Bold Housing Program Develops Big Problems : Plan Plagued by Shoddy Construction, Cost Overruns, High Vacancy Rates, Opposition

Troubled by high costs, shoddy construction, high vacancy rates, fierce community opposition and other problems, the attempt to provide several thousand units of affordable housing along the Century Freeway route is floundering as the project nears the halfway mark.

The housing program, part of a 1981 federal court decree that ended a decade of litigation over the freeway, is the boldest part of the $2.5-billion Century Freeway project, which also includes the 17.3-mile freeway between Norwalk and Los Angeles International Airport and 20 miles of light rail.

The idea was twofold: To provide replacement housing for some of the 20,000 people who have been uprooted by construction of the freeway and also to replenish the supply of badly needed low- and moderate-income housing along the southern tier of the city and county of Los Angeles.

The Center for Law in the Public Interest, representing successful plaintiffs in the long Century Freeway lawsuit, insisted on the housing plan, despite objections from the two other signatories to the 1981 federal court decree--the California Department of Transportation and the Federal Highway Administration.

Finally, the two government agencies decided to go along in order to get the freeway built.

A complicated formula called for construction of new apartments and town houses and for rehabilitation of existing single-family homes. These were to be built, at first, in a “primary zone” six miles north and south of the freeway route and were to be offered first to people displaced by the freeway construction and later to low- and moderate-income members of the general public.

Altogether, about 3,700 units were to be built or refurbished at a cost of more than $300 million.

Six years into the program, however, serious problems have developed. The units are costing well over $100,000 apiece to produce, at least 30% more than comparable housing costs elsewhere.

An estimated 30% to 40% of the 1,000 or so units completed so far stand empty, for one reason or another. Some have been vacant for a year or more.

Some of the sites chosen for Century Freeway housing have been ill-advised and some construction has been shoddy. Several communities along the freeway route, strongly opposed to what they perceive to be “public housing,” have tried to block construction.

Recently, there have been allegations of fraud and corruption within the Department of Housing and Community Development, the state agency responsible for the program. These charges now are the subject of both federal and state investigations, officials say.

But the astonishingly high cost of building this housing--an average of at least $110,000 per unit, a figure called “mind-boggling” and “unimaginable” by housing experts--is the program’s most serious weakness.

Figures Disputed

Robert J. Norris, interim director of the Century Freeway Housing Program, disputes this figure, contending that the average per-unit cost of acquiring the land and building the houses or apartments is “around $100,000” and that his agency has taken steps to reduce that figure.

But a source at the Federal Highway Administration in Washington, which provides 92% of the money for Century Freeway housing, as it does for the freeway itself, said per-unit costs now are averaging $125,000 to $135,000.

In a September, 1985, report, the U.S. Department of Transportation’s inspector general found that per-unit costs were already averaging $100,000. A year later, the inspector general found that “the price paid for replenishment housing has escalated 36% during the period 1983 to 1985,” while general construction costs in the Los Angeles area “have not increased significantly.”

It is even costing more than $100,000 per home to relocate and refurbish 30- to 40-year-old structures, moving them from Hawthorne and Inglewood, near the western end of the Century route, to Downey and Norwalk, at the eastern end.

Originally, officials thought that it would be faster and cheaper to provide Century Freeway replacement housing by refurbishing existing units. That has turned out not to be the case.

One recent contract authorized payments of $125,000 per unit for moving and rehabilitating four houses.

Officials Partly to Blame

Contractors say Century Freeway Housing Program officials are partly to blame for the high rehabilitation costs.

“They want you to create a new house with these 30- or 40-year-old structures you’re moving,” said Ronnie Jones, whose company has relocated and refurbished eight Century Freeway houses. “They want new foundations, new electrical, new plumbing, new roofs, new sub-flooring. All that’s left are the walls and the termites.”

Other contractors say vague job specifications and contradictory inspections by housing agency personnel have added to costs.

Many of the houses stand empty for months after they have been moved and refurbished, because of long escrows and other problems. By the time new owners move in, the homes often need repairs, again adding to the overall cost.

The rehabilitation program has had its comical aspects.

Several years ago, all of the houses in the 13600 block of Behrens Street in Norwalk were removed to make way for freeway construction.

After all the homes had been razed or carted away, the freeway was reduced in size, and officials decided to put homes back on the Behrens block. So Caltrans hauled houses from Hawthorne and Inglewood, 15 miles west along the freeway route, and plunked them down on the very same Norwalk lots from which the earlier homes had been taken.

‘Must Think We’re Crazy’

“People around here must think we’re crazy,” said a Caltrans engineer as he was leading a tour of the area. “We pulled houses out of here and now we’re putting them back.”

Finally convinced that the program is saving neither time nor money, officials at Caltrans and the Department of Housing and Community Development say the number of rehabilitation units will be limited to 450 and have decided to scrap the relocations altogether.

“Intuitively, you knew you could fix up a house cheaper than you could build a new one,” said David H. Roper, the Caltrans Century Freeway project boss. “But, as a matter of fact, it hasn’t proved out.”

Housing experts not associated with the Century Freeway program cannot understand why the refurbished units and new construction are costing so much.

Perla Eston, housing director for the Los Angeles Community Redevelopment Agency, said it is “mind-boggling” that $100,000 or more would be spent to relocate and rehabilitate a single-family home, since her agency accomplishes the same task for about $20,000.

If the new construction were close to downtown Los Angeles, it might run as high as $80,000 to $90,000 per unit, Eston said, but costs in such areas as Compton, Watts and Willowbrook, where much of the Century Freeway housing is being built, are usually around $50,000 per unit.

Range of Cost

Both Joseph Gelletich, director of housing development for the Los Angeles Housing Authority, and Michael Kelly, an official of the San Francisco Housing Authority, said per-unit construction costs for low- and moderate-income housing generally range from $50,000 to $75,000.

Why is Century housing costing so much to build?

“In all public sector construction, your costs are going to be high,” said Norris, who pointed to federal requirements that prevailing union wages be paid and that a maximum number of contracts go to firms owned by women and racial minorities as contributing factors.

But the federal government requires prevailing wages to be paid on all the construction it finances, so the Century project is not unusual in that respect.

However, the minority contracting goals are higher on both the housing and highway segments of the Century Freeway than on most federal or state projects. The goals have boosted costs, according to many people familiar with the program.

The requirement that about 47% or more of the housing construction dollars must go to firms that are owned and operated by women or racial minorities has brought many new builders and subcontractors into the Century Freeway Housing Program. But some of these companies, inexperienced and under-financed, drop by the wayside and it is expensive to replace them.

‘They Raise Their Rates’

The relatively few successful minority and female subcontracting firms “have you over a barrel,” said builder Charles O. Quarles, whose Bedford Group is developing five Century Freeway housing projects. “They know you have to choose them, so they raise their rates,” increasing project costs.

Resistance to the housing program has been strong in several communities along the Century route. At least a dozen projects, involving hundreds of apartments and town houses, have been stalled or abandoned by community opposition, including these:

- The City of Hawthorne lost a lawsuit aimed at halting construction of Hawthorne Terrace, a 100-unit apartment complex, but has appealed and is threatening to tear down the apartments if the appeal is successful.

- In Sunshine Acres, an unincorporated South Whittier area, residents were alarmed when South-Central Los Angeles gang graffiti appeared at a Century Freeway housing site and tried to stop the project. Work resumed only after housing officials promised to rent the units either to senior citizens or at market rates, with no special consideration for low-income applicants.

- In Downey, where many refurbished single-family homes have been relocated, city officials have tightened building codes, treating the “rehabs” like new construction and thereby driving up project costs. “The City of Downey has made it clear they don’t like this program,” said a contractor who did not want to be quoted by name.

- Opposition has been especially strong in Baldwin Hills and Windsor Hills, middle and upper-middle-class black areas of Los Angeles, where four projects have been abandoned or delayed.

“We will not allow the ghetto to be dragged up into these hills,” leaders of Baldwin Hills and Windsor Hills homeowner groups said earlier this year.

There is a paradox in this, since the Baldwin Hills-Windsor Hills area has offered strong support to the National Assn. for the Advancement of Colored People, one of the plaintiffs in the lawsuit that led to the consent decree that created the housing program.

Some of the opposition has “very strong racist and prejudicial overtones,” former housing chief Michael A. Houlimard Jr. said last spring, but most is “income prejudice--’I’m doing better! I want my investment to be returned and therefore, I deserve to live with people like this rather than people whose income is maybe restricted for one reason or another.’ ”

However, the widespread belief that Century Freeway apartments and town houses are filled with the poor is not supported by the facts.

The state attorney general’s office reported that 64% of the occupied units in the last six rental projects completed went to “moderate-income” families--those earning $26,568 to $39,840 annually.

Another 11.6% went to “low income” families ($16,608 to $26,567 annually), 21.6% to those with “very low” incomes ($8,035 to $16,607) and 2.8% to “very, very low income” families (zero to $8,034).

Battled to Save Projects

The attorney general and the Center for Law in the Public Interest have battled to save threatened Century Freeway housing projects--sometimes successfully, sometimes not. But if community opposition remains strong, chances of meeting the consent decree goal of 3,700 units, or even the housing agency’s reduced goal of 3,400 units, will be slim.

Besides high costs and local opposition, the Century Freeway Housing Program is plagued by red tape.

The “multiple levels of review” involved in a project that involves three bureaucracies--the Federal Highway Administration, Caltrans and the state Department of Housing and Community Development--are “another contributing factor” to high costs, said Norris, the housing agency’s interim director.

Fearing these bureaucratic problems, most large builders in the Los Angeles area have steered clear of the program. For example, Shapell Industries of Beverly Hills had planned to develop five Century Freeway projects but dropped them all.

“Too much red tape,” Chairman Nathan Shapell said. “They were nuts. They sent you from one place to another--from Los Angeles to Sacramento, then back to Los Angeles, and you still couldn’t get the problem solved, so we sold the projects at a loss and said, ‘Get lost.’ ”

Norris noted that land prices are soaring in the “primary zone” (six miles north and south of the freeway route) identified in the consent decree for housing construction, another reason for the high costs.

“You’re getting a more sophisticated group of landowners out there,” he said. “They realize the value of their land. . . . You can just about hear the cash register jingling when their phone calls come in.”

Money Well Spent

So far, the housing program has cost about $170 million, according to the Federal Highway Administration. Norris, who has been running the program since June 1, said the money has been well spent.

“With all we’re trying to do here--pay prevailing wages, meet minority goals, keep up with a massive reporting responsibility--it’s a wonder costs aren’t more than they are,” he said.

But the heavy expenditures already have reduced the number of units expected to be built, from 3,700 to about 3,400, and further reductions are possible.

Dismayed by these cuts, the Center for Law in the Public Interest wants to restructure the housing program, proposing that a public-private partnership or quasi-public corporation take over from the state and build most of the remaining units.

Many blame the Housing and Community Development agency for runaway construction costs, high vacancy rates and other problems.

“They screwed up,” said a Federal Highway Administration official who asked not to be identified. “We’re not a housing agency and neither is Caltrans. . . . It was up to (Housing and Community Development) to make this work and they just couldn’t do it.”

The cost of administering the program is astronomical.

‘Way Out of Line’

In 1985, when only 324 housing units had been completed, the inspector general for the U.S. Department of Transportation found that administrative costs were $40,000 per unit--”way out of line,” the inspector general said.

These costs have been reduced as more units have been built but they remain high.

Housing and Community Development Director Christine Diemer Reed said program costs have been reduced to $13,300 per unit, but people familiar with the housing program say the figure is much higher.

The inspector general’s $40,000 figure “probably has come down since 1985, but it’s still awful high,” said Willis Kisselburg, who oversees the housing program from the Federal Highway Administration’s regional office in San Francisco.

Most knowledgeable sources place costs now at about $25,000 per unit, roughly twice what other housing agencies say they spend.

People who work at middle levels in the housing program, as well as outside observers, say inexperience and bureaucratic bungling are partly to blame for the high administrative costs. They also say the agency is top-heavy with managers, some of whom spend state money loosely.

State-Leased Cars

For instance, according to housing agency sources, 15 to 20 people who work at the Century Freeway housing program offices in Inglewood drive cars that the state leases for $50 a day, plus gasoline and repairs and a $30-per-car monthly parking charge. Although these cars are supposed to be for state business, they often are used for personal trips, according to these sources.

Reed said, “We have just recently advised our executive staff that state cars can’t be taken home,” although the housing agency director said she had no evidence that any agency employees were doing so.

Even though the housing program employs about 85 people and has an annual budget of more than $6 million, the work is not done promptly or efficiently, according to builders, developers and contractors involved in Century Freeway housing.

” Everything seems to take a long time,” said Kent Kurasaki, president of Shur Corp., a Pasadena firm that has built four Century Freeway projects and has two more in the works. And in the construction business, like the taxi-cab business, time is money.

“There are no budget guidelines,” another builder complained.

Because of sour experiences on eight relocation and rehabilitation jobs, Ronnie Jones, president of Tumohr Construction Co., said he does not plan to bid on any more housing program work.

“The planning . . . is just a little absurd,” said Jones, 37, a black Yale University graduate who formerly was housing director for the City of Compton.

Inconsistent Inspections

Jones said project specifications are vague, inspections are inconsistent and payment has become increasingly slow.

“At first we would get payment in a week but now it’s up to three weeks,” he said, and that two-week difference can be crucial for a small contractor with bills to pay.

High vacancy rates are another serious problem. The 1986 Department of Transportation inspector general’s report found that “nearly 60% of all completed housing units were vacant”--an inventory of more than $25 million.

Last summer, Norris told federal Judge Harry Pregerson, who signed the 1981 consent decree and now oversees its implementation, that the vacancy rate had been reduced to 30%, but researchers for the Center for Law in the Public Interest say it is at least 40%.

The Federal Highway Administration has withheld $30 million to $40 million in recent years in an effort to force the state to move people into the units faster, but to no avail.

Among the reasons for the high vacancy rates are these:

- Too many condominiums and not enough rental apartments were built.

- Some condominiums have been in escrow for more than a year, due partly to the shaky credit standing of many prospective buyers and partly to foot dragging by lending institutions.

- Many people displaced by freeway construction chose a single, lump-sum payment from Caltrans, rather than wait for new Century Freeway housing.

- Prospective buyers and renters have shied away from units built in low-income, high-crime areas of Compton, Lynwood, Watts and Willowbrook. The inspector general noted that although only 16% of displaced people expressed a desire to live in the central portion of the freeway route, more than a third of all housing units are to be built there.

“Some of the units are very nice but they’re not in safe neighborhoods, where you can raise children,” said Yvonne Townsend, director of the Corridor Advocate’s office, an agency established by the consent decree to handle the problems of people displaced by freeway construction.

Marginal Locations

Some Century Freeway housing locations seem marginal at best.

Chadron de Ville is an attractive cluster of 42 condominium units in Hawthorne, but it is located on a narrow, dead-end street, backed up against a flood control channel. Residents say there is inadequate parking and play space for children and that they are caught in a cross fire between two rival Latino gangs.

A 180-apartment project planned for a narrow, unused railroad right-of-way near Culver City in West Los Angeles was dropped after neighborhood groups convinced the Los Angeles City Council that the project would cause terrible traffic congestion and undermine the quality of life in the community.

The sites are poor because “the people who are making the policies don’t have to live there,” said Ted Watkins, whose Watts Labor Community Action Committee has been a major home builder in South-Central Los Angeles for many years.

As completed housing units stand empty for months, or even years, they become easy targets for vandals. To protect the houses, Caltrans boards them up. The empty, boarded-up homes, weeds growing profusely in their front yards, stand along the freeway route as bleak, silent testimonials to inept planning.

Prices Scaled Down

Because Century Freeway housing prices are scaled down for low-to-moderate income buyers and renters, they represent good bargains, but some owners and tenants complain about the shoddy construction.

Residents of Fonthill Villas, a 26-unit apartment complex on a crowded Hawthorne street, complain that ceilings leak, windows are broken, the elevator and security gate frequently do not work and they are sometimes without water or electricity. Complaints to the resident manager, the management company and the Century Freeway Housing Program go unanswered, these tenants say.

At Florwood Estates, a 30-unit condominium project in Hawthorne, many of the bedroom floors are slanted, forcing owners to place cement blocks and other supports beneath their beds in order to sleep on an even keel.

At Chadron de Ville, the plumbing leaks, the air conditioning frequently breaks down, electrical outlets do not work, some doors cannot be locked and the kitchen cabinets were placed upside down in several units, according to Pearl Fisher, president of that homeowners association.

“The basic problem is the units were not properly checked out before the individuals moved in,” Fisher said.

Warranty Often Expires

The builders are responsible for correcting construction flaws for a 12-month period, but, because escrows on Century Freeway condominiums are taking so long to complete, the warranty frequently expires before the owner moves in.

A high turnover rate among top administrators has contributed to the problems. The housing program has had several directors and acting directors since planning began in 1979 and there have been various bosses at Housing and Community Development, the parent state agency, in that time.

“One of the management problems has been lack of program continuity,” said Rudy Subia of the Federal Highway Administration. “Each new director, whether permanent or acting, has to learn about the program. That takes several months and, about the time they start to understand it, there’s another change.”

Reed, the lawyer who has been Housing and Community Development director since last January and was acting director for eight months before that, demonstrated only limited knowledge about details of the Century Freeway Housing Program during a lengthy interview in her Sacramento office.

Reed had not read the critical reports of the U.S. Department of Transportation’s inspector general. She said that high vacancy rates were “an allegation I have heard” but had no information about.

‘I’m Not a Program Person’

Asked why administrative costs were so high, Reed replied: “I’m not a program person. . . . I don’t know if that’s true. I haven’t been briefed on it.”

Asked about apparent inefficiencies in the housing program, Reed again replied, “I am not a program person,” then added: “If it’s not efficient, I would think it would be the responsibility of the managers to correct it.” Reed is the program’s top manager.

Asked about the high cost of relocating and rehabilitating single-family homes, she said she had not been “fully briefed” on that issue, either.

“I certainly don’t want you to walk away with the impression that we don’t know what we’re doing,” Reed said in summation. “I wouldn’t want anybody to think we’re just trying to wing it down there.

“We’re doing the best job we can, under the terms of the consent decree,” she added. “Building housing is difficult, whether it’s public or private. . . . I think we are doing a great job. I am proud of what we are doing.”

But others are less happy, especially at the Center for Law in the Public Interest.

“We’re disappointed with the inefficiency, the high cost per unit, the falling behind schedule,” said center attorney John Phillips, who has been involved with the case throughout its 15-year-history and helped draft the consent decree. “The program has been run so inefficiently that they have not been able to build as many units as the decree calls for.”

Law Center Proposal

As a result, Phillips said, the law center has proposed that Housing and Community Development finish up 2,200 of the units required by the decree and then quit the program. The Federal Highway Administration then would turn over the remaining money, an estimated $126 million, to a public-private partnership or quasi-public corporation that would use the funds to build as much additional housing as possible.

Phillips and center attorney Helene V. Smookler believe that this approach would sharply reduce program costs and could lead to construction of 4,000 or more units altogether.

The Federal Highway Administration favors this idea but the Department of Housing and Community Development is opposed.

In the past, Judge Pregerson has been reluctant to order important changes in the consent decree that were not agreed to by all parties. But dissatisfaction with the housing program has reached such a high level that the judge may well decide to override the state agencies’ objections and order a new plan into effect.

BUILDING CENTURY FREEWAY HOUSING UNITS

Century Freeway construction has affected some 7,000 houses and 20,000 people. To alleviate the upheaval, a federal judge ordered that 3,700 replacement housing units be provided. These replacement housing projects were completed within a corridor six miles on either side of the freeway.

Location Units 1. 2200 Bullis Rd., Compton 66 2. 4325 Clara St., Cudahy 12 3. 4802 Santa Ana Ave., Cudahy 12 4. 14032 Doty Ave., Hawthorne 26 5. 13023 Florwood Ave., Hawthorne 44 6. 20813-29 Norwalk Blvd., Lakewood 50 7. 3901 Candlewood St., Lakewood 12 8. 151 W. Gardena Blvd., Los Angeles 90 9. 14423 Chadron Ave., Los Angeles County 42 10. 13900 Studebaker Rd., Norwalk 35 11. 12169-75 Pine St., Norwalk 6 12. 12025 Walnut St., Norwalk 10 13. 5905 Rosemead Blvd., Pico Rivera 22 14. 122-25 Greenwood Ave., Montebello 32 15. 14742 Blaine Ave., Bellflower 24 16. 11401-11411 Berendo Ave., L.A. County 22 17. 11208 S. Western Ave., Los Angeles County 34 18. 7600 Cresent Ave., Buena Park 45 19. 810 Compton Blvd., Compton 32 20. 9020 Beverly Rd., Pico Rivera 46 21. 1500 Kay St., Compton 86 22. 4429 Inglewood Blvd., Los Angeles 32 23. 14210 S. Vermont Ave., Los Angeles 32 24. 578 Stepney St., Inglewood 29