Tom Gores, the owner of the Detroit Pistons, recently shelled out $100 million for a 33,000-square-foot house in the Holmby Hills neighborhood of Los Angeles, paying roughly $3,333 per square foot. Bruce Makowsky, an LA developer who made a name for himself selling handbags on television and now flips luxury homes, may soon start listing properties that cost $500 million. This housing trend has significantly increased the political clout of real estate developers in Los Angeles, who represent a vital industry for the city. However, that influence has taken advantage of the outdated LA General Plan, the set of community plans and zoning laws for the city’s neighborhoods which has not been updated since the 1980s.
The General Plan divides the City of Los Angeles into 37 smaller communities, each the size of a small city. Construction rules for each neighborhood are specified down to details like sidewalk width, building heights, parking requirements, and residences-per-building. However, because the General Plan is so antiquated and no longer reflects the city’s needs, developers must frequently seek exceptions to its rules. Further, individual Community Plans are largely ignored because they’re so outdated. Despite this inherently flawed process, the benefits it delivers to politicians and developers undercut any willingness among the city’s political and business elite to update the General Plan.
Los Angeles is a unique city, given that its population boom came after WWII when the automobile quickly became the preferred method of transportation. As a result, suburbanization dominated urban development patterns. LA once had a robust public transportation system consisting of trolley cars like those still found in San Francisco today. But after WWII, a group of companies worked to undermine the trolley car system in favor of road construction to promote the automobile. With the passage of the Federal Aid Highway Act of 1956, blossoming suburban areas of Los Angeles such as the San Fernando Valley were cemented into place. By the late 1980s, roughly 80 percent of all daily commuters in LA County were solo drivers, the city’s public transportation was a national joke, and residents had fled the city’s rotting historic downtown core for the suburbs.
In the past 35 years, the trend has reversed back toward urban density. Residents – particularly millennials – now want to live in walkable neighborhoods close to where they work and are unlikely to own a car. But the current zoning regulations used to approve and deny building development were written in a car- and suburban-centric era that has since come to an end. The urban framework of the city might still be left over from an era where the automobile dominated, but the General Plan, a forward-looking document that is supposed to account for future growth trends, should reflect current urban planning views instead of those from the 1980s.
The City of LA Planning Department can grant exemptions from these zoning laws through a complex system of permits, called variances, over which the LA City Council has ultimate approval. Yet there is hardly ever any dissent in the votes, which are usually 15-0 in favor. As a result, each councilmember basically acts as the monarch of real estate development within their district. Developers know that if the councilmember doesn’t approve of a project beforehand there’s virtually no chance of getting a variance from zoning laws. Such a system introduces considerable risk of corruption.
In fact, the Los Angeles Times recently reported in a detailed exposé a major instance of a developer funneling money toward political campaigns to influence the variance system. Samuel Leung wanted to develop Sea Breeze, a $70 million apartment building in the Harbor Gateway area of Los Angeles. Because the proposed site for the project was zoned for industrial purposes – factories, distribution facilities and warehouses – the Planning Department recommended that the City Council not grant an exception to Leung. Another government entity that reviews development variances, the Planning Commission, also recommended a no-vote. However, the Los Angeles Times found considerable evidence that over six years Leung had paid off politicians in order to build public support for Sea Breeze, which eventually led him to gain approval for the variance he sought.
This corruption has persisted for so long because it exists in a legal gray area. The web of political donations that the Times discovered showed how the process is obscured. Instead of directly donating to politicians, a vast network of companies, employees and business associates connected to Leung made the donations. But the LA City Prosecutor either won’t investigate these networks, due to the challenges of prosecuting such a murky chain of political donations or to prioritize the office’s limited funds.
This type of backroom dealing pales in comparison to the region’s worsening housing crisis. While median household income in LA is about $53,482, the median home price is $590,400, up 7.3 percent from last year. That means that the average LA house costs about 12 times the median household income. Nationally, houses cost on average only five times the median income. It’s the same story with rentals: Roughly 48.2 percent of average monthly income in LA goes toward rent. Unsurprisingly, homelessness is a big problem for Los Angeles, where approximately 80,000 people are on the streets every night.
Los Angeles Mayor Eric Garcetti has developed an initiative to address this issue and alleviate homelessness by building 100,000 affordable housing units by 2021. But Garcetti can’t simply declare affordable housing into existence, and Los Angeles cannot afford to subsidize the construction without incurring astronomic debt. To get around these issues, Garcetti has chosen to use the California Density Bonus Law as a financial incentive for developers to support his initiative. The law grants concessions to developers to build beyond the scope of what’s allowed by zoning laws – as long as they also construct affordable housing. Developers are particularly interested in lowering expensive requirements for parking-spots-per-household, fast-tracking environmental impact reviews, and building higher-density units.
But Garcetti’s plan has a surprising opponent: The AIDS Foundation. The Foundation’s mandate is to provide support for those at risk of HIV/AIDS – which includes a lot of the homeless population in the city. In addition to opposing Garcetti’s plan, the Foundation is supporting an alternative plan, the Neighborhood Integrity Initiative (NII), which they proposed using part of their $1.2 billion total budget. It’s slated to appear on the March 2017 LA ballot.
The NII would forbid all construction that deviates from the General Plan for two years and effectively freeze real estate development. The AIDS Foundation and its supporters claim that the NII would help slowdown and maybe prevent further gentrification, which displaces many people at increased risk for HIV/AIDS. At the very least it would force City Hall to rethink the current system of real estate development. This argument is especially poignant in Hollywood, where a historically large LGBTQ+ population has seen some of the most intense effects of development and gentrification in the last 15 years. Like many other advocacy organizations, the AIDS Foundation blames gentrification for causing increased homelessness among an already disadvantaged population. Concerns about further gentrification under Garcetti’s proposal need to be considered. The question is open to debate about whether new luxury developments’ inflation of price in the market sufficiently undermines the benefits of new affordable units. Moreover, much of the real estate market both in Los Angeles and worldwide depends on global macroeconomic trends that are difficult to forecast. So a policy proposal that risks the well-being of an already marginalized group for a potentially disastrous housing plan deserves to be evaluated with a critical eye.
And yet Garcetti’s proposal is the best option for the city’s homelessness problem. The 100,000 new units would alleviate a considerable amount of stress on the existing housing supply while piloting a plan that could lead to additional affordable-housing projects. But NII would force Los Angeles residents to wait 25 years for affordable housing that might never actually pan out. Further, the NII would set back the wave of lower prices from old luxury developments at least two years – the length of the moratorium on variances – exacerbate shortages, harm the city’s general housing market, and cripple affordable housing developments along newly built public transportation light-rail train lines.
The LA Country Metropolitan Transit Authority (Metro) recently completed two new rail lines and is in the process of building two more, all of which are built along transit corridors with expected to be affordable higher-density development projects. This expansion of public transportation is a huge part of city leaders’ and developers’ justification for increasing density beyond historic precedents. Those who can’t afford or choose not to own a car could live in these new affordable units and have easy access to public transportation.
But NII supporters argue that this goal is unrealistic, as developers will prioritize building luxury apartments near public transportation instead of affordable housing units. Wealthier residents might try the train, but the intended goals of the transportation project would go unrealized. Regardless of the debate over who might use transit most, the NII’s passage would prevent these crucial developments, effectively dooming Metro’s effort to create a robust public transportation system that may go unused by the populations it is designed to serve.
In fact, Metro was so concerned about the Neighborhood Integrity Initiative ruining the nearby affordable housing developments that it sponsored its own ballot initiative, Measure JJJ, for the November ballot. The measure asked voters to decide whether affordable, dense residential housing should be incentivized around major transit stops. Measure JJJ passed with overwhelming support and guarantees the future of critical, transit-oriented projects before the NII even makes it to the ballot box. However, even though Measure JJJ would overrule the NII along important transit corridors, the rest of the city would still suffer from NII consequences.
The problematic effects of the NII and the outdated General Code have inspired an effort to update the General Code, called “Recode LA.” Organized by the Planning Department, Recode LA includes considerable urban land use technical planning and won’t be finished undergoing revisions until 2018. Given the political constraints surrounding any new proposal, it is unlikely that Recode LA will have any meaningful impact on the lives of Los Angeles residents in the near future. Further, a similar attempt to update Hollywood’s Community Plan was thrown out by a judge who concluded that the process had been unfair.
In the meantime, voters in the city face several choices regarding how the future of Los Angeles will be forged. Developing public transportation systems modeled after those of other major American cities should be at the top of the list. For residents whose most immediate need is affordable housing, supporting Garcetti’s plan ought to be prioritized as well. Only time will tell whether the City of Angels can build enough homes for those citizens to live.