Bring Back Blight, Sprawl; evict CDBG to Fix Affordable Housing

HousingWhen you were a child did you ever try walking down the upward side of an escalator at a mall? It can be dangerous and often results in bringing you back to where you started.

Howard Husock’s recent “How to build a Housing Ladder: Lessons From, and For, Silicon Valley” (Oct. 3, 2018) is an analogous backwards attempt to solve the Silicon Valley affordable housing crisis.

Husock’s solution is to build new “middle housing” (2-to-9-units), in areas where there is a lack of developable land:

  • As part of mixed commercial-residential developments
  • Elevated above parking lots in air rights projects
  • Converting open space in office parks
  • Small multifamily housing projects on “greenfield” (unzoned) land

From 1979 to 1985, I implemented every one of Husock’s above policy prescriptions with negligible results when I worked for the LA County Community Development Block Grant program:

  • A study for a 1,000-unit multi-family housing air rights project proposed to be built over a bus yard in West Hollywood (never built)
  • Funding a land-write down for a 100-unit Section 202 high-rise senior housing project on commercial zoned land adjacent to a shopping center in West L.A.
  • Soliciting a design-build contract for a 12-unit energy-efficient multi-family housing project on infill land in East Los Angeles
  • Relocating and rehabilitating new freeway construction removal houses to vacant sites for affordable housing,

* From 1985 to 2014, I played a role at a utility district in selling surplus land for housing development on “greenfield” (raw, unzoned land) sites.

Similarly, HUD CDBG policies have yielded insignificant results in the Palo Alto Peninsula as unaffordability and homelessness have only increased.

CDBG Housing Funding Drawdown Failure

CDBG is a federal HUD flexible revenue sharing program that can be used at the local level for housing and infrastructure improvements in lower-income target areas. The drawdown rate for CDBG funding for housing for California is the worst in the country at $4.83 unexpended for every $1 allocated (or 17% expended-see here, page 39).

In my experience, CDBG functions much as Steven Malanga of the Manhattan Institute states:

“Local officials quickly betrayed the CDBG’s ostensible antipoverty mission, using the grants to supply patronage jobs and set up nonprofits run by their allies….a Brookings Institution report noted that communities viewed the federal largesse as “free money.” One federal investigation found that nearly one-third of the operatives in Boston mayor Kevin White’s political machine worked for the city as CDBG coordinators” (“Let’s Kill the CDBG”, City-Journal, Autumn 2017).

Depreciation Creates Affordable Housing

The term “housing ladder” used by Husock is a misnomer.

The term refers to buying a cheap home in an older area and building up equity and then selling and moving up to a tier of higher priced housing as family income increases (e.g., moving up the ladder). Cheaper rental housing does not provide an upward ladder of social mobility from home equity loans, renovation or appreciation.

Moreover, the housing ladder concept should also not be confused with the term “neighborhood filtration.” Older housing “filters” down to first-time buyers.

In other words, all affordable housing by definition is older housing. Only in California is there a policy that lower income households are entitled to brand new, luxury housing by inclusionary housing policies and building new apartments with redevelopment funds.

Redevelopment as Demolisher of Affordable Housing

Further compounding this problem is the rampant redevelopment found in California where older housing districts are demolished for brand new, greater property-tax-generating commercial retail and hotel development.  But affordable housing units don’t even nearly keep up with demolitions. Only 20% of the increased property taxes generated go toward low-income replacement housing.

In 2011, Gov. Brown abolished redevelopment agencies during the 2009-2012 budget crisis. In 2017, Assembly Bill 1568 restored redevelopment for affordable housing using sales and use taxes in addition to property taxes.

The political Right objected to redevelopment mainly because of the use of eminent domain for private purposes.  The Left objected because it would end the purported supposedly reduce low-income housing, and along with it, political patronage jobs.

But neither objected to the goal of redevelopment in the first place: getting rid of “urban blight”; and along with it, market-produced housing affordability. And older homes that weren’t in a redevelopment district were eligible for CDBG low-interest rehabilitation loans and outright grants, again to reduce “blight”. “

Redevelopment and CDBG functions to build back up the property tax base lost from California Proposition 13 by effectively making older (affordable) housing stock unofficially a non-conforming use of property. Prop. 13 reduced the base property tax rate from 4% to 1%. Redevelopment is a sort of reverse Prop. 13.

A 1999 report, “Banking on Blight,” indicates a large proportion of the land area of cities in California are designated redevelopment project areas, notably the City of Long Beach with 54% or 26 square miles. A glance at a map of the redevelopment project areas in the Cities of San Jose in Silicon Valley and in working class Oakland shows a similar magnitude of the extent of redevelopment (see here and here).

Urban Sprawl Reduced to Crawl

With the demolition of thousands of blighted, older, but affordable, housing units in urban California by redevelopment, the only other housing option for first-time buyers is to find market affordable housing at the urban fringe, but California’s social engineers even deterred this.

In 2008, Gov. Schwarzenegger signed Senate Bill 375 – “Redesigning Communities to Reduce Greenhouse Gases”, as an anti-urban sprawl policy.  SB 375 would divert new development to cities as opposed to the urban fringe purportedly to reduce carbon footprints and promote “smart growth”.

Affordable Housing as a Social Problem

Tom Sowell has aptly stated “someone once defined a social problem as a situation in which the real world differs from the theories of intellectuals.” In the case of housing affordability, this would apply to both the Right and the Left’s solutions to the affordable housing crisis in California.

Ergo, if you want affordable housing, eliminate redevelopment and anti-urban sprawl transportation and housing policies; and zero-out the federal CDBG program, as Trump advocates.