TRD Special Report:For the second installation of TRD’s series on the Neighborhood Integrity Initiative, we took a look at how it could affect Build Better L.A, an affordable housing measure voters passed in November. Stay tuned this week as we explore the implications of the NII in depth.
Updated, Wednesday, November 30, 2016, 1:30 p.m.: A new affordable housing ordinance that could eat into developers’ profit margins has the Los Angeles real estate community pacing in circles.
The details of how Measure JJJ — which voters approved on Nov. 8 — will be implemented are few and far between. The measure requires developers with projects bigger than nine units that require a zone change to set aside up to 40 percent of the units for low-income households. Under the policy, developers also have to pay their workers the prevailing, labor union-approved rates. But the City Attorney, the Planning Department and even the groups behind the measure, known as Build Better L.A., have not yet provided any answers regarding how it will take effect.
Meanwhile, the Neighborhood Integrity Initiative, a separate development-curbing measure bankrolled by the AIDS Healthcare Foundation, could be passed by voters on March 7. How exactly it might compromise the projects allowed under Build Better L.A. is also a nettlesome variable.
Much like Katy Perry and Taylor Swift, or Kanye and — well, anybody — it’s unclear if the two could even function side by side.
“It’s way too early to figure out how the two will interact,” said Dick Platkin, a former City Planner who writes about development issues for CityWatch. “Even if the Neighborhood Integrity Initiative passes, there will be loose ends.”
One thing is certain: the NII would be more restrictive than Build Better L.A. The latter allows changes to the General Plan if a percentage of affordable units are constructed –either for rent or sale — for a period of ten years. The NII would allow no changes to the General Plan under any circumstances. It would allow 100 percent affordable projects that request a zone change or height district change, so long as they do not amend the General Plan.
What happens now?
With or without the NII, there is confusion about what Build Better L.A. entails. Developers who have proposed projects, purchased land, and submitted entitlement applications could be affected — or they could not. How pending projects could be handled was not explicitly defined by the initiative itself.
“The measure is silent on that issue,” said City Planner Claire Bowin in an email.
The Planning Department has, in the past, applied new legislation to existing applications submitted after a selected date. But details, Bowin said, “are still [to be determined], as the cutoff date, if one is applied for Build Better L.A., has not been announced.”
Even the measure’s backers — a coalition of nonprofit and labor groups — don’t know which projects are impacted and what enforcement will look like. Brady Collins of the Koreatown Immigrant Workers Alliance, one of the nonprofits in the coalition, said the group does not have specifics right now, but stressed it will hold the city’s feet to the fire.
“As a group, we’re definitely putting together a plan for Build Better LA,” he said.
The Real Deal asked the City Attorney’s press representative Rob Wilcox about which projects would be affected, how it would interact with other measures, and whether a developer has legal grounds to litigate.
“Those are all legal questions which would be answered in giving advice to our client and therefore is confidential,” Wilcox said in an email.
A spokesperson for the NII declined to comment for this article. Instead, the spokesperson referred The Real Deal to Jack Humphreville, a municipal watchdog who writes for CityWatch, and an supporter of the NII. He said the implementation of Build Better L.A. will be “a disaster.”
Humphreville pointed to Build Better L.A.’s twin assaults on investors’ bottom line: higher construction costs via labor wage requirements and lower profit margins via greater affordable housing set-asides.
“Build Better L.A. makes no economic sense at all,” he said. “You’re increasing costs [and] at the same time you’re lowering revenue. The numbers just don’t work, so you don’t have an attractive deal for developers.”
Richard Green, director of the USC Lusk Center for Real Estate, said that while Build Better L.A purports to increase the amount of affordable housing, it actually imposes requirements that make increasing the supply too difficult.
“The thing about Build Better L.A. is it was an attempt to bring more affordable housing to Los Angeles,” Green said. “But it has so many layers of complexity to it that I don’t think it’s going to help very much.”
Correction: A previous version of this article stated the NII would allow General Plan amendments for 100 percent affordable projects. In fact, it will not allow them under any circumstances. Instead, it will allow zone changes or height changes only when the project is 100 percent affordable.