Local Journalism Happens With YouSupport

A Buyout Program for the Rich Passed the CA State Senate

How Senator Allen’s SB-83 favors the wealthy and passed the senate.

Waves crash into beachfront homes off Pacific Coast Highway.
Beachfront homes off Pacific Coast Highway (Source: Flickr)

California Senator Ben Allen’s climate bill to use public money to buy out wealthy homeowners along the California coast passed the Senate on May 28, 2021, and is heading to the Assembly. SB-83 would essentially establish a public housing program for the wealthy and mobilize millions in public funding to support beachside property owners. Allen, who represents communities from Rancho Palos Verdes to Santa Monica, is optimistic that it will pass. Meanwhile, California is in the midst of a crisis in housing affordability that climate change will only worsen. SB-83 is a prime example of disaster capitalism, in which the society’s response to a disaster exacerbates inequity and advances the interest of the wealthy over the poor. The Assembly should reject SB-83. 

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

The value of California’s waterfront real estate is at a record high, but as sea levels rise, property values will drop, and owners of coastal property are worried. SB-83 wants to bail them out and make their bad investment the public’s problem. The program’s intent is to allow local governments to buy waterfront properties and rent the properties to the former owners. By the time sea levels rise, and property values drop accordingly, the coastal residents will have already cashed out and moved on. 

Sea level rise is a slow, predictable climate problem. In California, unpredictable disasters loom large. The Big One is coming. Wildfires are the new normal. More than 1 million homes in California are located in high-risk fire areas. Fires and earthquakes kill and displace people, and we routinely underestimate how much money is needed to respond to them. We can’t predict nearly well enough where earthquakes and fires will strike, and the consequences are disastrous.

Conversely, research clearly shows where and to what extent sea levels will rise over the next 80 years. Owners of waterfront properties have all the information they need to project that the value of the properties will one day drop. They could sell their homes today, but they want to keep living at the beach until the waves literally crash into their living rooms. By selling to the government, they get both the lifestyle and the profits. 

Other recent climate events have demonstrated wealthy property owners’ awareness of the threats to their homes. When the Woolsey Fire descended on Malibu in 2018, the community’s response was incredible: the beachside homeowners mobilized private firefighters to protect million dollar homes from consuming flames. Wealth meant the difference between a home that burned down and a home that didn’t. 

The private firefighter is one service of many that are part of costly insurance packages that people with high incomes can afford but most can’t. But insurance likely won’t cover depreciation due to sea level rise, because it’s predictable. And as time goes on, sea levels will rise along with insurance premiums. So, coastal property owners are turning to the government for a bailout.  

Increasingly, the end of a natural disaster has marked the beginning of a harrowing displacement cycle that impacts those who cannot afford to rehouse themselves. Homes lost to earthquakes and wildfires have forced people without means onto the streets. When the Camp Fire devastated Paradise, CA, in 2019, those who could afford it retreated to Lake Tahoe and Big Sur while others, after staking out the flames in Walmart parking lots, became 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 hit in 1994, 330,000 homes were damaged, and 50,000 people were displaced. Twenty-thousand became immediately homeless and needed shelter. The recovery from the Northridge earthquake required federal assistance of over $300 million to expand homeless shelters, rehabilitate multi-family housing, and distribute Section 8 vouchers to 10,485 households who could not afford to rehouse themselves. Still, Los Angeles was $150 million short of full recovery. 

We are chronically underprepared to support the most vulnerable. Rather than make deliberate investments in social housing for those in need, SB-83 proposes that the government enter the luxury real estate market that treats real estate as a commodity to generate profit, not as housing for those in need. 

Under SB-83, Los Angeles could secure a loan from the State, purchase a $45 million home in Malibu, and rent it out to pay off the loan. To pay off the loan, the City would need to rent the home continuously for $100,000 per month for nearly 40 years. If we’re so sure the loan can be paid off, why are property owners so eager to get the government involved?

More, California essentially stopped playing landlord to public housing in 1950 when Proposition 50 passed. Only 6,728 units of public housing exist in Los Angeles. Meanwhile, SB-83 aims to establish a public luxury housing program at a time when 45,384 people making less than $59,000 a year are waiting for the next available public housing unit. The next addition to our public housing stock cannot be a luxurious beachside mansion for $100,000 a month. 

The great flaw with SB-83 is that it doesn’t create housing for those who need it, but would enrich those who don’t. The Malibu property at 33740 Pacific Coast Highway sold for over $10 million in 2007. If bought for its $45 million asking price, that’s a $35 million profit for the owner, which is exactly the point: to secure their return on their investment. 

For the $45 million it would spend to bail out the owner of 33740 Pacific Coast Highway, the City could buy Hillside Villa, an affordable apartment building in Chinatown. Hillside Villa is on the brink of losing its affordability, and when it does, 124 families will be displaced. The tenants have advocated for the City to buy the property, but the multi-year search for funding has yielded nothing so far. There are 11,400 affordable housing units with covenants that will expire in the next five to 10 years. Therefore, doesn’t it make more sense to establish a loan program for local governments to purchase such properties? After all, lasting affordability is critical to addressing climate change. The next big earthquake could displace 270,000 people

In a time of crisis, public policies decide who suffers. Will our policies value human life and equitable recovery, or will they perpetuate inequity and expand the interests of the wealthy? 

Our elected officials should be thinking about ways to use public funding to make California more affordable for everyone. One way is to support a state-wide Tenant Opportunity to Purchase Act, which would give tenants the opportunity to collectively purchase their building if it goes up for sale. Investing in this policy promotes affordability and puts the community in control of their own housing, which is one critical way 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 Just Economy.