What Canadian cities can learn from L.A.’S affordable housing crisis
Insufficient supply seems to be a problem, Murtaza Haider and Stephen Moranis say.
Despite the glamour and hype that surrounds Los Angeles, the region faces numerous socio-economic challenges. L.A.’S congestion-ridden multi-lane freeways, for instance, have become the poster child of traffic problems in North America. A more significant concern is housing affordability, which affects no fewer than 1.9 million households in L.A. County.
A report by the Mckinsey Global Institute reviewed the housing affordability challenges in the L.A. region and proposed several interventions for ramping up housing supply to address the problem.
The Mckinsey report identifies the fundamental challenge as one in which economic growth “sometimes sets off unintended consequences.” Prosperous cities all over, despite the wealth they generate, have failed to address “one of the most basic human needs — a decent place to call home.”
New York and San Francisco in the U.S., London in the U.K., and Toronto and Vancouver in Canada are examples of wealthy cities that have failed to meet the housing needs of low-income households. Even middle-income households are now struggling with the issue of affordability in many of those cities.
L.A. alone is home to four million inhabitants. L.A. County, which includes L.A. and other neighbouring cities, houses millions more. The challenges are enormous. In the city, 70 per cent of the households face financial strain to “obtain a standard-size unit in their current neighbourhood,” the report found.
Inadequate housing supply seems to be the problem. Since 2010, L.A. has added just 88,000 units. In the past five years, only an abysmal 7,300 units of affordable housing have come online.
The Mckinsey report implores Los Angeles to “ramp up construction of affordable units, with a specific focus on serving households earning less than 120 per cent of the area median income.”
While space is tight in L.A., land is not an endangered species. The report highlighted the potential to add 1.5 million to 1.9 million new housing units on existing underutilized residential parcels.
L.A. is fighting back with strategies to provide housing relief. Measure JJJ is targeted at increasing density near public transit stations and along transit corridors. The idea is simple: When land near transit infrastructure is available for intensification, affordable housing units must be developed at an aggressive pace. The underlying assumption in developing parcels near transit is that the transit system has capacity and is comprehensive enough to provide efficient connections to labour market clusters.
Equally relevant is a measure to streamline the approval processes for land development, something that currently takes years.
New housing development also needs substantial capital investments. L.A., which has “ample capital available,” is replacing past subsidy-driven approaches with incentive-driven regimes.
Those include “density bonuses” to developers who build larger projects near transit infrastructure in return for commitments to provide affordable housing units.
However, that is not enough. The Mckinsey report suggests embracing prefab construction to provide micro-units and co-living developments, something it believes can cut construction costs in half. Financial Post
Murtaza Haider is a professor of Real Estate Management at Ryerson University. Stephen Moranis is a real estate industry veteran. They can be reached at www.hmbulletin. com.