Angelenos taxed themselves to raise $1.2B to house homeless. Did it work?

In 2016, as the number of people living on the streets of Los Angeles climbed ever higher, Angelenos were itching for a solution to the city’s growing homelessness problem.

Asked to support a $1.2 billion bond measure to build affordable housing so that people living on the streets and those at risk of becoming homeless could have roofs over their heads, voters responded with a resounding “yes.” Prop. HHH passed with 77% of voter support that November, prompting Elise Buik, the HHH campaign co-chair and CEO of United Way of Greater Los Angeles, to declare, “help is on the way.”

But more than six years later, with the city’s homeless population roughly 1½ times what it was when the measure passed — and with fewer than half the units up and running — some are wondering whether Prop. HHH should be considered a success or a flop.

The short answer: depends on whom you ask.

Although city housing officials and affordable housing advocates say the HHH program is on track to deliver about 1,600 more housing units than initially promised, over a 10-year period ending in 2026, many tax-paying Angelenos had expected that thousands more housing units would be built.

They’re also upset that the average construction cost per housing unit has increased markedly, and frustrated by the pace at which projects have been completed – though city housing officials say that, on average, nearly one new project should be completed per week the rest of this year.

Miguel Santana, L.A.’s former city administrative officer who later chaired the Prop. HHH citizens oversight committee, said it’s important to remember that the program “wasn’t designed to build as much housing as possible, as quickly as possible.” Rather, he argued, it was structured to best leverage $1.2 billion in city investment with federal, state and other funding sources to get “bigger bang for the buck.”

“Housing is being built. It’s being built not as fast as it should be, but it is being built,” Santana said.

“That’s not to say that the frustration is not legitimate,” he noted about voters who have lost patience. “There is a reason why people overwhelmingly supported the initiative. They wanted to end the suffering that has now become a part of our daily lives among Angelenos.”

That’s partly why San Fernando Valley resident and neighborhood council member Susan Collins is critical of the effort.

“(HHH) cannot build fast enough to impact what we’re seeing on the street,” she said. “The entire point of HHH was to address that.”

As long as more people are becoming homeless each year than are getting housing, the HHH program can’t be called a success, said Collins, who serves on the board of the Sherman Oaks Neighborhood Council but was speaking for herself.

Before leaving office late last year, then-Mayor Eric Garcetti said in an interview that Prop. HHH was never intended to be the sole solution to ending homelessness in the nation’s second-largest city. He credited the program for accelerating the city’s production of affordable housing units.

“We’ve done more in five years than in 30 years, and we’ve also increased the number of people we house by fourfold a year — 5,000 to 21,000,” Garcetti said in December.

His remarks followed a blistering report that then-City Controller Ron Galperin issued a year ago in which he cited skyrocketing costs and mounting delays with HHH-funded projects.

“Per unit costs continue to climb to excessive levels — over $800,000 in one instance — and the total number of completed units (1,142) is wholly inadequate in the context of the ongoing homelessness emergency,” Galperin wrote.

Although the $800,000-per-unit project is an outlier, the average per-unit cost of HHH projects has increased.

In an earlier audit of the HHH program, Galperin noted that the city initially thought HHH units would cost $350,000 to $414,000 per unit, depending on the number of bedrooms. Yet by 2019, the median per-unit cost had grown to $531,373, with more than 1,000 units projected to cost more than $600,000.

“The median cost of building many of these units approaches – and in many cases, exceeds – the median sale price of a condominium in the City of Los Angeles ($546,000) and of a single-family home in Los Angeles County ($627,690),” Galperin wrote in a 2019 report.

Currently, the average total development cost of an HHH unit is estimated at $547,533, according to the city’s HHH progress dashboard.

Ann Sewill, general manager for the city’s housing department, responded to Galperin’s 2022 audit in a letter to Garcetti and the City Council last year, noting that affordable units may cost more than market-rate housing due to requirements to pay prevailing wages to workers, provide higher energy efficiency standards and furnish the units. And there are extra legal fees and costs associated with cobbling together financing from multiple sources.

She also said Prop. HHH was intended to fund 7,000 housing units in a decade, yet 8,000 units were in the pipeline as of late 2021 – surpassing initial projections. That projection has since grown, with the city’s housing department now saying the HHH program will produce nearly 8,600 units by 2026.

The reliance on multiple funding streams “adds time and money, but stretches HHH funding to meet production goals. Without leveraging, HHH would have produced only 3,900 permanent units,” Sewill wrote.

See the full HHH Progress Report Dashboard

Broken promises or unclear messaging?

Developers say affordable housing projects typically take four or more years to complete – longer than regular housing developments – because of the way the approval and financing process works.

“People wanted (housing) in two years, and that just was never realistic,” said Stephanie Klasky-Gamer, president and CEO of LA Family Housing, which is expecting to build 750 new permanent supportive housing units over the next three years. Permanent supportive housing is long-term housing combined with support services for the residents.

“We are absolutely on the right course. We have been and continue to be good stewards of HHH dollars,” Klasky-Gamer said. “As a community member, I say that. As a taxpayer, I say that. And as a homeless services provider, I believe all of that to be true.”

Meanwhile, Sewill said the city has reached a point where about one new HHH-funded affordable housing project should be completed each week, and the public should start to notice the results.

“They don’t come off the production line evenly, of course, but on average we’ll be seeing one per week for the rest of this year,” Sewill wrote in an email last month.

The most recent estimates show the HHH program will produce just shy of 8,600 units when all is said and done. But wasn’t it supposed to pay for 10,000 affordable housing units?

That’s what many Angelenos believed to be the case – though city officials maintain that only 7,000 units were ever expected to come from HHH bond dollars.

Sewill confirmed that before Prop. HHH, the city expected to produce 300 affordable housing units per year, or 3,000 units over a decade. When Prop. HHH was proposed to voters, the thinking was that it would help finance an additional 700 units annually, or 7,000 units in 10 years, bringing the total number of new units to 10,000 over a decade, Sewill said.

But voters say Prop. HHH was sold to the public as a bond measure that would pay for 10,000 units. Some residents interviewed for this story accused city officials of walking back their promises and attempting to change the narrative.

“The way they shared HHH is that they would be able to build 10,000 units,” said attorney Grace Yoo, who ran for City Council in 2020, adding that Angelenos feel “misled” about the timeline and costs.

“There was so much time lapse that it caused more people to be upset,” she said. “I think you’ll find most Angelenos are sorely disappointed because there was so much hope and expectation.”

Galperin, the former city controller, agreed the bond measure was presented to voters in a way that “the reasonable understanding was that there would be 10,000 units” funded through Prop. HHH.

And while the public understood it would take time for those units to be built, he said, bureaucracy caused unnecessary delays.

“Nobody expected these units to be built in a day,” Galperin said. “However, the process that was put in place was one that created a lot of delays. The longer you wait to get something done, the more expensive it becomes.”

Affordable housing developers who rely on government subsidies often need to cobble together financing from several different sources – a painstakingly slow process that can take years.

For example, a developer may seek funding from the city or county, as well as state and federal governments. But rather than apply to the various agencies simultaneously, the developer must secure funding from, say, the city or county first before they can apply for state funding. And they may not be able to apply for federal funding until they’ve been awarded the state funding.

Moreover, because of the high demand for funding, if a developer’s application isn’t selected, they have to wait until the next round of funding to re-apply, which could take anywhere from several months to a year.

According to Galperin, HHH projects typically require six or seven funding streams.

And as developers wait for all the financing to fall into place, they’re likely paying interest to banks for the land they’ve acquired.

Over the years, multiple factors have driven up the price tag of HHH units. Obvious reasons include supply chain issues and labor shortages caused by the coronavirus pandemic that led to increased costs and project delays.

But there may be lesser-known reasons as well.

Jason Ward, an associate economist with the RAND Corporation, estimates that requiring developers of HHH-funded projects to pay “prevailing,” or union-level, wages, increases a project’s overall costs by 10% to 15%.

Additionally, Ward noted in a 2021 report that about 18 months after voters approved Prop. HHH, the L.A. City Council adopted a project labor agreement. In order to get HHH funding, the labor agreement effectively required developers who intended to build 65 or more units to adhere to working conditions such as when work can be performed, worker ratios, and extra pay for union employees who work holidays. The project labor agreements added about 15% to construction costs, Ward said.

The long wait

A typical affordable housing project once took four to five years to complete from the time a developer acquired a site to when they finished construction, according to Dora Leong Gallo, president and CEO of A Community of Friends, a nonprofit that builds and provides permanent supportive housing to people experiencing homelessness and mental illness.

But after the COVID-19 pandemic hit, that timeline grew to seven years or longer in some cases due to supply chain issues and labor shortages, Gallo said.

Besides the lengthy process of securing funding, the city’s approval process can add to the timeline since developers must wait for multiple departments to sign off on their plans or work – a process that can take up to a year if the city is understaffed, Gallo said.

She and others interviewed for this story expressed optimism, however, that the timeline can be shortened. During her first week in office in December, Mayor Karen Bass signed an executive directive to fast-track the construction of 100% affordable housing projects and shelters in L.A.

Gallo described a culture shift in City Hall under the Bass administration and called the mayor’s directive for city departments to review applications concurrently, rather than one after another, a “game changer.”

“With the mayor’s executive directive, we could do this in three or four years,” she said.

Galperin, meanwhile, said there should be improved coordination between city departments to reduce red tape and to simplify the funding process so it’s less complex and time-consuming.

“I would like nothing more than to see this be a success,” he said of the HHH program. “For each and every person that actually ends up in a unit and gets off the street and is hopefully able to get their life back together again, it’s a success.”

“The creation of housing – be it permanent, affordable, transitional – actually saves lives and in that sense, each life that it saves is a success,” Galperin said. “I would just like to see the speed at which whatever is going to get done, get done sooner.”