Measure H is Not a Magic Bullet

These illusionists want you to accept “official statistics” about a “dismal” L.A. housing situation, but these figures amount to pulling a rabbit out of a hat; they are not grounded in reality. According CNN Money, Los Angeles is statistically more affordable than 43 other large cities, and Forbes says LA has a less expensive rental market than cities such as Boston, San Francisco and Honolulu.

Middle-income Angelenos buy property every day in this city, so why should we believe Prop H illusionists who argue that families making over six figures need financial assistance, especially when this financial assistance will come from taxpayers with lower incomes than they have?

The illusionists want to hide the fact that wealthy developers--often masquerading as nonprofit organizations--are the true backers and beneficiaries of the measure. The illusionists hope to distract you with tear-jerking tales about how H will help the elderly and the down-and-out in downtown L.A., but this is merely a device to gain sympathy and votes. Numerous elderly and lower income Angelenos will be seriously hurt if H passes because they will be paying higher taxes, and not receiving any benefits.

The illusionists want you to believe that this billion-dollar housing bond will cost you no more than a Frappucino, when in truth it could cost you personally over $10,000 during the 30-year bond period, with absolutely no benefit.

Proposition H is comprised of three parts, and like oil and water, the parts do not mix. Part One is the “water” or the sustenance factor. It allocates approximately one third of the funds for the homeless and truly indigent of our city, a noble cause which may or may not need supplemental funding. Los Angeles’ current surplus of $717 million could be used for this purpose.

Parts Two and Three, the oily or “subsidizing the rich” components, do not in any way merit funding and necessitate a vote against the entire proposition. Part Two—which will receive another one-third of the funds--is nothing more than the latest brand of rent control, and the traditional arguments against it apply. Studies show that rent stabilized buildings—even those that start out new--eventually become dilapidated and drive up the cost of market-rate rents, hurting the poor and middle class in the end. The developers who build the projects are the true beneficiaries.

Rent control can also impede those it is supposed to help. Rent control tenants who experience any degree of financial success often do not buy, but instead remain psychological prisoners, sacrificing equity-building opportunities and hundreds of thousands of dollars in order to cling to their cheap rentals. “Clinging,” a common practice, negatively impacts affordability for others.

Part Three is related to home buying and is the most problematic or slippery component of Prop H. It taxes “property owner” families so that “non-property owner” families (even those making six figure incomes) can buy real estate. If Prop H passes, lower and middle income Anglenos will be required to subsidize those who make more money than they do. A family of four with an income of $103,950 could receive Prop H money from a family with a mere $50,000 income. This gross injustice could lead to financial hardship, even foreclosure, for existing property owners, such as the elderly on fixed incomes.

The illusionists are inaccurate when they say H helps middle-income workers. I did a calculation for five of my real estate clients—a small business owner, an advertising sales employee, a police officer, a construction worker and a teacher—to determine the impact of Proposition H on their wallets. They all made sacrifices to buy homes within the last two years, including investing in bread and butter rental properties. If H passes, all will be seriously penalized for their hard work. They may be forced to sell or to lose their properties to foreclosure.

Over the 30-year bond period, the small business owner with a family annual income of $90,000 would pay between $23,214 and $34,980. In the end, he will have paid one-third to one-fourth of a year’s income for nothing.

The salesperson with a family income of 80,000 would pay between $17,958 and $27,060. The police officer with a family income of $70,000 would pay from $9,636 to $14,520.

The construction worker with a family income of $60,000 would pay from $4,380 to $6,600, and the teacher with a family income of $48,000 would pay from $2,190 to $3,300. It should also be noted that these numbers are based upon the probably underestimated figures provided in the Voter Information Pamphlet; they could be higher due to interest rate hikes in the bond.

Prop H is flawed in other ways: it is not financed by everyone. Wealthy renters and many corporations pay nothing. Why should a tenant who makes $300,000 per year and rents a $9,000 per month mansion in Brentwood be exempt while the lower income teacher who lives in Van Nuys be taxed? Why should a multi-national corporation leasing retail space for $30,000 per month pay nothing while the construction worker who resides in Canoga Park be burdened?

Prop H was rushed through City Hall rather than vetted by the people of our city, and it is detail-deficient and ill-timed. There are no specifics in H about how the money will be spent, leaving one to conclude that the measure may fund wacky Inclusionary Zoning-type plans. H is badly timed because the real estate market is stumbling; it is the wrong time to conjure up new units that the market cannot absorb. Socialized programs hurt affordability in the end; the market adjusts itself to compensate for unsustainable price hikes and dips.

Magic is not necessary to increase the number of homeowners in Los Angeles. There is a knowledge deficit, not a housing deficit. Education rather than subsidization is the key. A huge number of middle-income families can afford to buy, but simply need information as to how. This is where Realtors and lenders come in. Public/private partnerships between government and real estate professionals provide the key to increasing homeownership.

Vote against smoke and mirrors. Vote against the tax dollar disappearing act. Vote against Housing Hocus-Pocus. Vote against Prop H.
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Charlotte Laws, Ph.D. is a Realtor, a member of the Greater Valley Glen Council and a 912 Commissioner. Her website is http://www.CharlotteLaws.org and her blog is http://charlottelaws.typepad.com