It’s outrageous that the average cost to build a city-subsidized apartment for the homeless in Los Angeles has climbed to $559,000 with highest per-unit cost now at $746,000. I just looked at a listing for a two-bedroom condo in Malibu for $659,000.
But those are the costs that Los Angeles City Controller Ron Galperin disclosed in his annual audit of Proposition HHH that he put out in September. Prop HHH was passed by 77 percent of L.A.’s voters in late 2016 who were willing to put their city deeper into debt to help get many of our homeless into homes. They authorized $1.2 billion in spending to build permanent supporting housing for the homeless as well as some affordable units for low-income folks.
Now, nearly four years later, most of the money – $1.17 billion – has been allocated but only three housing projects have been completed with a total of 228 units. Thirty more are in construction, but it’s taking way too long.
And it’s costing way too much. Why? Well, there’s the mandate they be built with prevailing-wage jobs – union jobs – and union rules, which adds about one third to the cost, according to developers I asked. That means a $300,000 unit becomes a $400,000 unit. Add in the various other “soft costs” the city requires, and, hey, did somebody just whisper “boondoggle”?
Look, it’s no secret that any government-built project is going to be costly and slow. Everybody knows the projects would come in faster and cheaper – much faster and much cheaper – if they were turned over the private sector. But the city would never do that. The city council is willing to settle for much costlier and therefore fewer housing units so long as the unions are happy. As one apartment developer in our article in this issue put it: “we’re concentrating on creating prevailing-wage jobs in lieu of solving the homeless problem.”
Here’s a thought: Instead of this boondoggle of paying luxury prices to build units for the poor, why not forget the construction and just give the money straight to the homeless so they could rent their own units?
Since the cost of each city-subsidized unit exceeds half a million, put $500,000 into a protected investment account for each homeless person who was destined to get a city unit. Then give him or her $2,500 month from that account. That’s enough money to rent a two-bedroom apartment in many areas of the San Fernando Valley with enough left over to pay utilities.
How long would that $500,000 last if we took out $2,500 a month? Assuming a 7 percent average annual return, it would last forever. Assuming a 4 percent return, it would last nearly 27 years. (The average annual return for the stock market over the last century has been 10 percent.)
Don’t like that idea? Here’s another: Instead of overpaying to build new, use the money to buy used. The median price of an existing condo in the San Fernando Valley in June was $515,000. Remember, that’s less than the $559,000 average cost for each unit that the city is building. (By the way, Galperin said that $559,000 is a pre-development projected cost. In other words, it may go higher.)
The city could buy up existing condos and turn each one over to a homeless person. The city would end up with more units, because they’d be cheaper, which means they’d get more people off the street than what they’re doing now.
A third idea: Do what pretty much every developer says to do and rehab and repurpose existing buildings. Almost any kind of building – old hotel, retail space, office building – could be adapted and reused for much less money.
Galperin noted that two of the city projects for the homeless that came in for less than $400,000 a unit were conversions of existing motels. So, the city does know how to do it. It just needs to replicate that on a grand scale.
Angelenos voted in good conscience and in good numbers a few years ago to help the homeless. The city government is turning all that into a travesty in slow motion.
Galperin said “it’s an embarrassment and a breach of trust with people who voted for it.” Sure, it’s expensive to build in Los Angeles, he said, “but there are ways to do this faster and cheaper.”
Yes. Much faster. And much cheaper.