Affordable Housing Regulations Crushing New Home Construction in L.A.

Developers blame new regulations.

Edward Conde/Flickr

When Los Angeles voters were considering Proposition JJJ—an initiative last year to mandate affordable housing requirements for new developments—critics from Habitat for Humanity to the Los Angeles Times warned that the measure would lead to less housing construction in one of America's most expensive cities.

Now that the law has passed and is in full effect, those warnings are being borne out.

From March to June, developers submitted just 5,117 applications for new housing construction permits in the city, down from 9,226 for the same period last year, according to a study released by the Building Industry Association of Southern California (BIA).

Tim Piasky, CEO of the BIA's Los Angeles branch, puts the blame squarely on JJJ's expensive requirements.

"There was land available" for new construction projects, Piasky says. "But now those requirements made those projects exceedingly more expensive, and developers could not make those projects financially feasible."

Under Proposition JJJ, construction projects seeking amendments or changes to the city's building code or zoning requirements must include a certain percentage of affordable housing units. The percentage is set by the Los Angeles Department of City Planning, which published guidelines in March, and it is largely determined by how close new developments are to public transit lines.

For instance, a development that is half a mile from the nearest intersection of two bus lines would have to make 20 percent of its new units affordable to lower-income households, defined in California law as families making 80 percent of an area's median income. For developments that are less than 750 feet from the intersection of two light rail lines, the percentage is 25 percent.

JJJ also added new labor regulations, compelling developers to pay a prevailing (read: union) wage and requiring that 30 percent of construction workers on a project be permanent Los Angeles city residents. 10 percent of those local workers are required to be "transitional workers"—defined as workers "facing socioeconomic obstacles or other barriers to employment and whose primary residence is within a five mile radius of the project site."

"It put a lot more hurdles in place as far as housing construction," says Piasky.

From March to June last year, 2,110 developments applying for building permits sought the amendments or exemptions covered by Proposition JJJ. In the same period this year, the number of applications dropped to 118.

According to Piasky, even those projects that don't fall under JJJ's requirements are seeing their costs go up, as demand for land not subject to the initiative has also increased.

City planners have pushed back against claims that Proposition JJJ has caused a citywide construction slowdown, saying that overall building permits for the first six months of 2017 are still up over the first six months of 2016.

Much of that, however, might have to do with Proposition S, a failed city ballot initiative from early March that would have prohibited any exemptions or amendments to the city's building requirements for two years. Developers reportedly rushed to file applications prior to the vote, so as to be grandfathered into pre–Proposition S rules.

Even before these changes, Los Angeles was one of America's most expensive cities to live in. A report from Harvard's Joint Center for Housing Studies says that 57 percent of renters in the Los Angeles metro area were spending more than 30 percent of their income on housing; 31 percent were spending over 50 percent of their income on rent.

Census Bureau data compiled by the website ApartmentList found that rents grew by 15 percent in Los Angeles from 2005 to 2015. Wages, meanwhile, grew by less than 5 percent, so more and more Angelenos' pay is being eaten up by housing costs.

By mandating the construction of more affordable housing units, Proposition JJJ was supposed to fix that. Instead it seems to have made the situation worse. "If there are no projects going forward, how are they producing affordable units?" asks Piasky. "Not only are they not producing affordable units they aren't producing any housing units."

Comments

[Longtobefree]

I am shocked, shocked.

California; secede already, and take Hawaii with you.

[Rhywun]

10 percent of those local workers are required to be "transitional workers"

*head-desk*

[Dillinger]

between jobs, or between genitals?

[dschwar]

or moving across international borders, perhaps?

[Rhywun]

I'm guessing it means folks with a criminal record.

[dschwar]

I can't see how anyone could think things would work out differently. I never saw J. Jonah Jameson write an editorial on behalf of low to moderate income housing. Doesn't anyone pay attention to what initials mean?

[chemjeff]

Proposition JJJ

Ha, cute title. Now, the next proposition on the list, called Proposition... oh wait.

10 percent of those local workers are required to be "transitional workers"?defined as workers "facing socioeconomic obstacles or other barriers to employment and whose primary residence is within a five mile radius of the project site."

How are employers even supposed to determine this when hiring a prospective employee?

Interviewer: Do you have a barrier to employment?
Interviewee: Well yes, I'm not currently employed.
Interviewer: *checks off Proposition JJJ box*

[Rhywun]

By asking them questions that the same politicians are always agitating should be illegal to ask.

[Adam330]

I'd imagine there's a large bureaucracy charged with issuing certifications that people are transitional workers and/or a large bureaucracy charged with fining employers that guess incorrectly.

[Don't look at me.]

The fining staff is larger than the certification staff.

[loveconstitution1789]

That is one way to liven up Taxifornia's housing market again. Make sure there is less housing so prices go back up to pre-2008 inflated levels.

[Don't look at me.]

We'll teach those evil developers who dare make a profit off their capital at risk.

[Ron]

Transitional workers
once again making it better to be a criminal or illegal in California

[Firefox-support]

Adorable housing the regulations making innovative helping the user.

Firefox Customer Service

[Samson M]

There seems to be problems at two different levels here.

At one level, there are more and more ppl who are so called permanently unemployable because of criminal background, drugs, poverty, general not quite in the right spot. Also big cities are simply becoming too expensive for people. More and more ppl will be priced out. And then theres the rust belt post industrial towns... whats the incentive to move to bigger cities when its prohibitively expensive?? This bill is a short sighted way to alleviate that.

At the other level, simply creating regulations that make it difficult to develop any properties at all is just another example of the left-progressive's ultimate lack of depth or creative thinking. They only do what looks right without actually giving a shit about the consequences of thinking things through.

But then again sometimes the libertarian outcry, "less government, free markets!" seems almost as utopian as the progressives 'vision'. Its important to point out the misdirection and many times catastrophic policy making effects of progressives but what else? We need concrete demands that address real issues.