“HHH will exceed the promised production by 26%.”
February 24th, 2022 | Uncategorized|
HHH funds were approved by voters to build 7000 units alongside the usual 3000 units in the City’s pipeline of housing to end homelessness. As of the end of 2021 there are 8,000 HHH units in the pipeline1, and the City continues to fund on an annual basis 300 non-HHH supportive housing units.
“HHH will exceed the promised production by 26%.”
The most recent audit once again found no concerns or irregularities. The Controller’s office offered generous guidance and assistance in working through roadblocks such as speeding up wage compliance approvals, and project funding at escrow closing.
The Housing Department strongly disagrees with the audit headline that “problems overshadow progress”. In an election year saturated with soundbites, the people of Los Angeles need facts. Detailed statements concerning construction costs, streamlining, and repurposing of HHH commitments can be viewed on LAHD’s official response to the audit.
The headlining “sound bite” project – the $800,000 per unit one identified in the audit, is an outlier and it is not the share of the City’s investment. There land acquisition and funding complexities that cannot be reduced to soundbites and are not generally communicated in detail to the public, and that using such a line as soundbite (“$800,000 per unit one identified in the audit”) erodes the work of HHH and viability for future similar programs.
Accountability. Each HHH project goes through rigorous vetting, through the Citizens’ Oversight Committee, the Administrative Oversight Committee, the Homelessness and Poverty Committee (lead by councilmembers), and the City Council and Mayor’s sign off has a conditional loan commitment that states the conditions that must be met for it to remain in effect. All HHH projects undergo a last financial review at construction loan closing. Details per housing development can be viewed on the Prop HHH Progress Report, including downloadable data (updated monthly).
Construction Costs. The 2020 audit noted that the median total development cost per unit was $549,608; this year the median rose 5.5% to $580,155. In the same twelve months the National Producer Price Index for Residential Construction Costs rose 17.6%. Costs for HHH or any affordable housing development need to be put in the context of costs for equivalent market rate developments. Even a quick google search of “multifamily construction costs in California” produces data backed reports from the Terner Center at UC Berkeley, the UC Riverside School of Business, and others showing that market rate construction in all of California, and particularly in Los Angeles and the Bay Area, has reached staggering heights. Context matters, failing to acknowledge the market context makes it seem that it is impossible to identify a feasible plan to produce the housing we need.
Comparing apples to oranges. While it is possible to compare the costs of affordable housing and comparable market rate developments and identify the elements that increase costs in affordable units – prevailing wages, higher energy efficiency standards, operating and replacement reserves, furniture and developer fees – there are costs that aren’t included in development budgets for market rate projects because they are paid upon sale when the project is completed, or covered by escalating rents over time. Financing of affordable housing projects requires “soft” financing from multiple sources, which adds time and money.
Accounting. Of the 125 HHH projects in the pipeline, there 84 projects with overall cost of $557,492 per unit, with an average HHH-loan amount of $133,000 per unit. 25 projects with average cost per unit of $659,600, for an average of HHH-loan amount of $140,833 per unit. The City’s financing part to the overall developer private/public financing is important to understanding the City’s share of the HHH investment.
Recommendations already in place:
“The HHH program is almost complete.” Ann Sewill, General Manager, Housing Department. “Within the next few years all the projected HHH homes will be built and occupied.”
Stay the course. At its conclusion, the HHH program would have provided vital resources to address homelessness – housing and services, but, we must not lose sight of the comprehensive solution to homelessness and that HHH is one part of the overall approach.
1Pipeline: includes all projects at all stages of the program.
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