USC’s Dean Kreditor: Regulatory Reforms Can Produce Housing

As one who is familiar with the goals and objectives of the new Housing Department, what are your overall reactions to its creation?

First, I can’t help but feel some encouragement that there’s an official, symbolic recognition that the housing problem is real, that it needs to be elevated in our consciousness and that we need some kind of response. My concern is that the agency’s attention may be directed at the smallest but most difficult problem at the cost of focusing on a much larger problem.

What we call the housing crisis is really a crisis of affordability. It’s not that people can’t get into housing—they can, but often at great expense to the rest of their lives. There are a lot people who can get a house—but only if they forsake distance for price. Then there are those who can’t quite qualify for housing.

The bottom decile, which includes the homeless, represent the most graphic example of housing problems. We might have a great triumph in that area, measured by a handful of projects that take care of maybe ten percent of that population, but that would have very little impact on the population as a whole.

I’m not saying walk away from the homeless, but they’re the visible manifestation of something gone wrong. I don’t believe that by taking the homeless off the street and giving them housing that you’ve solved the problem.

By investing heavily in a small slice of our problems we crowd everything else off the agenda. I would like to see an agency address the broad spectrum of housing problems.

What agenda items should the Housing Department address?

To me the housing problem is one of affordability caused by shortage—we simply have not figured out how to build enough housing. We have all sorts of political, land assembly, and regulatory obstacles that interfere with a perfect market system in which all those who need housing would find it. A lot of what we do in the regulatory environment is intended to raise the cost of production and consumption, and that reduces supply.

We’ve burdened development with a whole series of requirements about infrastructure, species protection, environmental protection—all of which historically would have remained in the public sector. But because of Prop 13, we’ve shifted the cost of all those things to those who don’t have a vote yet. To turn around and say we have an affordability crisis, then, seems to me two-faced.

Any developer would love to buy their way into the market on affordability—there have been many real estate fortunes made by producing houses at the low end.

A housing agency could conceivably be our conscience on these issues, raising the consciousness of the local bureaucracy on matters such how much we can offload our fiscal shortfall to future residents and still get affordability.

We need to disentangle, we need to streamline, we need to give time back to the developers. I’m not asking the public sector to subsidize the middle class. They don’t need to because they own time, and that’s worth more than the money.

Doesn’t affordability also imply increased density in the City of Los Angeles?

I have no problem with increased density. I see it as no offense to the spiritual laws of Los Angeles. But we could deliver even at the current density if we removed the nonphysical costs. Also, most of Los Angeles’ housing problems for the middle class and lower-middle class will be solved outside of Los Angeles, in places like San Bernardino and Moreno Valley.

What about the interests of the existing communities in impeding development?

I don’t know who the existing communities are. Given any neighborhood, by the year 2010 only one of six people living there now will still be there. Whose interests are they protecting? There’s a presumption that only the existing population that votes can speak for that area—there are a lot of other interests. I would find what development would be compatible with local tastes, and then figure out how to do it affordably.

Three years from now, what criteria should we use to evaluate whether the Housing Department has been a success?

I’m willing to concede that it’s important to show that the artful expenditure of public funds can put a dent into the bottom rung of the ladder.

But their greatest long-term contribution would be to disentangle and resolve the conflict between our regulatory impulses and our profound social unease about housing affordability. If you look at the Planning Department you will find both interests represented side by side without full appreciation of the conflict.

If the Housing Department brings this conflict into focus and helps resolve it, that would be a profound change.

When government funds are spent, what role do you think non-profits should play?

I think they’re similar to the role of foundations in public policy—they provide examples of how to solve problems at the lowest end, but other than winning some prizes, they’re not doing much for the population as a whole, aside from those who actually use the units. So there is a role for non-profits, but it is largely illustrative.

Do you support the City’s $100 million bond issue for housing?

If its objective is to fund those units that simply cannot be produced otherwise, I’d be very supportive. But I don’t want that to hog the agenda. Doing this won’t solve our housing problems—it will solve a visible, sticky problem, but we’ve got bigger ones.