Los Angeles Daily News

[Note from Professor Svorny: I didn't use the word "skyrocket,'' the newspaper editors title the articles. See below...]

By Shirley Svorny

Tuesday, April 20, 2004 - Los Angeles City Councilman Ed Reyes has offered a proposal for "affordable housing" that can only make housing in Los Angeles less affordable.

The proposal, for what urban planners call "inclusionary zoning," requires developers to set aside below-market-price units in exchange for subsidies and other benefits designed to offset the costs. It would require developers of five or more homes to set aside 20 percent to 40 percent of the units for low-income households. Developers of apartment complexes would be faced with a 12 percent set-aside requirement.

But the proposed constraints on new construction that force developers to include housing for low-income families would raise the costs of development. Thus development would be arrested, and the total number of housing units available in the city would decline.

Reyes argues that building low-income housing in L.A. would cut long commutes and relieve congestion and traffic. That is quite a tall order for a simple ordinance governing new construction in an area already heavily built up.

How many units is Reyes talking about, anyway? In calendar year 2003, 1,498 new homes were built in Los Angeles. During the same period, 6,433 new apartment units were constructed. Even if this pace of development were to be unaffected by inclusionary zoning, it would mean an increase of approximately 1,220 units aimed at low-income families a year.

At what cost? The most obvious cost is that other families cannot occupy these housing units. There is no net creation of housing and, in fact, if inclusionary zoning discourages new construction, as can be expected, it would have a negative impact on the number of housing units available in Los Angeles.

The lack of new construction means that individuals or families who would otherwise move into new units stay put, limiting home sales across the board in the city and putting upward pressure on prices of existing homes in every neighborhood.

One way to think about it is that the lucky families who obtain subsidized housing would be better off, but that every other family renting or considering the purchase of a new home would be worse off.

Another issue associated with inclusionary zoning, as I see it, is that the families we worry about the most are unlikely to secure one of the newly built units set aside for the poor. Poor people have a hard time competing with their neighbors in working the system to get low-priced units.

Higher-income individuals can secure subsidized housing by shifting assets and other means. One of the most troubling stories I've heard is about subsidized tenants who, in anticipation of yearly inspections by the housing authorities, hired a moving company to take all of their expensive belongings out of the unit. In one case, a developer's own mother qualified for a low-income unit in his complex. These stories limit my confidence in the ability of government agencies to identify those most in need.

The current long drive times that Reyes is concerned about reflects a preference on the part of families for safe neighborhoods and safe schools. Instead of helping selected households get into a safe neighborhood through inclusionary zoning, why not jack up police patrols and install streetlights where people already live?

One reason the City Council may prefer inclusionary housing to other efforts to improve the living conditions of the poor is that increasing police patrols or putting in streetlights must be directly funded by the city. In contrast, the costs associated with inclusionary housing are borne by households across the city, a hidden tax of sorts. We'll see photos of Councilman Reyes congratulating families who benefit from inclusionary housing efforts in our local papers and in Reyes' own mailings, but only a few of us will blame him for reduced housing options and higher prices in the city.

Reyes' efforts can't solve housing, congestion or traffic problems in L.A. And with his inclusionary zoning ordinance, he stands to make housing in Los Angeles more expensive for the vast majority of residents.

Shirley Svorny is professor of economics at California State University, Northridge.