Having made a deep financial commitment to create housing for some of its 27,000 unsheltered homeless people, Los Angeles is falling short in building new apartments to take thousands of people off the streets, a new study finds.
Nearly three years after city voters approved a $1.2 billion construction program over 10 years, the city has yet to see the first building completed. Average per-apartment costs have zoomed more than $100,000 past prior predictions, the study by city Controller Ron Galperin finds.
“To create a bigger impact now and in the future, the city must make some immediate changes to its approach,” said Galperin in comments via email. “Los Angeles needs to figure out how to make the cost of development cheaper and the timeline quicker.”
At an average cost of $531,373 per unit – with many apartments costing more than $600,000 each – building costs of many of the homeless units will exceed the median sale price of a market-rate condominium. In the city of Los Angeles, the median price for a condo is $546,000, and a single-family home in Los Angeles County has a median price of $627,690, the study states.
Prices rose dramatically because of higher-than-expected costs for items other than actual construction, such as consultants and financing. Those items comprise up to 40% of the cost of a project, the study found. By contrast, land acquisition costs averaged only 11% of the total costs.
Instead of the 10,000 apartments touted by city leaders as the goal of the bond issue, the city measure known as Proposition HHH is now projected to provide a total of 7,640. The hope is that the new apartments, combined with dormitory-style shelters and other facilities, can make a dent in the city’s unsheltered homeless population.
Prices rose dramatically because of higher-than-expected costs for items other than actual construction, such as consultants and financing. Those items comprise up to 40% of the cost of a project, the study found. By contrast, land acquisition costs averaged only 11% of the total costs.
Instead of the 10,000 apartments touted by city leaders as the goal of the bond issue, the city measure known as Proposition HHH is now projected to provide a total of 7,640. The hope is that the new apartments, combined with dormitory-style shelters and other facilities, can make a dent in the city’s unsheltered homeless population.
At the time, Los Angeles Mayor Eric Garcetti responded by saying if Trump cared about the crisis, he’d be trying to find more federal money to help resolve it.
As for city controller’s report, Garcetti’s office issued a statement Monday in which it said it stands by the goal of 10,000 new housing units using both the funds from the proposition and other sources. And it didn’t dispute Galperin’s findings.
“The controller’s report is a thoughtful look at a generational challenge, and it rightfully acknowledges the deep complexity of the task before us. We are on track to meet our goals – and Mayor Garcetti is as committed as ever to reaching the objectives,” said spokeswoman Andrea Garcia.
At least Californians are now fully focused on the issue. A new survey by the Public Policy Institute of California finds homelessness has drawn even with the economy as the top concern among the state’s residents.
Against that backdrop, Los Angeles had hoped that, to a large extent, it could build its way out of the crisis. The bond measure provides up to $140,000 per unit with the rest coming from other sources. Yet of 19 projects under construction, 60 in pre-development and 35 awaiting city approval, only two are expected to be finished by the end of the year, the study found.
Part of the problem with costs is that some of the projects are being built in some of the most-expensive areas of the city. More apartments could be built at a lower cost, the study found, if they were resituated in lower-cost, outlying areas.
The city also could promote lower-cost alternatives to traditional apartment buildings. Some 975 apartments will be in six projects in which the cost will average $351,965, with some as little as $200,000 a unit.
“The projects are pending city approval and feature modular construction, shared housing and simplified financing,” the report states. “If successful, these approaches have the potential to significantly lower costs and shorten development timelines.”
But overall, Galperin recommended big changes to the program in order to maximize the amount of housing that can built.
“There is a tremendous sense of urgency to make critical changes now,” he said in comments on the report. While all the funding has been allocated, “there is still an opportunity to review the expensive projects.”
“A course correction is required,” Galperin said in his report, “before it is too late.”
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