The Well-Deserved Death of California's Redevelopment Scam

A big win for property rights in the Golden State.

The California Redevelopment Association's Web site is still up and running and still features job postings for redevelopment jobs, although the site does report that the association's annual convention and expo has been cancelled. It's just a matter of time before the news reaches the CRA web-master that redevelopment in California is dead. There is weeping and gnashing of teeth in redevelopment circles, but other Californians should rejoice.

After many political battles and court fights, it's over as of last Wednesday. These heavy-handed and arrogant agencies, which dispensed corporate welfare and abused eminent domain, are kaput. The new successor agencies will merely pay off the debt the agencies had irresponsibly accumulated, but there will be no more projects. Efforts to delay the execution and recreate new agencies went nowhere.

Gov. Jerry Brown's decision to kill redevelopment—and his ability to keep redevelopment-loving Democratic legislators on board the plan to the bitter end—will perhaps be his best legacy. It makes the many bad things he is doing (tax increases, rail subsidies, protection of union excesses, etc.) nearly tolerable.

This is a sweet reminder to those who have battled in the trenches for a good cause that once in a while it's possible to win. In the many years I wrote about redevelopment and the sad tales of people being driven off their property, of the misuse of public funds and absurd subsidies to the corporate welfare crowd, I never envisioned a scenario in which redevelopment would end. And I would have laughed out loud had someone suggested that a Democratic governor, with Democratic legislative support would have put RDAs in their well-deserved grave.

Political change rarely happens in ways that we expect. That's a reminder to remain optimistic (Note to self: Stop being such a nattering nabob). Change rarely follows any blueprint. Here's a case where a broad coalition of anti-redevelopment activists stuck to the moral high ground and eventually we witnessed a seismic shift in thinking and policy. Perhaps it was only a matter of time before the unsustainability of redevelopment became clear. How long could tax increment gobble up more and more of the budget before anyone noticed?

In justifying their opposition to the governor's plan, many Republicans insisted that redevelopment would never really end. That's a reminder that it's sometimes worth being a little less cynical.

This is California, so the end of redevelopment does not mean the rebirth of common sense or fiscal sanity. Surely, bad things will be proposed to fill redevelopment's void, but it's much easier fighting the rebirth of these agencies than trying to kill existing agencies. The money source is going away. RDA funds will go to new constituencies, who will immediately have vested interests in protecting those streams.

Some defenders of redevelopment have said: "The money will now just go to public sector unions and prop up other forms of wasteful spending." There's obviously much truth to that given that virtually every dime the government spends is wasted. My readers surely know that I am no fan of public sector unions. But it's much more sensible to spend money on legitimate public services than on corporate subsidies. Redevelopment agencies are abusive, so shutting them down will help protect property rights. Cities can still abuse eminent domain, but without the funding source they won't bother as often. And the public-sector pay and pension issue is unsustainable also—it's a matter of time before cities rein in these costs. Redevelopment let cities delay dealing with the problem by encouraging them to seek out new tax revenues by subsidizing sales-tax-generating redevelopment projects.

Legislators are now trying desperately to save "affordable housing." Twenty percent of redevelopment funds were earmarked toward these subsidized housing projects and the affordable-housing industry and liberal politicians in particular are complaining that the poor will no longer have a place to live. Senate President Pro Tem Darrell Steinberg (D-Sacramento), introduced legislation recently that would let cities keep those low-income housing dollars from RDAs, but it failed to get enough votes to implement this before 2013, according to the Sacramento Bee.

It would be nice if legislators understood economics. (I know, dream on!) The end of affordable housing subsidies is bad for those organizations that rely on government funds to build these units, some of whom portrayed dire scenarios to reporters. But a reduction in subsidized housing funds will not harm the poor.

First, redevelopment agencies often squander affordable housing dollars because the locals don't like to have low-income housing built in their middle-class neighborhoods. So RDAs would often use the money for projects for the elderly. Second, affordable housing doesn't necessarily increase the actual number of units that are affordable to poor people. I wrote about one project years ago in Anaheim where the city wanted to knock down a privately owned apartment complex and put up a government-run project that would have housed far fewer people. Third, the government does a terrible job building these projects. It overpays government-approved contractors and at times will spend hundreds of thousands of dollars per unit—far more than the private sector would spend. The projects end up being make-work projects for union contractors and subsidized developers.

Affordable housing advocates believe that poor people should be housed in brand new apartments or houses, which is silly. Thanks to the housing bust, there's more affordable housing available than ever. The market does a great job providing homes and apartments. Government "affordable housing" breeds dependency, as people who live in below-market houses lose any incentive to ever move out of those subsidized places.

This is a troubling vestige of the redevelopment process. But it's still worth raising a glass of champagne and celebrating the end of redevelopment as we gear up for new political battles.

Steven Greenhut is the editor of CalWatchDog.com.