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To:

To:

From:

From:

THE COUNCIL

THE COUNCIL

THE MAYOR

THE MAYOR

TRANSMITTAL

TRANSMITTAL

Date:

Date:

MOV 1 8 2015

NOV 1$ 2015

TRANSMITTED FOR YOUR CONSIDERATION. PLEASE SEE ATTACHED.

TRANSMITTED FOR YOUR CONSIDERATION. PLEASE SEE ATTACHED.

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ERIC GARCETT

ERIC GARCETT

Mayor

Mayor

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Los Angeles

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HOUSING + COMMUNITY

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Investment Department

Investment Department

Strategic Planning & Policy Division

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The The Honorable Honorable Eric Eric Garcetti Garcetti

Mayor, Mayor, City City of of Los Los Angeles Angeles

200 200 N. N. Spring Spring Street, Street, Room Room 303 303

Los Los Angeles, Angeles, CA CA 90012 90012

November November 17, 17, 2015 2015

Attn: Attn: Mandy Mandy Morales, Morales, Legislative Legislative Coordinator Coordinator

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Eric Garcetti, Mayor

Rushmore D. Cervantes, General Manager

Eric Gametti, Mayor

Rushmore D. Cervantes, General Manager

Council Council Files: Files: 13-1389 13-1389

13-1624 13- 1624

14-0361 14-

0361

14-0600-S123 14-0600-S123

Council Council District(s): District(s): All All

Contact Contact Person(s): Person(s):

Rushmore Rushmore Cervantes Cervantes (213) (213) 808-8405 808-8405

Edwin Edwin Gipson Gipson (213) (213) 808-8597 808-8597

Claudia Claudia Monterrosa Monterrosa (213) (213) 808-8650 808-8650

REPORT REPORT BACK BACK IDENTIFYING IDENTIFYING LOCAL, LOCAL, PERMANENT PERMANENT FUNDING FUNDING SOURCE(S) SOURCE(S) FOR FOR THE THE

CITY'S CITY’S AFFORDABLE AFFORDABLE HOUSING HOUSING TRUST TRUST FUND FUND (AHTF) (AHTF) AND AND REQUEST REQUEST TO TO FUND FUND A A NEW NEW

AFFORDABLE AFFORDABLE HOUSING HOUSING BENEFIT BENEFIT FEE FEE STUDY. STUDY.

SUMMARY SUMMARY

In In response response to to the the worsening worsening housing housing affordability affordability crisis crisis in in Los Los Angeles, Angeles, six six of of Los Los Angeles’ Angeles' City City Council Council

Gilbert Cedillo, Mitch O’Farrell, Felipe Fuentes, Curren Price, Bob Blumenfield and Mike

members,

members, Gilbert Cedillo, Mitch O'Farrell, Felipe Fuentes, Curren Price, Bob Blumenfield and Mike

Bonin Bonin representing representing both both high high income income and and very very low low income income areas areas of of the the City, City, put put forth forth Motions Motions requesting requesting

a a report report to to analyze analyze and and identify identify potential potential local local permanent permanent funding funding sources sources for for affordable affordable housing housing

financing, financing, including including a a voter-approved voter-approved bond bond measure, measure, a a fee fee on on new new development development and and earmarking earmarking a a percent percent

of of the the incremental incremental annual annual property property tax tax revenue revenue among among others. others. On On October October 8, 8, 2014, 2014, the the City City Council's Council’s

Housing Housing Committee Committee reconstituted reconstituted the the various various Motions Motions calling calling for for the the Los Los Angeles Angeles Housing Housing and and

Community Community Investment Investment Department Department (HCIDLA) (HCIDLA) to to issue issue a a report report with with a a comprehensive comprehensive set set of of

recommendations recommendations that that addresses addresses all all of of the the Motions Motions (Council (Council file file numbers numbers 14-0600-S123, 14-0600-S123, 14-0361, 14-0361, 13- 13­

1389, 1389, and and 13-1624). 13-1624).

After After researching researching various various local local and and non-local non-local funding funding options options for for a a local local affordable affordable housing housing fund, fund,

including including a a survey survey of of tools tools used used by by other other cities, cities, HCIDLA HCIDLA through through this this report, report, presents presents a a recommendation recommendation

for for a a local local permanent permanent funding funding source source through through an an Affordable Affordable Housing Housing Benefit Benefit Fee Fee program. program. The The proposed proposed

An Equal Opportunity / Affirmative Action Employer

An Equal Opportunity/ Affirmative Action Employer

New Affordable Housing Benefit Fee Study

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New Affordable Housing Benefit Fee Study

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program would establish a one-time monetary charge levied on new developments to assist the City with

program would establish a one-time monetary charge levied on new developments to assist the City with

financing affordable housing activities.

financing affordable housing activities.

HCIDLA is recommending an Affordable Housing Benefit Fee over other potential tools described in this

HCIDLA is recommending an Affordable Housing Benefit Fee over other potential tools described in this

transmittal based on an extensive review of other cities throughout the country, which compared one-time

transmittal based on an extensive review of other cities throughout the country, which compared one-time

versus long-term, sustainable revenue generating methods. Of the various methods reviewed, the

versus long-term, sustainable revenue generating methods. Of the various methods reviewed, the

utilization of an Affordable Housing Benefit Fee has been the most viable and consistent method of

utilization of an Affordable Housing Benefit Fee has been the most viable and consistent method of

generating a permanent funding source. While other options may generate larger funding, such as a bond

generating a permanent funding source. While other options may generate larger funding, such as a bond

measure, these funds are short-term solutions with finite funding.

measure, these funds are short-term solutions with finite funding.

This recommendation aligns with the affordable housing goals of Mayor Garcetti, including his support

This recommendation aligns with the affordable housing goals of Mayor Garcetti, including his support

for studying a new Affordable Housing Benefit Fee that would create a dedicated, local stream of funding

for studying a new Affordable Housing Benefit Fee that would create a dedicated, local stream of funding

for affordable housing activities.

for affordable housing activities.

HCIDLA recommends pursuing an Affordable Housing Benefit Fee while concurrently examining and/or

HCIDLA recommends pursuing an Affordable Housing Benefit Fee while concurrently examining and/or

implementing other large-scale affordable housing initiatives in the near future such as new preservation

implementing other large-scale affordable housing initiatives in the near future such as new preservation

and rehabilitation loans, the creation of a new Housing Finance Agency, and the potential for supporting

and rehabilitation loans, the creation of a new Housing Finance Agency, and the potential for supporting

new Community Revitalization and Investment Authorities and/or Enhanced Infrastructure Finance

new Community Revitalization and Investment Authorities and/or Enhanced Infrastructure Finance

Districts. Districts.

In 2011, the City's Affordable Housing Benefit Fee study found a close correlation between new

In 2011, the City’s Affordable Housing Benefit Fee study found a close correlation between new

development and housing demand. Since that study was published four years ago, HCIDLA recommends

development and housing demand. Since that study was published four years ago, HCIDLA recommends

a new study that reflects the City’s current economic environment. The new study should examine any

a new study that reflects the City's current economic environment. The new study should examine any

potential fee in the context of other impact fees imposed on new development.

potential fee in the context of other impact fees imposed on new development.

Based on the study results, a detailed framework for an Affordable Housing Benefit Fee Ordinance will

Based on the study results, a detailed framework for an Affordable Housing Benefit Fee Ordinance will

be developed by the Department of City Planning, in close coordination with HCIDLA, for review by the

be developed by the Department of City Planning, in close coordination with HCIDLA, for review by the

Planning Commission, the City Council and the Mayor.

Planning Commission, the City Council and the Mayor.

RECOMMENDATIONS

The General Manager of the Los Angeles Housing and Community Investment Department (HCIDLA)

The General Manager of the Los Angeles Housing and Community Investment Department (HCIDLA)

RECOMMENDATIONS

respectfully requests that:

respectfully requests that:

I. I.

Your office schedule this transmittal at the next meeting(s) of the appropriate City Council

Your office schedule this transmittal at the next meeting(s) of the appropriate City Council

committee(s) and forward it to the City Council for review and approval immediately thereafter;

committee(s) and forward it to the City Council for review and approval immediately thereafter;

II. II.

The City Council, subject to the approval of the Mayor, take the following actions:

The City Council, subject to the approval of the Mayor, take the following actions:

A. A.

INSTRUCT the City Administrative Officer to identify the source of funding for up to

INSTRUCT the City Administrative Officer to identify the source of funding for up to

$500,000 for the Department of City Planning, in close coordination with the Los Angeles

$500,000 for the Department of City Planning, in close coordination with the Los Angeles

Housing and Community Investment Department, to execute a contract for the

Housing and Community Investment Department, to execute a contract for the

development development of of a a new new Affordable Affordable Housing Housing Benefit Benefit Fee Fee study study and and to to effectuate effectuate the the transfer transfer

of of funds funds to to the the Department Department of of City City Planning Planning in in the the next next Financial Financial Status Status Report. Report.

B. B.

AUTHORIZE the General Manager, HCIDLA, or designee to prepare Controller

AUTHORIZE the General Manager, HCIDLA, or designee to prepare Controller

instructions and make any necessary technical adjustments consistent with Council and

instructions and make any necessary technical adjustments consistent with Council and

New New Affordable Affordable Housing Housing Benefit Benefit Fee Fee Study Study

Page Page 3 3

Mayor Mayor actions actions on on this this matter, matter, subject subject to to the the approval approval of of the the City City Administrative Administrative Officer, Officer,

and and authorize authorize the the Controller Controller to to implement implement these these instructions. instructions.

BACKGROUND BACKGROUND

A A

The The severe severe lack lack of of affordable affordable housing housing is is a a pervasive pervasive problem problem facing facing the the majority majority of of City City residents. residents. Today, Today,

working-class working-class and and middle-class middle-class Angelenos, Angelenos, both both renters renters and and owners, owners, in in Los Los Angeles Angeles face face high high housing housing

costs. costs. The The significant significant urban urban renewal renewal taking taking place place in in many many of of the the city's city’s traditional traditional lower lower income income and and

diverse neighborhoods is further exacerbating the high housing costs. Recently transformed

diverse

neighborhoods is further exacerbating the high housing costs. Recently transformed

neighborhoods neighborhoods like like Venice Venice Beach, Beach, Silver Silver Lake Lake and and Echo Echo Park Park have have become become expensive expensive areas areas to to live live and and

out out of of reach reach for for most most Angelenos. Angelenos. Already Already new new urban urban renewal renewal pressures pressures are are being being felt felt in in long long neglected, neglected,

typically typically poor, poor, areas areas of of the the east east and and south south regions regions of of the the City City such such as as the the Figueroa Figueroa Corridor, Corridor, Leimert Leimert Park, Park,

Highland Highland Park, Park, Boyle Boyle Heights Heights and and Westlake Westlake among among others. others. This This ongoing ongoing transformation transformation in in many many of of Los Los

Angeles' Angeles’ older older established established neighborhoods neighborhoods may may be be a a positive positive change change for for commercial commercial corridors corridors and and for for

homeowners homeowners whose whose increased increased property property values values are are a a welcomed welcomed asset. asset. However, However, revitalization revitalization can can also also

have have a a devastating devastating impact impact for for low-income low-income renters renters who who are are least least able able to to withstand withstand increasing increasing housing housing costs. costs.

Transforming Transforming and and Expensive Expensive City City

Much Much of of this this urban urban renewal renewal comes comes on on the the heels heels of of an an unprecedented unprecedented $40 $40 billion billion government government funded funded

transportation transportation expansion expansion in in the the region region and and the the added added value value has has invited invited much much needed needed investment, investment, but but also also

speculators speculators to to "fix “fix and and flip" flip” properties properties that that in in turn turn contribute contribute to to increasing increasing housing housing costs costs in in the the surrounding surrounding

areas. areas. The The City City is is challenged challenged to to encourage encourage revitalization revitalization and and investment investment while while simultaneously simultaneously promoting promoting

neighborhood stability. It is a timely moment for the City to seize the opportunity and reap the benefits

It is a timely moment for the City to seize the opportunity and reap the benefits

from from this this revitalization revitalization to to help help create create a a more more equitable equitable and and sustainable sustainable housing housing market market with with more more choices. choices.

neighborhood stability.

The The State State ofHousing of Housing and and Affordability Affordability Gaps Gaps

contributing contributing factor factor to to the the acute acute housing housing affordability affordability problem problem is is a a mismatch mismatch between between what what is is being being built built

and what needs to be built. In 2013 (the most recent year for which full data are available), of the 1,605

In 2013 (the most recent year for which full data are available), of the 1,605

and what needs to be built.

A A

units units needed needed for for low-income low-income households households in in the the City City of of Los Los Angeles Angeles only only 593 593 were were built. built. Los Los Angeles Angeles

added added 37 37 percent percent of of the the needed needed housing housing for for low-income low-income residents residents but but nearly nearly 150 150 percent percent (5,874 (5,874 units) units) of of

the the units units needed needed by by above above moderate moderate income income earners. earners. In In spite spite of of the the economic economic recovery recovery and and accompanying accompanying

increases increases in in multifamily multifamily production, production, new new apartment apartment rents rents are are not not reachable reachable by by lower lower income income families. families. An An

inability inability to to supply supply enough enough housing housing for for diverse diverse income income groups groups is is contributing contributing to to eroding eroding confidence confidence in in Los Los

Angeles' Angeles’ potential potential to to promote promote income income and and social social mobility. mobility.

The The average average rent rent in in Los Los Angeles Angeles is is $2,0311 $2,031' while while new new apartments apartments built built in in the the preceding preceding ten ten years years rent rent for for

$2,609 and have a 12 percent vacancy rate2; a 5 percent vacancy rate indicates that supply and demand

are are in in balance. balance. At At these these rental rental rates, rates, families families must must earn earn $81,240 $81,240 to to afford afford the the average average rent rent and and $104,360 $104,360

afford afford a a newly newly built built apartment. apartment. In In reality, reality, the the Los Los Angeles Angeles median median income income is is only only $50,5443 $50,5443 and and the the

current current living living wage wage of of $15 $15 per per hour hour translates translates to to $26,2504 $26,2504 in in annual annual wages; wages; both both wages wages leave leave a a tremendous tremendous

to to

and have a 12 percent vacancy rate2; a 5 percent vacancy rate indicates that supply and demand

$2,609

wage gap for workers seeking to rent in Los Angeles. The high vacancy rate for newer, more expensive

wage gap for workers seeking to rent in Los Angeles.

The high vacancy rate for newer, more expensive

housing housing exemplifies exemplifies the the disparity disparity in in the the type type of of housing housing being being built built demonstrating demonstrating that that new, new, higher higher cost cost

housing, housing, is is out out of of reach reach for for many many Angelenos. Angelenos.

1 Real Real Facts Facts Online. Online. City City of of Los Los Angeles, Angeles, Average Average Asking Asking Rent Rent 2014 2014

Real Facts Online. City of Los Angeles, Market Overview Average Occupancy Rate 2014

2 Real Facts Online. City of Los Angeles, Market Overview Average Occupancy Rate 2014

3 3

2

U.S. U.S. Census. Census. American American Community Community Survey Survey 2014 2014

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On the homeownership front, Los Angeles is the second-least affordable region in the country for middle-

On the homeownership front, Los Angeles is the second-least affordable region in the country for middle-

class people seeking to buy a homes. The median priced home of $560,0006 in Los Angeles is more than

two-and-a-half times the average national home price ($208,900)7. Such high home prices require a

two-and-a-half times the average national home price ($208,900). Such high home prices require a

class people seeking to buy a home5. The median priced home of $560,0006 in Los Angeles is more than

conventional conventional monthly monthly mortgage mortgage payment payment of of $3,146 $3,146 with with corresponding corresponding annual annual earnings earnings that that are are upwards upwards

of of $125,000. $125,000.

Across the board, rental and homeownership housing costs exceed what the median income or middle

Across the board, rental and homeownership housing costs exceed what the median income or middle

class can afford, in particular given the stagnation of incomes in the city since 2007 (see Attachment 1).

class can afford, in particular given the stagnation of incomes in the city since 2007 (see Attachment 1).

SOLUTIONS IN CITIES WITH SIMILAR HOUSING CHALLENGES

SOLUTIONS IN CITIES WITH SIMILAR HOUSING CHALLENGES

Cities with high housing costs are narrowing the affordable housing gap through local funding initiatives

Cities with high housing costs are narrowing the affordable housing gap through local funding initiatives

that help put housing within reach of low-income households. Staff compared Los Angeles to cities with

that help put housing within reach of low-income households. Staff compared Los Angeles to cities with

similar affordable housing challenges. Commonalities among the select cities include an expensive real

similar affordable housing challenges. Commonalities among the select cities include an expensive real

estate market, robust economic growth, a high rent burden, and a large renter population that exceeds the

estate market, robust economic growth, a high rent burden, and a large renter population that exceeds the

number of homeowners. The research revealed that five out of the six comparison cities recently adopted

number of homeowners. The research revealed that five out of the six comparison cities recently adopted

or updated a housing plan with local dollars dedicated to affordable housing financing and strategies to

or updated a housing plan with local dollars dedicated to affordable housing financing and strategies to

increase the future local funding commitment (see bar graph below). The blue bar illustrates the fiscal

increase the future local funding commitment (see bar graph below). The blue bar illustrates the fiscal

year 2014-2015 local commitments ranging from a high of over $800 million in New York City to a low

year 2014-2015 local commitments ranging from a high of over $800 million in New York City to a low

of of $20 $20 million million in in the the City City of of Boston. Boston. In In fiscal fiscal year year 2015-2016, 2015-2016, Los Los Angeles’ Angeles' Mayor Mayor Garcetti Garcetti made made a a $10 $10

million million contribution contribution to to the the Affordable Affordable Housing Housing Trust Trust Fund; Fund; $5 $5 million million from from the the City’s City's general general fund, fund, and and

another another $5 $5 million million from from a a future future hotel hotel tax tax on on short short term term rentals. rentals.

'Harvard 5 Harvard University's University's Joint Joint Center Center for for Housing Housing Studies Studies

6 Data Quick California Home Sale Activity by City - 2014 City Chart

'Data Quick California Home Sale Activity by City - 2014 City Chart

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New Affordable Housing Benefit Fee Study

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200 200

100

100

0 0

$806.5

$806.5

Cities with High Housing Costs: Local Affordable Housing

Commitment

Cities with High Housing Costs: Local Affordable Housing

Commitment

(Numbers in Millions)

(Numbers in Millions)

2014 2014-2015 - 2015

$145.5

$145.5

$58.6

$58.6

$4.2

$4.2

New York

New

York San

San Francisco

Francisco

$121.2

$121.2

$16.5

$16.5

Chicago Chicago

$79.0

$79.0

$4.2

$4.2

Washington, Washington,

D.C. D.C.

$33.8

$33.8

$1.3

$1.3

Seattle Seattle

$20.0

$20.0

r,

$4.5

$4.5

Boston Boston

$0.0

$0.0

$20.9

$20.9

Los Los Angeles Angeles

HOME

LOCAL HOME

LOCAL

*New *New York York City’s City's bar bar graph graph size size is is not not drawn drawn to to scale. scale.

Los Los Angeles' Angeles’ reliance reliance on on diminishing diminishing federal federal resources resources will will cause cause a a dramatic dramatic decrease decrease in in housing housing

At its height, in 2008, the Affordable Housing Trust Fund (AHTF) allocation was $108

production. At its height, in 2008, the Affordable Housing Trust Fund (AHTF) allocation was $108

million. million. Today, Today, the the total total funding funding is is approximately approximately $27 $27 million, million, all all of of which which are are federal federal funds funds and and program program

income. income. The The rising rising housing housing costs costs and and shrinking shrinking public public funds funds are are prompting prompting many many cities cities to to implement implement or or

reinvigorate reinvigorate their their own own local local funding funding resources resources such such as as housing housing linkage linkage fee fee programs programs or or levies levies to to help help fund fund

local local trust trust funds funds and and other other affordable affordable housing housing programs. programs. The The affordable affordable housing housing challenge challenge is is universally universally

shared shared by by the the cities cities highlighted highlighted above above and and all, all, but but the the City City of of Los Los Angeles, Angeles, are are responding responding with with locally locally

created created solutions. solutions.

production.

LOCAL LOCAL AFFORDABLE AFFORDABLE HOUSING HOUSING FUNDING FUNDING OPTIONS OPTIONS

An An improving improving economy economy with with increasing increasing investment investment provides provides the the City City an an opportunity opportunity to to expand expand housing housing

options options for for families families and and children children as as well well as as improve improve housing housing stability stability in in neighborhoods neighborhoods to to get get ahead ahead of of

Based on

the inevitable market forces that threaten to displace long-time, often lower income residents. Based on

the inevitable market forces that threaten to displace long-time, often lower income residents.

the the comparison comparison of of other other cities cities with with high high housing housing costs, costs, below below are are several several options options for for new new local local programs programs

and and measures measures to to help help generate generate revenue revenue to to create create and and preserve preserve affordable affordable housing housing and and thereby thereby promote promote

upward mobility and opportunity for all.

upward mobility and opportunity for all. At a glance, the funding options HCIDLA researched are as

follows: follows:

At a glance, the funding options HCIDLA researched are as

 

Affordable Housing Benefit Fee:

Affordable Housing Benefit Fee: A linkage fee for all new development. This requires

A linkage fee for all new development. This requires

approval approval of of the the City City Council Council and and the the Mayor Mayor to to enact enact through through a a local local ordinance. ordinance.

Housing Bond Measure:

A bond measure to approve new property tax revenues for affordable

Housing Bond Measure: A bond measure to approve new property tax revenues for affordable

housing. housing. This This requires requires a a ballot ballot measure measure with with a a two-thirds two-thirds vote. vote.

Housing Levy: A

Housing Levy: A citywide tax that authorizes additional regular property taxes to be used for

citywide tax that authorizes additional regular property taxes to be used for

affordable affordable housing. housing. This This requires requires a a ballot ballot measure measure with with a a two-thirds two-thirds vote. vote.

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Enhanced Infrastructure Financing District (EIFD):

A financing authority for cities to

Enhanced Infrastructure Financing District (EIFD): A financing authority for cities to

construct construct and and rehabilitate rehabilitate infrastructure, infrastructure, including including affordable affordable housing, housing, by by capturing capturing local local property property

tax tax growth growth within within a a district’s district's boundaries. boundaries. New New districts districts are are adopted adopted by by resolution. resolution.

Community Community Revitalization Revitalization and and Investment Investment Authority Authority (Authority): (Authority): A A financing financing authority authority for for

cities cities to to construct construct and and rehabilitate rehabilitate infrastructure infrastaicture by by capturing capturing local local property property tax tax growth growth within within an an

authority's authority’s boundaries, boundaries, it it requires requires a a 25 25 percent percent set-aside set-aside for for affordable affordable housing. housing. New New authorities authorities

are are adopted adopted by by resolution resolution

Former Tax Increment Set-Aside: Permanently earmarking a percent of the fonner CRA tax

Permanently earmarking a percent of the former CRA tax

revenue revenue to to the the Affordable Affordable Housing Housing Trust Trust Fund. Fund. This This requires requires approval approval of of the the City City Council Council and and the the

Mayor Mayor to to enact enact a a permanent permanent allocation allocation from from the the General General Fund. Fund. However, However, this this funding funding is is currently currently

absorbed absorbed in in the the General General Fund Fund and and pays pays for for a a variety variety of of City City services. services.

Former Tax Increment Set-Aside:

Fees Fees on on Real Real Estate Estate Recording Recording Instruments: Instruments: Similar Similar to to Assemblymember Assemblymember Atkins’ Atkins' AB1335 AB1335 bill, bill,

Los Los Angeles Angeles County County could could impose impose a a new new document document recording recording fee fee on on real real estate estate transactions. transactions. Any Any

potential potential effort effort to to impose impose fees fees on on real real estate estate transactions transactions at at the the local local level level should should be be considered considered in in

context context with with ongoing ongoing statewide statewide initiatives. initiatives.

Affordable Affordable Housing Housing Benefit Benefit Fee Fee

The The Affordable Affordable Housing Housing Benefit Benefit Fee Fee program program (alternatively (alternatively referred referred to to as as a a housing housing impact impact fee fee or or linkage linkage

fee fee program) program) is is a a one-time one-time monetary monetary charge charge levied levied on on new new developments developments to to assist assist a a City City with with a a percentage percentage

of of the the cost cost related related to to the the additional additional housing housing needs needs of of employees employees in in said said developments. developments. The The legal legal basis basis for for

the the fee fee program program is is that that a a portion portion of of the the jobs jobs created created by by new new property property developments developments are are low low paying. paying. When When

wages wages are are low, low, workers workers are are unable unable to to afford afford the the market market rate rate rent rent and and therefore therefore demand demand affordable affordable housing. housing.

The The difference difference between between what what households households at at various various income income levels levels can can afford afford to to pay, pay, by by only only dedicating dedicating

30 30 percent percent of of income income toward toward rent, rent, and and the the average average market-rent market-rent is is the the income income gap gap that that is is referred referred to to as as the the

"earned “earned income income deficit”. deficit". The The portion portion of of low low paying paying jobs jobs in in each each new new development development differs differs depending depending on on

the the development development type. type. The The City's City’s first first Affordable Affordable Housing Housing Benefit Benefit Fee Fee study study was was completed completed in in 2011 2011 and and

it it found found a a close close correlation correlation between between new new industrial, industrial, commercial, commercial, and and residential residential construction, construction, and and the the

demand demand for for new new affordable affordable housing. housing. The The study study meets meets the the California California Mitigation Mitigation Fee Fee Act Act (Gov. (Gov. Code Code

sections sections 66000 66000 et et seq) seq) requirement requirement that that a a fee fee be be "roughly “roughly proportional” proportional" in in nature nature and and relate relate to to the the impact impact

of of the the proposed proposed development. development. This This is is important important because because it it establishes establishes a a quantifiable quantifiable justification justification for for the the

fee. fee.

The The fee fee is is typically typically charged charged on on a a square square foot foot basis basis to to new new commercial commercial and/or and/or residential residential development development and and

it it is is established established through through the the adoption adoption of of a a local local ordinance ordinance with with approval approval of of the the City City Council Council and and the the Mayor. Mayor.

While While linkage linkage fees fees of of this this sort sort are are criticized criticized for for potentially potentially burdening burdening the the development development community, community, the the

right right policy policy can can minimize minimize the the impact. impact. This This type type of of fee fee program program helps helps the the City City provide provide reasonably reasonably priced priced

housing housing for for workers workers so so that that the the City's City’s overall overall economic economic health health is is unaffected unaffected and and demand demand for for goods goods and and

services services persists. persists.

Per Per this this transmittal, transmittal, HCIDLA HCIDLA seeks seeks to to initiate initiate a a new new nexus nexus study study to to reflect reflect current current economic economic and and housing housing

market market conditions. conditions. The The new new study study is is critical critical for for designing designing a a linkage linkage fee fee program program that that minimizes minimizes negative negative

impacts impacts to to the the development development community community while while still still providing providing significant significant resources resources to to help help the the City City finance finance

affordable affordable housing housing opportunities. opportunities.

New New Affordable Affordable Housing Housing Benefit Benefit Fee Fee Study Study

Page Page 7 7

Bond Bond Measure Measure

Citywide Citywide bond bond measure measure is is another another option option for for creating creating a a local local affordable affordable housing housing fund. fund. The The recent recent past past

shows shows City City residents residents strongly strongly support support a a local local bond bond to to fund fund affordable affordable housing. housing. However However despite despite this this strong strong

support, support, in in 2006, 2006, during during the the housing housing bubble bubble peak, peak, the the City’s City's affordable affordable housing housing bond, bond, Measure Measure H, H, failed failed

pass pass by by a a small small margin margin with with 63 63 percent percent voting voting in in favor favor and and 37 37 percent percent voting voting against against the the proposed proposed

housing bond. The $1 billion bond measure would have resulted in an average annual city debt service

The $1 billion bond measure would have resulted in an average annual city debt service

payment payment of of approximately approximately $58 $58 million million per per year year for for 30 30 years. years.

housing bond.

to to

A A

Some Some challenges challenges in in creating creating a a bond bond measure measure include include an an extensive extensive and and expensive expensive campaign campaign as as well well as as

added debt. This type of bond must be repaid by the City of Los Angeles from additional property tax

This type of bond must be repaid by the City of Los Angeles from additional property tax

added debt.

revenues revenues based based upon upon the the assessed assessed value value of of all all taxable taxable property, property, creating creating more more City City debt debt and and competition competition

for other City services funded through a ballot measure. Additionally, a ballot measure of this sort requires

for other City services funded through

a a two-thirds two-thirds vote vote of of qualified qualified electors electors in in the the City. City.

a ballot measure of this sort requires

a ballot measure. Additionally,

Housing Housing Levy Levy

Another Another option option explored explored for for establishing establishing a a local local source source of of funding funding for for affordable affordable housing housing includes includes the the

implementation implementation of of a a citywide citywide tax tax levy levy that that authorizes authorizes additional additional regular regular property property taxes taxes to to be be dedicated dedicated to to

affordable affordable housing. housing. A A housing housing tax tax levy levy would would require require a a ballot ballot initiative initiative with with a a majority- majority- two-thirds- two-thirds- voter voter

approval. The levy could be set for a limited time period and may be re-authorized by voters.

approval.

The levy could be set for a limited time period and may be re-authorized by voters.

The The City City of of Seattle, Seattle, Washington, Washington, has has had had several several housing housing levies levies since since 1981. 1981. The The latest latest levy, levy, approved approved in in

November November 2009, 2009, provides provides $ $145 145 million million over over seven seven years. years. The The cost cost to to a a property property owner owner is is a a percent percent of of the the

assessed assessed property property value. value. The The current current Seattle Seattle Levy Levy costs costs the the owner owner of of a a median median priced priced home home ($475,000) ($475,000)

$60 $60 per per year year or or $5 $5 per per month. month.

The The tax tax levy levy approach approach is is a a way way of of spreading spreading the the responsibility responsibility to to provide provide affordable affordable housing housing opportunities opportunities

across across all all property property owners owners so so that that all all share share the the burden burden in in a a uniform uniform manner manner with with minimum minimum overall overall impact impact

to to individual individual property property owners. owners. Similar Similar to to a a housing housing bond bond measure, measure, a a tax tax levy levy requires requires dedicated dedicated City City

resources resources for for a a ballot ballot measure measure campaign. campaign. Unlike Unlike a a bond bond measure, measure, however, however, a a levy levy does does not not require require a a debt debt

service service from from the the City, City, since since it it is is paid paid through through an an additional additional property property tax. tax.

Enhanced Enhanced Infrastructure Infrastructure Financing Financing Districts Districts (EIFD) (EIFD)

In In 2014, 2014, the the California California legislature legislature authorized authorized the the Enhanced Enhanced Infrastructure Infrastructure Financing Financing Districts Districts (EIFD) (EIFD) as as a a

new new financing financing authority authority for for cities cities to to construct construct and and rehabilitate rehabilitate infrastructure infrastructure by by capturing capturing a a portion portion of of the the

growth growth in in local local property property taxes taxes within within a a targeted targeted area. area. New New districts districts are are adopted adopted by by resolution. resolution. Those Those that that

issue issue tax tax increment increment bonds bonds to to attract attract private private capital capital must must obtain obtain 55 55 percent percent of of the the popular popular vote vote within within the the

district district boundaries. boundaries.

While While specific specific affordable affordable housing housing set-asides set-asides are are not not required required of of EIFDs, EIFDs, cities cities may may identify identify affordable affordable

housing housing as as a a goal goal for for an an EIFD EIFD targeted targeted area. area. EIFDs EIFDs may may invite invite other other local local taxing taxing entities entities to to join; join; limited limited

participation participation may may diminish diminish the the potential potential revenue revenue sources. sources. Where Where community community opposition opposition to to an an EIFD EIFD is is

strong there may be a tendency to push the location of a district out of core areas in the City where

there may be a tendency to push the location of a district out of core areas in the City where

affordable affordable housing housing is is most most needed. needed.

strong

Community Community Revitalization Revitalization and and Investment Investment Authority Authority (Authority) (Authority)

In In 2015, 2015, The The Governor Governor signed signed AB2 AB2 (Alejo) (Alejo) creating creating a a Community Community Revitalization Revitalization and and Investment Investment

Authority Authority that that diverts diverts tax tax increment increment (of (of consenting consenting local local agencies) agencies) to to infrastructure infrastructure projects projects in in

New New Affordable Affordable Housing Housing Benefit Benefit Fee Fee Study- Study

Page Page 8 8

disadvantaged disadvantaged communities, communities, it it requires requires a a 25 25 percent percent set-aside set-aside for for affordable affordable housing. housing. New New authorities authorities are are

adopted adopted by by resolution. resolution.

Community Community Revitalization Revitalization and and Investment Investment Authorities Authorities may may invite invite other other local local taxing taxing entities entities to to join join except except

for for the the LA LA Unified Unified School School District; District; limited limited participation participation may may diminish diminish the the potential potential revenue revenue sources. sources.

Where Where community community opposition opposition to to an an Authority Authority is is strong strong there there may may be be a a tendency tendency to to push push the the location location of of

the the Authority Authority out out of of core core areas areas in in the the City City where where affordable affordable housing housing is is most most needed. needed.

Permanently Permanently Earmark Earmark a a Portion Portion of of the the City's City’s Former Former Tax Tax Increment Increment to to the the AHTF AHTF

One One of of the the original original purposes purposes of of former former tax tax increment increment funds funds was was to to create create low- low- and and moderate-income moderate-income

housing within redevelopment areas; with a minimum of 20 percent dedicated to very low-income. In

housing within redevelopment areas; with a minimum of 20 percent dedicated to very low-income.

keeping keeping with with this this intended intended purpose, purpose, last last year, year, HCIDLA HCIDLA made made a a recommendation recommendation to to dedicate dedicate 25 25 percent percent of of

the the former former tax tax increment increment coming coming to to the the City City of of Los Los Angeles' Angeles’ General General Fund Fund to to the the Affordable Affordable Housing Housing

Trust Trust Fund Fund (AHTF) (AHTF) beginning beginning in in fiscal fiscal year year 2014-2015. 2014-2015. Alternatively, Alternatively, HCIDLA HCIDLA also also proposed proposed a a phased- phased-

in in approach approach to to achieve achieve a a maximum maximum annual annual dedication dedication of of 35 35 percent percent of of the the former former tax tax increment increment dollars dollars to to

the the AHTF. AHTF. Based Based on on an an annual annual projection projection of of $49 $49 million million in in unrestricted unrestricted former former tax tax increment increment dollars dollars

contributed contributed to to the the City’s City's General General Fund, Fund, these these proposals proposals (Council (Council File File #14-0361) #14-0361) would would provide provide between between

$12 $12 million million and and $17 $17 million million annually annually to to the the Trust Trust Fund. Fund.

In

Making Making a a Trust Trust Fund Fund allocation allocation means means that that a a portion portion of of the the former former redevelopment redevelopment funds funds are are not not available available

for for alternate alternate uses. uses. Currently, Currently, this this revenue revenue is is funding funding a a variety variety of of other other critical critical City City services services as as part part of of the the

General General Fund. Fund. The The Mayor Mayor has has recently recently committed committed to to contributing contributing $10 $10 million million from from the the General General Fund Fund to to

the the Affordable Affordable Housing Housing Trust Trust Fund Fund in in future future annual annual budgets, budgets, which which is is 60 60 to to 80 80 percent percent of of what what the the CF14- CF14-

0361 0361 motion motion would would have have achieved. achieved.

Fees Fees on on Real Real Estate Estate Recording Recording Instruments Instruments

Similar Similar to to Assemblymember Assemblymember Atkins Atkins AB1335 AB1335 bill, bill, Los Los Angeles Angeles County County could could impose impose a a new new document document

recording recording fee fee on on real real estate estate transactions transactions but but statewide statewide legislation legislation clarifying clarifying the the county's county’s authority authority to to

impose impose said said fee fee may may be be necessary. necessary. The The local local county county fee fee would would also also require require a a countywide countywide ballot ballot measure. measure.

The The resulting resulting funding funding would would likely likely be be administered administered and and controlled controlled by by the the county. county.

FEDERAL, FEDERAL. STATE STATE AND AND OTHER OTHER FUNDING FUNDING SOURCES SOURCES

New New affordable affordable housing housing funding funding streams streams from from Sacramento Sacramento and and Washington Washington D.C. D.C. epitomize epitomize the the magnitude magnitude

of of the the problem problem and and the the urgency urgency to to address address this this crisis. crisis. This This new new funding funding has has limitations limitations however. however. These These

sources sources are are competitively competitively awarded awarded and and the the City City of of Los Los Angeles Angeles is is not not guaranteed guaranteed a a minimum minimum funding funding

level, and many require a local match. Further, without a local commitment, City projects are unable to

level,

Further, without a local commitment, City projects are unable to

leverage leverage these these outside outside sources sources competitively. competitively. Other Other funds funds are are highly highly restrictive restrictive and and may may only only be be used used for for

very very specific specific populations, populations, limiting limiting the the City’s City's ability ability to to use use the the dollars dollars where where the the local local need need is is greatest. greatest.

Below Below is is a a snapshot snapshot of of said said funding funding streams. streams. With With the the exception exception of of the the National National Housing Housing Trust Trust Fund, Fund,

expected expected to to distribute distribute funding funding in in 2016, 2016, all all other other sources sources are are available available beginning beginning in in 2015. 2015.

and many require a local match,

New Affordable Housing Benefit Fee Study

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New Affordable Housing Benefit Fee Study

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Federal, "ederal, State State and and Other Other Competitive Competitive Funds Funds

National National Housing Housing

Trust Trust Fund Fund

$TBD* $TBD*

AHSC AHSC

$400M** $400M**

Multifamily Multifamily

Housing Housing

Program Program

$100M $100M

Prop Prop 41 41

$545M*** $545M***

L.A. L.A. County County

$75M**** $75M****

(annual (annual allocation) allocation)

(FY (FY 15/16 15/16

(one-time) (one-time)

(limited (limited duration) duration)

(limited (limited duration) duration)

allocation) allocation)

*Amount *Amount to to be be determined determined after after the the Federal Federal Housing Housing & & Transportation Transportation budget budget is isfinalized. finalized.

**Scheduled **Scheduled to to end end in in 2020 2020

***$75 *$75 million million awarded awarded in in 2015 2015 with with $545 $545 million million in in