New construction is springing up all over Downtown LA, and developers are creating assets that promise high rates of return on their investment. Why, then, is City Hall giving away huge tax breaks on projects that look to be extremely profitable? Earlier this month, UN4LA sent the following letter to LA's elected officials.
Dear Mayor Garcetti and Members of the City Council,
The Board of United Neighborhoods for Los Angeles (UN4LA) wishes to express its deep concern over the scale of tax breaks that the City is offering to real estate developers. While tax breaks can be a useful tool to encourage investment and produce benefits to the City, they must be used judiciously. CityWatch has published a series of articles on this issue by Jack Humphreville, and the details he reveals have led us to the conclusion that City Hall is abusing this practice.
The City’s Annual Report shows that in 2017 alone Los Angeles entered into six Development Incentive Agreements that waived a total of $850 million in revenue. Recently the City entered into two additional agreements for another $126 million in tax breaks, increasing the grand total of lost revenue to the City to the tune of nearly $1 billion.
We are concerned that, rather than using tax breaks judiciously to spur development and create jobs, the City is giving away badly needed tax dollars to increase the developers’ profit margins on projects that are extremely profitable without incentives.
To give an example, let's look at the proposed Fig + Pico hotel complex that will rise directly across from the Convention Center. While adding hotel rooms to this area is certainly a desirable goal, it is hard to imagine how the City can justify subsidizing this project with $103 million in front-end loaded tax breaks. Even without the tax incentives, an analysis of the information provided to the City by developer Lightstone Group makes it look like the project will be extremely profitable. With no additional tax incentives, Lightstone would realize an annual cash return of around 14%. If the property is sold or recapitalized within the next seven years, the return on equity would be over 100%.
How, then, does the City justify offering the for-profit developer tax incentives totaling $103 million? This puts the developer’s annual cash return in the range of 20%, and, if the property is sold or recapitalized, the return on equity would exceed 200%. As if this weren't enough, the agreement includes the sale of a City-owned parcel on Figueroa for a paltry $9.6 million, which is less than half of the property's current fair market value. It is laughable that, as part of the deal, Lightstone has agreed to pay $1 million to the City for projects to improve the neighborhood. This only highlights the ridiculous imbalance we see in comparing the benefits received by the developer to the benefits received by the people of Los Angeles.
While City Hall’s generosity is troubling in itself, this trend becomes truly disturbing when placed against the backdrop of the City’s Structural Budget Deficit. The Mayor and the City Council have been using accounting sleight-of-hand to patch together a “balanced” budget, but in reality rising pension contributions and other personnel costs are an ever-increasing and unsustainable burden on City coffers. Even with revenue as high as it is, the City is struggling to cover its costs. Why, then, are we giving away enormous sums of tax revenue to subsidize projects that are already profitable?
UN4LA believes that the City should put a stop to this unconscionable practice immediately. It is an irresponsible giveaway that puts the interests of real estate developers over those of Angelenos. Tax incentives should be used judiciously to spur development that might not otherwise happen. They should not be used to increase developer profits at the expense of the people of Los Angeles.
Do we need to send Sacramento a message?
Earlier this year State Senator Scott Wiener created a stir when he introduced SB 827. The bill has drawn a lot of attention because, if approved, it would override local zoning near transit stops, effectively taking planning authority away from cities. But while SB 827 has drawn the most media attention, there are other bills making their way through the State legislature that would dictate how local jurisdictions build housing, and cumulatively they amount to an assault on local planning control.
We can't possibly track all of these bills and fight them individually.
We need to tell the folks in Sacramento to back off.
So how about a ballot measure to keep our State officials from meddling in local planning?
That may sound like an extreme step, but the situation is extreme. The State legislature is making an unprecedented effort to override local planning authority. SB 827 would allow developers to build four to eight story residential structures near transit, with no review by local officials, no public input, and no environmental assessment. And that's only the beginning....
Another bill, SB 828, amends State law to require cities to build more housing. Currently every city is required to take part in the Regional Housing Needs Allocation (RHNA), which sets goals for new residential construction. This bill, again by Scott Wiener, would mandate that cities accomodate 200% of the low-income units needed. There is certainly a demand for affordable housing, but this goal is absurdly unrealistic, especially since public housing subsidies have been cut by more than half over the past decade. At the same time, SB 828 says that high housing prices "shall be alleviated by rapidly increasing housing supply, particularly housing supply for moderate and above-moderate income households." Wiener seems to think that just mandating more residential construction will make it happen. He apparently doesn't realize that developers build housing, not cities. Local governments can't force developers to build anything.
Then there's SB 831, which overrides local restrictions on building Accessory Dwelling Units (ADUs, or granny flats). This bill would: 1) Prohibit any requirement that the ADU applicant reside on the property; 2) Prohibit considering the additional square footage when calculating allowable floor area ratios; 3) Exempt the project from fees for new construction. But it gets worse. SB 831 says that if a city doesn't act on an ADU application within 120 days, then it's automatically approved. If a city doesn't approve the application, it can be taken to court, and if the judge finds the city is violating the law, the minimum fine is $10,000.
Sacramento is making an unprecedented effort to override California cities' control over planning and zoning.
Is it time to start thinking about a ballot initiative that would get our legislators to back off?
Let us know by visiting today's post on our Facebook page:
IS IT TIME FOR A BALLOT MEASURE TO KEEP SACRAMENTO FROM MESSING WITH LOCAL PLANNING?
The following post was published as a rebuttal to a piece by Steven Sharp that appeared in the LA Times last month (Downtown has a high apartment vacancy rate? The rest of L.A. should be so lucky, LA Times, 2/13/2018). In it, Sharp responds to critics who expressed alarm over high vacancy rates reported in Downtown LA last year, and cites figures from CoStar to show that the number of empty units has declined.
Our response is based on skepticism about the way Downtown developers are dealing with high vacancy rates. In 2017, both the LA Weekly and Curbed reported that Level Furnished Living (LFL), a building approved by the City for residential use, was now advertising units that were available for stays as short as a single day. Essentially this means that a building that was approved as a residential tower is now functioning as a hotel, and that 303 units meant for people to live in are now available for overnight visitors. If the Downtown property market is as hot as Sharp claims, it seemed odd to us that the building's owners would be converting housing into hotel rooms. It also seemed like the conversion would be an easy way to remove vacant units from the market.
But after our post was published, a reader alerted us to the fact that LFL had been functioning as corporate housing, or an extended stay hotel, pretty much since it opened. (Developer plans fully furnished apartments in downtown L.A., LA Times, 2/25/2015) Have the owners illegally engineered a change of use? Or has LFL always been a hotel?
The July 30, 2013 determination letter from the Department of City Planning (DCP) says that the approved project consists of 303 residential condominiums and 7 commercial condominiums. A search on ZIMAS, LA's on-line zoning information system, shows no subsequent approvals that alter the building's use. The City has argued that the extended stay use was permitted, because visitors would be residing at LFL for longer than 30 days. But it's clear that since last year, folks are invited to stay at LFL for a lot less than 30 days, and LA's zoning code clearly prohibits this. A spokesman for LFL's owner claims that they've been working with the City to create a transit occupancy permit for the building, but the City has not offered any comment.
Since our response to Sharp's piece is based on the estimation of Downtown vacancy rates, this does make the situation more ambiguous. Were LFL's empty units included in vacancy numbers prior to 2017? Were they ever included at all, since it seems that the building has functioned as a kind of hotel ever since it opened? What is clear, though, is that the DCP approved 303 units as residential condos, and that these units are now being offering as hotel rooms.
LFL aside, our point is that across LA housing is being converted to hotel rooms. And it's clear that City Hall is complicit in the process. Not only has the City failed to enforce existing laws, but it has willingly allowed at least one other property (The Metropolitan in Hollywood) to change from an apartment building into a hotel.
How is it possible to come up with accurate vacancy rates when property owners are taking units that were intended for housing and posting them on-line for tourists? And how is it possible that City Hall has still failed to pass an ordinance that would legally clarify the difference between the two uses? An even more disturbing question is, how is it possible that at a time when renters are being evicted so that landlords can convert units to short-term rentals, the City has done almost nothing to enforce laws that are already on the books?
* * *
In Steven Sharp's recent Los Angeles Times op-ed, "Downtown has a high apartment vacancy rate? The rest of L.A. should be so lucky." the author responds to critics of real estate trends in the Downtown LA. While many critics, like us, have questioned the need for so many luxury high-rise apartment buildings in the central city, Sharp claims that widely cited statistics on their high vacancy rates are misleading. In his view the new, expensive units are necessary to meet demand, and this trend should be emulated in the rest of Los Angeles.
We sharply disagree with his conclusions for the following reasons.
The real estate research firm CoStar caused a stir last year when it reported a 12.4% residential vacancy rate in Downtown LA. Sharp notes that CoStar's data showed a drop to 10.3% in January 2018. He then says the vacancy rate has declined further to 8.1%, and 4.7% for buildings that have been open for one year or more. Looking at these numbers out of context creates the impression that developers have been right all along. Their bet on high-priced housing paying off, and it was only a matter of time until the real estate market absorbed their expensive units.
But do these numbers tell the whole story? Hardly.
In September 2017, KPCC reported that more than 2,000 of the over 21,000 market rate apartments in the Downtown were vacant. And in November 2017, the LA Weekly reported that the owner of Level Furnished Living (LFL), a high-rise apartment building at 9th and Olive, converted its building to an extended stay hotel.
Where LFL led, by converting 303 apartment units into hotel rooms to protect its bottom line and reduce the residential vacancy rate, others will soon follow. In fact, The Metropolitan in Hollywood also pulled the same stunt, all with City Hall help. The owners of The Metropolitan asked the Department of City Planning to grant a Transit Occupancy Residential Structure (TORS) overlay. They got their wish, and are now in the process of converting over 50 apartments into hotel rooms.
Meanwhile, many apartment building owners are not waiting for City Hall’s blessing to make the same changes. Since the City Council has failed to pass an ordinance regulating short-term rentals and since the Department of Building and Safety does not enforce existing laws barring this practice, there are numerous reports of local landlords converting also their residential units into short-term rentals.
But, even if we accept Sharp’s numbers as accurate, it’s important to test his supply-side argument through Downtown LA’s real estate market. He says, “Downtown's growth has created competition among landlords for residents. Prices have leveled accordingly, and many property owners have resorted to incentives, such as free parking or discounted rent in order to lure tenants.” It is true some downtown rents have plateaued, but we need to look at the words “discounted rent” carefully. What landlords are actually doing is offering one or two months of free rent when prospective tenants sign a lease for expensive apartments. While tenants are getting a short-term discount of between 8 to 16 percent for one year, the rent is remaining the same because the owners cannot afford to make significant long-term rent reductions.
Their projects are financed by global investors enticed to Los Angeles by a high rate of return on their money. For them, these aren’t just residential buildings; they’re financial assets. In order to retain their value, their rents must remain high to assure a handsome profit. Supply-siders repeatedly argue that if City Hall aggressively green lights new residential construction, housing costs will fall. But will these become affordable for the average Angeleno family? In 2017 the Zumper real estate site reported the median monthly rent for a one-bedroom apartment in Downtown Los Angeles was $2,500. The median household income in Los Angeles is around $55,000 a year. The standard formula dictates a household should spend one-third of its income on rent, which comes out to $1,500 a month. There’s no way the rent for these new units will permanently fall by 40% or more to this level. As a result, middle-income and low-income households are priced out of the Downtown, assuming they could even squeeze a family into a one-bedroom apartment.
Sharp insists that “supply and demand” is a fundamental law of nature, like gravity. But his strict supply-side view is hardly a natural law, and it cannot explain 21st century urban real estate markets. These markets are now global. Companies most of us have never heard of pour billions into lucrative real estate projects that are nothing more than a prospectus for distant investors. Real Estate Investment Trusts (REITs) buy and sell assets, like high rise apartment buildings in downtown Los Angeles, based purely on profit projections. Such immediate consequences as pollution, displacement, overcrowding, and gentrification are irrelevant to them.
Furthermore, the emergence of short-term rentals means that many property owners, like LFL, have realized that a “hotel” is far more profitable than an apartment building. A number of the city's hottest neighborhoods are seeing badly needed supply taken off residential market so landlords can please investors by renting empty units to tourists.
Sharp finishes his article with, “Downtown isn't a case study in what's wrong with development in Los Angeles. It's the best model we have for what's right.” This is a truly startling statement; one that makes clear how completely disconnected his view is from reality. While City Hall has had important successes in revitalizing DTLA, the same area continues to be plagued by exorbitant housing prices, rampant homelessness, crumbling infrastructure, and rising crime rates. Transit ridership continues to fall, as traffic congestion grows worse. And in spite of all the talk about creating livable communities, local government still has not even found a permanent home for the Downtown’s only elementary school.
If Downtown is the best model City Hall has to offer, we are in deep trouble.
Over the past year or so our legislators in Sacramento have let it be known that they aren't happy with the pace of development in California's cities. As housing prices continue to rise, traffic continues to worsen, and the reality of climate change becomes ever more apparent, the Senate and Assembly have decided that local jurisdictions aren't doing their job and that the State needs to intervene. In 2017 the Legislature worked feverishly to pass bills that would restrict local authority over land use. Now they're starting off 2018 with SB 827, a radical effort to override local planning, claiming it will ease the housing crisis and get more people riding public transit. In reality it will do niether.
SB 827 is the brainchild of State Senator Scott Wiener (D-San Francisco). It would exempt residential projects that include a percentage of low-income housing from local zoning restrictions if the project is within 1/2 mile of a major transit stop or 1/4 mile of a high-quality transit corridor. This means that local requirements regarding height, density, floor area ratio, and design review would no longer apply. The idea is to promote high-density residential construction along transit corridors. Wiener, and many others, argue that this would not only ease the housing crisis by producing new units but would also encourage transit ridership, thereby reducing greenhouse gas (GHG) emissions.
SB 827 is meant to further Transit-Oriented Development (TOD), a policy that state agencies and local jurisdictions have been pushing for years. In theory, TOD seems like a great idea, and the fundamental principle is sound. If you focus residential development along transit corridors it makes access to trains and busses easier, thereby taking cars off the road and cutting GHG emissions. What's not to like?
But there's a big difference between theoretical outcomes and cold, hard reality. The Los Angeles Department of City Planning (DCP) embraced TOD long ago, and invokes it frequently when arguing for high-rise projects anywhere near a transit corridor. So how has that worked out? Not so good. In spite of the fact that thousands of new units have been built along LA's transit corridors over the past decade, transit ridership is lower than it was 30 years ago, and it has declined for the past 3 years running. This is especially disturbing when you realize that LA County (the area served by the MTA) has added over one million residents during that same period. It's not just that transit ridership hasn't increased, it hasn't even kept pace with population growth.
Don't take our word for it. Check out the recent report released by UCLA's Institute of Transportation Studies, Transit Ridership Trends in the SCAG Region. (SCAG stands for Southern California Association of Governments.) While the report covers all of Southern California, the data show that LA is leading the region in lost transit ridership. So as City Hall approves one skyscraper after another, making the claim that TOD will save us all, the number of people actually taking busses and trains has plummeted.
The report provides much valuable insight into what's actually happening on the transit landscape. While local and regional officials have enthusiastically promoted large scale development, claiming that these projects are transit friendly and will reduce traffic, in reality per capita vehicle ownership in the SCAG region has risen dramatically since 2000. During the 1990s the region added 1.8 million people and 456,000 household vehicles, or 0.25 vehicles for every new resident. But from 2000 to 2015 the region added 2.3 million people and 2.1 million household vehicles, or 0.95 vehicles per new resident.
But that's just Southern California. Maybe things are going better up north? Not really. With the fervent support of Bay Area officials, developers have been having a field day in San Francisco and beyond, building thousands of new units and claiming the increased density will boost transit ridership. But here's a quote from Vital Signs, a web site maintained by regional agencies which provides info on Bay Area transit....
"While featuring one of the nation’s most extensive public transit systems, the Bay Area has not experienced significant growth in transit ridership over the past few decades – with residents primarily shifting between bus and rail modes. This has resulted in crowded conditions on BART and Caltrain, while suburban buses have lower utilization than in years past."
The site highlights the fact that per capita transit ridership in the Bay Area has declined by 11% since 1991. And while many have touted the fact that an increasing number of San Francisco households are car free, that doesn't mean people aren't using cars. A recent report from the San Francisco County Transportation Authority showed that people are making 170,000 trips via Uber and Lyft on weekdays. This amounts to 570,000 vehicle miles driven by Uber and Lyft cars on a typical weekday. Bottom line, in spite of all the TOD boosterism by San Francisco officials, lots of people are still using cars to get around.
So while state and local officials have been telling us for years that that high-density development will get people out of cars and onto transit, that hasn't happened. But what about housing? Even if SB 827 might not deliver on transit ridership, wouldn't it still ease the housing crisis by generating lots of new units?
We do need to build housing, but creating new units isn't going to ease the crisis unless they're accessible to middle-income and low-income Californians. While SB 827 makes the inclusion of affordable units one of the criteria for removing restrictions, the percentage of affordable units isn't likely to make a significant difference. Generally speaking density bonus incentives are offered on projects that include between 10% and 20% affordable housing. This means that the rest of the units are "market rate" (i.e. really expensive) and most likely to attract the demographic that owns and drives cars.
To make things even worse, research is showing that new development along transit corridors has been causing gentrification and displacement. The Urban Displacement Project, a joint effort by UCLA and UC Berkeley, recently released a gentrification map of LA. This research shows that high-density development near transit lines has pushed housing costs up and pushed low-income residents out of Chinatown, Highland Park, East LA and Hollywood. And anyone following the LA real estate scene knows that as soon as the MTA's Crenshaw/LAX Line was approved investors started diving into communities like Leimert Park and Inglewood. The result? More gentrification and displacement.
Putting all this together, it's hard to see how SB 827 will deliver any benefits either in terms of housing or transit ridership. And it's important to be specific about the reason why. It's not that TOD is a bad idea in itself. The problem is that in spite of all the talk, state and local policy has not been geared towards producing new housing that will increase transit ridership. In reality, what local governments have been doing is using the TOD argument to promote unchecked development. In LA City Hall has been shredding local zoning and offering developers generous entitlements while arguing that this will ease the housing crisis and promote transit ridership. The DCP has been telling us that they're planning for a new TOD era where people won't need cars. But what they've actually produced is a tangle of new planning initiatives, none of which mean anything because the City Council will sweep aside any zoning regulations in place for developers that have enough clout at City Hall. And the bottom line is that housing costs continue to rise while transit ridership continues to fall.
SB 827 will only exacerbate the situation. In cities across California we're seeing high housing costs, homelessness, worsening congestion, and declining transit ridership. The only way to solve these problems is through real planning. Creating plans that will actually serve the needs of our urban communities is difficult, complex work. It means starting with hard facts rather than wishful thinking. It means doing neighborhood outreach instead of backroom deals. And it means engaging with communities in long, difficult discussions where all stakeholders have a chance to be heard.
The folks in Sacramento want us to believe we can forget about doing the hard work that planning demands and solve our problems with a quick and easy shortcut. Don't believe it. SB 827 will not solve the housing crisis or get more people on transit. It will only continue to fuel the speculative development binge that's crippling California's cities.
If you have a problem with Sacramento overriding local planning control, better contact your representatives in the State Senate and Assembly quickly. If last year's legislative session is any indication, developers and their lobbyists will be pushing hard for the passage of this bill. And it couldn't hurt to also call your local city officials to tell them you oppose SB 827. There's only one way for California to solve its problems, and that's through real planning. There are no shortcuts.
Last month on NBC’s News Conference, State Senator Kevin de León made some inaccurate and insulting remarks regarding Neighborhood Councils (NCs) and the development process in Los Angeles. He equated NCs with NIMBYism, and claimed that they have the power to shut down projects they don’t like.
United Neighborhoods for Los Angeles (UN4LA) finds it surprising that Senator de León, who represents a large portion of Los Angeles, does not seem to understand how the City’s Neighborhood Council system works. The NCs have no power to stop anything. They are purely advisory bodies, and even if an NC votes unanimously to oppose a project, that does not stop the project from moving forward.
UN4LA feels Senator de León has been grossly unjust to LA’s Neighborhood Councils, and that he owes them an apology. We have written an open letter to him, telling him he needs to apologize to the NCs. We also ask that he educate himself about NCs and how they function, since his misunderstanding of the role they play seems to have been a factor in his support for SB 35, a bill that eliminates public input on some development projects. Here is our letter….
Dear Senator de León,
We are writing to you to express our deep disappointment regarding comments you made recently on News Conference hosted by Conan Nolan. In talking about the California Legislature’s recent attempts to deal with the housing crisis, Nolan made the claim that Neighborhood Councils (NCs) are somehow obstructing the construction of affordable housing. Allow us to quote your response….
"You're making reference to NIMBYism, of course, Neighborhood Councils, whether it's in Los Angeles or elsewhere, they're gonna stop any type of project if they don't like that project.”
This statement is not only insulting, it reveals a disturbing lack of understanding of LA’s NC system and the development process in general.
For your information, the Neighborhood Council system was created by the Los Angeles City Charter. There are currently 97 NCs throughout LA, made up of elected stakeholders who give their time to work on issues affecting their communities and the City at large. They are engaged in a wide variety of activities, including disaster preparedness; public art projects; sponsoring events for youth and children; health and safety education; expanding access to parks; and a range of other endeavors. They do all this without compensation, many of them spending hundreds of hours per year, with the goal of making Los Angeles a better place to live.
Yes, Neighborhoods Councils also review and comment on projects that require some form of discretionary approval by the City. But your claim that “they're gonna stop any type of project if they don't like that project,” shows how sadly uninformed you are about the NC system. In reality, they have no power to stop anything at all. They are advisory bodies, and their input cannot make or break a project. The Department of City Planning has often voted to approve projects that were opposed by NCs. Your comment quoted above completely misrepresents the reality of the situation, and gives a wildly inaccurate picture of Neighborhood Councils and how they function.
It is also disturbing that you apparently believe NCs are synonymous with NIMBYism. The word “NIMBY” is a derogatory term thrown around frequently these days by developers and politicians to disparage anyone who objects to a project for any reason. It has become commonplace to blame so-called NIMBYs for the housing crisis, with many claiming that the housing shortage has been caused entirely by self-centered, shortsighted people whose only concern is protecting their property values.
But the members of the UN4LA board know many people who serve on NCs, and some of us have also served. Our experience is that the vast majority of NC members are dedicated, unselfish people who have volunteered to spend hundreds of hours serving their communities. Yes, they sometimes oppose projects, and you might be surprised to learn that in many cases they have legitimate concerns, including the loss of rent-stabilized housing, inadequate infrastructure, overstressed public services, safety issues, reduction of open space, and the destruction of our urban forest.
While you dismiss these people as NIMBYs, if you were to take the time look closer, instead of the stereotypical suburban homeowner looking to preserve property values, you would find people who are deeply concerned about the negative impacts that reckless development is having in terms of displacement, damage to the environment, and overburdened public services. You would also find people who actually work in the field of real estate and development. Do you include them among the ranks of obstructionist NIMBYs who are opposed to new housing? It is depressing for those of us who have served on NCs to have our efforts disparaged by someone who should know better than to make such sweeping generalizations.
We do thank you for your honest account of your interactions with hypocritical politicians who say one thing to the public and then pursue another course behind closed doors. Of course, we're well aware that some of them are dishonest, but it’s refreshing to hear someone from the State Legislature openly acknowledge that there are people on the City Council who we simply cannot trust. They tell us they want to preserve affordable housing, and then approve generous entitlements for developers who demolish RSO units. They tell us they’re planning transit-oriented development, and then approve luxury skyscrapers designed for a demographic that's more likely to drive expensive cars. They tell us they want to create healthy communities, and then dump liquor permits on neighborhoods that are already awash in alcohol, and where violent crime is rising.
In public our elected officials tell us they're working to make the City a better place. But we see the results of the policies they're actually pursuing behind closed doors: housing prices keep climbing, evictions are rampant, homelessness is skyrocketing, crime is spiking, and congestion is worse than ever. The only thing going down is transit ridership, which is lower than it was 30 years ago, in spite of the fact that the County (the area served by the MTA) has added over a million residents during that period.
We feel you owe LA's Neighborhood Councils an apology. Your inaccurate and insensitive remarks have offended many of the people who give their time and energy to make Los Angeles a better place. The citizens who serve on our NCs don't expect to be rewarded, but they deserve to be respected. By lumping them all together and dismissing them as selfish NIMBYs out to sabotage development, you have done them an injustice. You have wronged them.
And beyond an apology, we hope that before the legislature reconvenes you will think more deeply about your efforts to "reform" the development process. Many community members were angered by the passage of SB 35, which will prevent them from having a voice in the debate over some projects. The spectacle of you and Senator Scott Wiener celebrating this “accomplishment” was baffling to those of us who have seen the damage done by reckless development. But it now becomes clear that in your view we are simply selfish NIMBYs, and that you believe shutting us out of the process is a necessary part of your “reform” agenda.
Before the next legislative session begins, we hope you will take the time to educate yourself about LA’s Neighborhood Councils, the people who serve on them and the many ways they help the community. We hope that as you work to shape your legislative agenda, that instead of crafting bills that reduce public participation, you will think about the importance of maintaining and possibly encouraging greater public participation in the development process.
In your appearance on News Conference you said, "We have to work together if we're going to deal with this housing crisis." UN4LA strongly agrees with this sentiment, and we believe the vast majority of Neighborhood Council members would also agree. We would love to work together with you. If you’ll allow us to.
The folks in Sacramento are in a frenzy right now trying to pass legislation to ease the housing crunch. They realize that housing costs are becoming an extreme burden for Californians, and there's an avalanche of bills cascading through the state legislature that purport to address the crisis. While some of these bills are thoughtful, reasonable attempts to create solutions, others are poorly conceived and could end up doing more harm than good.
One of the latter is SB 35, which takes planning authority away from cities and allows developers to skirt public review. The bill was introduced by Senator Scott Wiener, and he seems to genuinely believe that it will help ease the housing crisis. But like so many others who think that relaxing regulation will solve the problem, Wiener hasn’t taken a good look at the forces that have actually created this situation.
First, let's look at what SB 35 actually would actually do. The bill would require that multifamily housing developments that satisfy certain standards be handled with a streamlined, ministerial approval process. The goal is to speed up approvals of urban infill projects that contain a certain number of affordable units, and to prevent challenges that could slow or stop the process. Public review would be conducted by the local planning commission, and would be limited to 90 days if the project contains less than 150 units, or 180 days if it contains over 150 units. Certain areas are exempt, such as coastal zones, wetlands, fire hazard zones and hazardous waste sites. It’s also important to note that the bill’s provisions would only apply to cities that haven’t met state mandated housing goals, but since that’s true of almost every city in California, you can pretty much assume it’ll apply to the town you live in.
And let’s start with that. We haven’t been building enough housing in California, and that’s certainly a problem. No doubt it's true that many of California's cities have outdated and inadequate zoning codes, and this needs to be addressed. But speeding up approvals and limiting public input isn't going to make things better. We’ve been doing plenty of that since the beginning of this century, and all we’ve got to show for it is higher housing costs and more homelessness.
The problem here is that the bill’s authors don't understand the true causes behind skyrocketing housing costs. Is there a shortage of affordable housing stock? No question. But rising costs have less to do with short supply than with the onslaught of speculative development that’s been encouraged by government at the federal, state and local levels for over 15 years now.
The law of supply and demand is considered a basic economic truth, and there are plenty of cases where you can show a direct relationship between short supply and high prices. But those who insist on the supply side argument when talking about housing in California are making a grave mistake. They aren't looking at the whole picture, and they don’t understand that the market is severely distorted right now for a number of reasons.
First, there's an avalanche of investment capital flowing into real estate these days. With interest rates at historic lows, returns on traditional investments have become negligible. Real estate, on the other hand, offers a high rate of return, and since the US economy began to recover there's been a massive flow of money into development. This has driven a speculative frenzy that has pushed property prices higher than ever.
Second, there’s been a huge shift in the people shaping the market and their motives for getting into it. Fifty years ago multi-family housing was considered a safe bet for people who wanted a reliable source of income. Most apartments were owned by individuals or families. Even if the owner didn’t live on site, chances were the tenants knew the owner, and generally speaking if you paid your rent and didn’t set the place on fire you didn’t have to worry about getting kicked out.
Those days are gone. Nowadays multi-family buildings are being snapped up by anonymous LLCs that do everything they can to keep the tenants at arm's length. Providing decent housing is the last thing on their mind. The property is just an asset that they've determined they can cash in on. Here in Los Angeles, if the building is covered by the Rent Stabilization Ordinance (RSO), they usually evict the tenants in order to build something bigger. In LA alone we've lost over 20,000 RSO units since 2001. Often these investors buy a building at a higher price than it’s assessed for, knowing that the city will almost certainly grant whatever entitlements they request. This means there's a good chance they can drive up the property’s value before the bulldozers even show up on the site. The new generation of real estate investor is only interested in maximizing their return, so those who do build are mainly catering to the high end of the market. This has resulted in a glut of pricey units, and a shortage of affordable ones.
So shouldn't empty units mean lower prices? Not any more. The third factor here is the rise of short-term rentals. It used to be that a landlord who couldn't rent units would eventually lower the asking price to attract tenants. But now the landlord can just post the units on AirBnB, and in some cases make more than they would on a standard rental. In fact, there are reports of landlords who simply turn their buildings into hotels. (City Attorney Files Charges Over Illegal Hotels, LA Business Journal, June 2016)
So those who argue that we just need to build housing, any kind of housing, are ignoring significant economic forces that are skewing the standard supply and demand formula. In the world of California real estate, the old rules don't apply any more. If you want evidence, take a look at "Impacts of the Widening Divide: Los Angeles at the Forefront of the Rent Burden Crisis" (Ray, Ong, Jimenez, UCLA Luskin School of Public Affairs, July 2014). The authors evaluate housing data going back four decades, and they conclude that rental price increases have outpaced income growth even when vacancy rates were relatively high. They find that neither a tight market nor increased housing quality explain the widening gap.
Senator Wiener, and many others, argue that zoning codes in a number of California cities are too restrictive, and they have a point. There's no question that in some cases homeowners have pressed for low-density zoning in order to protect their property values. This has resulted in bad planning that limits growth in order to serve the interests of a minority. But SB 35 tries to fight bad planning by avoiding planning, and that will only make things worse. In today's speculative environment, developers are always looking for ways to rush their projects through. This bill allows them to do that just by tacking on a certain number of affordable units. Though Senator Wiener's intentions seem to be good, he must realize that development interests have been showering Sacramento legislators with cash in recent years. Lobbyists have been pushing hard to loosen regulations and roll back CEQA. They want the quickest approvals and the least public scrutiny possible.
SB 35 plays right into their hands. From Senator Wiener's public comments on the bill, it seems he buys the simplistic supply/demand argument and believes this piece of legislation will ease the problem. But he's counting on the people who created the problem to solve it. No question many cities have tried to limit housing construction, and that needs to be addressed. But by allowing a streamlined approval process, SB 35 promises to make the problem even worse. We already have streamlined approvals in LA. City Hall calls it "expedited processing", and it's been used repeatedly to rush bad projects through and deny the public a voice. This bill will only lead to less planning and less public oversight. It's the same cure developers and politicians have been prescribing for years now, and the disease just keeps getting worse.
Here's a link to the bill, if you want to look at it yourself.
SB 35 Text
If you'd like to contact your State legislators to comment on SB 35, you can use the link below to find out who's representing you in Sacramento. Please act quickly. This bill has been sent to committee and could come up for a vote soon.
Find Your Rep
United Neighborhoods for Los Angeles (UN4LA) declares its strong support for Measure S, and asks citizens who care about the future of Los Angeles to vote Yes on S on March 7.
UN4LA has chosen to back Measure S because it is consistent with the group's guiding principle, community-driven planning. For too long, communities have been left out of the loop when it comes to envisioning LA's future. City Hall has shown a complete disregard for basic planning principles as the Department of City Planning (DCP) pursues a reckless, ad hoc approach to development. Spot-zoning should be the exception, not the norm. Sadly, recent news stories have only served to confirm the suspicion that local politicians are willing to trade project approvals for campaign cash.
Los Angeles continues to grow, and development is necessary to ensure the city's economic health. But in order for development to benefit all Angelenos, it must be based on careful planning, and the planning process must start in our communities. We must begin by listening to the people who actually live in LA's neighborhoods, and build for the future based on their vision for the city. We must also insist that the environmental assessments required by the State of California are based on actual data, and that they are prepared by professionals with no financial interest in the outcome.
Measure S is not anti-development, it’s pro-planning.
It will not shut down new development. It does not ban new housing. It will not bring about economic Armageddon in Los Angeles. Measure S will compel City Hall to start planning for the future. It REQUIRES that the City update the General Plan and the Community Plans. It will impose a two-year moratorium on spot-zoning while these updates are completed. It will also REQUIRE the City to be responsible for preparing Environmental Impact Reports (EIRs), instead of allowing developers to choose who prepares these important assessments.
UN4LA believes that Measure S will empower citizens to participate in community-driven planning which will benefit all Angelenos. We look forward to partnering with communities in this process, and helping to provide the tools they need to create a healthy, prosperous future.
Mayor Garcetti knows his record on housing looks pretty bad. The fact that his administration has bent over backwards to help developers build luxury units while affordable housing becomes ever more scarce has made him the focus of intense criticism. With his bid for re-election coming up next year, Garcetti is anxious to make it look like he's doing something to address the situation.
The first step was to issue Executive Directive 13, entitled Support for Affordable Housing Development. And to follow up, the City published a report in August that has lots of beautiful graphics that show what a great job the Mayor's doing. If you take the report at face value, it looks like we've turned the corner and that everything's going great. Take this statement, for instance.
From July 1, 2013 to June 30, 2016 there were 5,982 affordable units financed or incentivized in the City. Of those, 5,774 were affordable to low-income households, reaching 38% of the Mayor’s 15,000 unit goal.
Wow. That's gotta be good. It says we've created almost 6,000 affordable units since July 1, 2013. Or does it? Let's go on to the section titled Details of Affordable Units....
Of the affordable units financed or incentivized in the City from July 1, 2013 to June 30, 2016, 1,488 were at-risk, low-income units preserved from losing their affordability status.
Okay, then apparently 1,488 of the Mayor's total were actually existing units that the City preserved. So even though that brings us down to about 4,500 new units, that's still not bad. And we should encourage the Mayor to preserve affordable units, since his policies have led to thousands of units covered by the rent stabilization ordinance (RSO) being taken off the market.
And since we're talking about RSO units, why don't we take a look at how many we've lost in recent years. According to a report issued by HCIDLA in April of this year, from 2013 through 2015 over 2,600 rent stabilized apartments were taken off the market under the Ellis Act. In many cases the landlords who invoked Ellis were encouraged to do so by the generous entitlements that the City hands out to developers looking to squeeze more money out of their property.
So if we subtract the 2,600 RSO units lost under Ellis from the remaining 4,500 units that Garcetti's crowing about, that brings us down to a net gain of 1,900 new units. Suddenly the Mayor's housing numbers ain't looking so good. But if you've got the stomach for it, let's keep going....
Beginning in 2014, HCIDLA and the Housing Authority of the City of LA (HACLA) established a goal to provide financing for 300 units of permanent supportive housing (PSH) for the homeless each year. From July 1, 2013 to June 30, 2016, the City has fallen short of this goal, producing on average 227 homeless units per year. However, through new land-use reforms and new revenue sources, the Mayor expects to increase annual production to 1,000 PSH units in the years to come.
Okay, well, at least this part is honest. The City admits that they haven't even been able to reach their decidedly modest goal of creating 300 PSH units per year. Over three years, they've only built 681 units. I guess that's something. Unless you also take into account that in 2015 alone the Los Angeles Homeless Services Authority cut funding for about 2,000 beds that served people needing transitional housing. This wasn't Garcetti's doing. It's part of a shift in the way the federal government is trying to address homelessness. But the upshot is that the number of people actually living on the street has increased by over 1,000 since 2015. So the 681 PSH units the City has built over the past three years aren't even sufficient to accommodate the increase in people on the streets over the past year.
Still, the Mayor says he's going to increase the production of PSH units to 1,000 a year. How? Take another look at the last sentence from the paragraph above.
However, through new land-use reforms and new revenue sources, the Mayor expects to increase annual production to 1,000 PSH units in the years to come.
What new revenue sources? Is the City finally going to start charging developers the same fees that many other major cities charge routinely? Let's hope so. The City Council has been talking about it for years, and still hasn't taken any action on this issue. But the most important phrase in that sentence is "new land-use reforms", because that tells you what the Mayor's real agenda is.
No doubt "new land-use reforms" refers to re:code LA, which is the Mayor's attempt to re-write the City's zoning code. There's no question the code is outdated, but re:code is basically a giveaway to development interests. In spite of the City's claim that they've done extensive public outreach, in reality re:code has been largely written behind closed doors. For the most part, the public workshops have been a PR sham, dealing in vague generalities rather than offering information about how communities will actually be affected. And while the public can attend Zoning Advisory Committee meetings, they haven't been allowed to comment. When the Mayor talks about "land-use reforms" he really means letting developers do whatever they want.
And going back to the Mayor's Executive Directive 13, he says that he's going to speed up the approval process for affordable housing. But he also says he's going to speed up the approval process for all housing development. In other words, he's going to accelerate the pace of reckless overdevelopment geared towards serving the wealthy. He's going to give even more freedom to the anonymous LLCs that have taken thousands of RSO units off the market. He's going to ramp up the construction of apartments that start at $3,000 a month, while telling us the tenants will ride the bus to work. Bottom line, he's going to solve the housing crisis by pushing harder on the same policies that helped create it.
United Neighborhoods for Los Angeles (UN4LA) believes that instead of pushing bad projects through faster than ever, we need to slow things down and start doing some real planning. We also need to bring communities into the planning process so that they can find solutions that will work for their area. The affordable housing crisis impacts all Angelenos, directly or indirectly. Shouldn't we let the people who are most affected by this problem have a voice when it comes to solving it?
The people of West Adams, Baldwin Hills and Leimert Park have been working for years to create a new Community Plan in order to provide a framework for future growth in these areas. In May of this year they released the Final Environmental Impact Report (FEIR) for the plan. That should have been a time for celebration. But far from celebrating, many community members felt betrayed when they learned that the City Council was working feverishly to approve a massive project that violated the Community Plan in a number of ways.
The proposed Cumulus project would dump nearly 2 million square feet of new development, including a 30-story skyscraper, at the already congested intersection of La Cienega and Jefferson. It goes far beyond what would be allowed under the new Community Plan, and renders meaningless the years of hard work that local residents invested in creating it.
This is just one more instance where the City Council has shown its total contempt for the planning process. Once again, City Hall has chosen to empower developers with deep pockets, while cutting the community out of the decision-making process.
As a result of the City Council's actions, the Crenshaw Subway Coalition and Friends of the Neighborhood Integrity Initiative are jointly suing the City Council and the developer to stop the project. Follow the link to read their press release.
Crenshaw Subway Coalition
If you've been following local news over the past few years, you know that a lot of people are angry about the City of LA's current approach to development. Unfortunately, the media often frames the argument in terms of pro-density developers and city officials with a vision for the future against aging white homeowners who want to cling to the past.
The problem with this view is that it doesn't begin to deal with the scope and complexity of the problems we're facing. The simplistic pro-density vs. anti-density trope makes it look like City Hall and developers are fighting to bring LA into the future, without taking into account the reality of what's happening as a result of the current building binge. For years the City has been building residential complexes along transit corridors in the belief that it would get people out of cars, but transit ridership is down and congestion is worse than ever. The Department of City Planning incentivises the eviction of low-income tenants by offering zone changes and other variances to landlords. City Hall has been successful in luring businesses and residents to "revitalized" communities, but hasn't addressed LAPD staffing shortages, causing huge spikes in crime. And while our elected officials will move heaven and earth to push a luxury housing complex through the approval process, they have yet to create a credible plan to solve the homeless crisis.
Let's face it. The development process in LA is completely, utterly broken. The Mayor and City Council routinely hand out zoning changes and major variances to developers who have contributed thousands of dollars to their campaigns. The Mayor blithely overturns unanimous decisions made by the City Planning Commission. The DCP has greenlighted numerous luxury skyscapers in its push for higher density, while thousands of affordable units are taken off the market. LA's water resources continue to shrink, and yet the City refuses to undertake a cumulative assessment of the demands planned construction will make on our water supply. And why are we even talking about updating our General Plan and Community Plans, when it's clear that City Hall has zero interest in monitoring and enforcement?
So what we do? It's clear that many Angelenos feel they have no voice in planning for the future of their community, and there are a number of groups that have organized to fight individual projects. But wouldn't our efforts have a greater impact if we were all working together? United Neighborhoods for Los Angeles (UN4LA) was created to give Angelenos a unified voice. If we can come together to press for better planning, we have a better chance of getting City Hall to pay attention. UN4LA will fight for:
• Projects that are designed to enhance, not exploit, your community.
• Water, power and transit infrastructure that you can rely on.
• Consistent enforcement of zoning and building codes.
If you're interested in working with us, or if you just want to learn more, follow this link to our Contact page:
The City of LA is facing numerous challenges right now, but we believe that we can meet these challenges and overcome them. We've seen the disastrous results of short-sighted policy decisions made by politicians and developers acting out of self-interest. It's time for our communities to come together and demand a role in shaping the city's future. UN4LA believes that better planning means a better Los Angeles.
If you feel the same way, let's talk.