Explaining Southern California's economy

Workforce housing in LA costs too much. Here's how to fix it

Expo Rail

Ashley Myers-Turner/KPCC

Metro rail lines in Los Angeles, coupled with the development of housing along transit corridors, could make the city a more affordable place to work, according to a recent report from the Los Angeles Business Council.

Los Angeles isn't a cheap place to buy or rent a house or an apartment. Only New York and San Francisco will cost you more.

According to UCLA's Paul Habibi — he's at the Anderson School of Management and focuses on real estate — this is dealing a grave blow to the city's competitiveness. But he has a solution, which he's outlined in a just-released report, produced in conjunction with the Los Angelss Business Council, an organization devoted to sustainable economic development in the region.

The idea laid out in "Developing Livable Communities: Enhancing Economic Competitiveness in Los Angeles" is straightforward. We don't have enough affordable workforce housing. But developers don't want to develop for the portion of the market that needs that housing the most: people earning between $42,400 and $63,600. Those folks — what Habibi calls a "donut hole" — make too much to qualify for subsidized housing, but don't make enough to afford the high-end housing that developers prefer (for obvious reasons).

Enter an integrated solution. Create an incentive to develop housing for this group along transit corridors, which are currently being expanded in L.A. "Continued investment in transit and transit corridors will make LA more economically competitive," said Habibi, who was the report's lead author.

If you think this is about creating more density in infamous L.A. urban sprawl, you'd be right on track. "You want to bring the workforce back toward the employment centers," Habibi said. "We need to lower the economic cost of getting workers from point A to point B."

Habibi thinks that multifamily rental housing makes the most sense for this development model. "It's the most cost-effective platform, because the cost per unit for developers is significantly less."

Habibi would know: In addition to serving on the Anderson School faculty, he's a Principal of Habibi Properties, LLC, "which owns over 1,600 apartment units in the Los Angeles area," according to his UCLA bio. Would this approach to development be good for his own business? Quite possibly, but Habibi takes a nuanced view that, in the end, isn't purely about maxmizing profits.

At the moment, Habibi acknowledges, it makes more sense for developers to go for market-rate projects because they can make money doing it. So incentives have to be provided in terms of reduced risks and costs for developers — and the reducing has to be achieved through policy.

"The city needs to get very proactive and streamline development," he said.

That would entail potentially less restrictive environmental reviews, as well as city housing authorities stepping in to fill the gap left by the end of redevelopment agencies.

It would be easy to conclude that a bunch of new multifamily housing units clustered along existing and future transit routes would be enough to provide the workforce housing that L.A. lacks. But Habibi argues that there's more work to be done.

He envisions the development of "mobility hubs," where an assortment of getting-around options would plug into a mass-transit center, increasing overall mass-transit usage. This is from the report:

Approximately 200,000 people live within a quarter-mile of a transit stop in Los Angeles County, but six times that number – 1.24 million – live within one mile of a transit stop. Research shows that if these people used transit as often as those who live a quarter-mile from a stop, ridership would increase by 70,000 riders – a 19 percent increase on Metro rail lines.

Transforming vision into reality is going to require money, some of which could come from Measure J, a ballot initiative that will be in front of voters in November. It builds on Measure R's half cent L.A. County sales tax by stretching that funding out by 30 years.

Is it "game over" for new affordable workforce housing if Measure J fails? Not according to Habibi.

"Very little is dependent on Measure J, he said, insisting that the critical issue is to lower costs for developers.

"I don't think it will be a tough sell," he said. "If you lower risks and lower costs, the end result would be immediate."

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