LISSA’S: Wal-Mart vs. the Poor

Wal-Mart vs. the Poor

Blame Howard Jarvis for big-box projects beating low-income housing

By Greg Katz

On the campaign trail 30 years ago, Howard Jarvis said his anti-tax measure would guarantee housing to those with low incomes, whether renters or homeowners.

Things haven't panned out that way.

In trying to compensate for their lost property tax revenues, city governments have focused their zoning decisions largely on bringing sales tax generators – Wal-Marts, Best Buys, and other big box retailers – into their cities. A study by the Public Policy Institute of California found that, given 20 possible priorities for new developments, more than 300 city managers in California ranked "new sales tax revenue generated" at number one on average – and "meeting affordable housing needs" at number 15.

"The shift was, with Prop. 13, that local governments' – cities, and in many cases, counties – preferences shifted from a mix of residential and business properties to retail and business properties, because the expectation was that they'd make no demands or fewer demands on services, and that they'd bring in, in addition to property tax, sales tax," says Julie Spezia, executive director of non-partisan affordable-housing advocate Housing California. "Zoning for apartment buildings and multi-family, anything really over a single family residence [became] very difficult to get cities and counties to be willing to do. That really constricted the supply."

"To the extent that cities were expected to maintain certain service levels at the same time their primary revenue source was taken away, this is really where the rubber met the road," says Professor Stuart Gabriel of the UCLA Anderson School of Management, who's studied the land-use effects of Prop. 13 for decades. He explains that, as a result of the lost local revenues from Prop. 13, the land use conversations between developers and cities take place in the language of dollar signs. "If I was a developer, and you were the city of Thousand Oaks, and I came to you and said, 'Look, I've got this giant parcel. One idea is to put affordable housing on the parcel, and the other idea is to put a luxury hotel, and they both cancel, so I can make money doing either' … you, as the city of Thousand Oaks, would say, 'Whoa! I vastly prefer the luxury hotel because I'm going to get huge occupancy tax and sales tax revenue from the hotel.'"

With the huge incentive for retail property, is Prop. 13 going to shaft affordable housing every time? "It has in most every case, yeah. The authors of Prop. 13 basically sold that piece of legislation by suggesting that the lower property taxes would make housing more affordable to entry-level buyers. The upshot is that it's exactly the opposite, because affordable housing oftentimes doesn't pay its way in terms of local government cost-revenue impact, and because of that, affordable housing doesn't get built; it's much scarcer. And because of … excess demand for affordable housing, housing at the lower rungs, all things equal, has become more expensive and not less expensive because of Prop. 13."

Is there a way to fix this problem without repealing Prop. 13, Professor Gabriel? "It's not clear how that incentive structure would be mitigated, short of removing this limitation."

source: LA City Beat