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The Real Deal Los Angeles

Real estate industry rallies against Neighborhood Integrity Initiative, now known as Measure S

“This has a Brexit/Trump feel to it,” said Simon Ha of Steinberg
From left: Robin Hughes, Simon Ha and Gary Toebbin (Adobe, Steinberg, Chamber)

From left: Robin Hughes, Simon Ha and Gary Toebbin (Abode, Steinberg, Chamber)

Separately, they represent different factions of the local real estate economy — commercial and nonprofit developers, the construction trades, architectural firms and even the Los Angeles Area Chamber of Commerce. But on Wednesday morning, the group came together at Gensler’s Downtown Los Angeles office to discuss how to fight the Neighborhood Integrity Initiative, which they believe would cripple the industry — and ultimately, the long-term well-being of the city.

Slated to appear on the March ballot, Measure S would impose a two-year moratorium on all developments in Los Angeles that require a General Plan amendment, with the stated intention of forcing the city to modernize that plan while also reducing the influence of private interests on government.

But critics of the initiative, like the group that spoke at the event on Wednesday — hosted by the Society for Marketing Professional Services — argue that the initiative’s backers are mostly well-off homeowners opposed to density and growth in their neighborhoods. Furthermore, they said, halting construction of most residential projects would have a recession-like effect on all aspects of the industry, a point speakers highlighted throughout the nearly-90-minute discussion intended to mobilize the industry against the measure. The impact would reach not only developers and construction firms, but also architects, brokers and other professionals involved in the design and build processes.

“We have to make this simple for our friends and neighbors: Measure S would be devastating — absolutely devastating — to the commercial and residential construction industries you are all apart of,” Los Angeles Area Chamber of Commerce President and CEO Gary Toebben said at the meeting.

Speakers at the event warned of political factors that could contribute to NII’s passage. The March ballot generally tends to draw wealthier, older voters who are likely to back to measure’s core message. The NII is also being pushed by the the well-organized, well-funded Coalition to Preserve LA, whose anti-crony-capitalism message could resonate.

“We’ve got to get people really fired up about this to get them to vote in the first place,” said Brent Gaisford, chief operating officer and cofounder of Upwell Real Estate Group.

Construction workers would be among the hardest hit if it passes, said Ron Miller, executive secretary of the Los Angeles/Orange County Building & Construction Trades Council. Miller said his industry has yet to return to its pre–Great Recession employment levels and halting most projects would undo the gains made since 2008.

“We can’t afford to have a moratorium for two years,” Miller said. “It would be more like eight years once we got back up and running.”

Event moderator Simon Ha, principal of Steinberg Architects, said that while the NII would create an “artificial recession” in the industry, it would also have a deep impact on the region’s overall economic health. Ha said that the measure would lead to increased housing costs for residents in one of the country’s most rent-burdened areas. He pointed to another local antigrowth ballot initiative — 1986’s Prop U — that had a chilling effect on Los Angeles’ housing stock. Aimed at stopping the spread of high-rise buildings, that initiative effectively “downzoned” properties throughout Los Angeles, making high-density projects difficult to develop.

Prop U had its intended effect, albeit at the expense of the city’s housing supply. While Ha said most analyses call for about 10,000 units to be built annually to satiate local demand, the city has averaged roughly 6,500 units each year since 1991.

A report released earlier this year shows the city’s rental-vacancy rate is at less than 3 percent, which has driven housing costs at all price points, Ha said, adding that the demand, of course, drives up rents.

“I’m not sure how much more people are able or willing to pay,” Ha said.

The current iteration of the NII offers an exception for projects entirely composed of affordable housing — but only if they don’t require General Plan amendments. It’s not enough to quell the fears of the nonprofit development community, said Robin Hughes, president and CEO of Abode Communities. Despite the initiative’s backers’ statements that the measure is opposed to “mega-developments,” it would also impact affordable projects, she said. Roughly one-third of the nonprofit Abode’s existing affordable portfolio would have been impacted under the provisions of the measure, Hughes said.

Some of those projects required NII-restricted amendments to the General Plan, which voids the exception for affordable housing projects.

“Even as the city tries to put forth effort to address the housing crisis in the city…we’re seeing initiatives like this that will have an impact for years,” Hughes said.

Chamber President Toebben said that, while Mayor Eric Garcetti has yet to publicly oppose NII, “there’s no way in the world if this passes he can make his goal” of 100,000 new housing units to city’s housing stock by 2021.

Event moderator Ha cautioned that the strong NIMBY sentiments could push the NII over the top. Santa Monica’s Measure LV, which would’ve required a citywide vote to construct new buildings taller than two stories or 32 feet, failed in November, but still managed to garner 43 percent of the vote, he said. If a small bloc voted differently, that measure would have passed

With much of Los Angeles feeling the impact of traffic and the other strains caused by growth, Ha worries that people could vote against their own long-term interests for the sake of curtailing growth now.

“This has a Brexit/Trump feel to it,” Ha said.