Many Calif. cities misuse housing funds

More than 100 cities statewide spent about $700 million in housing funds between 2000 and 2008 without building a single new unit, the Los Angeles Times reported today.

In most cases, none of the money went toward increasing the existing housing stock by renovating properties, the newspaper found in an investigation that showed local governments ignored or skirted laws that required them to create affordable housing.

-- In Irwindale, the city spent $87 million over the eight-year period, but produced only 42 homes and 62 rehabilitated units. Some of the money was spent on industrial land next to an old gravel pit and warehouses, a site that officials now acknowledge was unsuitable for housing. New plans call for
building a hot-sauce factory there.

-- In Santa Ana, officials spent millions on projects that knocked down homes, displaced low-income people and worsened blight without producing anything in its place. Block after block in a 94-acre area east of Santa Ana's civic center is lined with boarded-up buildings and vacant lots.

-- On Santa Catalina Island in Avalon, a half-block of cottages that was razed to make room for new homes has languished, undeveloped for about 15 years.

In about three dozen cities, most affordable housing funds were spent on "planning and administration," though not one unit was ever built.

State law requires municipal redevelopment agencies to spend 20 percent of the roughly $5 billion in property taxes they collect each year on building and preserving homes for poor and moderate-income people. But affordable housing is not politically popular, and The Times found that many projects face inexplicable delays.

Others end up worsening blight and hurting the people they were supposed to help. Land ostensibly set aside for affordable housing was in some cases turned over to commercial developers, raising questions about whether cities ever intended to build the housing in the first place, The Times reported.

Citing limited funds, the Department of Housing and Community Development stopped auditing redevelopment agencies three years ago, and the Times investigation showed that state officials do little to ensure that cities spend the money properly or report accurately on their activities. Numerous
discrepancies were found between what officials told reporters they had produced and what they told the state.

"The state has unleashed this incredibly powerful land-use and financial tool that is redevelopment with virtually no effort, no time, no resources spent to hold these agencies to account," said Catherine Rodman, a San Diego lawyer who has sued several agencies over their use of housing funds.

The state's approximately 400 municipal redevelopment agencies control the largest pot of non-federal money available to build and subsidize affordable housing.

These little-understood arms of government are run by city council members and county supervisors, or in big cities like Los Angeles, by political appointees. The agencies, which often work in concert with private developers, are funded by differential increases in property tax revenue from blighted areas they improve.

Redevelopment law gives officials great flexibility in addressing the housing needs of poor and moderate-income families. Redevelopment agencies can do more than build homes: They can buy and fix foreclosed homes, provide grants to homeowners to improve properties and pay to keep existing units affordable.

But they are also generally required to set the money aside for housing, and to develop the land they buy within five years. They are also required to replace any units they destroy.

Still, more than 20 agencies produced less than one unit of new or rehabilitated housing for every $1 million spent, according to the Times analysis of state records over eight years. A ballpark estimate for building a unit and keeping it affordable for 55 years ranges from $350,000 to $500,000, experts said.

In Lynwood, officials conceded during a recent lawsuit filed on behalf of residents that they could not fully account for how they had spent millions in affordable housing funds over more than a decade. They also admitted that they had not been putting the full 20 percent of revenue aside for housing, as required by law.

"There is no keeping track of the project files and there isn't any control ... as far as what should go in the file and where it's kept... I mean, there's no list," then-Assistant City Manager Lorry Hempe testified in a 2008 deposition.

Public Counsel, a pro bono law firm, settled the lawsuit last year after the city agreed, among other things, to build 91 homes.