Affordable Home Ownership in Santa Monica - Not Affordable Renting

The state of California has issued an unfunded mandate that Santa Monica must build 6000+ affordable homes, or face punitive fines and loss of zoning control.

The city currently plans to build these as affordable apartments to rent, which would be utterly disastrous, both for the occupants of the affordable housing, and existing city residents.

But if the homes were built as deed-restricted affordable condos for sale we would avoid the negative financial impacts on existing residents and the social/economic harm on the residents of the affordable housing themselves.

Too expensive:

Cost to build 6000 affordable apartments - $4Billion. (this would cost every household in the city, both renters and owners, more than $80,000 - and much more if affordable renters did not have to pay towards it)

Maximum fine from the State on Santa Monica for non compliance: $100,000 per month fine x 6 = $7.2Million per year.

It will take 555 years to pay off $4Billion at $7.2 Million per year..

Alternatively, the interest rate on $4Billion, at 5% is $200Million.

Much better to do nothing and pay the fines.

Affordable condos-for sale would be largely self financing, as the sales proceeds could go toward paying the construction costs. (Thus saving $4billion). This would also avoid the fines and risks of state takeover of planning.

Furthermore, the affordable-for-sale condos would pay property taxes.

Historical injustice:

Santa Monica is attempting to compensate those displaced by the 10 freeway construction by offering them, and their descendants, the ability to apply for affordable housing here.

This a laudable, but entirely ignores the fact that this was a taking of property owned by those displaced, and the city plans to substitute it with rental housing - This just reinforces the initial property taking.

The city must instead offer to those displaced affordable-condos-to-own, which will truly compensate them, rather than this feeble and false substitute.

The LA Times (11/14/2021) - "If you look at Black and Latino neighborhoods, in terms of homeownership, the loss of equity...the damage is tremendous..."

The LA Times (12/26/2021) -"...the city should be making it easier for her family to actually buy a home in the community ..."But what else is there?" Monroe said. "The theft is still there. The generational wealth is still gone."

National Geographic (8/2021) "A typical white family's wealth is eight times that of a typical black family - a legacy of bias in housing." The article makes clear the enormous benefits of black homeownership.

Over and over we see that the poor have their property taken and end up in affordable housing from which there is no escape - and are victimized by both the initial property taking, and then by well-meaning but misguided politicians, who should let them regain the ownership that was taken from them.

Social and economic injustice:

Only the rich can afford to buy single family houses or new condos in Santa Monica.

Affordable renting is just renting, and leads nowhere - the rich get richer and the poor stay poor. To close that gap the poor need to own property. The city must make ownership a primary goal for all classes of residents, especially the poor.

Taxing a societal benefit into extinction:

House purchasing is a massive economic benefit and should be encouraged.

When a house is sold, many parts of the economy benefit, including realtors, remodelers and construction industries.

This pays business taxes, sales taxes, income taxes, and it uplifts the property tax basis. Apartment buildings rarely turn over. Thus delaying property tax uplifts.

Buying and selling a home should be as friction free as possible, in an ideal world it would be no more difficult than renting and would ensure freedom to live as close to employment and schools as possible.

Friction and costs in selling a house lead to longer commutes and inefficient job matching.

Real estate transfer taxes ignore whether a house has actually increased in value.

Transfer taxes, and indeed anything that adds to the cost of buying a house are entirely counterproductive. They are grit in the gears of housing.

Should cities need to raise taxes, taxing house selling is the worst possible choice. It simply discourages ownership, stalling sales, and delaying property tax repricing. This actually reduces traditional property taxes, and is utterly counter-productive.

The poor really can own their homes:

The Forgivable Equity Builder Loan program of the California Housing Finance Agency provides 10% of the purchase price towards a down payment.

LA County has many resources for purchasing income restricted homes.

The city of Santa Monica itself has existing equity sharing programs that allow affordable purchasers to share the cost with the city.

Centrally planned, wrongly sized apartments:

If people can choose which condo to buy, they will choose ones that meet their needs, rather than ones the city chose to build. Frequently the city planners build the wrong size of apartments - usually too small. But with a free market to choose from, developers would build what people want, and resident owners would end up with housing which they really want, not that which central planners have (usually incorrectly) specified for them.

Furthermore, affordable rentals now being built offer almost no parking - making street parking unusable. This would be far less likely to happen if people could choose which home to purchase, as they would avoid buying homes without parking, and then builders would be much less likely to build them.

An argument against ownership and its rebuttal:

It is argued that there will be attempts to evade the income-deed-restrictions, but prior cases have been few. And past abuses have been enabled by our city's lax attitudes, not flaws in the system itself. If Santa Monica gets a reputation for firmly enforcing the rules, then efforts to skirt them will be rare. Monitoring deed restrictions is not a passive activity for the city, but like managing affordable rentals, it will require a hands on approach.

There are stakeholders invested in the current system of affordable renting who will try to stop affordable homeownership. But building thousands of affordable rentals is a problem that cannot be solved by current practices.

In summary:

Social, economic and historical injustices are guaranteed to continue until the poor and displaced are allowed to own their own homes.

Home ownership brings very real benefits to occupants: stability, freedom from eviction, pride, the ability to pass a home to children, the creation of multigenerational wealth, financial education, social stability and community.

Only landlords get rich. For city-owned housing, no one gets rich - its a financial swamp of waste, cronyism, poor housing choice and a general lack of responsibility by all parties.

(There are numerous instances of affordable housing providers doing needless work because the money was in the budget and would be lost if not spent.)

If those apartments were owned, the homeowners would take responsibility for them - instead of being instilled in a culture of dependency and a lack of accountability. Homeownership, literally, brings home an understanding of the value of a home and how to maintain it - all things that are essential to uplift families into a mindset of growing wealth, financial sophistication and independence.

Building 6000+ affordable rental homes will cost $4billion and will bankrupt the city. Building affordable condos for sale will be largely self-financing.

6000 affordable condos-for-sale will pay property taxes.

6000 affordable rentals will not pay property taxes and will essentially be getting all their city services for free - leaving an ever-shrinking pool of property-tax paying residents to pay ever higher taxes to cover it. Eventually this will collapse city revenues and city services, leading to middle-class flight and reducing Santa Monica to a failed city - undesirable to business, tourism or even the inhabitants of the affordable rentals themselves.