A new Los Angeles (LA) County ballot proposal calls for real estate developers in Los Angeles to incorporate equal housing opportunities into oversized development projects. Oversized development projects include residential developments which require special exemption from city zoning limits and planning requirements.

The proposal was submitted by the Los Angeles County Federation of Labor (the Federation) and its activist partners, and calls for developers to:

  • provide housing available at low- and mid-tier prices either within the oversized development or nearby, or pay fees to the city to fund equal housing; and
  • hire local or disadvantaged residents to work on construction sites.

The two-punch proposal takes on urban development restrictions and employment recovery simultaneously — two major problems LA has been fighting since the Great Recession in 2008.

Preservation vs. development

The Federation’s proposal isn’t the first to address oversized development projects. Another ballot proposal aimed at developers calls for a two-year moratorium on oversized projects. Restrictions on the county’s exceptions made for development projects exceeding zoning limits also come with the moratorium.

So which remedy is best?

Moratoriums have proven to do more harm than good in urban areas. San Francisco shot down a similar proposal in July 2015, recognizing a moratorium only hurts urban residents by forcing local rents to skyrocket due to lack of housing supply. Higher rents push out low- and moderate-income residents, cultivating an outrageous cost of living only manageable by high earners. Zoning restrictions only cause more distortions.

The Federation’s proposal for equal housing inclusion in large developments and employment opportunities on construction sites addresses these problems directly. Enforcing these modifications on oversized, luxury developments levels the playing field for underemployed and low-earning residents.

The spike in LA’s multi-family construction starts is supported by a strong demand for housing, which needs to be fairly implemented to accommodate residents of all income tiers. Additionally, LA’s employment recovery lags behind the rest of California, making it more difficult for residents to keep up with climbing rental rates and home prices. Employment in the construction industry specifically has barely risen from 121,600 in Q4 2014 to 129,700 in Q4 2015. The proposal’s requirement for a percentage of construction employees to be local residents at least partially remedies this stagnation.

Urban real estate markets

What’s good for residents is good for real estate agents. More residents employed to build more available housing dramatically opens an agent’s client base in significantly impacted urban markets.  Plus, the availability of housing to low- and moderate-income buyers means residents who have been clinging to units with ever-increasing rent for fear of losing their accommodations are free to move, generating even more business for local agents through resident turnover. Turnover, a function of rental and housing markets, always generates broker fees through property management and sales.

Ultimately, time will tell the effectiveness of these proposals. They need to make it to the November ballot first — then, LA’s residents will decide their fate.