A signature homelessness initiative championed by Mayor Karen Bass is facing mounting scrutiny after hundreds of taxpayer-funded apartments meant for homeless residents sat empty while public agencies continued paying rent. At the same time, federal authorities froze funding for the Los Angeles Homeless Services Authority alleging financial mismanagement.
More than one-third of the units in the city’s master leasing program were vacant as of mid-May, with more than 250 residences gathering dust, LAist reported. The master leasing program — a cornerstone of Bass’ effort to rapidly expand housing options for homeless Angelenos — involves public agencies leasing entire apartment buildings and then subleasing units to residents whose rents are covered by government subsidies.
On Thursday, the U.S. Department of Housing and Urban Development sent a letter informing LAHSA that it was immediately suspending all of its federal funding for the body, LAist reported. The funds have been frozen pending an investigation into whether the agency broke the law in its handling of federal grant money.
“HUD cannot ignore LAHSA’s wanton management of public funds,” Andrew Hughes, a deputy secretary at the federal agency, said. LAHSA has received $944 million in HUD funding since 2021.
Of 758 units spread across 14 master-leased properties, 259 were unoccupied in May, up from 226 vacant units a month earlier. That’s a vacancy rate of around 34 percent — higher than downtown Los Angeles’ struggling office market. Taxpayers remain on the hook regardless of occupancy, with the LAHSA paying an average of roughly $3,400 per month per apartment. The empty units are costing an estimated $880,000 monthly, or about $10.6 million annually, according to agency figures cited by LAist.
The vacancy rate far exceeds comparable programs. San Francisco’s long-term housing portfolio for unhoused residents has a vacancy rate of about 9 percent, contrasted with roughly 33 percent in Los Angeles’ master leasing effort.
LAHSA officials blamed the vacancies on restrictions that require incoming tenants to have qualifying housing subsidies, many of which have been reduced or paused following state funding cuts. As a result, apartments can remain empty even as the agency continues paying rent, security and operating costs under long-term agreements.
Auditors recently found LAHSA has committed to more than $70 million in future payments tied to noncancelable leases, with master leasing responsible for much of the agency’s expanding lease liabilities. Most contracts run for five years and offer only limited opportunities for early termination.
The fallout comes as Los Angeles County prepares to assume greater control over homelessness spending through its Department of Homeless Services and Housing starting July 1. County officials have directed the agency to terminate seven of the 14 master leases, while services at the properties will transition to the county’s Department of Homeless Services and Housing.
— Chris Malone Méndez