NEW REPORT: How Land Use Reform Can Solve the Los Angeles Budget Crisis
SB 79 Could Bring Up to $1 Billion to City Coffers; Help Solve Housing Shortage
Los Angeles – The City of Los Angeles could largely solve its $1 billion budget shortfall by allowing more homes to be built near its transit stations, according to a new report out today from Streets For All, an LA-based safe streets and land use advocacy organization.
The report shows that under the provisions of SB 79, state housing legislation proposed by Sen. Scott Wiener and co-sponsored by Streets for All, the new homes that would become legal to build could generate up to $1 billion in new property tax revenues. Even under a “modest growth” scenario where only 20 percent of the possible SB 79 homes (which is 0.7% of the city of Los Angeles land) are built, the city would get a windfall of nearly $200 million – more than the City is estimating to save by laying off 1,600 city employees.
“There’s a common misperception that new homes are a budget burden on cities, but for the most part, the opposite is true,” said Marc Vukcevich of Streets For All. “New homes mean new property tax revenues – which are the lifeblood of the LA city budget.”
“We hope Angelenos who are concerned about our budget crisis will call on their elected officials and ask them to support SB 79, and other legislation that can help alleviate our housing crisis. If LA had been building housing the last 10 years, we wouldn’t be in this mess.”
The report’s key findings include:
- Multi-family housing and commercial parcels represent 12% of land in the City of LA but nearly half of its property tax revenue
- At maximum build-out (3.3% of the City redeveloped), SB 79 would allow the City of LA’s annual property tax income to grow by nearly $1 billion
- Redeveloping 20% of parcels touched by SB 79 would net nearly $200 million, which in the context of this year’s budget crisis, would increase property tax revenue enough to avoid the 1,600 proposed city layoffs
- In LA, 45% of residential parcels near high quality transit are zoned exclusively for low density
As a part of a package of pro-housing reforms currently moving through the California legislature, SB 79 would set minimum zoning standards across the state near high-capacity transit, and allow transit agencies more flexibility in developing land that they own. Transit-oriented housing allows people to live closer to work and amenities; it also reduces traffic congestion and pollution. The finding that such legislation can also bring significant new sources of revenue brings additional context, especially in light of the budget crisis faced by Los Angeles and many other California cities.
Streets For All’s study uses county assessor data to find the average property tax value per acre per zoning category, highlighting the potential revenue that could be captured by legalizing more housing.
“Californians have consistently voted for more and better public transportation services in our communities, and we’ve responded with billions of dollars of state and local investments,” said Senator Scott Wiener (D-San Francisco), author of SB 79. “But in too many of our cities, local land use regulations prevent more Californians from living near major transit stops, which not only causes more climate pollution, but limits transit ridership and harms city budgets. This report confirms something that is true for many cities in our state: That we can close our budget gaps, address climate pollution, increase transit ridership, and solve our housing shortage at the same time. That’s what we’re trying to do with SB 79.”
“Los Angeles is going through a time of profound change as we work to recover from the devastating fires, and prepare to be on the global stage for the Olympics and World Cup, and all the while tackle homelessness — and our billion dollar budget crisis threatens progress on all fronts,” said Nithya Raman, District 4 Representative for the Los Angeles City Council. “This important report from Streets For All shows that housing is a massive driver of tax revenue, meaning that addressing our housing shortage makes good fiscal sense.”
“Los Angeles is facing painful budget cuts—meaning no speed bumps or sidewalk repairs and 1,600 employees on the chopping block —yet we continue dumping billions into crises caused by our housing shortage, like homelessness,” said Marc Vukcevich, Director of State Policy for Streets For All. “Our research clearly shows SB 79 can flip that script, generating up to $1 billion annually in property tax revenue by zoning for and building more transit-oriented housing. We’re proud co-sponsors of SB 79 because more housing near transit isn’t just smart transportation, housing, and climate policy, it’s the lifeline LA needs.”
“The state of California is making bold and historic investments in transit, and nowhere more so than in the city of Los Angeles – which currently leads the United States in new transit investments,” said Brian Hanlon, CEO of California YIMBY. “But there’s a disconnect between these large public investments and the city’s ongoing struggle to permit more homes near its taxpayer-funded transit stops. This study is more proof that legislation like SB 79 will only help cities like LA achieve their existing goals on housing, transit, and climate action.”
California has the highest cost of living of any state, primarily due to our extreme housing shortage – the result of decades of under-building during a period of ongoing high demand. At the same time, overly restrictive zoning laws prevent millions of Californians from living near public transit, making train and bus systems impractical for many.
Housing researchers have found that making it legal to build an abundance of homes at all income levels, in close proximity to major transit stops, can help address the housing shortage by lowering costs – while also making publicly-funded transportation more accessible and practical for California workers and families.
As Los Angeles prepares for forthcoming large-scale events like the Olympics and World Cup, the city will need to invest not only in transit and housing but also to balance the budget, ensuring hosting these events does not further endanger the City’s finances. While SB 79 is a long-term fix to a structural budget problem, it offers three much-needed solutions to overlapping issues facing Angelenos: housing supply, transit accessibility, and budget revenue.
Key Facts and Figures:
Multi-family housing and commercial parcels represent 12% of the land in the City of LA, but nearly half of its property tax revenue.
SB 79 would impact 10,528 acres of residential parcels in Los Angeles, around 7.5% of residential zoning in LA and 3.3% of the City’s land area.
Under SB 79 rezoning, we estimate the potential property tax revenue from just currently vacant or near-vacant lots near transit is $244,279,000.
We find that over 100,000 acres of land, or 45% of all residentially suitable land, is zoned for low density (R1, R2, or Parking), within a ½ mile radius of SB79’s definition of a high quality transit stop.
In our analysis, 76% of the value of redevelopment in SB79 parcels comes from the added value of denser housing. 24% of the value of redevelopment comes simply from properties being reassessed.
ABOUT STREETS FOR ALLStreets For All is a Los Angeles-based organization advocating for safe, sustainable, equitable transportation. We advocate for state-wide policy changes as well as local improvements to ensure our city is safe, healthy, and connected.