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Incentives to build affordable housing aren’t working, city controller says

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In six years, only 329 units were built because of the density bonus program

An incentive program to entice real estate developers to build affordable units in residential projects isn’t producing enough affordable housing—and it’s probably because it’s not penciling out financially for them to do so.

A report released Monday by the city controller’s office found that from 2008 to 2014, just 329 income-restricted apartments and condos were built as a result of LA’s density bonus program, which offers developers the right to build bigger and taller than what zoning codes allow.

“That’s a low number. That’s not nearly enough,” City Controller Ron Galperin told Curbed. “From a financial point of view, the fact that we’re not seeing a great many private developers create a lot of private units, tells us, for them, the math hasn’t really been there.”

Adopted in 2008, the density bonus program offers a whole “menu” of rewards for developers who agree to incorporate income-restricted units into their market-rate buildings. The rent on the units is restricted for 55 years.

Galperin called the program, which is required under state law, one of the city’s most important tools for creating affordable housing.

“There’s no question it could be doing more,” he said.

In all, 21 percent of all multi-family complexes built in the city of Los Angeles in the six-year period from 2008 to 2014 took advantage of the program, creating 4,463 affordable units. But a large portion of those, 4,134 units, also took advantage of other incentive tools and probably would have been built without the density bonus program, Galperin said.

Though development in some Los Angeles neighborhoods is booming, the city is in the midst of a housing shortage, which experts say has led to an affordability crisis. Federal data shows the cost of rent in LA increased 5 percent last year, outpacing the national average.

Abundant Housing LA, a nonprofit led by urban planners and academics pushing for the creation of more housing, has found that only about 25,000 new housing units were built in Los Angeles from 2010 to 2015. It compares that to 1940 to 1980, when, it says, in every decade, more than 100,000 units were constructed.

The controller’s report was released six weeks before voters in the city take up Measure S, a ballot measure that aims to curb real estate development in Los Angeles. Its backers claim too much luxury housing is being built and that the character of LA is being destroyed by dense buildings.

But if the city has become denser, don’t blame the density bonus tool, Galperin said.

“When the density bonus law first started becoming implemented there was a lot of fear that we were going to see a lot more density all over Los Angeles,” he said. “There was a lot of concern saying 'We're going to have all of this density created in our neighborhood.’”

“That didn't happen. There are other reasons why you see density—this isn't one of those.”

His office made a number of recommendations to make the density bonus program more appealing to developers. One calls for exploring whether developers should be allowed to get the bonus then build affordable units elsewhere. Another says the city should consider loosening income level requirements for affordable units. If the rent restrictions aren’t so stringent, the report says, the city could nearly double the amount of low-income units that are built.