A eulogy for Measure S

In the run-up to the March 7 vote, the “Yes on S” billboards towered over Los Angeles communities like the mega-developments the ballot initiative targeted. But ultimately, that outsized campaign presence didn’t translate in the voting booth, and Measure S failed to muster even 30 percent of the vote in a small-turnout election.

Despite the bitter fight and crushing defeat, voices on both sides of the issue expressed optimism last month. They’re hopeful that the criticisms leveled by the measure’s supporters will spur long-lasting changes to the city’s cumbersome, outdated and politically charged planning process.

The measure, which began its life as the Neighborhood Integrity Initiative, focused on eliminating the spot zoning that its supporters said gave rise to poorly planned growth and high-rise buildings that negatively impacted their surrounding areas. Measure S would have frozen any development requiring a General Plan amendment or zoning change for two years or until major city land-use documents were updated. The development community that opposed the measure argued that because those documents are decades out of date, the entitlement process is often reliant on plan amendments and the proposed moratorium would create a recession-like effect, further exacerbating the housing shortage in Los Angeles.

In an interview after the vote, land-use attorney Chauncey Swalwell — a partner in Goodwin Procter’s Real Estate Group — said that the real estate community is relieved by the results of the election but is taking a “wait-and-see attitude to what really is going to come out of this.” While developers had vehemently opposed the moratorium, they did agree that the community and general plans need to be updated, he said.

“A lot of people on the business side think there are some things that definitely need to get figured out and done better in the city,” Swalwell said.

For David Abel, the publisher of the Planning Report and an Urban Land Institute Los Angeles board member, the measure was an opportunity to fix a process that he described as “corrupted and nontransparent.”

He worries that the calls for reform will not be addressed if the defeat of Measure S is framed as a “triumphant smashing” despite a voter turnout of less than 20 percent.

“[Opponents] said [Measure S] went too far, but did they really mean the status quo was fine and they’re not going to fix it?” Abel mused to The Real Deal.

Several actions taken at the government level appear to show that civic leaders are serious about at least discussing potential fixes. A directive issued by Mayor Eric Garcetti the week after the vote, which also saw him reelected by a comfortable margin, addressed some major concerns of Measure S backers: It bars so-called ex parte communications between developers and planning officials once a project has begun the entitlement process, and it directs budgetary resources toward revamping the outdated general and community plans.

The latter step supports a new City Council’s ordinance, approved in February, which calls for updates to Los Angeles’ 35 community plans — in addition to plans covering the airport and the Port of Los Angeles — every six years. According to information supplied through the mayor’s office, enacting that plan for the 2017-2018 budget will require 30 new staff members and will bring the total annual budget for the community-plan update process to $11.5 million. That cost is expected to be covered through the general fund and an increase in a surcharge on building permits. As of press time, the council had not scheduled a vote on the final ordinance, which the city attorney is developing.

David Waite, a partner at Cox, Castle & Nicholson specializing in land-use matters, said the development community sees value in updating the documents that lay out development policies.

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With many of the community plans dating back to the 1990s — and, in the case of Hollywood, 1988 thanks to a successful legal challenge to its updated plan in 2014 — land-use policies are largely out of step with the kinds of the development being put forth. Waite said that the result of this is an “arduous” process reliant on zone changes and plan amendments, which in turn subjects many developments to political problems and legal challenges. The current system “requires patient capital” to navigate, and updating the plans will likely create a regulatory environment with improved clarity, he said.

“My hope is that those who were supportive of Measure S will not be too impatient and [will] allow this process to move forward so that we can effectively achieve a more predictable process in the city of Los Angeles,” he said.

The current unpredictability can have a chilling effect on small and midsized developers who don’t have the capital to risk on a project that could die in the planning stage or whose approval could be overturned in court, according to Brent Gaisford, co-founder of Upwell Real Estate Group, a development firm focused on innovative rental-housing solutions. “If the site isn’t zoned to allow it, we just don’t do it because of the risk,” he said.

Gaisford added that the overwhelming opposition to Measure S showed that residents, or at least those motivated to vote on the issue, had a desire continue the city’s growth and not “freeze in time.”

“I think that’s really positive, and developers have an opportunity to participate in that conversation and should,” he said. “If we can address the concerns that were raised by Measure S, we can have a real positive path forward.”

Gaisford envisions a future where the city’s zoning principles reflect current trends in living and development, which favor mixed-use, transit-oriented projects.

Carl Muhlstein, the Los Angeles-based international director at JLL, said that enacting such principles will be key to managing the “runaway train” of growth the city is experiencing. Additionally, the inherent risks within the current system make high-return luxury-housing projects more attractive to developers than affordable housing. Those factors ultimately push the increased legal and construction costs onto consumers, he said. Streamlining the process could begin to bring that expense down and could potentially create other opportunities to grow the city’s housing stock.

“If you went to the development community and said, ‘I guarantee you a building permit in six months without fear of litigation if you give me 15 percent affordable housing,’ do you know how fast they would sign up?” Muhlstein said.

Ultimately, however, Muhlstein sees the defeat of Measure S as a rebuke of an anti-growth campaign led by “NIMBYs and neighborhood councils who just don’t want any development in their neighborhoods.” Those voices still have the means to challenge projects through channels such as the California Environmental Quality Act, he said, but preventing the moratorium proposed in Measure S eliminates a grave threat to the local industry.

“Real estate development is still a dicey game, but at least they get to play out the process,” Muhlstein said.