Los Angeles Homeless Towers’ Taxpayer Cost

Three skyscrapers in downtown Los Angeles designed to house the homeless could end up costing federal taxpayers more than $1 billion.

Homeless services nonprofit Weingart Center Association is behind the three towers, which would utilize federal Section 8 Housing vouchers to repay the state and city and to fund private developer fees and investor returns over the buildings’ 55-year life, The Center Square reported.

“Taxpayers are being forced to foot the bill for over $800,000 per unit for homeless housing,” Susan Shelley, vice president of communications for the Howard Jarvis Taxpayers Association, told The Center Square. “There should be an audit to determine if this is genuinely the best option to provide housing or if this is just making a lot of people rich off the taxpayers’ dime.”

Weingart opened a 19-story, 278-unit tower in Skid Row last year. The project cost $167.7 million, or more than $600,000 per unit. The tower was funded with $32 million of the city’s homeless housing bond, a $1.8 million land loan from the City of Los Angeles, $48.7 million in deferrable loans from the California Department of Housing and Community Development, $56.9 million in tax credit equity and $85.3 million in tax-exempt bonds. Developer Chelsea Investment Corporation, meanwhile, earned $18.3 million in development fees.

This summer, Weingart opened a second tower that cost $171 million for 298 units. That project, developed by Related Companies, is estimated to be in line to generate $534 million in federal voucher revenue over its lifespan. A third tower containing 104 units is now in the planning phase with a $865,656-per-unit price tag, or $90 million total; at that figure, it costs more to build one of these units than to pay the median price for an entire home in the state. Related is set to collect $10.4 million in fees on that project.

The dependence on government financing and high costs per unit of the recent developments come a sPrivate-sector construction of market-rate housing in Los Angeles has fallen in recent years. Permitting approvals for government-regulated affordable housing climbed to 60 percent in fiscal year 2023-2024 from 24 percent in the previous four years, according to The Center Square.

Many real estate insiders blame Measure ULA, which charges a transfer tax on big-ticket property sales. A recent report from UCLA bears out that finding, noting that the transfer taxes can be linked to notable declines in housing production and property tax revenue growth, per The Center Square.

Guests at The Real Deal’s Building Back L.A. roundtable last month echoed that sentiment with real-life anecdotes.

“Buyers and sellers are absolutely disgruntled over ULA, and it is not going away. It’s actually getting worse every day,” Aaron Kirman, CEO of Christie’s International Real Estate Southern California, said. “When you are doing these deals and sellers can be charged anywhere between 4.5 and 5 percent additional fees on top of commissions and closing costs and everything else, it’s make it or break it for a lot of these developers, not only on the luxury level, but for apartments, for retail, and everything in the middle.”

“It really has probably stopped 50 percent of the deals, maybe even more,” Kirman added.

“We have developers that would love to develop in L.A., that do develop in L.A., that are just saying until ULA gets off the books or changed substantially they’re not going to do it,” Sean Burton, chairman and CEO of Cityview, also noted.

The Howard Jarvis Taxpayers Association is working on accomplishing just that. The group is a proponent for a new initiative called the Local Taxpayer Protection Act to Save Proposition 13, which would repeal Measure ULA and similar transfer taxes. The proposal, which is collecting signatures until next February, would restore the prior maximum transfer tax of 0.11 percent.

— Chris Malone Méndez