Housing in City of Angels

With only two days to go before Christmas, my attention fixated on an article in the Opinion section of the Los Angeles Times. The title: “Make housing a 2020 issue.” What particularly attracted my interest was its author, L.A. Mayor Eric Garcetti. As he’s devoted a good bit of his personal attention over this past year to exactly this subject and, as the statistics reveal not very successfully, he commands my rapt attention. I’m eager to see what he says and more specifically who he’s addressing – if not himself.

His three introductory paragraphs appear to fit in nicely with the season, perhaps even with allusions to the manger scene in Bethlehem.

His reference to Blanca Ahumada, who must “cry herself to sleep – her mind racing with anxiety over where her family would find a good night’s rest the next day,” was touching.

He then provided a few details as he described her as “a mother of seven kids … from a 2-month-old to a 14-year-old … who had lost her job… and her husband only gets occasional work as a day laborer … their landlord raised the rent … they couldn’t afford to pay it.”

However, the next line truly took me aback: “The family was left homeless not because of illness or anything they had done wrong …”

I confess at this point I almost concluded my reading of his article and moved on to something of more consequence, such as astrology forecasts or the comics, for I dreaded to envision how the article might devolve with the lifestyle of the Ahumadas described so to absolve them of “anything they had done wrong.”

Nonetheless, I continued my reading in the hope the mayor might return to sanity. I’m glad I did, as one remarkably astute recommendation appeared. We shall get to it soon.

But first, we need a clearer view of the housing crisis nationwide. The report is more than eight million American families pay at least half their income on rent and far too few receive any form of assistance. I’ve seen figures indicating that nationwide, more than 49.7 percent of renters pay not less than 30 percent of their income to the landlord.

Perhaps even more distressing, according to the Center on Budget and Policy Priorities – an American nonprofit organization which conducts research and analysis to help shape public debate over proposed budget and tax policies – only one in four U.S. households eligible for assistance actually receive it … and in Los Angeles the number is one in eight.

Mayor Garcetti then reaffirms his contention of the importance of making housing the main issue, with his statement: “Housing is without a doubt the No. 1 issue in California and Los Angeles.” But then his following lines introduce an approach qualifying as the most sensible I’ve yet heard from any politician over the past two years.

His declaration: “No candidate should campaign here without prioritizing Section 8 increases. The Trump administration and its newly appointed homelessness czar, which claim to be dedicated to addressing the root causes of homelessness, could prove that by ramping up investments in federal housing assistance now. At a minimum, the number of Section 8 vouchers should be doubled nationwide and the program should be funded to match rising rents in cities such as ours.”

Of all the programs touted to provide for those with insufficient funds, this is the one making the very best sense in every respect. HUD’s Section 8 housing voucher program, currently enables 2.1 million low-income families to rent private apartments they might not otherwise afford.

I’ll digress now to fill you all in on what Section 8 is about. In the 1970s studies showed the worst housing problem afflicting low-income people no longer related to substandard housing, but rather the high percentage of income spent on housing. Congress passed the Housing and Community Development Act of 1974, further amending the U.S. Housing Act of 1937 to create the Section 8 Program. In this program, tenants pay about 30 percent of their income for rent, while the rest of the rent is paid with federal money.

This Section 8 authorizes the payment of rental housing assistance to private landlords on behalf of low-income households in the United States. Of the 5.2 million American Households receiving rental assistance in 2018, approximately 1.2 million of those households received a Section 8 based voucher. Of this rental assistance, 68% of total rental assistance in the United States goes to seniors, children and those with disabilities. The U.S. Department of Housing and Urban Development manages Section 8 programs.

The main Section 8 voucher program is designed for income-qualified households. Under this section of the Housing Act, individuals or families with a voucher find and lease a unit – either in a specified complex or in the private sector – and pay a portion of the rent. Most households pay 30% of their adjusted income for Section 8 housing. Adjusted income is a household’s gross (total) income minus deductions for dependents under 18 years of age, full-time students, disabled persons, or an elderly household, and certain disability assistance and medical expenses.

Before I go further, I’ll acknowledge Section 8 housing invites its detractors. In many blue-collar and middle-class neighborhoods longtime residents hate the program. Typical of their comments are the recipients’ “attitudes don’t blend with our suburban life-styles” and “children in voucher homes go unsupervised.”

A resident of Richton Park, Illinois, fears the signs of disorder that come with voucher tenants – “the unmown lawns and shopping carts left in the street – could undermine the neighborhood.” In the southern suburbs of Cleveland are complaints to the effect “the house next door is being rented to people whose kids are up all night. It’s like they’re trying to find the worst people.”

And according to Joe Szabo of Riverdale, a municipality south of Chicago, its Potter Elementary School once boasting a top academic reputation, “… now has the state’s highest student turnover. Student achievement has dropped.”

I can’t speak to the testimonials of these detractors. I’m sure they feel what they feel and believe what they believe. However, I’m no stranger to the Section 8 scene. As a landlord both owning and managing apartments in several counties of Southern California for many decades, I’ve accepted and continue to accept Section 8 tenants.

In general, they conduct themselves properly, typically pay their rents promptly and maintain their units as do our many nonsubsidized tenants. It’s true, of course, we prequalify each tenant, but we set no special requirements for any select group.

With this said, I’ll now wholeheartedly endorse Mayor Garcetti’s plan to expand the Section 8 voucher plan and suggest the following conditions be enacted into the program:

(1) The number of vouchers approved and issued must be vastly expanded.

(2) The amount of money authorized by the federal government will be increased to match the number of vouchers issued.

(3) If a prospective Section 8 tenant is otherwise acceptable, his or her income may not, by federal law, be allowed as a cause for rejection by a landlord.

A final thought: After reviewing the various inoperable proposals to eliminate housing inequality and subsidize the construction of new low cost structures, as have been floated by the professional politicians these past several years, it’s a pleasure to encounter a device which actually functions effectively.

Without a doubt, the Section 8 program proved itself, over the past 45 years, to be both practicable and economically feasible. It should be expanded exactly as Mayor Garcetti recommends. As a prominent public official in a city suffering the effects of America’s housing crisis, he’s a logical person to lead the campaign to bring it to fruition. With a touch of luck, this may just come to pass.

Al Jacobs, a professional investor for nearly a half-century, issues weekly financial articles in which he shares his financial knowledge and experience. Al can be contacted at al@abjacobs.com.