Tag Archive for: affordable housing boondoggle

California Pioneers Subsidized Housing for Public Employees

When it comes to affordable housing, what California’s state legislators have done epitomizes what happens when you have a government bureaucracy that serves itself instead of the public, one that is under the complete control of special interests.

They have enacted laws that have made it nearly impossible for the private sector to build homes, which has made homes unaffordable. Then to supposedly solve the problem they created, they brought in the public sector to build “affordable housing.” Their “solution” is a preposterous fraud that has already wasted tens of billions, and the worst is yet to come.

Nothing about publicly subsidized affordable housing is affordable. As a matter of fact, government funded “affordable housing” costs far more to construct than privately funded housing. But thanks to the politically engineered shortage of privately funded housing, and thanks to the result of this, a politically engineered and unaffordable price to rent or purchase homes, public housing is being sold to voters as a humanitarian necessity. And after the taxpayers foot the bill to construct this housing, taxpayers then foot the bill to subsidize the “affordable” rental rates charged the lucky occupants. Forever.

Subsidized housing developments were once known as the “projects,” which back in the 1960s were built as part of the “war on poverty.” These attempts at providing free housing backfired, as tenants with no ownership stake had no incentive to care for their property. But at least the projects were built cost-effectively. No such luck this time around. Certainly not in California. By the time the litigation has ran its course, and the many expert consultants have taken their share, and the public bureaucrats have collected their fees, and the financial middlemen have been allotted their skim, the cost of these new public housing “projects” exceeds over $500,000 per unit.

From Flophouse to Bauhaus – Courtesy of Taxpayers

Critics of this astronomical price tag may relax, however, because affordable housing is no longer called “project” housing. It’s been rebranded! The new names, along with “affordable housing,” are “supportive housing,” “community housing,” and “municipal housing.” And instead of stark red brick mid-rise blocks of apartments, reminiscent of Ceaușescu’s proletarian barracks, today’s public housing may still be big boxes of concrete and steel, but they’re designed by visionaries, integrating “social justice” and “green design” into “transit oriented” utopias, replete with curved surfaces, a calming color palette, and “pedestrian paseos.”

The latest scam being foisted onto voters is called “workforce housing.” Never mind that government policies made housing unaffordable – let’s borrow money to build subsidized housing for government workers. This new scam taps into a few reliable voter sentiments. Not only is this “affordable housing,” but it’s financed through a school bond which only requires a 55 percent vote to get approved vs two-thirds for most other public bonds. This scam also taps into voter sentiment favoring anything to support schools and “the children,” as well as sentiment favoring helping our “public servants.”

Perhaps before providing some examples of this scam, let’s reiterate why it is a scam:

(1) Housing is unaffordable in California because government policies have made it impossible for private sector developers to construct affordable homes.

(2) Instead of changing these government policies, a coalition of public sector unions, crony developers, and financial intermediaries have decided to present voters with bond measures – already totaling tens of billions – to construct “affordable housing.”

(3) Due to the morally corrupt (but entirely legal) process costs – government planning and oversight, nonprofit service providers and partners planning and oversight, expert consultancy, litigation and settlement costs, financing costs, “green” compliance costs, “inclusion” compliance costs, project labor agreement costs, permits and fees, plus spectacularly expensive ongoing administrative costs – the total project cost per unit for these affordable housing projects actually exceeds what private development projects incur per unit, to the insufficient, limited extent those private projects are approved.

(4) Public employees are indeed unable to easily afford to live in the communities they serve, but that’s because everyone is unable to easily afford to live in these communities.

(5) It is alleged that representing “workforce housing” as eligible for the lower threshold of 55 percent voter approval because it’s a school bond may be illegal.

Bearing in mind that the first four reasons are reasons enough for this new practice to be a scam in every sense of the word “scam” (scam: “a dishonest scheme”), nonetheless, examples of #5 should be exposed. With help from Richard Michael, who for years has fought local government corruption and publishes (and perpetually updates) his website “BigBadBonds.com,” here are a few:

2018 Local California School Bonds that Included Funds for Workforce Housing

Pittsburg Unified School District, Measure P, $100 million

Jefferson Elementary School District, Measure U, $30 million

Palo Alto Unified School District, Measure Z, $460 million

Monterey Peninsula Unified School District, Measure I, $213 million

Pacifica School District, Measure O, $55 million

Perhaps we should be surprised that only five ballot measures of this nature could be found on local ballots in California during 2018. Then again, this is a whole new frontier of government expansion. Housing as not only a human right, but as an obligatory government entitlement, and never mind the fact that government policies made housing unaffordable.

Maybe the paucity of school bonds with “workforce housing” funding buried in the fine print is because it’s a new innovation. Or maybe it’s the fact that including “workforce housing” in a school construction bond is quite possibly illegal, since school construction bonds are for, imagine this, school construction. But the 55 percent threshold isn’t absolutely critical – three of these five were passed by over a two-thirds vote.

And what of bonds that require a two-thirds vote? How do they fare, and to what extent are these bonds offering “workforce housing”? A look at San Francisco’s Prop. A, which piled another $600 million in borrowing onto the tens of billions already spent by taxpayers to provide “affordable housing” and “supportive housing” offers a glimpse into the future. Because in Prop. A’s allocation of funds – which doesn’t unequivocally require a single unit of new housing, just rehabilitation of existing housing – is $20 million for “educator housing.”

San Francisco’s Prop. A was approved by 71 percent of voters.

Current California Housing Policies Are a Fraud

Across the state, voters have been conned into borrowing – against their future tax payments – tens of billions of dollars in pursuit of housing for the homeless, housing for low income residents, and, now, housing for public employees. All of this is a “dishonest scheme.” It is a monstrous fraud.

It is a fraud because the model being pursued will never solve the problem. By the latest estimates, California has over 150,000 homeless, well over 1.5 million state and local public employees, and at least 7 million people living below the poverty line. Shall all these 8.65 million people receive government subsidized housing?

A few basic calculations provides the answer: To provide “supportive housing” for all of California’s 150,000 homeless, even at $250,000 per unit – which is rock bottom and extremely unlikely to ever constitute the average cost – taxpayers would have to shell out $37.5 billion.

And what about “workforce housing”? Does anyone expect public employee unions to tolerate the lottery style allocation of subsidized housing to a select few, which is the process endured by low income families? One may rather expect these benefits to proliferate, finding their way into operating budgets as well as buried in bond measures. Again, even at a low-balled $250,000 per unit – taxpayers would have to shell out $375 billion.

As for “affordable housing,” it’s fair to say that the sky high home price equilibrium would be broken long before 7 million affordable housing units ever got built. But it’s also fair to wonder how on earth any private sector housing will remain in California – apart from plush high rise condos for the international investor class – when they’re competing with taxpayer funded developments at the same time as punitive laws continue to make it almost impossible to build without subsidies.

When it comes to housing, as with so many other things, California leads the nation. Instead of building practical enabling infrastructure and limiting their zoning laws and building codes to practical necessities, they have institutionalized a system of rapacious yet totally legal corruption, masked by moral imperatives.

It is a fraud of historic proportions, with incalculable cost and tragic consequences.

This article originally appeared on the website California Globe.

 *   *   *

 

 

 

The Boondoggle Archipelago

Across California, there is a growing string of islands, exquisite gems in the urban ocean. Dredged from the pockets of taxpayers, constructed by elite artisans, these pristine islands have been created at stupefying expense. But their beauty is seductive. Spend more!

Each time an island is completed, or even proposed, glowing reports are logged across the land. So fortunate are those who shall live on these islands! So wonderful are those who shall build these islands, and care for their inhabitants! What a magnificent, marvelous thing we have done!

Or have we? From deep within the ocean a seismic wave is building, triggered by reality and propelled by common sense. Because these islands, more properly referred to as homeless shelters, supportive housing, and “low income housing,” are far too small, and far too precious, to ever, ever accommodate every castaway that needs a roof over their heads. They will never offer the required land mass to solve the problem. Instead, history shall know them as California’s Boondoggle Archipelago.

The builders of the Boondoggle Archipelago hide behind laws they won’t try to change, and behind court rulings they won’t challenge, and happily follow the rules. Happily, because the rules are rigged to ensure that the vast majority of California’s homeless and low-income families shall remain forever adrift, and so long as there are castaways, there’s money for the builders.

A short cruise across the urban ocean from north to south, visiting various typical islands in California’s Boondoggle Archipelago, should offer ample evidence that no amount of money will ever solve the problem, and therefore billions and billions of dollars, year after year, shall continue to line the pockets of the builders.

In Oakland, the “Estrella Vista” project, at a cost of $64 million, offered 87 units of affordable housing. That’s $736,000 per unit. An analysis of the project costs debunks the misleading notion that the only public money invested in these units came from Alameda County’s Measure A1, passed in 2016 to allocate $580 million to “affordable housing.”

While Alameda County’s Measure A1 Bond only contributed 3 percent to the cost of Estrella Vista, matching loans from the City of Emeryville (7.2%), the City of Oakland (3.2%), plus other federal and state sources (17.6%) constituted much of the remainder. The biggest source of funds, “LIHTC Equity,” at 42.9 percent, bears further explanation.

LIHTC stands for “Low-Income Housing Tax Credit,” and these tax credits, which can be bought, sold, and traded, represent a one-to-one reduction of a corporate tax bill. They are not a tax deduction, they are a tax credit, meaning that for any profitable corporation that pays taxes, their face value is equivalent to that same amount of cash in the bank. Who pays for tax credits? Taxpayers, since whenever taxes are avoided in one place, the resulting shortfall in tax revenues has to be covered by other taxpayers.

This is typical.

San Jose’s Measure A, approved by voters in 2016, allocated $950 million to construct affordable housing. Supposedly this beast of a bond will fund the construction of 4,800 units of affordable housing. That would come out to a supposedly reasonable average per unit cost of $198,000 (“supposedly reasonable,” because the national average cost to construct an apartment unit is only around $75,000). But not so fast. Courtesy of the County of Santa Clara Office of Supportive Housing, let’s examine this island chain.

The “Veranda” will offer 19 units at a total development cost of $11.9 million; that’s $626,000 per unit. The “Villas on the Park,” 84 units for $476,000 per unit. The “Gateway,” 75 units for $406,000 per unit. The “Crossings,” 39 units for $586,000 per unit. “Quetzal Gardens,” $706,000 per unit. “Leigh Avenue,” $780,000 per unit. Wading through the 15 new housing projects that have disclosed funding details, San Jose’s Measure A is part of a larger funding package – nearly all of the money coming from taxpayers – that will construct 1,357 units at a cost of $748 million. That’s $552,000 per unit.

On November 5th, San Franciscans approved Prop. A, which means their home owners will be paying principal and interest on another $600 million to build “affordable” housing. A careful review of the actual text of the ordinance indicates this money may not actually construct a single unit of new housing. Instead, the terms of this bond could be fulfilled merely by rehabilitating existing housing.

An October 7th, 2019 report in the San Jose Mercury offers a vivid example what “rehabilitation” accomplishes in the real world. The article describes how an apartment building in Antioch was converted to affordable housing, but when the renovations were completed, the tenants actually ended up paying more in monthly rent. To stay in their homes, they had to win the subsidies lottery, and rely on ongoing government assistance. Most moved out, replaced by the lucky few.

How is this helping anyone?

Rehabilitation of existing units brings us to our first island in the southern seas of California’s Boondoggle Archipelago. On October 24, Curbed LA reported that the Los Angeles City Council unanimously voted to provide an additional $24 million in homeless housing bonds to “repurpose a building on the Veterans Affairs campus in West Los Angeles for housing for veterans.” According to the article, the rehabilitated building would provide 59 units of permanent supportive housing for homeless and chronically homeless senior Veterans.

According to Ryan Thompson, writing for VeniceUpdate.com, the developer’s budget for this rehab project is $54.6 million, which equates to a per unit cost of $926,000. In his write-up, Thompson not only questions the astronomical per unit price tag, but the entire process whereby these contracts were awarded and how the designated developers were selected. It warrants close reading.

Political patronage to the well connected builders who are generous with their campaign donations. Nonprofits exploiting their tax exempt status and hiding behind their benevolent public image while they rake in hundreds of millions. Endlessly growing flotillas of public bureaucrats. A lottery to anoint the lucky occupants of the few, but spectacularly expensive, island refuges. Market rate builders setting sail for new, more competitive oceans, far, far away. Millions of castaways remaining adrift in the urban ocean. These are the consequences of the Boondoggle Archipelago.

Spending up to one million dollars per unit to not even create new housing, but to upgrade an existing structure, is not an outlier. These astronomical costs are common. In Venice Beach, a new structure being proposed to accommodate homeless and low income residents is budgeted, including the value of the land, at over $200 million, in order to create 140 new apartment units. That’s a cost of $1.4 million per unit.

In order to assist the homeless, in 2016, Los Angeles voters approved Prop. HHH, authorizing $1.2 billion to construct “supportive housing.” As reported by the Los Angeles Times, the total project cost, on average, for the few thousand units that will eventually get built is $550,000 each.

What’s really going on here? Are the builders who take taxpayer money to build these island paradises smooth sailors or brazen pirates? And with tens of thousands of homeless and literally millions of “low income” Californians, who do they think they’re kidding? After all, at a price tag of $500,000 each, and evidence suggests that is on the low side, it would cost $65 billion just to house California’s existing homeless. It would cost orders of magnitude more than that to build “affordable housing” for all of California’s qualifying low income families. And are these actually island paradises, or state administered wards?

The most evocative use of the word “archipelago” in the 20th century was not used in a benign context. It was “The Gulag Archipelago,” the title of a book by Alexander Solzhenitsyn that called the world’s attention to the network of prisons and labor camps that absorbed millions of Russians during the Soviet era. And during the second half of the 20th century when Solzhenitsyn was writing his book, across America we built our first Boondoggle Archipelago – housing projects. They were built, they were occupied, they demonstrably failed to alleviate poverty in the inner city, and now they’re being demolished.

What did we learn? Apparently, all we learned was spend more. Do it again.

The Boondoggle Archipelago is defined primarily by the corrupt patronage it exemplifies. But it’s worth stepping back and asking the question – are we not only wasting hundreds of billions of taxpayers money, but also condemning hundreds of thousands of Californians to dependency?

If the builders and supporters of the Boondoggle Archipelago are sincere in their desire to help the homeless and the needy, they would first try the following solutions: Overturn the court settlements that prevent arrests for vagrancy, and repeal Prop. 47 so users of hard drugs and petty thieves will again face jail time after repeat offenses. Do that, and see how many “urban refugees” suddenly find shelter again with their relatives or their friends.

Then construct tent cities, taking advantage of the knowledge the U.S. Military has gained in setting up these compounds all over the world. Round up the homeless and put them into the appropriate facility – one type for substance abusers, one for petty thieves and other minor offenders, one for mentally ill, and one for families and individuals who are genuinely down on their luck. Over time, if appropriate, move these people into better shelters – but put a cap on the costs.

At the same time, to make housing affordable for low income Californians, end the environmentalist war on land development. Repeal the California Environmental Quality Act, since federal law provides ample protection. Repeal SB 375 and similar laws that have made it nearly impossible to develop open land. Start using public money to build more enabling infrastructure. Quit forcing developers to spend more money preparing permit applications and paying fees than they spend in actual construction. Then turn private investors loose to again build market housing at affordable prices. Today, developers either turn crony, or move to other states. They have no choice. The laws are rigged.

Or just stay the course on the urban seas, filling your drift nets with billions in taxpayer cash.

California’s policymakers, state and local alike, can keep throwing money into the Boondoggle Archipelago. But recognize what these facilities really are. They’re housing projects; a failed model.  When people are drowning, you don’t build them an island. It takes too long. It costs too much. You throw them a life preserver.

This article originally appeared on the website California Globe.

 *   *   *