City Council Indictment Shows How L.A.'s Overregulated Housing Market Breeds Corruption
City Councilmember Curren Price is indicted for steering favors to affordable housing developers who were bribing his wife.
The country is reeling from the news that a major political figure has been indicted.
On Tuesday, county prosecutors charged Los Angeles City Councilman Curren Price with 10 counts of embezzlement, perjury, and conflict of interest.
According to the indictment, Price's wife accepted $150,000 in payments from affordable housing developers whose projects were being considered by City Council committees Price was on. Prosecutors allege Price failed to report these payments while voting to approve developers' projects, sell city-owned land to them at less than the appraised value, and award them city affordable housing funding.
Most of the developments Price assisted were Proposition HHH projects—a 2016 ballot initiative that approved a $1.2 billion bond issue to pay for the construction and city acquisition of supportive and affordable housing for low-income and formerly homeless Angelenos.
The implementation of Prop. HHH has been the subject of numerous scathing audits from the Los Angeles Controller's Office, which says its projects suffer from serious delays and cost overruns.
"Overall HHH per-unit costs in the primary pipeline continue to climb to staggering heights. For projects in construction, the average per-unit cost increased from $531,000 in 2020 to $596,846 in 2021," reported the last controller audit from 2022, which noted that per-unit costs of some projects exceed $700,000.
Initial estimates had projects coming in at a per-unit cost of $350,000 to $414,000 per unit, reported the Los Angeles Daily News.
The Price indictment is yet another dark mark for a program that's failed to stem the steady rise of homelessness in Los Angeles.
"We will continue to work tirelessly to root out corruption at all levels and hold accountable those who betray the public's trust," said L.A. County District Attorney George Gascón.
It's not the only housing-related Los Angeles corruption scandal to play out recently.
In January, former Los Angeles City Councilman José Huizar pleaded guilty to charges stemming from his acceptance of bribes from developers hoping he would approve their projects in the face of trade union opposition.
Third parties like trade unions and community groups have their own perfectly legal means of shaking down developers.
California's environmental review law requires that government agencies study and mitigate the environmental impacts of projects they have discretion over. The same law gives third parties the right to file administrative appeals and lawsuits if they think a government agency "abused its discretion" by approving a project without conducting a thorough enough study of those environmental impacts.
That arrangement has sparked a whole cottage industry of "greenmailing" third parties who threaten to delay projects for years with appeals and expensive litigation unless project sponsors agree to pay them off—say by agreeing to provide "community benefits" or promising to hire all union labor.
These tactics are generally legal. So is submitting to them. Only when a developer pays a politician to try to avoid a greenmailing hustle do federal and state prosecutors get involved.
In some ways, they're making a bad situation worse.
The economist Gordon Tullock has argued that in the context of an inefficient system with bad rules, corruption is actually a net good—at least in the short term.
Market participants pay bribes as a means of escaping the need to comply with even more costly rules and regulations. In the longer term, Tullock argued, corruption locks in bad government by giving officials an incentive to keep bad rules that necessitate corrupt workarounds in place.
That's effectively where Los Angeles has found itself. The city has made development an expensive, cumbersome, massively overregulated process in which politicians have an extraordinary amount of discretion and third parties can bring everything to a grinding halt.
The human cost in terms of high housing costs and rising homelessness is readily apparent. When voters frustrated by high housing costs and rising homelessness approve a government-led solution like Prop. HHH, it falls prey to the same corrupt rent seeking that caused the problems in the first place.
The occasional indictment of a city politician doesn't do much to change this state of affairs. The incentives to participate in corruption remain.
What would reduce everyone's incentive to engage in corruption is letting people build want they want on land they own.
It'd be hard for government officials to charge people for favors no one needs and they can't deliver. As a silver lining, housing would cost less and fewer people would be sleeping on the streets.
