California Gov. Gavin Newsom is requesting $2 billion in federal funding to develop low-income housing in Southern California communities devastated by the Palisades and Eaton Fires.
Under a recently passed Los Angeles city ordinance, many destroyed apartments must be replaced by low-income housing, including all those built before October 1978.
This $2 billion is part of a $40 billion federal aid request, including up to $14.2 billion more that could support low-income housing development.
In the Pacific Palisades, high land and construction costs make low-income housing — as determined affordable by citywide, not local income, per the ordinance — financially infeasible without taxpayer or charitable support.
Before the fire, two-bedroom apartments in the Palisades cost between $4,000 and $5,000 per month. A family of two working parents and two children making up to 80% of the citywide area median income, thereby qualifying as low-income, could not be charged more than $2,496 per month for a two-bedroom apartment, according to the Los Angeles Housing Department. That would fall well short of construction costs.
Newsom’s $2 billion requested in low-income housing tax credits to incentivize “the development of low-income housing” would be buttressed by his request for a further $4.3 billion in “business grants” to “local governments,” including a “commercial acquisition fund to protect against displacement.”
He also requested $9.9 billion from the U.S. Department of Housing and Urban Development via Community Development Block Grants for “individuals, businesses, the state and local communities,” which also could be used to provide taxpayer funds for low-income housing development.
This $2 billion would “support the creation of 6,500 new affordable units” and “incentivizes the development of low-income housing.”
A development subsidy of $307,692 per unit via the low-income housing tax credit could make rents of $2,496 feasible for developers, especially when combined with possible supplementary funding via some form of the aforementioned programs. Some of the $5.3 billion Newsom requested for Small Business Administration loans could also be used for replacing lost apartments with low-income housing.
Pacific Legal Foundation, a libertarian public-interest law firm, suggested to The Center Square that Los Angeles’ low-income housing requirement for the Palisades could be an unconstitutional taking, and thus may not withstand court scrutiny.
“Rent control is an unconstitutional taking of property without the payment of just compensation. This scheme is admittedly a form of rent control, so it’s clear the City of Los Angeles wants to be sued by its own residents,” said Mark Miller, senior attorney at Pacific Legal Foundation, to The Center Square. “Moreover, the city’s decision to take the property rights of property owners who already suffered the tragedy of losing their homes to a fire that the city was woefully unprepared to contain adds insult to injury.”
