Apartment Management Magazine Solving the Homeless Crisis Should Be a Public-Private Partnership
By Roderick Wright, California State Senator (Retired)
We can all agree that homelessness or being homeless is a social, economic and health issue. The failure occurs when we try to fix the problem. Nothing, especially homelessness, is an easy problem to solve, and if it was, it would have already been solved.
Let’s all agree, people sleeping rough are unhealthy, ugly and inhuman. So now how do we solve this crisis? U.S. District Judge David O. Carter has ordered the city of Los Angeles to do something about the homelessness facing the city following a lawsuit filed by the Los Angeles Alliance for Human Rights. In Los Angeles County and most others, the Public Guardian is responsible for those unable to care for themselves, forcing our government to act. However, many homeless people on our streets and in temporary shelters today have not tried to get help.
What is not clear is to what extent a judge can order the city of Los Angeles to act? Can he, for example, take control of city spending? Could he make unilateral decisions about how City funds are spent? Could he despise the rulers of the city and imprison them? Could a judge fire firefighters or other city workers to free up the funds needed to cover the cost of the shelters? Could he confiscate private property and give it to the homeless? I remember when a federal judge oversaw the California Department of Corrections and caused the release of many inmates.
A person’s political philosophy often influences what they see and whether societal problems should be resolved by government. Clearly, we are all exposed to health risks both by the existence of a larger homeless population in and around housed members of our communities living in the regions. A disease outbreak recently occurred near Los Angeles City Hall and has been attributed to the homeless population defecating on the streets. Obviously, we are seeing more homelessness in lower income communities – there just isn’t a lot of street camping on Rodeo Drive.
People on the right side of the political spectrum largely believe that the problem is the fault of the homeless themselves and the government should not reward irresponsible behavior. They often refer to the United Way or other charities as opposed to the government to solve social problems. On the left, however, many people think we should tax ‘the rich’ and ask the government to build more housing and provide services to today’s homeless population.
As we have seen with the recent passage of the HHH proposal, people in general are ready to invest something. Voters have approved over $ 1.2 billion, but there’s not much to show just yet. The question is, do people have a “right” to something like housing, which actually costs money? If they do, who pays for it? I guess the other question is, when it costs over $ 600,000 to build a new housing unit in the city of Los Angeles, can we ever make a dent in solving the homeless problem? when 60,000 more people are homeless in the city today? At $ 600,000 a unit, Proposition HHH is only getting us 2,000 units for the 60,000 homeless people on our streets today.
The city tried to build homeless shelters and found it very expensive and inefficient. What if we try a new approach? What if we created an incentive for private investors to risk private capital, build shelters and make profits? Many on the left will object to investors making a profit, even though it could provide a more efficient process and a quick fix at a lower cost.
What does the provision of housing mean when you break it down? Land, labor, materials, rights, permit fees, and ultimately return on investment. (KING). In order to make housing more affordable, one or more of the elements of this equation must be affected. Time is another part of the equation, because “time is money”. The longer it takes to build anything, the more it costs.
So what would be my proposal to resolve this homelessness crisis? I would use the best business solutions from the right and the best social solutions from the left. To begin with, we should use the concept of “Triple Net Lease” to encourage private investment. This means that the tenant, in this case the government, would take responsibility for all taxes, insurance and maintenance for the period of the lease, say the term is 20 years. The public would be surprised to learn how many companies are in fact on triple net leases, and in fact many government offices are in fact on triple net leases. The risk of having a project built would be minimized for the developer, with the assurance that the project would be fully leased when completed. The government would not be at risk because it would only spend funds on completed projects.
Many of the interface and construction costs, land, engineering, labor, and some materials could be tax deductible if the project went through the Credit Allocation Committee. state taxes. Since they already grant tax credits, special attention could be given to these projects for the homeless, thus reducing the time to obtain the credits. This option would only be an option on permanent housing projects.
On the state side, a simple filing with the Franchise Tax Board should suffice to obtain tax benefits. Some promoters may wish to dispense with tax credits because of too much red tape. Another possibility could be “social impact funds”. These are funds that invest in social projects and require a lower return. Social impact funds could literally be renewed when they become investors in the projects.
Because this could easily be a profitable venture, many investors would likely be interested because these projects make great business sense. Either of these options would significantly reduce construction costs. But more importantly, they would reduce developer and government risk by encouraging private sector participation. Developers could also solicit investors and distribute credits and benefits as well as equity investments in the project. The project would still have depreciation and interest deductions like any other construction project. The loss of tax revenue from credits and other incentives would be offset by the profits made by developers and the resulting income and property taxes.
For transitional housing (where the resident would live until a permanent unit is available and they are stable), these would be built as dormitories (cohabitation) or motel-type structures. Some engineering design and zoning analysis should be done in advance to determine the appropriate height and density that would be allowed per lot. Keeping development projects moderate in size will undo some “NIMBY” (Not In My Backyard) opposition.
There should also be an exemption from the California Environmental Quality Act (CEQA). In many cases, CEQA lawsuits can take years to rule on often trivial matters. Since this population would not have many cars, there could be a change in off-street parking requirements. Staff and visitors should be accommodated, but it is not necessary to provide spaces for all residents as they are homeless and most would be unlikely to own a car.
Since this would ultimately be a government-managed project, there should be no permit fees or fees, as they would only be billed to the government in the form of a maintenance fee anyway. rental. If density is established by law, the permitting process should only be departmental. This will reduce the NIMBY-ism, but above all reduce costs by speeding up the development of the project.
As for the return on investment or “ROI”, it would depend on the amount of rent that would be charged. The actual rental conditions would be agreed in advance. Under this proposal, the government would not have to spend any money on the front-end, as it would simply pay the monthly rent for the agreed term of the lease once the project is completed. The developer would assume the risk of completing the project. It is not a charity program, but a true public-private partnership using the best of what each has to offer.
The purpose of transitional housing would be to get “people” off the streets. If enough transitional and homeless housing is built, we could erase the scourge of homeless people sleeping rough. In the current state of the law, if the government can provide housing, it can take a person off the streets. The social services needed to make this system work again would fall back on the government, as it already does. Better that they sleep indoors than on the street. Things like pets and other issues should all be taken care of by the government.
For the permanent housing component, this could be managed by the Housing Office and, once again, have the housing rented under a triple net lease. The government could contract for management, but housing construction would be a welcome change. There are a few non-profit groups that provide services to “former homeless people” when they are in permanent housing. LeaseUp Los Angeles through People Assisting the Homeless (PATH) provides these services today. PATH could partner with the government to serve tenants who may still need “complementary” services such as counseling and health care. PATH also offers homeowner protections in the form of insurance and financial incentives. (Their website is leaseupla.org).
By taking advantage of the best of both, public-private partnerships have proven to be much more effective and practical. The author, Roderick Wright, is a former member of the California State Senate and Assembly. He has developed affordable housing with the Inner-City Housing Corporation. He worked in the Los Angeles City Planning Department and worked on housing and energy issues in the public and private sectors. He also worked for the Southern California Association of Governments (SCAG). Mr. Wright has owned a rental property for over 40 years and is also a member of the Apartment Association of Greater Los Angeles and the Coalition of Small Rental Property Owners.