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Home/Articles/Policy/Homelessness in LA is Big Business for Mega-Philanthropy

Homelessness in LA is Big Business for Mega-Philanthropy

For California nonprofits and politicians paid to solve the homelessness problem, reality is less important than ideology.

When I was out surfing a weekend ago, I heard a conversation in the lineup that went something like this:

“So these guys made a homeless encampment right down the hill from my house. They told me, they said, ‘Hey man if you kick us out of here or call the cops on us we’re going to light this hill on fire.’ And that’s what they did. They lit the hill on fire and one of the police helicopters got footage of some of them as they fled.”

Anyone who lives in Los Angeles County knows that our homelessness problem is out of control. The county has 66,436 homeless persons, with the City of Los Angeles counting over two thirds of those. You cannot traverse the city, or the county, without coming across rows and rows of first-world favelas. Tent fires, disease, human excrement, drug use, crime, and mental illness co-exist in pernicious symbiosis. And all this despite the fact that the city and the county passed $4.7 billion in tax-increased funding in 2016 and 2017—Proposition HHH and Measure H respectively—to address a problem that has only grown exponentially worse. Proposition HHH is a bond measure designed to build permanent supportive housing or “housing first” as its acolytes describe it; Measure H is a 0.25 percent sales tax increase in the county, pushing the minimum sales tax in the county above 10.25 percent. 

What does Los Angeles have to show for its nearly $5 billion increase in spending on homelessness? If you were to peruse the websites of major philanthropic groups that have helped pedal the initiatives, each of which passed by comfortable margins, you would think success had already been achieved, that nonpartisan technocratic expertise had brought or is bringing the problem swiftly under control. The opposite is true. Over the three-year period—and well before the COVID pandemic hit—homelessness numbers in Los Angeles are up: 16 percent in the city and 13 percent in the county from the year prior. 

Those numbers haven’t discouraged LA’s nonprofit sector from grandiosity. Los Angeles mega-philanthropists continue to have supersized visions. As Fred Ali, president and CEO of LA-based Weingart Foundation, humbly attests, “Philanthropy can be the laboratory for an agenda to overturn racial injustice, challenge white supremacy and nurture equity.” Other nonprofits are only slightly less ambitious. United Way Los Angeles claims on their website that “We’re experts in fighting and preventing homelessness and poverty… We’re attacking these issues at their roots, championing for systemic change.” Their “root cause” approach to poverty has led to a fixation on the “housing first” approach to homelessness—a fixation which led philanthropic groups like United Way to shun mere “bandaid” approaches to homelessness such as temporary shelters, bridge housing, safe overnight parking sites, etc. 

Housing First, according to Stephen Eide, senior fellow at the Manhattan Institute, “has two premises. First, permanently subsidized housing is the only solution to homelessness, and, second, all housing benefits should be provided unconditionally.” In other words, no-strings attached “wet” housing subsidized by the taxpayer.

Did Angelenos know that when they support Proposition HHH by overwhelming majority that they were voting to further this ultimately tendentious, all-encompassing world view at the expense of other less ambitious homeless services that nonetheless kept the figure for the unhoused tens of thousands lower than what it is today? If they didn’t, they’re beginning to find out. In many ways, as a study released by the Sol Price School of Public Policy at USC points out, the objective was not for voters to understand the theory behind the ballot initiative; it was just a matter of getting them to vote yes. In philanthropy, as with any other entrenched special interest group, dollars alone, not results, equal victory. Money is cause for celebration in itself. Unfortunately for the taxpayer, getting paid doesn’t just mean securing private funds, but directing public coffers towards the progressive-technocratic vision of the philanthropy experts.

Authors Nicholas Williams and James M. Ferris point out in the USC study “Scaling Up: How Philanthropy Helped Unlock 4.7 Billion to Tackle Homelessness in Los Angeles” that philanthropic groups must appreciate “the need to engage government”:

“Philanthropic leaders must understand that large scale problems often require public resources and, hence, must be willing to engage with government as they look for solutions.”

Further on in the piece, Williams and Ferris spell out what “engage” actually means:

As philanthropy takes a more active role in policymaking at all stages of the process—from helping to frame the ballot measures to working to get them passed and now implementing them—it is important for philanthropic leaders to understand what is possible. This type of engagement is not necessarily comfortable for philanthropy given the restrictions on lobbying and the risks involved in failure. But the roadmap for how philanthropy can be proactive in public policy has been laid out as more foundations have decided to go “all in” for greater impact in recent years.

Note the words “helping to frame the ballot measures,” and, “working to get them passed.” Philanthropy groups, in other words, many of them worth billions and billions of dollars and affiliated with for-profit parent or subsidiary corporations, must in effect become policymakers and lobbyists. While the authors mention “restrictions on lobbying” the truth of the matter, as fed-up Venice Beach Neighborhood Council firebrand and investment professional Soledad Ursua points out to me, is that “non-profit” status—a legal and tax code distinction, Ursua explains to me, not a moral one—largely shields big philanthropy from the kind of donor-lobbyists disclosure laws and restrictions to which private citizens and for-profit corporations are subjected. This goes part of the way in explaining why Angeleno voters did not know that when they were voting to increase government spending by $5 billion with little to show for it, they were voting to impose the “expert” wisdom of philanthropic elites on the region’s homelessness crisis. 

Again, by the looks of their websites, it would appear that the experts have yet to be humbled. United Way-supported community activist group, Everyone In LA boasts that “8,000 units of supportive housing in the construction pipeline.” Never mind that the “in the pipeline” doesn’t mean built or that the project has even broken ground. As of this writing 228 units have been built and three quarters of the projects haven’t even begun construction. Christopher Rufo, senior fellow at the Manhattan Institute, points out that at least 40 percent of the budget for each unit has gone to non-construction related costs—so-called “soft costs.” 

The Hilton Foundation, another major player in Los Angeles philanthropy and equally willing to dream big, proclaims on its website the goal of “Ending chronic homelessness.” Despite the obvious shortcomings of the Housing First strategy Los Angeles, in which not enough units are being built and even if they were, at least 56,000 would still remain unhoused based on a current homeless tally of 66,000 and goal of 10,000 units to be built, the foundation nonetheless confidently asserts: “A wide body of research shows that permanent supportive housing is the best, most cost-effective solution.” This despite the fact that Rufo and even the LA Times have put the cost per unit built as high as $700,000 per studio or one-bedroom apartment, which is above the market rate in an already inflated real estate market, and despite the patent failure, both in the raw numbers and in the lived experience of Angelenos everywhere, of LA’s homelessness mitigation strategy. 

To understand both the lofty idealism and haughty arrogance of LA’s—and, by extension, America’s—nonprofit and philanthropic sectors, Hudson Institute scholar and philanthropy reform advocate William Schambra argues that Americans “need to understand that philanthropies are just like the universities—they get tax breaks to promote radical causes…The whole field,” Schambra adds, “is completely radicalized,” pointing to studies which show that hundreds of millions of dollars have been transferred from nonprofit foundations to the Black Lives Matter movement just this year. By Schambra’s telling, most Americans are oblivious to the fact that major nonprofits like United Way are in effect another lobbying arm of far-left social justice agendas. 

Before we can even begin to tame them, Schambra points out, “first we need a change in public awareness,” so that people realize that “foundations are at the core of the idea that the elites know better for us.”

Elizabeth Mitchell is one of the lead attorneys in an ambitious lawsuit on behalf of concerned citizens and business owners across Los Angeles that demands immediate action to provide shelter for the unhoused. While Mitchell acknowledges there is a place for permanent supportive housing in LA’s homelessness crisis, she argues that the situation on the ground in Los Angeles verges on disaster. “The city is paralyzed by analysis or the NIMBYS [Not in My Backyard] or the activists…The city’s current choice [has been] to enforce zero laws and essentially permit chaos to reign.” Many of the activists, as she and Schambra pointed out to me, are supported by or affiliated with major philanthropies and argue that any attempt to clear homeless encampments in public spaces is akin to “criminalizing” and “further traumatizing” a homeless population that has already been victimized by the system. To force them off the streets against their will would be to further the injustices done to them.

“What,” I ask Mitchell, “is the proposed solution of these types of advocates who insist on the fundamental human rights of the drug addicted and mentally ill to live on the streets?”

She shrugs in response and after a pause says, “You have to keep asking them questions, I guess, and eventually you’ll understand what they really need and they’ll finally come inside.”

Christopher Rufo is even more direct in his criticism of the philanthropic groups who continue to promote—seemingly blind to reality—the “housing first” model alongside the inalienable right to street encampment. “Why do so many activists and philanthropic groups still apparently embrace the ‘housing first’ mantra when it’s clearly not working in places like Los Angeles?” I ask in an email exchange.

Because they are unwilling to admit that almost all street homelessness is driven by addiction and mental illness. This conflicts with their worldview in a fundamental way, which makes assessing the reality—and, consequently, the solution—impossible. Furthermore, building housing is easy: put up a roof and four walls. Enforcing the law and fixing the deep human pathologies such as addiction, mental illness, and family breakdown are extremely difficult. So nonprofits prefer to build new housing and cut blue ribbons. It makes them feel good, even if it’s not ultimately a solution to homelessness.

In the “worldview” of philanthropic elites, individual human agency—and the individualized treatment approach that must accompany it—is eclipsed by a matrix of structural racism and capitalist exploitation, presumably. 

Steven Eide, quoted above, sees even more cynical forces at work than mere cognitive dissonance. “There’s a school of thought that the only thing we can do is give people housing,” he said. “All these other problems, we can’t do much about those, but what we can do is give people housing. People are reluctant to be candid about that [because of]… the criticism that you’re just warehousing people and giving up on them.”

Ironically, Eide points out to me, the warehousing effect is oftentimes exactly what comes to fruition. “Wet housing,” where sobriety is not a precondition of entry, turns the housing units into drug dens where people overdose and die, making health outcomes as bad or worse than if they were on the streets. Some of the homeless who are attempting to get sober actually turn down the housing because they don’t want to cohabitate alongside people still using drugs.

For Soledad Ursua, a Venice Beach native who has watched the homelessness problem where she lives get progressively worse, “the homeless are big job creators,” part of a “Homeless Industrial Complex” in which the destitute are used as pawns in money-making schemes. Large and well-funded nonprofits make donations to campaigns and in return, “they get no bid contracts. It’s a classic pay-to-play scheme.” She observes, “They [nonprofits] are not subject to traditional lobbying rules. They’re the only ones exempted and it’s very strange.” 

Ursua points me to a co-authored paper with Edward Ring which sheds light on how profit-seeking individuals and for-profit companies exploit loopholes in the tax system:

One of the most tax-advantaged ways to legally embezzle public dollars is via a nonprofit entity, which then carries a for profit subsidiary. All of the revenue goes directly to the nonprofit controlling entity, wherein there are no caps on salaries and everything is effectively a write-off…They can pay consulting and contracting free to for-profit entities, which often can result in additional pay if the same employee is on the payroll of both entities.

In other words, Ursua explains to me, an employee of a California nonprofit might appear, in publicly disclosed tax filings, to be making, say $200,000 a year, but they are often making twice that much because they are also being paid by the for-profit company to which the non-profit directs its business. This is why, Urusa tells me, tax law needs to be reformed so that all tax-exempt organizations file public consolidated financials which disclose relationships with parent or subsidiary for-profit companies. “When you’re a mega-conglomerate you have all kinds of affiliated entities, profit and nonprofit.”

The paper claims that “Nonprofit organizations have become corrupt and politicized and gone far beyond the charitable missions for which their tax-exempt status was originally conceived.” To remedy this, “Hold all 501(c) (3) organizations to the same lobbying disclosure rules” as other tax-exempt organizations. Other suggestions include a tax on excess compensation for nonprofit executives and broadening SEC enforcement rules to include as “investment advisers” any special interest that makes donations to a public official’s campaign and receives a municipal contract after their election. In the words of the article: “Why should investment advisers have to register and adhere to campaign finance restrictions in the private sector, but not the public sector?”

Why have impractical and outright radical policies been allowed to guide the City of Angels in its humanitarian crisis of a response to homelessness? Why haven’t the citizens of Los Angeles risen up in populist anger against the politicians and the ill-conceived social science experiments of the mega-philanthropies? 

“The pushback is real and the pushback is coming,” Elizabeth Mitchell tells me. The lawsuit on behalf of her clients, then, is just a warning shot across the bow.

When I ask Ursua about the apparent dearth of voter outrage in Los Angeles over the homelessness crisis, she explains: “I think people stayed quiet because they didn’t want to be called alt-right or racist or white supremacist… [In the meantime] the socialists brand has risen, especially on social media, and I don’t even know anyone in the actual neighborhoods affected who supports them.” Through intimidation and the distorting lens of social media far left activist groups and their philanthropic enablers give off the illusion of strength. 

In previous writing forTACand the Daily Caller, I have alluded to the possibilities of success for so-called “realignment Republicans,” in the Golden State—for a GOP that addresses the bread and butter concerns of everyday Californians whose quality of life is assaulted, on so many fronts, by the policies of hard left Democrats. The homelessness issue, as Schambra points out, suggests “the growing divide between wealthy progressives and more-traditional, middle-class liberals.” For the populist-nationalist working class party of the future, Schambra avers that: “It’s difficult to conceive a political issue that lends itself more readily to the exploitation of that divide than homelessness.”

The opportunity is there for a nimble, adaptive GOP to name and drain a swamp that most Angelenos don’t know or fully understand. Republican aspirants to the governorship in the recall race against Gavin Newsom would be wise to put Los Angeles and the unholy alliance of big government and big philanthropy at front and center stage. Perhaps the right messenger and the right message could break through the “blue wall” of urban Los Angeles the same way Trump surprised the crestfallen expert class in Wisconsin, Michigan and Pennsylvania in 2016. To paraphrase the former president: What the hell does the GOP have to lose? 

Kurt Hofer is a native Californian with a Ph.D. in Spanish Literature. He teaches high school history in a Los Angeles area independent school.

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