The Great L.A. Housing Scam

by Scott Zwartz

Wednesday, April 20,2016

       Garcetti Proposes Higher Taxes for Angelenos

      In the recent State of the City address, Mayor Eric Garcetti proposed yet another tax increase for Angelenos.  This time the alleged purpose is to provide housing of Los Angeles’ homeless.  Here are Garcetti’s exact words:

“That’s why I’m calling on the City Council to pass my linkage fee proposal. And that’s why, by this time next year, we intend to ask voters to approve funding for our comprehensive plan to combat homelessness.”

     Slick politicos use slippery wording. The words — approve funding for our comprehensive plan — means a tax increase.  This multi-billion dollar tax increase will not go to house the homeless, but instead the money will go to subsidize the billionaire real estate developers. [This ploy is similar to how Garcetti diverted the Promise Zone funds for education of Blacks and Latinos and gave it to his developer cohorts in Hollywood.]

       Here’s How Garcetti’s LA Housing Scam Works:

       Let’s Call it Garcettism 2.0

      Garcetti has been demolishing as many rent controlled units as possible.  Long term residents of rent controlled units pay the lowest rent and they tend to be the disabled and the elderly and much poorer than the average person.  When they are thrown out of their rent controlled units, then they have to seek new housing, but at a substantially higher rental.  The rent for their new unit will start at the (artificially inflated) rate for rentals in Los Angeles.  [LAMC §§ 151.21(B) and 151.22] The simple fact is that the new rent is far too high for the people whom Garcetti has dispossessed of their long term homes.  Sometimes, they have lived in their homes for decades.

     Let’s look at the City’s own data. Garcetti omitted this information from his recent State of the City Speech.   This data is up-to-date; it comes from the April 15, 2016 report from Garcetti’s own HCID  Department [Housing and Community Investment Department].

From 2001 through 2015, the total number of RSO units removed from the rental housing stock through the Ellis provisions (20,374) represents approximately three percent (3%) of the RSO housing stock.  April 15, 2016 HCIDLA report.

    These are just the rent controlled units which were taken away through the Ellis Act.  The rate of demolition has dramatically increased.  In year 2009, only 90 units were destroyed, but in 2014, over 1,200 rent controlled unit disappeared due to the Ellis Act. April 15, 2015 HCIDLA report The rent control provision apply to apartment constructed before October 1, 1978.  A lot of apartments have been constructed since 1978.

     Thus, Garcetti increased homelessness by helping his billionaire friends tear down the apartments of the poorest people so that Garcetti can claim that Los Angeles have a homeless crisis. It is a crisis alright, a crisis which has been manufactured by Garcetti.

        Garcetti Conceals that Los Angeles Has Ample Housing

       Garcetti, however, conceals from the public that Los Angeles has a glut of vacant apartments.  The higher end apartment which have been constructed over the past decade have a 12% vacancy rate.  A 5% vacancy rate is considered the equilibrium.   November 15, 2015 HCIDLA report

       If Garcetti cared about the homeless, he would put them into the homes which are available now.  Thousands of people are homeless now and we have a 12% vacancy rate now.  Yet, Garcetti conceals this fact.

       Garcettism was officially recognized by Judge Allan Goodman when he rejected Grcetti’s June 19, 2012 Update of the Hollywood Community Plan, ruling that it was intentionally based on Fatally Flawed Data.  Garcetti’s is still misleading the public by providing them with false information while withholding accurate data from them.

    Instead of having the homeless housed in the glut of vacant housing, Garcetti capitalized upon the plight of the increased homelessness to tell Angelenos that we have to increase our taxes in order to give more tax dollars to his developer buddies in order to subsidize their high rise projects, which then will include a few “Ellis Replacement Unit” at a new higher rent which the homeless cannot afford.

      The increased number of homeless results from  the City’s allowing the tearing down the homes of poor people.  This throws many of them onto the streets.  It is the systematic manufacture of homelessness.

      Here’s Garcetti’s Housing Scam in a Nut Shell

     Step #1:

       Tear down homes where the very poor, the elderly and the disabled live shoving them out onto the street.

    Step #2

       Raise sales taxes in order to subsidize luxury housing, claiming that some of the new units will be set aside for the poor.

     Here’s Demographic Reality

     Which Drives Garcetti’s Housing Scam

    Los Angeles is suffering a significant net exodus and there is no reasonable prospect that it will become a net gain of immigrants in the foreseeable future. In 2015, the city lost 71,000 people.  That exodus means that between 24,000 and 30,000 housing units became available in just year 2015, and it means all those people are not in LA demanding housing for years 201, 2017, 2017 etc.  In other words, the demand for new housing among those who can afford it is drying up.  That is a financial disaster for the LA developers who have sunk so much money into buying up LA property especially in Hollywood.

     As the HCIDLA has documented, LA has a glut of apartments constructed in the last decade (Nov 17, 2015 HICLA Report), making the financial viability of future high rise projects untenable.  Building into a glut is financial folly.

      As Judge Goodman’s decision revealed, Garcetti has duped developers for years into the false belief that LA was growing at the same pace after 2000, as it had experience between 1970 and 1900.  Thus, developers have invested hundreds of millions of dollars into LA, particularly in Hollywood, only to find that people are fleeing this type of high density urban living.

      How The Faux Housing Shortage

       Bails Out Billionaire Developers

      One devious way to bail out the developers is to manufacture an artificial housing crisis for the poor and then use tax dollars to subsidize the construction of more dense housing projects on the ruse that the apartments will solve the homeless crisis.

      Using tax dollars to bail out billionaires is not a new scam.  Financially, there is no real difference between Garcetti’s scam to increase taxes and the federal government’s bail out of the big banks after the Crash of 2008.  The overall scheme is the same: tax tax money from average people to billionaires.

       More Garcettism Means More Deterioration

      The result of this myopic deception will be L.A.’s more rapid deterioration.  Not only is L.A. experiencing a significant net exodus of people, employers will not re-locate to Los Angeles.  Employers do not move into an area where the infrastructure is decaying and where taxes are increasing.  Any employer who looks at LA sees the exodus and he also sees that independent bodies like Inrix’s Scorecard 2016 rate LA as having worse in traffic congestion and highest in unemployment.  Employers know that even if LA were to reform itself, taxes will have to be significantly increased to repair the decayed infrastructure.

      When we add to the mix that the LAUSD is among the worst school districts in the state, and California schools are among the worst in the nation, and the US ranks among the worst in the industrialized world, employers see a place which its intelligent, upward mobile workforce shuns.  At best, its workers would have to pay between $11,000 and $32,000 per yer per child to send their kids to a private school.

      Any employer who employs an educated work force realize that asking his employees to move to Los Angeles is like asking them to take a pay cut of $11K to $32K per yer per child.  The alternative is for the employer to pay his employees signi-ficantly more.

      When any employer does his homework, he/she will see that under Mayor Garcetti Los Angeles is close to free fall.  The DWP just enacted a multi-year rate hike of which the City skims 18%.  Garcetti already is trying to impose a $120 BILLION tax increase to fund the very type mass transit projects which are causing the exodus from Los Angeles. Now Garcetti is now proposing higher taxes to subsidize the very type high density projects which are at the root of Los Angeles’ woes.

      Power Tends to Cause Corruption,

       While Corruptionism Destroys

       The bogus housing shortage is only the latest Garcetti scam to divert tax dollars to a very few of his buddies.  As the Crash of 2008 showed, the laws of economics eventually assert themselves.  As the old maxim says, “GOD helps those who help themselves.”

   If Angelenos themselves do not rise up to stop Garcettism,  don’t expect divine intervention.