Construction cranes dot the Hollywood skyline. But is a slowdown coming?EXPAND
Construction cranes dot the Hollywood skyline. But is a slowdown coming?

Will There Be a Dramatic Slowdown in the Construction of L.A. Housing?

During the first half of this decade, Los Angeles gained more than 230,000 residents — and just 40,000 new housing units. That exacerbated an already festering housing crisis, which has made L.A. among the least affordable cities in the country.

Recently, there have been signs of green shoots. Construction cranes dot the skylines of Hollywood and downtown. And statewide, more new housing units were built last year than in any recent year.

But that progress may be about to stall in Los Angeles. A report by the Building Industry Association of Southern California, or BIA, says that applications for new housing units in Los Angeles have fallen dramatically this year.

Tim Piasky, the head of BIA's Los Angeles chapter, says the main reason for the decrease is Proposition JJJ, which was passed by L.A. voters in November 2016.

"You’ve taken a housing crisis we had, pre-KJJ, and you've made it worse," Piasky says.

The ballot measure mandates that any housing construction project applying for an exemption to the city's building restrictions (either a zoning change or a General Plan amendment) must designate a certain percentage of its housing units as affordable, meaning they would be rented at a below-market rate. The projects also would have to pay its construction workers the "area wage standard" and meet other work requirements. Proposition JJJ was sponsored by the L.A. County Federation of Labor, an umbrella group for unions in the county. Critics of JJJ said at the time that the measure was designed to force construction projects to hire union workers. They also said the new rules would stifle development.

"The San Fernando Valley has projects that are no longer moving forward," says Stuart Waldman, president of the Valley Industry Commerce Association. "They just couldn’t pencil out anymore."

But there may be another reason why new housing applications are down in that period — and the outlook for new construction might not be as dire as those numbers suggest.

A chart from the BIA report, showing the decrease in applications to build housing in Los Angeles. The blue line shows units requiring a zoning change, height district change or General Plan amendment. The orange line indicates units that are built "by right" — without the need for such zoning changes.EXPAND
A chart from the BIA report, showing the decrease in applications to build housing in Los Angeles. The blue line shows units requiring a zoning change, height district change or General Plan amendment. The orange line indicates units that are built "by right" — without the need for such zoning changes.

According to the BIA report, applications for new housing filed between March 8 and June 24 of 2017 amounted to just 5,117 units, compared with 9,226 during that same period last year. And just 118 of those units required a zoning change or General Plan amendment, versus 2,110 last year — an indication, according to Piasky, that developers have been put off by JJJ's new rules.

Piasky argues that JJJ has affected other housing units as well, by raising the price of land that doesn't require any kind of zoning change or General Plan amendment.

City planning department spokesman Yeghig Keshishian says it's too early to draw any conclusions about the effect of JJJ. He also says that in the first six months of 2017, his department has actually seen a greater number of new-housing applications submitted than in the first six months of 2016.

So how can the new-housing applications be down by one estimate and up by another? The BIA numbers only looked at the period of March 8 to June 24 — and it turns out there was a high number of applications before March 8.

The date is significant. On March 7, Angelenos voted to reject Measure S, which would have placed a two-year moratorium on all General Plan amendments and zoning changes (and thereby would have slowed development). Keshishian says developers may have rushed their applications to get them in before the March 7 election — hence the dropoff starting March 8, which is the beginning of the time period in BIA's study.

The post–March 7 decrease, says Shana Bonstin, a principal planner at the planning department, "could be just a cooling-off period after Measure S."

However, Bonstein says, "I can tell you, anecdotally, a number of applicants were concerned [about the passage of JJJ]. Many of our projects ended up going on hold. ... Some might be looking to see some others go through the process first."

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