L.A. Controller Urges City to Reduce Prop. HHH Costs, Cut Red Tape to Maximize Homeless Housing Efforts

LOS ANGELES —Today, L.A. Controller Ron Galperin released a report, “The High Cost of Homeless Housing,” on the results to date of Prop. HHH, the City’s voter-approved $1.2 billion bond program intended to subsidize the development of up to 10,000 units of supportive housing over 10 years. Controller Galperin’s report highlights how high construction costs and a lengthy approval process mired in red tape have prevented the HHH program from living up to its promise — and that immediate changes are needed.

Proposition HHH passed with the approval of 77 percent of voters in November 2016. While homelessness in Los Angeles has surged by 30 percent to 36,000 people since then, the City is set to fund just 5,873 supportive units and 1,767 low-income units with HHH dollars — currently at a median cost of $531,000 per unit. As of today, only 19 projects are in construction and zero HHH-funded units are open.

“Tens of thousands of people are sleeping on our streets, in our parks and on our sidewalks each night,” said Controller Galperin. “Providing housing and shelter is a proven way to solve homelessness, but three years after voters approved a $1.2 billion bond for that very purpose, not even a fraction of the housing required exists. A course correction is needed so that the City can maximize HHH dollars and create more units quickly and cost-effectively.”

When HHH passed in 2016, the City estimated it would cost between $350,000 to $414,000 per unit to build supportive housing, but since then, costs have skyrocketed. More than 1,000 of the planned units each cost $600,000 or more, with one project topping $700,000 per unit. While HHH dollars make up roughly one-third of each project’s costs, many HHH-funded units cost more than the median sale price of a market-rate condo in the City and a single-family home in the County. 

Why are HHH units so expensive? 

Not only has the cost of construction, including labor, jumped over the past three years, but the complex web of funding sources for each project, limited pool of eligible developers, and bureaucratic red tape are also to blame for high costs and overly long timelines. An unusually high 35 to 40 percent of costs are so-called “soft costs” (development fees, consultants, financing, etc.) compared to just 11 percent for actual land costs. Expenses will continue to rise as projects are taking anywhere from three to six years to complete, despite the City’s urgent need to house Angelenos experiencing homelessness. While City policymakers recently set aside one-tenth of the bond proceeds for more innovative projects in an attempt to cut costs and shorten timelines, the City should revisit other HHH projects to see if they can be done cheaper and faster as well, said Galperin. 

Adding to the high costs of development, Galperin also found that the City sold too many HHH bonds before it was ready to spend the proceeds, putting taxpayers on the hook for at least an additional $5.2 million in wasted interest payments.

Seeking lower-costs, quicker timelines

Galperin recommended that the City should:

  • Focus on innovative ways to save time and money on HHH projects, including reducing costs on projects that have been approved or conditionally-approved.
  • Direct more resources toward temporary shelters, bridge housing, hygiene centers and other service facilities to address people’s immediate needs.
  • Streamline the permitting process and add staff to ensure quicker development approvals and processing.

Along with the report, Galperin created an HHH resource map showing the cost and status of the City’s 114 HHH projects. Users can click on a pin to view information about each project, including the developer’s name, the cost, the development status, and the total and per unit HHH amount associated with it. An infographic outlining HHH progress is also included.

Read the report at lacontroller.com/hhhreport or https://lacontroller.org/audits-and-reports/high-cost-of-homeless-housing-hhh/

View the map at lacontroller.com/hhhmap or https://lacontroller.org/data-stories-and-maps/hhh-map/

Follow L.A. Controller Ron Galperin at @LAController on Twitter, Facebook and Instagram.