Good News and Bad News on the Animal Front

The Good News: Stuckey out of luck?

According to the Daily Breeze, Mayor Villaraigosa has fulfilled his campaign promise to fire Mr. Guerdon Stuckey, the General Manager of Animal Services. Although the Mayor's office has not confirmed the report, the animal community is cautiously optimistic.

Negative press about this issue has stalked the Mayor for the past two months. A majority of L.A. animal advocates have come to the conclusion that Mr. Stuckey is unable to move the city in the direction of "no kill."

Sixteen Directors of Animal Welfare (DAWs)--who were appointed through the Neighborhood Council system--sent a joint letter to the Mayor last week requesting his removal.

If the Daily Breeze article is accurate, the Mayor should be thanked. The Mayor's next step is to hire a competent and caring General Manager for Los Angeles Animal Services (LAAS).

The Bad News: CAO Report is huge (or elephantine!) disappointment.

Many in the animal community, including the Directors of Animal Welfare, want to see the local elephant exhibit closed and the three L.A. zoo elephants--Ruby, Gita and Billy—moved to a sanctuary. A 75-page CAO report came back stating that the taxpayers should fund a $33 million three-acre L.A. exhibit. Not only would this be disastrous for the elephants (who need at least 100 acres), but it would be burdensome for our city which is currently $268 million in debt. Some City Councilmembers have expressed their desire to see the elephants sent to a sanctuary. It is hoped that Mayor Villaraigosa will do the right thing for these beautiful and deserving creatures who are counting on him.


Caution: You're about to enter an Affordable Housing Zone

Inclusionary zoning ordinances and density bonuses—also known as "below market rate" (BMR) housing programs—can negatively impact the community. These affordable housing programs reward developers who earmark a percentage of new homes or condos for those in the low and moderate income brackets by letting them increase density, build taller structures and curtail open space and parking requirements. This can lead to over-crowding and infrastructure headaches for residents in the area.

But "below market rate" (BMR) housing programs are arguably problematic for other reasons. They are inherently unfair, hurt both market-rate and BMR property owners, rely upon an unfounded evaluation of the home ownership situation, and erroneously see the solution to the housing "crisis" as the weaving of a paternalistic safety net across America.

Nets are vital for hairy high-wire acts, but unnecessary—even deleterious--for the recipients of "below market rate" housing programs, who can earn as much as $126,000 per year in parts of Northern California. A New York Times article tells of Marin County woman who "likes nice things: fashionable clothes, dinner out with her husband, a private school for her daughter (and has a household income of)... $111,000," but is unable to buy a home without a 30% "inclusionary zoning discount" in her neighborhood of choice, where properties sell for as much as $1.8 million a piece.

This story and the thousands like it amount to an emotional assault on the millions of homeowners who had to make sacrifices (and still do)—forgoing private school tuition, vacations, restaurant dinners and the ability to live in their preferred neighborhood—in order to get into a condo or home. To afford the payments, they may rent out a guest house or share the premises with a "buying partner," such as a relative or friend. In the more expensive real estate markets, they may allocate as much as 50% of their incomes for mortgage payments and acquire a "stated income," "no ratio," or "no doc" loan in order to get bank approval in the first place. Many purchase with little to no down payment because they have no real savings. To know that Uncle Builder and Uncle Sam are handing money to others, especially those with higher incomes, is nothing short of insulting.

"Below market rate" housing programs can assist those who earn up to 120% of the median-income for the area. In Atherton, California—the zip code with the nation's highest median income—this would translate into home-buying subsidies for those who make $240,000 per year. In addition, BMR programs are prone to abuse by investors who hope to shimmy down a loophole.

"Below market rate" housing programs amount to more than an emotional assault: they arguably attack the pocketbooks of everyone. According to the Reason Foundation, a nonprofit that has extensively studied affordable housing issues, BMR programs "increase(s) the cost of market-rate homes in a typical city by $33,000-$66,000 per unit" because developers raise the prices of regularly priced properties to compensate for their losses on the low cost ones. This means that average home-buying Americans may be subsidizing their so-called needy, but oftentimes wealthier, BMR neighbors.

It seems these "needy" BMR neighbors--who initially bubble like lottery winners—are not so lucky after all because affordable housing programs, almost without exception, impose heavy resale restrictions on their new owners. BMR owners cannot obtain much, if any, equity from their new purchases for a period of time—usually between 15-60 years, depending upon the rules of the locality and program. In parts of Vermont, price controls stay in place for 99 years.

BMR owners have less incentive to upgrade their properties because it is questionable—at least in some parts of the country—whether they will be able to recoup fix-up costs. They cannot access their equity for emergencies or better investments. If they get a raise, the higher income may disqualify them from retaining the property. They cannot sublet or move out without becoming ineligible for the program, and they cannot sell to a relative or friend because the city or county gets first right of refusal at the reduced sales price. If the city or county declines, the property goes to the next BMR buyer on the waiting list.

Unless BMR buyers can weather the lengthy resale restriction periods in their "property prisons," they will have to initiate the buying process again only to find themselves in a less favorable position since home prices tend to increase over time. BMR buyers may realize they have erred by unnecessarily delaying the opportunity to accumulate equity like market-rate owners. As a Los Angeles city planner says, "These programs are not for those who want to build wealth."

"Not for those who want to build wealth" are words that express a vote of "no confidence" in the BMRers' ability to stand on their own two feet. Providing crutches for those without broken bones—since most BMRers could be market rate buyers—leads to chronic impairment because when healthy parts are not used, they become weak.

BMR programs effectively lock the door to real homeownership after giving the "needy" a deceptive weekend playing house. It is like the parent who sneaks an Easter egg into a child's basket and smiles, "look what you have," only to snatch it back and give it to another child.

BMR programs will no doubt become more popular as government continues to obsess over affordability statistics rather than consult with real life experts—real estate agents and lenders—who get low and moderate income clients into properties "all day long" in some of the most expensive real estate markets in the country.

When USA Today reports that "the minimum household income needed for a median-priced home at $495,000 (is) $115,910," it is incorrectly assumed that someone with a $55,000 income cannot buy the property.

Government must shed myths that housing is unaffordable and scarce. Potential buyers must be empowered with avenues for property investment, rather than coddled and saddled with wealth-deflating options.

The threats against current homeowners--whether related to high density or the subsidization of BMR buyers—must end. Government should trust in supply and demand and use available resources to clean up lower density, crime-invested neighborhoods where the market would naturally produce a less expensive product.

A BMR program is an RBM (really bad mistake), so use caution when you enter an affordable housing zone.

Assault on the American Homeowner

Sixty-nine percent of Americans are homeowners, and they are under siege. A number of "unfriendly" policies, proposals and court decisions within the past year have produced an atmosphere which is arguably antithetical to the American dream of carving out a slice of the apple pie and plopping a single family residence on it.

The assault weapons have catchy titles, such as inclusionary zoning, smart growth, density bonus incentives, eminent domain and mortgage interest tax reform. It could be said that corporations and developers attack from one side while politicians and government officials, acting in the interest of the less well-off, attack from the other.

In the tug-of-war between the "have a lots" and the "have a littles," the flag shifts back and forth in an effort to balance interests, and those in the middle are swept along for the ride.

This argument is more than a refrain of "the gap between the rich and the poor" tune as sung in Kevin Phillips' Wealth and Democracy, Lester Thurow's Fortune Favors the Bold or Lawrence Mishel's The State of Working America. The "middle" encompasses more than the middle-class. Most homeowners are at risk.

"Eminent domain" refers to the government's right--with fair compensation--to seize private property for public use, such as when residences could be bulldozed to make room for much-needed freeway. But in this "property assault era," the U.S. Supreme Court has ruled that the word "public" can be synonymous with the word "private." Do you remember what the definition of "is" is?

Any private property that can produce greater tax revenues in the hands of a more enterprising private property owner, such as a corporation that plans to build a shopping mall or high rise, could be plucked away for so-called public benefit. Attorney Dana Berliner said of the ruling, "This is a dark day for American homeowners."

An "attempted assault" emerged recently from President Bush's tax-reform panel, which proposed replacing the mortgage interest deduction with a meager tax credit equal to 15 percent of the homeowner's mortgage interest. According to Al Mansell of the National Association of Realtors, this could translate into a 15% decline in home prices in some parts of the country; and therefore, a significant loss of equity for homeowners. Fortunately, Congress is not expected to countenance the recommendation.

Because measures related to eminent domain and mortgage interest tax deductions are criticized by a vocal majority, they are unlikely to become permanent policy. However, inclusionary zoning, smart growth and density bonus incentives are another matter altogether.

"Smart growth" (SG) is supposed to be smart, but it can be short-sighted. SG advocates generally promote taller structures near mass transit lines, greater use of the existing infrastructure, conversion of obsolete and distressed commercial and industrial buildings into mixed-use properties and preservation of the countryside from urban sprawl. While these goals are noble and often sound, the impact of high density building upon existing residents must be factored into the equation.

"Smart growth" could be likened to a finely constructed ship. Without fuel, a place to dock and an unobstructed sailing path, the boat is useless. "Smart growth" proponents must consider the capabilities of the existing infrastructure to fuel new growth; they are often not upgraded to handle additional customers. They must factor in the parking and traffic situation--especially along mass transit lines which may already be congested—and the current density figures for the target area. Los Angeles, for example, is the densest city in the country with just over 7000 people per square mile. The plan which means smooth sailing in Oklahoma City may stall in L.A.

Directives or incentives aimed at providing affordable housing for low or moderate income residents are touched upon in most "smart growth" plans, but they are integral to "below market rate" (BMR) housing programs, such as inclusionary zoning and density bonuses. BMR initiatives ignore market forces--such as the law of supply and demand and the natural "trading up" homeownership process--by requiring or incentivizing builders to set aside a portion of their sale or rental units at below market rates for those deemed unable to afford current prices.

In addition to density increases, government may permit BMR developers to erect taller structures, skirt parking and open space requirements and dot single family neighborhoods with townhouses. Homeowners—from the "struggling" to the affluent--may, in turn, feel assaulted by the resulting traffic congestion, parking problems, loss of backyard privacy and inferior quality of life on previously serene streets. It could be likened to a cramped elevator; as passengers flood through the doors, claustrophobia increases as well as a fear that the community will exceed its capacity and plummet to its figurative death.

BMR programs exist in at least 134 cities, towns and counties in America, and in the following states: California, Colorado, Illinois, Maryland, Massachusetts, New York, Vermont and Wisconsin.

We cannot stop growth, but we must be intelligent about it. Above all, we must not take homeowner assault with a grain of salt.