LA City Council Support Does Not Secure Win for Measure S

The Rise of L.A.

According to Colliers International research, the Los Angeles Basin office market is the third largest in the country, behind NYC and the Greater DC area. As of the third quarter of 2016, it stands at 300 million square feet, of which only 11% is in Downtown L.A. and the rest is scattered in the wider metropolitan area.

Los Angeles is seeing a development growth rivaled only by the 1920’s. While the so-called construction boom is not limited to office construction, this is concentrated mostly in the Downtown, West and Central L.A. areas. Most of the projects underway are due in 2017. All signs point to a comfortable decade for investors, owners and, as more inventory comes online, realtors and tenants, too.

However, Measure S, aimed at stopping the spread of spot-rezoning high-rise projects and mega-developments, was hanging like a cloud over this bright future.

Politics as Usual?

In the ever growing Los Angeles real estate market, developers have been major contributors to elected official campaigns. Investigations conducted by the L.A. Times have linked spot zoning and spot General Plan amendments to sizeable political contributions. One such L.A. Times story focused on Samuel Leung’s “Sea Breeze” residential complex, placed in an industrial zoned area north of Sepulveda Blvd. The project required both rezoning, in an area planned for heavy manufacturing, and a height amendment, so it could be built higher than 45ft.

Rendering of Sea Breeze Apartment Complex (Los Angeles Department of City planning)
Rendering of Sea Breeze Apartment Complex (Los Angeles Department of City planning)

City Council Moves to Clean House

There is growing sentiment towards how spot zoning practices have resulted in obstructions to the flow of city systems. The “Neighborhood Integrity” ballot initiative seemed to have some support in the City Council. In the midst of public discussion over proposed Measure S, a new reform request was put forward.

On January 10th, five council members proposed drafting a new law, which would restrict donations made by developers to city officials. More specifically, it would ban contributions made by developers shortly before, during or shortly after their projects undergo city review. This proposal looks like an extension of Measure H, already adopted after the March 2011 vote, which bans contributions made by city contract bidders.

According to the L.A. Times, three of the five council members were, themselves, running in the March 2017 election and their opponents have been quoted as contesting their motives. Proposing this new law with only two months to go until the vote may put a smudge on their stated intentions of increasing transparency.

Furthermore, the proposal may not, ultimately, cover all bases.  So far, the terms have yet to be defined. It is said to “limit” contributions made by “developers and their principals” but does not exclude recipients that are also associated with the city and do not have a cap on accepted donations.

Voting on the Office Market’s Future

Although most of the talk against Measure S revolved around L.A.’s housing crisis, the initiative does name an exception for affordable housing projects, as well as “any type” projects that are already approved.  However, it does not look out for new commercial development projects, which risked ending up under a two year moratorium. As a result, the Los Angeles office marketwould stay within the lines. Office market expansions into neighborhoods undergoing significant changes, such as L.A.’s Arts District, would have temporarily restricted access to creative adaptive reuse options.

Both backers and opponents of Measure S praised the newly proposed ban. Supporters of the initiative considered it “an admission of guilt” and were happy to use it in the fight for a “yes” vote in this year’s March election. Critics of the ballot measure applauded the apparent integrity of the proposal, but questioned why it targeted only developers.

The Council seemed to be playing up to both sides, with an election around the corner and the Coalition to Preserve L.A. gaining more popular support for their initiative. The March 7th vote could determine if L.A.’s newly found growth spurt would come to a screeching halt.

Now the results are coming in and, while incumbents Mark Bonin, Joe Buscaino and Paul Koretz each got over 65% of the votes in their respective districts, Measure S fell through by an almost 40% margin.

Ioana Ginsac is a writer covering the latest commercial real estate news and trends for CommercialCafe.