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.
__________________

Charlotte Laws, Ph.D. is a Realtor, a member of the Greater Valley Glen Council and a 912 Commissioner. Her website is www.CharlotteLaws.org and her blog is http://charlottelaws.typepad.com

Dr. Laws is a real estate salesperson. Read the debate at smartvoter and make up your own mind.

http://www.smartvoter.org/2006/11/07/ca/la/meas/H/

Here's my suburban, petit-bourgeois, liberal-wannabe-radical analysis.

H is a bond. It will be paid back with an increase in the property tax. It will be used to build affordable housing, and generally shift money from the wealthier people to the poorer people. The tax, however, will be borne by all, including renters, because property tax gets passed on to renters.

Bonds are tricky, because you need to pay off the interest, and end up costing more than a tax increase. On the other hand, it's easier to pass a bond measure, and also sometimes necessary if there's an acute need, or a bond is the most affordable kind of loan to do a one-time public works project.

100% of the housing created under the bond will go to people who make $100,000 or less. 75% will be for the homeless and renters, primarily for people with combined household incomes of $40k or less. 25% will be for first time property buyers with the under-$100k income.

The reason for this diverse mix is to get votes, particularly from the top 25% of income earners who qualify to get assistance. They're going to be the young teachers, cops, firefighters, office workers, and others who would probably use the money to get a 1 or 2 BR condo. (These people, incidentally, end up paying off the bond, via property taxes, because they will pay the most for their houses. To them, the bond is like an additional loan to pay off. The old folks, who paid a lot less, or even pre-prop13 rates, pay the least to pay off the bond.)

Should a relatively lower-income person who owns a house vote for this bond? I think it depends on the effects. If you live in a location that's going to see an influx homeless people, due to the condo-ization of Skid Row, yes. These homeless people have to go somewhere. If you don't pay for it with a tax increase, you will pay for it with having to watch people dying in public, and deal with a potential property-value decrease.

If you're in the farther reaches of the north SF Valley, and recently purchased a $600,000 house, you're probably already voting against H, and probably not reading this argument anyway.

I'm out in the inner suburbs, and I'm already thinking more like the former than the latter. The homeless population out here has increased, and likely will continue to increase due to the changes in Downtown. It's too bad for H that I can't vote in LA.

What about if you're one of Laws' customers:
>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.

Let's see. They bought houses, and also bought rental properties, so they're also landlords. I don't see how using a larger mortgage to buy a property rental business qualifies as a "sacrifice" (except by the person renting the property). I'm also not sure how they would be forced into foreclosure, except by the declining property market that's going to induce a lot of people to stop making payments on their mortgages. That'll happen whether or not this bond passes.

The primary impact will be on landlords who rent out property to low and moderate income households, because new, clean (non-slum) units will come onto the market and compete for the rental money. So, if you are a landlord, renting to low-income people, you should vote "no" on H, because it'll hurt your profit margins.

That is, unless you also happen to live near this rental unit (like, it's in your backyard), and are going to be impacted by the influx of homeless people into Boyle Heights, West Adams, Westlake, Echo Park, etc. Then, maybe you should vote "yes".

Also, the construction worker should obviously vote "yes" because this will create a lot of construction jobs, meaning the opportunity to work more and at a higher rate. A fat $X,000 pay increase negates the effect of the property tax increase. What you have to do is lobby the city to demand that construction with bond money hire union (and join the union).

(Also, if you're affluent, one way to buffer yourself against the tax increase is to buy these bonds. Presumably, the return on the bonds is equal to the tax increase. If you can buy up more than "your share of the debt," you will come out ahead, and probably tax-free. Your share is: $ TotalDebt / #OfProperties.)

Also, Laws writes:
>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.

That's not true. With the market falling, the money for the first time buyers will go farther. The new construction will preserve construction industry jobs, and all the economic activity around that (service jobs and stuff).

Also, it seems like rents trail the market. A lot of "For Rent" signs have been up around LA because people can't afford the high rents. People double up or move away to cheaper locations. This isn't due only to rent increases (preventing people from moving in), but also due to the general economic recession. Wages in the low-income service sector don't seem to be keeping pace with rents. Landlords are seeing if their neighborhoods can be gentrified, and they're doing it by raising rents to test the waters.

Then Laws makes some contradictory statements in her conclusions. She says:
>Socialized programs hurt affordability in the end; the market adjusts itself
>to compensate for unsustainable price hikes and dips.
But contradicts that with:
>Public/private partnerships between government and real estate
>professionals provide the key to increasing homeownership.

This program is already a "public/private partnership to increase homeownership," but the real estate agents like Laws are cut out of the deal. Laws is a "middleman" much the same way that the government housing programs are a "middleman". Prop H is bad for Laws' business.

I guess both Marx and Hayek are right on this one. People think with their wallets, especially when they're directly affected.

JohnK,

Dr. Laws may be a realtor but she is exactly right about the problems with Ballot Measure H. The tax won't be born by renters, only property owners. Property owners cannot pass on tax increses to their tenants due to lease agreements, rent control and problems with what the market can bear. I am a landlord and I never raise my tenants' rents because I wouldn't want someone to do that to me. Do unto others stuff. Plus then theymight move and I'd have a vacant place to cover. I am too poor to handle that.

It is wrong, JohnK, that the Prop H money goes only to those with incomes under 100k - read the measure more closely - a husband, wife and two kids with an income of over 100k gets money. Bigger families get even more money. My income for me, my husband and my 16 yr old daughter including the rental income from our triplex is $69,000 per year. I am worried that the tax increases that I'll have will force me to lose the property at some point. I barely make it each month as it is.

I don't know if the market adjusts itself as Laws says, but I think she is right about public/private partnerships. They don't need to cost taxpayers one cent. Why do you think we should be taxed to the ears just to put these in place?

Realtors and lenders make money when more people buy so it makes sense that they would want to help for free.

Government just likes to spend money especially our ridiculous city council. The councilmembers are pushing this measure like crazy. Maybe there is a financial benefit to them? All those developers funding prop h will give them big campaign donations. Probably this is it.

Tax increases certainly will be passed on. That's what the anti-property-tax folks have said for years. Tax increases are passed along.

The increase is over 30 years, and lease agreements are only 1 year. There is rent control only in a few cities in LA, much less California, so the rents definitely will be raised. Maybe you won't do it.... but you should. You should also take the 3% annual increase that rent control allows. It's not about being "nice" - it's just business. When inflation is more than 3%, you'll be glad you did (and the tenants will be glad they have rent control). Expenses increase, and you have to cover them.

If the tax increase to pay for this bond issuance would drive up the rent so much that the tenants would move, it means the rents are at market rate or above. If your rent were below market, you could raise the rent with less risk of vacancy. The entire market rate will rise with this tax, so the pass-along is going to be felt everywhere.

According to smartvoter.org: "Over the life of the bonds, the average annual tax rate is 1.5% per every $100 of assessed valuation. A home with an assessed value of $500,000 will have an average annual tax of $73 for 30 years."

Thus, an apartment valued at, say, $200,000 will experience an average annual tax of $29.20. That's a pass-along increase of $2.43 per month.

If your triplex is worth $1,000,000, then your annual tax increase is $146. Spread the cost, and each household can pay and extra $50 per year (if the units are identical).

If that $50 is too much to bear, I suggest asking your boss for a very, very tiny raise. If you work for yourself, raise your rate by 50 cents, or charge an extra 5 cents on some products. Your tenants should do the same, and ask for a raise: it's good practice. Trust me, the boss can afford to pay $.15 more an hour - he own one of those very big SUVs and got a fat tax break on it. :-)

When the housing market is tight, adding more units will cause the price to drop a lot more than adding it when there's plenty of supply. The market, today, is tight, so this bond issuance will get bang-for-the-buck, for the tenants and firsttime house buyers.

The $50 extra annually spent on rent will *probably* be made up by the fact that rent won't rise quite so fast. If the low end of the market was going to increase rents by, say, 5%, maybe it'll only go up by 4.5%, due to all the new construction at the low end. That .5% savings would amount to $5 per $1,000 of rent. It's a wash. (That's kind of a benchmark of whether this plan fails, or succeeds.)

Today, landlords who own many units are jacking up the prices up to 30% when someone leaves a unit, just to see if it can be done. They're motivated to try and kick people out. They're willing to have units vacant, in the hopes that someone bites, and can tolerate several months of vacancies if they can make it back when the tenant signs a year-lease at the inflated price. They are trying to "make the market" so the market price rises.

They've seen the news traders and day traders do this. They've seen it happen with Enron. They know how to do it.

Extra units that are price controlled will compete with the market rate units, and tend to depress the prices a little bit. Maybe instead of trying a 20% increase, the speculators will try a 15% increase. That would still mean profit growth, but the renter (even though they don't know it) will have saved money. Instead of the rent rising from $1,000 to $1,200, it only goes up to $1,150. Maybe it goes up to $1,180. That's still savings. Spread that across dozens of units. Yippee.

The only problem - the crisis situation - is if the rents are flat, or dropping. Then the tax will hurt the owners.

As for dirty developers and H, yes, they are probably involved. Politics is just an ugly mess, all the time, and this would, hopefully, undo some of the damage that they've done. Utlimately, all that matters is that each unit gets built at the market cost for labor and materials, to deliver housing into an inflated market, below market price, to deflate the market a little bit.

The household Area Median Income is $46,452 in the County of Los Angeles. According to smartvoter the bond will allocate: "$250 million to help individuals and households at or below 150% of the AMI to buy their first homes, with $37.5 million to assist individuals and households at or below 80% of the AMI, if feasible;"

150% of the AMI is $53K, not over $100K. I don't think they mean that two $53K earners can be considered individually for the subsidy, if they constitute a household. Even if they use that liberal interpretation, it's just a little over $100K. You'd have to have that much income to buy in the nice parts of LA, today. If that interpretation seems unfair, it could probably be taken to a judge, and a group like ACORN might be willing to provide lawyers.

And, lastly, real estate agents and banks don't work for free. They want to get in on the government money action as much as any other business. Look at how many real estate salespeople are involved in politics. Mayor Riordan was a real estate mogul. The prop 87 backer money is real estate money. Phil Angelides did public/private real estate. Arnold Schwartzennegger is a real estate mogul. Jan Perry, Antonio, and the South Central Farmers was a big real-estate and land use issue. I could go on FOREVER. They do it because so much of local politics is about land use, zoning, and real estate.