LA WATCHDOG--Last week, the Times Editorial Board rightfully criticized Mayor Eric Garcetti for not taking a position on Build Better LA (Measure JJJ, the Affordable Housing and Labor Standards Relating to City Planning), saying we “need straight talk from [our] City leaders” and “now’s the time for them to come out of hiding on Measure JJJ.”
The measure’s sponsor and major proponent, the politically powerful Los Angeles County Federation of Labor, claims that Build Better LA will create more affordable housing and more well-paying construction jobs.
The truth is that if JJJ is approved by the voters, it will stymie the development of multifamily residential housing, create fewer jobs, make affordable and market rate housing more expensive, and deprive the City of much needed revenues.
And given the loopholes in Build Better LA that allow the City Council to amend this initiative and the massive amounts of cash involved, there is the potential for mischief and corruption.
If passed, developers who want a zoning, height, or density change will be required to have up to 25% of the project’s units be affordable for low and moderate income tenants. But inclusionary housing, especially at the levels dictated by JJJ, is not a free lunch because it will have a significant downward impact on rents and the developer’s return on investment.
Developers will also have to meet stringent hiring requirements. These will require that construction workers be paid the “prevailing wage,” a rate that is significantly higher than market wages. Developers would also have to meet local hiring requirements and comply with onerous reporting requirements. Overall, these “project labor agreement” mandates will increase costs by more than 40% according LA based Beacon Economics, a well-regarded research and consulting firm that has been retained by the City on numerous occasions.
Between the lower per square foot rents resulting from the addition of affordable apartments and the significantly higher costs per unit caused by the prevailing wage and other hiring and union mandates, the developers’ return on investment tanks, the risks increase, the banks refuse to make construction loans, investors bail, and developers abandon projects that would have been viable if not for JJJ, Build BAD LA.
As a result, fewer apartments will be built, there will be fewer construction jobs, and rents will increase because of the scarcity factor. The City’s revenues will also be impacted by fewer construction and development related fees that are required from real estate developers.
And the City’s economy will be adversely impacted by the downturn in construction.
JJJ allows the City Council to adjust the affordable housing percentages if the developer is able to show that such adjustments are necessary to ensure the developer a “reasonable return on investment.” Of course, given the amount of money involved, a few targeted campaign contributions will help ensure that the affordable set-asides guidelines are relaxed.
The developers may also pay an “in-lieu fee” into the City’s Affordable Housing Trust Fund if they do not want to include affordable units in a project. This will allow the developers to maintain luxury buildings where the high end tenants do not have to mix with the hoi polloi.
But once this cash is in the Affordable Housing Trust Fund, the Mayor and creative geniuses on the City Council will no doubt figure out a way to direct these funds to their pet projects without these deals seeing the light of day.
We are being sold a bill of goods by the Los Angeles County Federation of Labor, which, along with IBEW Local 11, have invested over $1 million in this ballot initiative.
But where is Mayor Eric Garcetti? Why isn’t he shedding light on this scam that is being perpetuated by the same wise guys that tried (but failed) to pull a fast one by exempting companies whose workers were represented by unions from the recently enacted minimum wage requirements?
Or is our upwardly mobile Mayor, the wannabe Governor, Senator, or Cabinet Secretary, willing to sell us out for fear of alienating the campaign funding unions that are feasting at our expense?
The Los Angeles Times urges a NO vote as JJJ because it will make LA’s housing crisis even worse by making affordable housing more unaffordable.
Vote NO on JJJ. It is BAD for LA.
(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council. He is a Neighborhood Council Budget Advocate. Jack is affiliated with Recycler Classifieds -- www.recycler.com. He can be reached at: [email protected].)