SB-83 is a bargain purchase of Coastal Elite

Beachfront homes off the Pacific Coast Highway (Source: Flickr)

The Senate on May 28, 2021 passed Senator Ben Allen’s climate bill to use public funds to purchase wealthy homeowners along the California coast, on its way to the Assembly. SB-83 would essentially establish a public housing program for the wealthy and mobilize millions in public funding to support owners of beachfront properties. Allen, who represents communities from Rancho Palos Verdes to Santa Monica, is optimistic he will pass. Meanwhile, California is in the midst of a housing affordability crisis that will only exacerbate climate change. SB-83 is a prime example of disaster capitalism, in which society’s response to disaster exacerbates inequality and promotes the benefit of the rich over the poor. The association should reject the SB-83.

The Sea Level Rise Revolving Loan Program will provide funds for local governments to purchase coastal property that will be underwater in the coming decades. This taxpayer-funded program will ensure that the wealthy owners of coastal properties make a good return on their investment before rising sea levels render them worthless.

The value of California’s waterfront property is at a record high, but as sea levels rise, property values ​​will plummet, and coastal landlords are worried. The SB-83 wants to save them and make their poor investment the public’s problem. The program aims to allow local governments to purchase waterfront properties and rent properties to previous owners. By the time the sea level rises, and property values ​​fall accordingly, coastal residents will have already cashed in and moved on.

Sea level rise is a slow and predictable climate problem. In California, unpredictable disasters loom. The big one is coming. Wildfires are the new normal. More than one million California homes are located in high-risk fire areas. Fires and earthquakes kill and displace people, and we routinely underestimate the amount of money needed to respond to them. We cannot predict well enough where earthquakes and fires will strike, and the consequences will be dire.

On the contrary, the research clearly shows where and to what extent the sea level will rise in the next 80 years. Waterfront property owners have all the information they need to predict that one day the value of their properties will drop. They can sell their homes today, but they want to continue to live on the beach until the waves literally crash into their living rooms. By selling to the government, they get both lifestyle and profits.

Other recent climate events have shown wealthy landlords awareness of the threats to their homes. When Woolsey Fire erupted on Malibu in 2018, the community’s response was astounding: Beachfront homeowners mobilized private firefighters to protect their million dollar homes from expendable fire. Wealth means the difference between a house that burned down and a house that didn’t.

A private firefighter is one of the many services that are part of expensive insurance packages that high-income people can afford but most cannot afford. But insurance probably won’t cover depreciation due to sea level rise, because it is so predictable. Over time, sea levels will rise along with insurance premiums. So, coastal property owners turn to the government for rescue.

Increasingly, the end of a natural disaster marked the beginning of a harrowing cycle of displacement affecting those who could not afford to resettle themselves. Earthquakes and forest fires have forced people to take to the streets due to lack of means. When a fire ravaged Camp Paradise, California, in 2019, those who could afford it retreated to Lake Tahoe and Big Sur while others, after setting fire to Walmart parking lots, were left homeless. In Sonoma County, homelessness increased six percent after the Tubbs fire. The Northridge earthquake is a stark example of displacement in Los Angeles. After the 6.7 earthquake in 1994, 330,000 homes were damaged and 50,000 people were displaced. Twenty thousand immediately became homeless and needed shelter. Recovery from the Northridge earthquake required more than $300 million in federal assistance to expand homeless shelters, rehabilitate multi-family dwellings, and distribute Section 8 vouchers to 10,485 families who could not afford to rehouse themselves. However, Los Angeles was less than $150 million from a full recovery.

We are chronically unprepared to support the most vulnerable. Rather than making deliberate investments in social housing for the needy, SB-83 suggests that the government enter the luxury real estate market that treats real estate as a commodity to generate profit, not as housing for the needy.

Under SB-83, Los Angeles could obtain a loan from the state, buy a $45 million home in Malibu, and rent it to pay off the loan. To pay off the loan, the city would need to rent the house continuously for $100,000 a month for about 40 years. If we are so certain that the loan can be repaid, why are landlords so eager to get the government involved?

More so, California essentially ceased playing the role of landlord in public housing in 1950 when Proposition 50 was passed. Only 6,728 public housing units exist in Los Angeles. Meanwhile, SB-83 aims to create a luxury public housing program at a time when 45,384 people earning less than $59,000 per year await the next available public housing unit. The next addition to our public housing stock couldn’t be a luxury beachfront mansion for $100,000 a month.

The big drawback of the SB-83 is that it does not create housing for those who need it, but it will enrich those who don’t. Malibu property at 33,740 Pacific Coast Highway sold for more than $10 million in 2007. If it was purchased at a asking price of $45 million, that’s a profit of $35 million for the owner, and that’s exactly the goal: securing a return on his investment.

For the $45 million it would spend to save the owner of 33740 Pacific Coast Highway, the city could buy Hillside Villa, an affordable apartment building in Chinatown. Hillside Villa is on the verge of losing its affordability, and when that happens, 124 families will be displaced. Tenants have called on the city to buy the property, but a multi-year search for financing has so far yielded nothing. There are 11,400 affordable housing units with charters that will expire in the next five to ten years. So, wouldn’t it make sense to create a loan program for local governments to purchase such real estate? After all, affordability is critical to tackling climate change. The next big earthquake could displace 270,000 people.

In a time of crisis, public policies determine who suffers. Do our policies value human life and a just recovery, or will they perpetuate injustice and expand the interests of the wealthy?

Our elected officials should think about ways to use public funding to make California more affordable. One way is to support the statewide Tenant Purchase Opportunity Act, which would give tenants the opportunity to buy their buildings en masse if it were to be sold for sale. Investing in this policy enhances affordability and gives the community control over their housing, one of the critical ways to prepare for climate change.

Chelsea Kirk is a research and policy analyst at SAJE-LA. To learn more about disaster capitalism, visit Strategic Actions for a Fair Economy.

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