August 11, 2004

 The Council OPPOSES Inclusionary Housing/Zoning because:

 a)  There are approximately 66 cities and counties which have implemented this policy in California and numerous reports show it is a failure. The Reason Public Policy Institute, for example, recently studied the Bay Area's Inclusionary Housing program and found that this approach burdens the housing market, lowers the overall supply of new homes (there were only 228 affordable units per year since 1973), significantly decreases government tax revenues, makes market-priced homes more expensive, and in the end, does nothing to help affordability for those in the lower income bracket. It assumes people will stay poor. It also broadens the gap between rich and poor.

 b) The low income individuals who purchase condos or townhouses under this program must sell their properties to other low income purchasers in the end, thus can gain no advantage in the real estate market. With the historical rising of prices, they are likely to fall further behind financially. They also have no incentive to upgrade the property or even maintain it since they may not be able to recoup these costs in the end.

c) Inclusionary Housing could provide for friction between neighbors. In addition to the fact that low income residents may have no incentive to upgrade or maintain their units—a factor that could anger the other people in the building--the latter may have to bear an additional financial burden due to caps on association dues for low income people. What if an emergency repair arises? Should the non-low income residents—many who may be struggling financially themselves--be expected to pay the entire cost? The low income residents may also dislike the fact that their units will not be built to the same standards as the other units in the building.

d) Neighbors will be displeased with the lax parking standards, the higher density and the ability for developers to build taller structures than current regulations allow. This has the effect of "up zoning."

e) The poor are already well-represented in Valley Glen (specifically) and in the San Fernando Valley (in general). We have a huge number of low income and Section 8 residents. Our community already bears a disproportionate share of the burden for assisting those with limited resources.

f) The Inclusionary Housing proposal states that the "set aside units" be permanently low income; thereby reducing tax money into perpetuity for the city and the state. At a time when there is a fiscal crisis, it seems fiscally irresponsible to deliberately create units that will hurt revenues.
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The Valley Glen Community Council proposes the following in lieu of Inclusionary Zoning/Housing:

a) Low cost loans and other real estate incentives are a less intrusive way to assist low income residents.

b) Commercial property could be re-zoned into residential or multi-use since the former generally sells for 25-50% less than the latter. In Santa Cruz, California the value of a commercial lot is $35 a square foot on average, while the cost of a residential lot is about $60 a square foot. Once the property is re-zoned, the value increases. These immediate savings can be passed on to the low income buyer / tenant and to the developer who agrees to build the project.

There are a huge number of vacant commercial buildings, often they are "boarded up" eye sores. Commercial real estate has not experienced the flurry of activity that the residential market has. Our proposal provides a method for using existing structures rather than taking more land and further destroying the environment.

Any converted or newly built low income structures should be kept small. Large projects have been known to fail. "The projects," for example, are known for crime, graffiti and other problems that accompany the inability to monitor ones neighbors. People are anonymous in these huge structures. In small buildings, neighbors often exert pressure on each other to keep up the property and grounds.

Properties could be built along transportation corridors where the property values tend to be lower.

Potentially a profit-sharing plan with the city could be explored whereby the city receives a percentage of the profits made by the low income purchaser after improvements and other costs. This would, in effect, make the city a partner. But the low income resident would have to be allowed to make a significant profit, and the city would have to find a way to avoid additional paperwork. The profit-sharing figures might have to be included as part of the Internal Revenue Form. 
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Why this new proposal makes sense:

I.   Neighbors will accept this idea because it has the feel of a "down zone." Neighbors will like the idea that more residential structures are being created. They will not morn the loss of a few commercial buildings.

II.  Low income buyers will eventually be able to sell at market value and can thereby lift themselves out of their predicament.

III.  Low income buyers will have incentive to upgrade and maintain their properties.

IV.  There will be no tension between neighbors because the entire building will be low income. There will be no burden for non-low income residents.

V.   Due to the small size of all buildings, neighbors will put pressure on each other for "pride of ownership" (in the case of owners) or a "high standard of living" (in the case of tenants).

VI.  The city and state will be able to receive market value property tax revenues at a time when government funds are crucial.

VII.  The creation of these multi-use dwellings or new residential structures (from former commercial properties) is unlikely to negatively impact the Los Angeles real estate market because the prices will not be held at artificially low levels. It is essential that we do whatever we can to keep the housing market strong because this is what keeps our local economy strong. Southern California IS real estate.

VIII.  Developers will want to build these units because of the hefty built-in profit. We believe the developers will have more incentive to build; thereby ultimately providing for a greater number of low income units.

We also have some long-term suggestions which would assist the low income housing situation.

1. Reverse the Sections of the 1986 Tax Reform Act that has devastated rental housing.

2. Streamline the entitlement process, reducing the bureaucratic delays. Time delays cost contractors money, and thereby cost everyone more.

3. Reinstate the market incentives for rental housing. Rent control keeps property values low; thereby decreasing the tax base and the revenues for the city and state. Owners of rent control buildings could be given market incentives to bring their property up to code, rather than being subject to the current confiscatory law.      

Thank you for considering our suggestions. If you have any further questions, feel free to contact us.

Greater Valley Glen Council