Revolving Loan Fund / Business, Foundation, and Investor Contributions / Workforce Housing Stock

MOTION-- For many years, Los Angeles has had one of the least affordable housing markets in the nation, and
the COVID-19 health and economic crisis has exacerbated that affordability crisis. More working
families than ever are struggling to afford their rent, and many families fear the economic
uncertainty laid bare by this crisis. A grossly unaffordable housing market, especially for moderate
income workers, is likely to be a significant constraint on our economic recovery.

According to a February 2020 report by the Los Angeles Economic Development Corporation
(LAEDC), California’s median home price in 2018 was 7.3 times its median household income. By
contrast, the median home price throughout the United States was 3.7 times the median household
income. This disparity is likely even greater in Los Angeles than in the state as a whole. The
LAEDC report observed that "the fact that the median Californian household must pay more than
seven times its income to afford a home should be grounds for grave concern regarding sustainable
economic growth," and it described housing affordability as "the largest barrier to economic
growth" in the Los Angeles region.

For Los Angeles employers, this lack of affordable workforce housing hurts their ability to attract
and retain talent, and negatively impacts the region’s competitiveness. Housing costs are
frequently cited as one of the most important reasons employers make a decision to locate or
expand job-creating facilities elsewhere.

The lack of middle-income housing affordability in the city also pushes the workforce to live in
more affordable areas distant from their jobs, dramatically increasing commute times and
suburban sprawl. Longer commutes leave workers with less time to invest in learning new skills
that could lead to higher pay. Workers who spend heavily on gas and transportation costs have
less to spend on their families, and therefore create less of an economic stimulus. Long commutes
damage regional air quality, worsen mental and physical health, and make workers less satisfied
and less productive.

Unfortunately, there is no dedicated source of funding to expand housing opportunities for
vulnerable middle-income working families -- those earning between 60 and 120% of area median
income (AMI), Many working families at this income level do not qualify for affordable housing
programs under City and State programs, despite being extremely rent-burdened by Los Angeles'
high market-rate rents.

One impactful and eligible tool that the City has used in the past is a public-private partnership
called the New Generation Fund, which currently has roughly $70 million for acquisition and
pre-development financing of affordable housing projects in Los Angeles. Given our city's high
development and acquisition costs, this amount does not meet the City's unprecedented housing
shortage, including for workforce housing.

There is an opportunity to engage private and philanthropic sources of capital to preserve and
acquire workforce housing that will benefit working families and stimulate regional economic
growth and jobs creation. The City should consider partnerships with businesses, foundations, and
investors to deploy pooled resources for stabilizing housing affordability through both
preservation and acquisition.

I THEREFORE MOVE that the City Council INSTRUCT the Housing and Community Investment
Department and the Chief Legislative Analyst to report with recommendations on the creation of
and resources needed to effectuate a revolving loan fund, empowered to receive contributions
from institutional investors, philanthropic organizations, and private companies, that will support
increasing the stock of workforce housing in the city. The fund should prioritize preservation and
rehabilitation of existing housing and acquisition of units or buildings in danger of foreclosure, for
the purpose of providing housing for families that earn between 60% and 120% of area median
income, protected through regulatory covenants.