Los Angeles to sell last bonds from measure to fight homelessness

Affirmed Housing

Los Angeles plans to sell $86.01 million in taxable general obligation bonds competitively next week, tapping the remaining authority from a 2016 bond measure voters approved to reduce homelessness in the city.

The bonds are expected to fund 39 permanent supportive housing projects under the program's loan program to provide 2,394 permanent supportive units, according to an investor presentation for the deal.

Voters approved Proposition HHH in 2016, authorizing $1.2 billion in GO bonds for supportive housing.

The measure's stated goal was to build 10,000 units of permanent supportive housing in 10 years to chip away at a homeless population estimated at 43,695 in October. The city has completed 5,597 units in 90 housing projects and 22 supportive facilities. It has another 3,087 units in 42 projects in the pipeline, roughly half of which are 50% complete, according to a June report from the City Administrative Officer.

In November, Los Angeles Mayor Karen Bass ended the state of local emergency she had declared around the city's homelessness problem on her first day as mayor in 2022. The announcement doesn't indicate the problem is over, Bass said, though she cited two years of declines in the city's unhoused population in the decision.

The Los Angeles Homeless Services Authority's homelessness count finalized in October reported a 3.4% drop in homelessness to 43,695 from a year earlier. The number is roughly 10,000 more than the numbers reported by the city in 2017, when it began issuing Prop. HHH debt.

In 2024, nearly 28,000 people were placed into permanent housing across Los Angeles County — the highest number on record and a 2.5% increase from the previous year, according to LAHSA. The agency credits the progress in part to the addition of nearly 3,000 new units of permanent supportive housing, many made possible by Proposition HHH.

"Because many of the tools created under the declaration are now in place, we can continue urgent action without the temporary declaration," Bass said in her letter to council members.

Over the past two years, unsheltered homelessness has declined by 14% countywide and 17.5% in the city, according to LAHSA. The city agency plans to conduct its annual point in time count from Jan. 20-22.

The declaration gave Bass the power to streamline permitting processes through her Inside Safe program, which moves people into supported temporary housing like hotel rooms until they can be permanently housed. She also issued Executive Directive 1, a policy that waived certain regulations for affordable housing developments, including public hearings and environmental reviews.

The mayor and some council members have been pushing to make her directive permanent.

Since 2017, the city has sold $1.1 billion in Proposition HHH debt in five issuances to fund 132 permanent supportive and affordable housing projects with 8,684 units and 24 facilities.

The largest sale was $389.4 million in 2022. As of March 31, 2025, a total of $1.03 billion had been spent for the PSH Loan and Facilities Programs, including $7.8 million in Los Angeles Housing Department and city attorney staff costs.

The city is designating the deal as "social bonds" under International Capital Market Association criteria, without third-party verification.

Ominicap is municipal advisor on the deal and Orrick, Herrington & Sutcliffe is bond counsel.

The deal was originally planned for spring, but Ben Ceja, the assistant city administrative officer and executive officer, said the "financing was moved up due to accelerated expenditure rates on Prop HHH permanent supportive housing projects."

Despite receiving negative outlooks, and two downgrades, from all four rating agencies after the massive wildfires that began a year ago, Ceja said the "city's bonds have continued to price well and we are anticipating the upcoming general obligation bonds will be well received."

Los Angeles was facing financial challenges before several fires fanned by 100-mile-hour winds struck the city, decimating the Palisades community on the city's west side and Altadena to the east, which falls outside of the city, but within the county's border.

The city government received two downgrades in the aftermath of the wildfires.

S&P Global Ratings cut Los Angeles GOs to AA-minus from AA in April, resolving a CreditWatch with negative implications but assigning a negative outlook.

KBRA downgraded the city's GO bonds to AA from AA-plus in May, resolving a "watch for possible downgrade" it assigned in January and assigning a negative outlook.

KBRA cited fiscal pressures that have led the city to project a nearly $1 billion budget shortfall for fiscal year 2026, "the resolution of which necessitates various proposed revenue assumptions and cost cutting measures," said Linda Vanderperre, a managing director, and Peter Scherer, a senior director, in the May rating report.

The city only hired Fitch Ratings and Moody's Ratings to rate next week's deal.

Fitch assigns the GOs a AAA rating and stable outlook, based on the statutory lien on the property tax that backs the GO bond repayment. It assigns Los Angeles its AA-plus issuer default rating with a negative outlook it assigned in June.

The city's budgetary imbalance heading into fiscal 2026, recent significant one-time unbudgeted litigation expenses and unplanned expenditures related to the fires were cited by Fitch in the negative outlook.

Moody's affirmed its Aa2 rating and the negative outlook it assigned in January, two weeks after the wildfires started.

The combination of the Proposition HHH funding, Measure ULA funding (a transfer tax on homes over a certain value approved by voters in 2022), and funding from the Measure H half-cent county sales tax approved by voters in 2024 "is still inadequate to meet the needs" of the large homeless population," the city disclosed in an appendix attached to the preliminary offering documents.

The city had $950 million of GO debt outstanding as of Dec. 1, according to the preliminary official statement, with only $60 million of authorized but unissued debt remaining after next week's deal. It has a further $2 billion of lease revenue debt, including $960.6 million lease revenue bonds sold in November to support a reimagining of the city's convention center.