The Well-Deserved Death of California's Redevelopment Scam

The Well-Deserved Death of California's Redevelopment Scam:

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

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