Friday, May 12, 2006

Los Angeles helps its downtown poor in the short-run -- but how about an "impact fee" for the long run?

   The city of Los Angeles adopted this week a moratorium on closing low-cost residential hotels -– what others might call flop houses -– and converting them into “luxury lofts.”  The move is designed to protect the very poor in the hotels from being tossed out onto the street and into one of the world’s most expensive housing markets.
   The L.A. Times quoted a homeless activist as saying, “We need a home, and right now the hotels are our homes.”  The problem is, of course, that the hotels are not their property.  With downtown L.A. and dilapidated-but-close-in Hollywood appearing more attractive all the time in the freeway-clogged region, the old flop houses are now more valuable for “upscale” housing.
    Considering my drum-beating over the need to provide affordable housing, I won’t step up on a soap box and lecture about how the moratorium won’t affect market pressures and won’t address the underlying dilemma of affordable housing.  But a moratorium is a very short-term solution, if that.
   In the long-run, of course, it will be very difficult to stop what critics call “gentrification.”  Indeed, the fact that affluent Angelenos are heeding the new urbanist calls to move back into the city and avoid their crazy commutes would seem to be a good thing.  And as a matter of efficient land use, it probably makes sense to have downtown areas occupied by workers, not by those who are unemployed.
   The moratorium may reflect the city’s hope that the housing market will collapse and that plans for conversions won’t appear as attractive a year from now.  Or the year may give the city time to figure out something else for those who would be displaced. 
   Here’s a more-long-term idea that was in part suggested by my Stetson colleague James Fox, who studies poverty issues.  Considering that the conversion of a flop house leads to a social “cost” –- the homelessness of some of the most vulnerable in the city, with the likely result that the city would have to help pay for their housing some place –- and considering that a solution short of a ban should be preferable to developers, why not impose an “impact fee” on the conversion developers?  If you’re going to close a flop house, you would have to help pay to house the residents elsewhere.  Or set up a homeless mitigation bank and a trading scheme.  It’s the economic idea of law's requiring a complete internalization of an action's total social costs.

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