The density bonuses will push the supply of housing to the right so that price goes down while the requirment that some of the housing be affordale ensures that this all doesn't go into high-priced housing.

Just my two cents,
Charlie Carnow

October 30, 2005 7:35 AM  

Anonymous Anonymous said:

What's going to happen if LA gets more afforable housing is more illegals will come here in packs. There are already too many in LA and one family will end up buying one house and 3 families end up living it in. Antonio is attacking this issue from the wrong side. That's because he doesn't have the brains to figure it out. Look at how other cities have resolved the problem.

October 30, 2005 8:08 AM  

Anonymous Anonymous said:

Mayor Sam was dead on on that post. Anyone who has ever spoken for longer than 10 min. with a limousine liberal like the ones Mayor Sam mentioned knows that they consist of little rational thought and a lot of hypocrisy.

But MS, is Mike Trujillo upset that you thrashed his boss?

October 30, 2005 8:50 AM  

Blogger Mayor Sam said:

All good points. I am not suggesting poor people or non-white people be kicked out of LA or killed in an Earthquake.

I'd like to live in Beverly Hills. Should they provide me with affordable housing?

I'd like to drive a BMW. Will Antonio provide me with one at the price of a Hyundai?

At some point it becomes ridiculous.

And of course - it private charity wants to attack the issue I am all for that. I am quite annoyed at the functions of charity that government keeps taking over. That's a completely different issue that I will attack at some point.

October 30, 2005 9:18 AM  

Anonymous Anonymous said:

It's not just charity, mayor sam, we are going to see the mayor "solve" every problem in LA by either raising taxes or through issuing new bonds (the same as raising taxes).

I think it's becoming very clear now AV's strategy for governance. A compliant "current" council will support everything the mayor wants because not too many of them will be around for much longer, i.e., terms limits, running for the assembly, senate, congress even (Cardenas), supervisor, etc. In other words, let Antonio have want he wants on the council and he will support us - while he still has some clout - in our political futures.

When the shit hits the fan, as it will, Padilla, Garcetti, Weiss, Reyes (planning director in 24 months?) will be off in their new jobs and the mayor will be running for governor.

But this plan won't work if one very simple thing happens - Nick Pacheco is elected to represent CD14.

The mayor's clout will diminish immediately and half the current council will re-evaluate their "loyalty" to the mayor and possibly join Pacheco in being a check and balance on the Villaraigosa administration. And this will be good for the City of Los Angeles.

I received a Pacheco mailer this week pointing out the following: Mayor Villaraigosa has hinted of bringing in new taxes. AV's close ally Bernard Parks is calling for a new fee on trash collection. President of the Board of Public Works and very close ally of AV, Cynthia Ruiz, asks publicly if Jose Huizar will support a new fee (tax?) on trash collection. According to a local Northeast Los Angeles newspaper, Boulevard Sentinel, Jose Huizar replies he will support a new tax on trash collection.

So, if Pacheco DOESN'T get elected, expect most council members to fall in line and support our mayor in taxing us to the hilt - A debt we will be paying off when Villaraigosa is collecting large pensions from the state and city (and maybe a federal one).

October 30, 2005 9:41 AM  

Anonymous Anonymous said:

Well stated Mayor Sam! We give outlandish payraises to evey labor union around (see DWP/prison guards) then say there's not enough money left to do the business of government, so let's stick it to the property owners with yet another bond. Enough! The cumulative effect of these thousands of dollars of annual bond payments.

And as for Carlie Carnow - finish off the analogy - so you end up with more cars on the road further exacerbating gridlock - or in this case further increasing density in a city that does not need increased density as a bad side effect of an effort to subsidize housing.

Furthermore, the program rewards having lots of kids. Family of four making less than $100K? For once let's say it out loud - don't bring more children into the world if you can't afford them! They are indeed expensive little bundles of joy. Between Earned Income Tax Credits and myriad other tax breaks designed to help the poor raise children, we are as a consequence simply making it easier to have more children. THe first rule taught in income tax is that tax policy causes social change. We don't need this change.

October 30, 2005 9:59 AM  

Blogger Charlie Carnow said:

The fact is there is so little land so that we are going to need to become more dense (additionally, that's why McMansions are such a bad idea unless we see McMansion owners renting out many of the rooms in their house). Right now Los Angeles is already at some points some of the densest cities in the nation is that because people will end up moving with their friends, family etc-and we get really bad crowding situations. It's much better to try to do something to provide these people a place to live. Also more density means that transit is a more effective investment. As for the argument about having more kids I doubt people are sitting around discussing tax policy when they make a decision on whether to have children. And as for anon 8:08 AM who argues that "if LA gets more afforable housing is more illegals will come here in packs" most of the population increase in LA till 2020 if I remember correctly (I'd have to find the data) is going to be do to natural increase-i.e having kids. For the Pacheco blogger, as of yet the Mayor hasn't proposed stuff like inclusionary zoning. When he talked about in the campaign he said that he said he would support it but that he didn't support the plant that went through the city council last year. When a politician says they support the 'idea' but then deign to vote for it it's usally just really crappy cover for expressing opposition to the idea. I hope that we see discussion of incusionary zoning again and a measure by next year.

October 30, 2005 10:17 AM  

Anonymous Anonymous said:

How can one little man Mayor Villaraigosa have so much control over every aspect of city government in LA? Where is the leadership? Every one is running scared of going against him. What ever happened to having your own voice and opinion? This city is going down the toliet and faster then a speeding bullet with Antonio telling everyone what to do. Just goes to show we elected the wrong council people, wrong mayor.

October 30, 2005 10:53 AM  

Anonymous Greedy Developer said:

Really bad post, dude. And out of line with Angelenos' thinking right now. First of all, inclusionary zoning is the only way of getting some more affordable housing WITHOUT taking from our pockets or the pockets of developers. It actually uses the market (i.e. a density bonus) to pencil it out (and even sometimes give a little more profit) for a developer, and doesn't need taxes raised. That's why more than 100 cities in CA already have it, and they are better off than LA's housing market.

Second, while I am no fan of how long it can take to build here (I am a developer), it is the price of land and no political will on the part of NIMBY neighborhoods, not city bureaucracy that is the main impediment to getting more housing built. We need more housing at the top end and the bottom end to relieve the middle class.

Guess you want the 90,000 homeless folks to wait only for trickle-down to help get them some affordable place to live.

You clearly have no idea about building housing. And if we don't do something about

I was at the conference at UCLA where Cisneros, Garcetti, and Villaraigosa all said the same thing, essentially: get us some more density in this city.

The problem isn't AV, who was brave and got a standing ovation from Repubs, Dems, developers and lefties alike. The problem is you, MS, and all the people who say no to anything being built in your neighborhood. Enjoying the traffic?

I build market-rate housing for a living and have done so for almost two decades and I KNOW from experience that you need some balls in the neighborhoods and some funding for the affordable end of the specturm. This bond will more than pay for itself in our local economy. Look at the effect of Prop 46 statewide, which passed with flying colors.

Our situation has been helped by the Trust Fund, which has turned $200 million into $1 billion in housing, according to Mercedes Marquez. That's a pretty good investment for taxpayers.

Cut 100% of the red tape out of government, and the low end (you know the folks who clear and clean your tables at the restaurant, serve you at Coffee Bean, and make sure your lawn doesn't die) of housing won't get any better.

Way to go, AV. Finally you are spending some of that capital and we should all band together to get this passed and to finally build some infrastructure here in LA.

It's a big idea, Brian.

October 30, 2005 2:40 PM  

Anonymous Anonymous said:

You go Charlie and the Developer!! You make sense.

Duh to anon 7:24!!!!

October 30, 2005 5:39 PM  

Anonymous Anonymous said:

Mayor Sam:

how can you compare something as basic as housing to a Cadillac? no, there is nothing in the constitution that says that people have the right to have affordable housing, but if they can't afford housing then I guess they are homeless. Most NIMBYs like yourself hate sharing space with homeless people, so let's get real and say that having safe housing for all people is something that we should work to achieve.

And the idea of just sending people to Palmdale will cause more traffic, another one of those things that is so high on the agenda of NIMBYs like you.

You may agree or disagree with AV's plan for how to provide affordable housing, but I can't believe that you are actually arguing that affordable housing is not an important goal for us as a City.

do you really want LA to become like Manhattan in terms of the cost of housing? I personally don't want to pay $2000 a month for an apartment the size of a closet, do you?

October 30, 2005 6:05 PM  

Anonymous Anonymous said:

Developer/2:40: I agree with you, mostly, and think that MS is out of the mainstream on this one. We talk about public safety SO much in this city, but housing is where people are getting crunched. I think that we don't have to go to the taxpayers, but if we do, it should be shared between business and residents if there is an assessment on this bond (which I support, BTW). Business is not getting off scott-free, and I think they want the housing crisis solved so they can recruit management from across the country to live here and have a decent place for lower-level employees to live.

Also, this will be huge for traffic. We have the worst traffic in the country because of places like Santa Monica that built the 3rd street promenade and office towers and NIMBYited all the new housing. Some progressive enclave.

But you hit the nail on the head--no more NIMBYism!

October 30, 2005 6:31 PM  

Anonymous Anonymous said:

Come on try to raise taxes AV, you will be re-called...no doubt in my mind. I will lead that charge.

October 30, 2005 7:08 PM  

Anonymous Anonymous said:

greedy developer, I am nor sure you are a developer - unless you are counting on getting a major share of the $1 billion. Many greedy developers are represented by the Central City Association whose president, Carol Schatz, has fought very hard AGAINST inclusionary zoning. Nice try, though.

BTW, "get more density" - 25000 per square mile alright for you in Northeast Los Angeles.

October 30, 2005 7:36 PM  

Anonymous Anonymous said:

i dont want LA to just be a bunch of f'd up rich people

October 30, 2005 10:43 PM  

Anonymous Anonymous said:

Agreed Mayor Sam.

The problem with LA's housing market is that supply of housing outstrips demand. That's it. Even with most of Southern California's middle class being decimated by the "Peace Dividend" i.e. defense cuts in massive numbers by Clinton, and the associated Defense Contractor consolidation, people still want to live in LA. We have lots of poor people, immigrating from other countries, legally and otherwise, and various trustafarians. The Middle Class is forced to gentrify neighborhoods like Echo Park but that only works so far.

The huge stock of housing in South Central LA is going to remain mostly poor and crime ridden; leaving poor people stuck in substandard housing and cutting off the natural place of LA's middle class. A real police force of say, four times the current size and not hobbled by Tony's PC residue from his ACLU President days would benefit everyone. Poor minorities could trade their rapidly appreciating houses for places like Denver or Dallas (cash out); prices would be lower and ridiculous projects like Playa Del Rey (hey, let's build on a methane field that will also liquify in an earthquake) would never get off the ground.

I don't object to spending money, just throwing it away. Affordable housing by government decree just results in a black market (see NYC's rent controls) or covert flipping through shady deals. An open market where supply can be increased to meet demand is better. Exposition Park doesn't have to be more dangerous than Downtown Baghdad, and we shouldn't accept it. The housing crisis is DIRECTLY related to the public safety crisis. Developers like Tony's bonds because it makes them money.

October 30, 2005 10:44 PM  

Anonymous Anonymous said:

Greedy developer sounds a like another poverty pimp.

A RHINO who gets rich off the government.

Like George Bush and Dick Cheney. Two more welfare queens.

October 30, 2005 11:05 PM  

Anonymous Anonymous said:

Sam I couldn't agree with you more on this bond issue.
The people who identified themselves as poor should realize that if they don't manage to get one of these "affordable" housing units (of which there will be scarce few) then this measure will ultimately push up their rent. When landlords have to pay higher property taxes to support more bond issues, they pass the costs along to renters by increasing rent.
I agree that inclusionary zoning is a mistake, but I am not ready to get rid of all the land use restrictions overnight and truly go free market alah Houston. The problem with going totally free market is we won't be able to go anywhere with the traffic. Because if you took away zoning use or density restrictions you could see tons of new housing overnight. But think of the traffic as areas which don't have the infrastructure to support all the cars are suddenly overwhelmed by thousands of additional housing units.
So I don't think that a true "free market" is the solution. If it becomes the solution I will have to leave LA.
BTW Kudos to Antonio for his support of Public transportation.
I generally support Antonio but also think he is wrong on this one.

October 31, 2005 7:55 AM  

Blogger Walter Moore said:

Rent control, oddly enough, drives up the price of housing for all the people who do not have rent-controlled apartments. It does so by tying up the housing supply; people with rent-controlled apartments tend to stay put. As a result, market forces are distorted, which means not only can the owners of new units charge you more, but also that you cannot "bid" for an apartment closer to your workplace. So you get to commute. Cities without rent control are cities without an "affordable housing" problem.

Plus, as per Mayor Sam, "affordable housing" is a misleading term. I can't afford to live in Malibu or Beverly Hills. Why doesn't anyone talk about an "affordable housing" problem in those cities? The answer, of course, is that not everyone can afford to live everywhere. If you can't afford to live in a given place, that's Nature' way of telling you either to make more money or live elsewhere.

October 31, 2005 8:16 AM  

Anonymous Archie Bunker said:

On top of more police officers and better public safety. What AV needs to do is simply reducing the regulations on Developers, instead of forcing a bond that only the dwindling Middle Class would have to push for again. Or better yet improve the schools and local business in South LA so that these perspective home buyers will invest there thus, distributing and lowering the cost of housing.

This is all this man, knows how to do, Borrow via A Bond. God Forbid he tries to actually reduce wasteful spending and stonewall certain unions like IBEW-DWP from getting outrageous hikes.

October 31, 2005 8:18 AM  

Anonymous Anonymous said:

I fear that I see a pattern developing with our Mayor. he doesnt really make tough choices. So, instead of either finding the funds for the housing trust fund, or putting together a plan that includes inclusionary zoning, he simply says lets pass a bond measure. The developers will pay for the campaign ( and of course, contribute to AVs' future campaigns) and the progressives think he is doing something about housing. This is not good policy! This is just govt by initiative and bond measures.
Where is the 'bold' Antonio? Now is the time to be strong when he has a politicial mandate. Take on IBEW, take on PPL, take on UTLA...or, move over and let someone us do the tough work!

October 31, 2005 9:15 AM  

Anonymous Archie Bunker said:

9:15

I saw that pattern when he was the Assembly Speaker. All of his intiatives: Schools, Parks, Water. ALL BONDS.

He want's to increase the Middle Class. You first doing that by enpowering the Working Class, so that they can AFFORD to buy a Home and doing that by reducing homeowner bills so that new working class families can afford a Home in Los Angeles.

If he really wants to push a bond, why don't he push a bond for LA and the Westside Cities, to build the Subway to the Ocean.

I say the hell with dealing with Waxman or Zev Yaroslavsky. Go around these assholes and since a subway is 100+ year infrastructure project it would pay for itself over time.

But I forget that takes risks and shows actual political strength.

October 31, 2005 9:40 AM  

Anonymous Anonymous said:

Phil, you're a moron.

Scarcity drives higher home prices. Without investment in housing, you cannot sustain businesses. Will new jobs in LA not require housing for their employees?

This has nothing to do with Marxist ideology or nor charity. It's about economics. Just as there are health and economic benefits for the whole of society to vaccinate its citizens, there are economic benefits in producing housing for the population and local businesses.

Will developers get money on the proposal? YES. And they should, just as union workers will get their paychecks. Better old housing stock in LA that's reaching the end of its life will be renewed.

This is progress.

October 31, 2005 9:55 AM  

Anonymous Anonymous said:

Is Cardenas planning to run against Zev?

October 31, 2005 11:14 AM  

Anonymous Anonymous said:

It's probably worth noting the value that affordable housing brings to a city, isn't it? You know, when your development model depends on cheap labor to do necessary stuff like clean hotels, change old people's leakey diapers, work in chain restaurants, Wal Marts, and retail in general, then you've kind of got to develop some structures that allow that labor to survive in the city.

So unless you just want to bus all of your nursing home patients to somewhere cheaper for workers to live -- vegas, phoenix? -- and have all of you food dry-iced delivered (etc.), you're pretty much left with subsidizing low-wage jobs through things like housing subsidies.

Of course, we could also stand up and demand that employers pay a living wage, too...

October 31, 2005 11:52 AM  

Blogger ubrayj02 said:

It's funny that, even when affordable housing agencies (*cough* Housing Authority of the City of Los Angeles *cough*) have $100 million lines of credit to purchase and develop land, they cannot do it.

Massive political battles would need to be fought by the city to build mid-rise buildings, and affordable housing, where they ought to be built in this city.

An inordinate amount of time and money would have to be invested by private developers to do the same. These companies can take that same amount of money to the Salton Sea and make a higher profit, with less hassle, building crappy R-1 housing in wilderness areas.

There is a way around some of the political and economic blocks that have prevented higher-density growth in parts of the city with massive amounts of public infrastructure:

Transfering Development Rights

Ultimately, governments cannot force their economy to move one way or another without causing undue detrimental effects. Governments need to game the economic system to get the results they want. TDM, properly applied, will build more housing, more park space, and strong political careers based on the wealth it generates for property owners and developers.

Check it out.

That's Transfer of Development Rights

October 31, 2005 2:16 PM  

Blogger Charlie Carnow said:

Archie Bunker, I don't usually agree with you but your spot on about a bond to build a subway to the ocean. If were going to spend $1 billion plus dollars that's the place to spend it-the MTA could also use the oversight that is required when you pass a bond.
To ubrayj02- doesn't L.A. have a transferrable development rights ordinance?

October 31, 2005 2:49 PM  

Anonymous Archie Bunker said:

Charlie,

Of course they do, How do you think the City of LA was able to chip into building the first leg of the subway?

October 31, 2005 4:13 PM  

Blogger ubrayj02 said:

Charlie Carnow,

Here is what I know about:

When Hahn was mayor he did this thing downtown with historic buildings.

Historic buildings were zoned for heights taller than the building. However, they could never build to that height limit because of their hitoric designation.

The gubmint (the City) allowed the owners of those historic buildings to sell the right to build up to other buildings that weren't historic - above their maximum zoned height.

So, the people who wanted to build more got to build more and the historic buildings got loads of cash to be restored and refurbished.

Something that I think worked particularly well with this system was that the City allowed price for extra square footage to be determined by the market - while at the same time doing something important for historic properties.

With proper implementation, transfering development rights can create park space, preserve agricultural land, while at the same time building density where demand is high enough to warrant it.

One upside is that TDM can enable a "hands-off" approach from the government. As long as zones to sell and buy development rights are fairly established, and the process works like a well-policed commodities market, the government won't need to do much of anything.

Also, with well-placed zones to designate as open-space, or whatever, a politician can thrive on good PR and can depend on support from those wealthy folks who profit from buying development rights.

The engineering solution (of simply building stuff where the city or some citizen's group says) doesn't address the political and economic realities that TDR can.

October 31, 2005 4:53 PM  

Anonymous konerko is god said:

Transferable development rights have been hugely successful in at least partially ameliorating the affordable housing problem in New York.

MS, you're looking at the wrong set of regulations. Why is it that so many conservatives rail against growth boundaries for suppressing the housing supply, yet scream even more loudly when anyone proposes up-zoning their precious little R-1 neighborhoods? Greedy Developer is right on the mark.

November 01, 2005 2:43 AM  

Anonymous konerko is god said:

BTW, Mayor Sam, what is the basis for your statement that the wealthy are leaving California in droves? I'm really skeptical of the notion that anyone who lives in San Marino, Newport Beach, the Palisades, or Palos Verdes would really pack up and leave for Phoenix or Vegas.

Oh, and that notion that California is somehow a "high-tax" state is nonsense. This chart, drawn from Bureau of Economic Analysis data, shows that California, while slightly above the median, does not take a significantly greater portion income in taxes than the national mean.

November 01, 2005 4:36 AM  

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