The Breakdown

Explaining Southern California's economy

LA rent crisis: Why aren't there more affordable apartments?

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This is the second part of KPCC's occasional series "High Rent, Few Options," which looks at the rent affordability crisis in Southern California. You can read Part One here. Let us know what you think in the comments below, on Facebook or on Twitter (@KPCC).

Ask why the rent is so high in Los Angeles, and you often get the same answer.

  • “There’s certain laws like the law of gravity and it’s called the law of supply and demand,” said developer Carl Lambert.
  • “It’s supply and demand,” said Los Angeles city Councilman Gil Cedillo.
  • “I think in simple terms, it’s an issue of supply and demand,” said Beverly Kenworthy, executive director of the California Apartment Association, which represents apartment owners.

In Los Angeles — a city where fewer and fewer residents can afford to buy a house — rents are the least affordable they've ever been; constructing more apartments would certainly help.

But developers say that building new housing – especially affordable units – is an agonizing process. 

“The city is constantly being reactionary,” Kenworthy said. “We don’t want density. We want our neighborhoods to look exactly the same. If we really want to address this housing crisis – because it is a crisis – we have to really be much more forward-thinking, and we have to embrace development and the growth and the demand that’s happening.”

At the same time, apartment construction is picking up again. Nearly 10 percent more permits to build multi-unit housing have been issued this year in Los Angeles County, compared with the same period last year, according to the California Homebuilding Association.

New multi-family housing permits in LA, Long Beach, Glendale Metropolitan Statistical AreaThe problem for renters is that most of those new apartments carry very high rents and are targeted at luxury renters.

Santa Monica planning commissioner Sue Himmelrich said she can only laugh when she hears developers talk about how hard it is to build.

“From the beginning of time, developers have claimed that their projects are too expensive to build, it’s infeasible, that they can’t do it,” Himmelrich said. “And they always seem to make money. I don’t see developers going bankrupt in Santa Monica. I don’t see them unable to flip their projects for a reasonable amount of money. It’s just not what’s happening.”

Still, developers point to local regulations as an obstacle.

Los Angeles' current zoning code was first adopted in 1946.  Back then it was a 67-page pamphlet. Every year since, more rules have been added, and now the code spans more than 600 pages.

The Los Angeles Department of City Planning is in the midst of creating a comprehensive revision to the zoning code that it hopes to have completed by 2017, but Kenworthy says all but the biggest, best-funded builders have already given up trying to navigate the bureaucracy.

“I have members of my organization, some of them build, but I have some of them who don’t [do] it anymore because it’s just too hard and too uncertain and too costly,” Kenworthy said.

Getting approval for a project described as ‘brain damage’

Lambert, who’s built dozens of mostly smaller apartment buildings in Santa Monica and the Westside, said developers have a phrase to describe the agony of getting a project approved.

“We call it brain damage,” he said.

Lambert said that before he could break ground on a recent project, he needed 33 separate sign-offs. It’s not uncommon for it to take three years from when he buys a piece of land to when he can break ground. He has to spend hundreds of thousands of dollars for environment impact, engineering and traffic studies, and many times there are delays.

L.A. developer Carl Lambert says It’s not uncommon for it to take three years from when he buys a piece of land to when he can break ground on a project.

“On one project I got held up for over a month because the Italian sink that I bought through a U.S. distributor didn’t have an approval in L.A. County,” Lambert said. “So I had to fly to Italy and get information from the distributor on how this sink was built.”

Sometimes Lambert has built affordable apartments, which has allowed him to qualify for government backed incentives. But he’s usually regretted it, because the projects take even longer.

“I’ve experienced all this wonderful pain over the years, and I’m now open, and do you think I’m going to want to go out [and] give everybody deals or give them a $600-a-month apartment with an ocean view? No, it’s going to be fair market value,” Lambert said.

Median rents in L.A. County increased by 25 percent between 2000 and 2012, according to the California Housing Partnership Corporation, a San Francisco-based group that advocates for more affordable housing.

The average rent for a one-bedroom is now $1,500 a month, according to Zillow.

A microcosm of expensive rent

Want to live by the beach in Santa Monica? That’ll set you back $2,420 a month for a one-bedroom apartment, according to Zillow, the most in Southern California.

The seaside town, where 70 percent of housing is rented, serves as microcosm of how hard it is to solve the affordability problem.

Since voters approved Proposition R in 1990, at least 30 percent of new housing is supposed to be affordable for low and moderate income households. The city actually exceeded the goal by 6 percent through fiscal year 2011-'12.

But under a state law known as the Costa-Hawkins Rental Housing Act, apartments built after 1995 can’t be rent-controlled.

“We can’t control our rent because of the Costa-Hawkins decision,” said Santa Monica planning commissioner Himmelrich. “That really is the pressure on our housing market.”

With little control over rents, only so many affordable units being built – 1,369 from fiscal year 1994-'95 through fiscal year 2011-'12 – and the city as popular as ever, it’s back to the supply and demand problem.

“It’s very hard to find something affordable, because it’s such a beautiful place to live and so many people want to live here, and it drives the prices up,” Himmelrich said.

But Himmelrich says she can afford to be tough on developers. Barely a day passes without one calling her, wanting to build.

“For each developer who wants to be here, there are 40 more behind them,” she said. “I mean, we have 40 development agreements waiting to be heard.”

Dwindling funds for affordable housing

Countywide there is a shortfall of 490,340 housing units, and the shortage is likely only going to get worse. That’s because there’s half a billion dollars less available in state and federal funding for affordable housing in the county than there was in 2008, according to the California Housing Partnership Corporation.

Los Angeles city councilman Gil Cedillo, who represents neighborhoods around Echo Park and Koreatown, finds the lack of funding troubling.

“We focus on creating jobs here in Los Angeles for people who live outside the city, and we don’t focus on building housing for people so they can live where they work,” Cedillo said.

In April, Cedillo led a “Renter’s Day” to highlight the problem of affordability. There was a modestly attended rally, but as for action? That will have to wait.

New York City mayor Bill De Blaisio recently announced an $8.2 billion plan to build and maintain 200,000 affordable housing units in that city over the next 10 years.

In L.A., Cedillo said that as much as he’d like to do something similar here, with the city trying to balance its budget there’s simply no money available.

“I really admire what those people do in New York because they really move aggressively on these problems,” Cedillo said. “We don’t have those types of resources to commit to housing.”

Cedillo has been lobbying for a state bill, the California Homes and Jobs Act of 2013, that would raise $500 million a year for affordable housing by charging a $75 fee on real estate transactions. But the measure’s passage now seems unlikely after three Democratic state senators who supported it were suspended for corruption and voter fraud.

That means that now, for first time in three decades, there are virtually no state funds available for affordable housing, according to the California Housing Partnership Corporation.

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