The Use of Redevelopment Housing Set-Aside Funds in Southern California: A New Look at Cities and Redistributive Spending

Author: Kim DeFronzo Haselhoff

Dissertation School: University of California, Irvine

Abstract:

The shortage of affordable housing in California is a severe problem that is only getting worse. While legislators have been responding to the problem (approximately 150 housing bills have been introduced in 2001, twice the usual number), their efforts may be hampered by the state's current budget crisis. These conditions demand that existing resources for affordable housing be optimized. This study examines the California Redevelopment Housing Set-Aside program, which requires that all redevelopment agencies set aside and use 20 percent of their revenues to build or improve the supply of affordable housing in the city in which the agency is located. While some cities have used their funds appropriately, others have not. This research asks the question: "What explains the variation in city use of housing set-aside funds in Southern California?"

Cities may be ignoring the state's mandate because affordable housing is considered a redistributive policy. According to Paul Peterson (1981) cities generally avoid redistributive policies that lower the "benefit/tax ratio," pursuing only those "developmental policies" that are expected to increase economic growth. Peterson's study, other housing studies, as well as the literature on suburban exclusion, suggest that no city will want to build affordable housing. My findings thus far suggest that city use of redevelopment funds for affordable housing reflect both a conscious policy strategy and a response to community need for affordable housing. Cities that have a large percentage of white residents, and cities with high home values, both are less likely to spend their funds, suggesting a conscious policy strategy that seeks to avoid increased expenditures for low-income residents. Cities that are not fiscally secure, but do have a somewhat stable economic base, and cities with increasing minority populations both are more likely to spend their funds, presumably in response to political pressure to respond to community need.

The methodology used for this study combines quantitative and qualitative analysis. As of June 2002 I am close to completing the quantitative study in which I explore the factors that lead some cities to spend their housing money while others do not. I also look only at cities that have spent their housing funds to determine what factors may compel them to spend more of their funds than other cities. The next phase of my analysis will involve adding a few more variables that may prove significant, and then moving on to case study analysis. The City of Los Angeles will be its own separate case study due to the large population size. Additional cities from the sample will also be examined to determine if any important influences on housing expenditures were missed in the quantitative portion of the study.

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