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THE VIEW FROM HERE - People being people, there is no system which we cannot corrupt. On the other hand, every once in a while, we can throw a monkey wrench into the corrupt mechanism for a brief reprieve. In 2012, for example, the destruction of the egregiously corrupt Community Redevelopment Agencies thwarted one horrid scam of the city council and its 1% overlords. No reforming spirit had seized LA or Sacramento. Rather the CRA’s were stealing so much from the state, county, and state budgets, that everyone, except the CRA’s, was about to go BK. Just a couple years before in 2010, Gov Arnie had vetoed Garcetti inspired AB 2531 which would have extended CRA/LA to every single parcel of land in Los Angeles. See City Watch 6-27.
In 2016, we had two housing frauds on the ballot: Measures HHH and JJJ. They promised to construct apartments for the homeless, but their real intention was getting billions of dollars in loans from the City of Los Angeles on the pretext of constructing affordable housing, but after the developer’s LLC’s got the city money, it would bankrupt, keep all the city money, which the city taxpayers then had to repay to Wall Street. Then, the kindly BK judge would end the affordable requirement so that the entire project would become market rate. Thus, HHH and JJJ were designed to subsidize developers’ construct of high-end projects whose rent was a gazillion times higher than any poor person could afford. In the federal case of Sunnyslope from Arizona, however, the Ninth Circuit outlawed the scam and developers had to stick by their promise to construct Affordable Housing. Thus, no LA developer would accept HHH JJJ funds. See Sunnyslope.
Because there is no system which the thieves cannot corrupt, after the Sunnyslope case, the city council devised new ways to keep the cash flowing.
Artwork credit: Robert Birkenes – fineartamerica.com.
Construct Projects Which Are Insanely Costly
As the City Controller reported in 2019, the cost to construct 1,000 HHH affordable units are projected to exceed $600,000 each, with one project topping $700,000 per unit. “The cost of building many of these units exceeds the median sale price of . . . a single-family home in Los Angeles County.” See Galperin Report By May 2024, the cost per unit was rising to $837,000. Of course, no one suspected that graft and kickbacks could be the reason that it cost so much to construct a $250,000.00 apartment. $250,000 was the amount which Rick Caruso mentioned while running for Mayor in 2023.
Mayor Karen Bass and the One of Latest and Greatest Housing Scams
Project Homekey, one of Mayor Karen Bass’s signature initiatives to solve the homeless crisis, has become the newest housing fraud. Basically, it seems to work like this:
1) There is no time to construct new permanent housing for those who are dying on the streets right now.
2) Thus, the city will purchase existing buildings so that the homeless can be housed ASAP
3) The city pays millions of dollars way, way over market price for buildings, but at least remain vacant.
The full name of the May 15, 2024 report is Westside Current, EXCLUSIVE: More Than 1,200 City-Owned Homeless Housing Units Remain Vacant Two Years After $800 Million Buying Spree, by Chris LeGras, Jamie Paige Only Part One has been published so far. Here’s the apparent scam.
The City purchases hotels, motels, and other multi-unit buildings for interim housing for the homeless due to the pandemic. However, the properties remain vacant as the city then pays developers millions more to make the units inhabitable and many still are vacant years later. For example, 14949 Roscoe Boulevard in Panorama City was listed for $6.3 million in October 2019, or $396/sq.ft. After it had not sold for three years, the City bought it on September 2, 2022 for $10 million which is $633/sq.ft. The city paid a developer to fix up the building so that the final cost is expected to be over. $1,000/sq.ft. It’s still vacant. (Westside Current)
Another example how Mayor Bass hands out cash to developers is 21121 Vanowen Street. On September 15, 2015, the developer had bought the land for $720,000. His 101-unit building has about 97,479 sq. ft for development cost of $39 Million. In October 2022, the city bought it for $55.2 million which 42% profit for the developer. (Westside Current)
One pattern gleaned from the Westside Current report is that the city pays way over market, and about 50% of the time, homeless people are never housed, but developers get a steady stream of cash from Washington under the Homekey Project. There’s another curious feature. The law requires the interim housing to be turned into permanent housing. That means that if one of the buildings does have formerly homeless people, they are kicked out while the city pays a developer millions of dollars to turn the property into permanent housing. The city’s claim that the developers have to follow the law is cacadoodoo dreck. The crooks write that law requiring that the city pay millions more dollars to upgrade the interim housing rather than allow the poor to remain housed.
Because these excessively high purchases prices go into the Comps, the putative values of nearby properties increase which results in more over market value sales which become new high Comps, further inflating the housing costs. The beauty of this new scam is that the developers are paid directly by the City’s Housing Authority of the City of Los Angeles (HACLA). They do not even have to go through the time-consuming Sunnyslope scam to get huge unwarranted profits.
Two things about Los Angeles never change: (1) Cash flows upwards to the developers and Wall Street, (2) while everyone else becomes poorer. If one has recently bought a $1.5 Million house in Hollywood, they overpaid by about $1 M. A house worth $21,000 in 1971 should be worth only $162,580 in 2024 plus upgrades for electrical, plumbing and other interior remodeling so that $500,000.00 would be a ballpark figure of value but for the decades of corruptionism inflating housing costs. Wall Street rakes in all those billions of dollars of extra mortgage payments. Homeowners, at least, build a little equity, while renters get nothing except rent increases when they retire. Corruptionis Aeternae is why family millennials and employers are fleeing LA.
(Richard Lee Abrams has been an attorney, a Realtor and community relations consultant as well as a CityWatch contributor. You may email him at [email protected])
