Uncovering The Paradoxical Effects Of Measure S With Mike Akerly

On March 7, LA voters will be presented with Measure S, an initiative that would check development and amend the laws governing changes to the general plan.

Proponents say its stringency will keep developers from influencing city officials with political contributions and keep the city from growing too quickly, affecting neighborhoods and increasing traffic. The opposition says Measure S would exacerbate LA’s housing shortage, dry up tax revenue streams directed toward parks, schools and essential city services, and trigger economic decline and job loss by halting development.

We caught up with Polaris Pacific vice president and regional manager Mike Akerly to learn about the ballot measure’s anticipated impact.

Bisnow: What is the state of LA’s housing stock? Is the city experiencing a construction boom?

Akerly: Although the media’s engendered this perception that we’re experiencing a massive residential construction boom, we’re in fact in the midst of a housing crisis. Housing construction in LA has lagged behind population growth for decades. People are quick to call it a boom because they drive down the 110 freeway and can see cranes dotting the downtown LA landscape. The reality is that we are nowhere near the point of oversupply or glut. 

LA needs about 30,000 new homes built each year just to keep up with ever-increasing demand. We would need to add an estimated 80,000 homes annually to halt the unprecedented increases in rents we’re seeing each year. This extra 50,000 would merely restore supply-and-demand equilibrium, rather than reversing the trend and causing rents to drop.

Last year, we added an insufficient 26,000 units, continuing a trend of falling behind that’s persisted throughout the current decade. Between 2010 and 2015, we built approximately one new unit of housing for every four people that were added to LA’s population in that period. 

Bisnow: Can you explain the impetus behind Measure S? What are the implications for development in LA if it passes?

Akerly: Measure S would put an immediate moratorium on all new residential development in LA that requires an amendment to the city’s general plan or changes in zoning, density or height. While this may sound like a clever tactic to force attention to the neglected and obsolete general plan — a document that hasn’t been revised for over 20 years — the proposed measure has some highly negative potential repercussions.

For example, a few months ago, LA passed Measure HHH, which permitted the city to raise funds to build 10,000 units of low-income and permanent supportive housing for the homeless. The first plans to arise out of Measure HHH call for building several hundred of those units on the sites of various city-owned properties, like fire stations and animal shelters. That development, however, would require amendments to the general plan, and thus be stopped in its tracks by Measure S.

In addition, Measure S is written to limit city planners’ ability to reduce parking requirements in new projects. LA is a metropolitan city that is home to over 4 million people. Its traffic issues are infamous worldwide. The general plan should address this, especially at a time when most planners and environmentalists are looking for ways to build transit-oriented developments across the city with fewer parking spots. Public transportation and ride-sharing services can ameliorate congestion as population density increases and space becomes even scarcer.

Bisnow: Would secondary markets benefit from Measure S? 

Akerly: It’s true that secondary markets such as San Diego and Long Beach will benefit from the influx of capital as developers identify opportunities for projects with less stringent local regulations.

On the other hand, you have many more developers who will shift their focus from new construction to conversions and value-add opportunities in order to avoid the reach of Measure S.

The result is that the existing inventory of older residences that typically command middle-market rents will get a facelift. This will move them into the higher end of the rental spectrum. Low-income residents may find themselves priced out and the overall housing stock count would stagnate. This would cause demographic shifts in last affordable bastions, as developers will push further into value-add areas with the biggest upside potential. 

Bisnow: Can you quantify the losses LA would suffer if this passes?

Akerly: If Measure S passes, LA stands to lose 12,000 jobs per year, especially in construction. The measure would slash the city’s GDP by nearly $2B, and $70M in sales, property and transient occupancy revenue would also disappear.

Measure S raises legitimate concerns, and it’s great a greater discussion has been initiated. Already, city council’s felt pressure to develop an ordinance that calls for updates to the general plan every six years. This would make the process more transparent and predicable for developers, decreasing costs, increasing efficiency and consequently benefiting the entire city. However, any solution aimed at improving the project approval process shouldn’t result in dire consequences for LA, its citizens, its economy or its housing market. 

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