Controller Report on Income-Restricted Affordable Housing

Posted on January 23, 2017 at 4

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Los Angeles – City Controller Ron Galperin released an audit today entitled ‘Income-Restricted Affordable Housing Units in Los Angeles: A Review of the City’s Density Bonus Incentives and Overall Oversight’.The review found density bonus incentives have had minimal impact in incentivizing private developers to include affordable housing in their projects. The audit also highlights the lack of adequate  tools to ensure income-restricted units are best going only to those who qualify.

Density Bonus Law Has Not Lived Up to Its Potential

The audit found that 21 percent of new multi-family projects of five units or more, built between 2008 and 2014 (169 of 790 projects) utilized some aspect of the density bonus program -- resulting in 4,463 units designated as affordable. However, just 329 of these units were created in market-rate projects throughout the City -- an arguably minimal impact when considering the City’s overall affordable housing needs.

The audit recommends modifying and, in some cases, increasing incentives offered through the density bonus program. Specific recommendations include:

  • Create additional incentives, such as additional density or permitting micro units;

  • Streamline processes through modifications to the current process of site plan review and expedited processing of Environmental Impact Reports;

  • Conduct a legal analysis of what opportunities might exist, within the density bonus program, to allow market-rate developers to create income-restricted units off-site -- or to pay equivalent values into a fund which would build income-restricted units throughout Los Angeles;

  • Review how Area Median Income (AMI) levels are defined for the purpose of the density bonus program so that it is more aligned with state policy.

“Affordable housing is one of the most pressing needs our City faces and the City has an obligation to develop and implement programs that create substantially more affordable units,” stated Galperin. “The City needs to evaluate and prioritize the density bonus program to reach the City’s stated goal of 100,000 new units by 2021 -- of which at least 15,000 would, hopefully, be officially affordable.”

The City’s Monitoring Program

The Controller’s audit also examined oversight and monitoring of the City’s overall stock on 28,482 income-restricted units. This includes density bonus units, Section 8 units, Community Redevelopment Agency project units, and other income-restricted units. While auditors found reasonably adequate monitoring by the City’s contractor, and a 93 percent compliance rate, better oversight tools are needed to deal with conditions of some owners collecting more rent than allowed and some tenants exceeding income guidelines.

Based on a thorough analysis of information available for 2014, the audit found the following:

  • For 1,482 units (5.2%) -- landlords charged higher rents to tenants than allowable under covenants to which landlords agreed. When such circumstances are identified, HCID’s contractor is charged with sending letters to owners demanding remediation.

  • For 464 units (1.6%) -- tenant earnings exceeded program guidelines. In more than two-thirds of such instances, tenants reported incomes that exceeded limits by at least $5,000 per year and in one case, by $149,000.

  • For 1,056 units (3.7%)  -- tenant incomes were not verified when tenants moved in.

  • For 1,181 tenants, no tenant income was reported at all.

“The City must ensure that affordable housing is occupied only by eligible, low-income people, and that people are not overcharged,” said Galperin. “Because we can’t build ourselves out of this crisis fast enough, it should be a priority to protect the affordability that does exist.”

Galperin’s audit yielded immediate action from City Council. Councilmember Mike Bonin, who represents the Westside and has been a champion for protecting and creating affordable housing in L.A., announced that he would introduce legislation on Tuesday to correct many of the issues raised by the Controller’s report.

“Los Angeles is in a housing crisis that is only worsening our ongoing homelessness crisis,” said Bonin. “Every single unit of affordable housing is imperative for our City, and the Controller’s work highlights areas where the Housing Community Development Department can improve how they oversee and monitor affordable housing stock in L.A.”

“I greatly appreciate Controller Galperin’s work on this important issue and I am taking immediate action to improve how our City operates so we can better ensure only those who are truly eligible for affordable housing occupy the too-few units of affordable housing in our City,” Bonin continued.

The audit released by the Controller’s Office evaluated a data sample between 2008 to 2014. It focused on units with a signed covenant agreement and monitored by HCID. Affordable housing units that may be under the authority of other agencies such as Housing Authority of Los Angeles (HACLA), Los Angeles Homeless Service Authority (LAHSA), U.S. Department of Housing and Urban Development (HUD), or others, were not included in this study.

The audit, along with the Controller’s other audits, reports, open data and more, is available