Why I'm Voting No On Proposition JJJ

Of all the local and state initiatives on the ballot this year, the City of LA's Proposition JJJ has probably caused the most division, at least among the circles I run in. Urbanists, housing advocates, planners, and social justice groups (to name a few) are fighting over whether this is just what LA needs to fix its affordability problems, or yet another short-sighted reform that says all the right things, but will leave us worse off in the long run.

Backers of the initiative have mostly argued that JJJ would create gobs of affordable units at no expense to anyone except developers, while also strengthening local hire provisions and supporting our unionized tradespeople in the region. And who could argue with that?

Opponents, meanwhile, have often railed against the proposition in apocalyptic terms, claiming that it will effectively halt most development in LA for the next 10+ years, exacerbating a housing shortage and affordability crisis that's already gone unaddressed for far too long. Reducing development will mean fewer construction workers, too, which does no favors for any workers, union or otherwise.

I'm in the latter camp—the opponents—though I've tried to be a bit more measured in my arguments against Prop JJJ. I think the supporters of the initiative have their hearts in the right place, and a lot of smart people whom I respect have lined up behind it. I also don't want to see bridges burned for the many issues on which we can and should collaborate in the future. But none of this changes the fact that I think JJJ is bad policy. And, even if it's passage is almost inevitable, I feel obligated to explain why.

 

Ballot Box Planning Is Bad

Before getting into any specifics, Prop JJJ is an example of ballot box planning, and ballot box planning has a pretty bad track record in LA and California. Prop 13 is a statewide proposition that had the good intent of protecting "house rich, cash poor" households from displacement, but has ultimately resulted in a massive transfer of wealth from younger, poorer, disproportionately non-white residents to older, whiter, more affluent residents. Locally, Proposition U passed in 1986 and is the reason we have so many ugly strip malls on our main commercial corridors, which has also pushed development into less transit-oriented areas where people already live, resulting in increased displacement.

Land use is complex in that you can't change one thing without affecting many others in unknown/unknowable ways, and yet we're asking average people to make permanent decisions based on really high-level promises about "affordable housing" and "good jobs" without any understanding about how those promises might backfire. Given the complexity of these decisions, even planners aren't great predictors of what will happen. But at least they know what to look for. The argument being made by people like me, and the local chapter of the American Planning Association, among others, is that there are genuine questions about the unintended consequences of this initiative. And we're not just talking about some ambiguous "well something bad could happen." We've identified numerous specific issues of concern that are being glossed over by JJJ supporters.

 

Affordable Housing Requirements Are Good, and Uncontroversial

Prop JJJ is really two initiatives in one, and the first is about affordable housing.

The idea is that if a developer buys a piece of property and then requests a zone or height change that lets them build extra housing, they should be required to set aside some of their units as affordable to low-income households. This is a completely reasonable demand. Extra housing means extra profit, and the community should have a mechanism for capturing much of that value rather than just giving it away to the property owner.

We actually already have a system in place, known as the density bonus, which allows you to increase the number of units you build by up to 35% so long as you set aside some as affordable. It makes sense that if you get a zone change or general plan amendment that increases your buildable density by 50%, 100%, or more, that you should provide even more affordable housing than the density bonus requires. 

But what is the right amount of affordable housing? In theory, a project with a 100% bonus should provide more affordable housing than a project with a 50% bonus. The answer to that question is something that City Councilmember Mitch O'Farrell and the Department of City Planning are working on. Importantly, if City Council adopts a similar policy—which you, me, and everyone you know should press them to do—it will be informed by research, will be reversable if it doesn't work as planned, and can be reformed at any time, as circumstances change. That's not the case with ballot box planning, which will lock us in for at least 10 years, even if any or all of the concerns held by people like myself come to fruition.

The inflexibility of Prop JJJ relative to a City-designed process isn't just about if things go wrong. With more thoughtful, informed, and malleable standards, we can be sure that we don't leave any affordable units on the table. Prop JJJ requires that any project exceeding the 35% density bonus set aside 11 to 20 percent of its units for low income households. But a project that receives a 100% bonus should be capable of providing more benefits than one with a 50% bonus, and City standards can be written to require more of projects with larger bonuses. 

 

Labor Requirements: Better Wages, But Less (And More Expensive) Housing

The second part of Prop JJJ is about labor.

The backers of the initiative rightly point out that affordable housing is one component of the affordability crisis, and that a lack of good-paying jobs is the other. Prop JJJ requires that all projects of 10 units or more pay "prevailing wages," which basically means union wages. (Other requirements in the initiative indirectly require that most workers be unionized.) Right now most large projects (50-100+ units) already use prevailing wages, and there's a reason it's usually limited to these bigger projects—they can afford it.

A study by Beacon Economics shows that prevailing wages tend to be around 50% to 150% higher than mean wages for a given craft, can increase total project costs by nearly 50%, and can make a lot of smaller projects financially infeasible. In other words, they don't get built at all. So while a larger share of units in big buildings end up set aside for low income households—adding perhaps several hundred new affordable units each year—we completely eliminate the viability of several hundred, or even several thousand market-rate units in smaller projects. And since many of those smaller projects also include affordable units, those are lost as well. This initiative is being framed as a way to make big developers pay their fair share, but the majority of projects that request general plan amendments, zoning, and height district changes are 50 units or less; these are the ones that will be hit hardest, and most likely to disappear from the market altogether.

The "Change Share" row breaks down what types of projects request zone changes, general plan amendments, and height district changes. Only about 1/3 of these requests are made by projects with more than 50 units; the projects represented by the green bar are the ones most impacted by the labor requirements, and most likely to be rendered infeasible. From Beacon Economics.

We already have a problem in LA with very little "missing middle" housing being built. Missing middle housing tends to be less obtrusive and less expensive, and if this housing type gets priced out of existence we're likely to see more "mega-developments" targeted even more toward the very highest earners. No one else can actually afford to live in a mega-development built with the highest-paid labor, especially when the market-rate units have to also subsidize the cost of affordable units. You have to earn a massive amount of profit on your market-rate units to be able to cover the cost of an affordable unit, since those units are a pure loss for developers. (Affordable rents are basically enough to cover operating expenses of a unit, and they pay back no capital costs at all.)

There's an important point I want to make about wages here.

People see opposition to prevailing wages and read that as anti-union, or assume that I oppose a livable wage. That's absolutely not the case, nor is it for anyone I know opposing JJJ. In this case we're talking about increasing wages from $20 or $30 an hour to $50 or $60 an hour. We're talking about going from already-livable wages—right around the median wage in the LA Metro area—to $100,000+ per year, and then we're mandating those higher wages by law for just a few thousand private workers in our city, while everyone else is left hanging.

My view is that if raising the minimum wage puts a McDonald's out of business, so be it. You shouldn't be able to operate a business that pays its employees poverty wages, and if McDonald's goes out of business we're really no worse off as a society. (Let's be honest, we're probably better off.) If significantly less housing gets built, though, that is a big problem, because people are continuing to move here whether we build new housing or not. They need a place to live. We may, may get a few hundred more affordable units each year as a result of JJJ, but our housing shortage will get worse even faster because the total number of units will grow more slowly. I reject the notion that we need to make things worse for the 1.3 million households already in LA in order to make life easier for a couple hundred fortunate families who win a lottery for an affordable unit each year. We can add affordable units without worsening the overall housing shortage, as I'll discuss below.

I'm sympathetic to the desire to pay people more, but paying a not-particularly-needy group of workers twice as much at the expense of higher housing costs for a million households is not something I view as a fair trade. If higher wages are warranted, everyone should be eligible for them, and we should just raise our minimum wage even higher. 

And remember, if total housing construction slows down, that means fewer construction jobs too. Those who keep their jobs might be better off, but a lot of people will be out of work entirely.

 

Affordable Housing Negotiable, Wages Are Not

Another issue with this initiative is that everything is negotiable except wages. The ballot language makes this clear: If a project is infeasible because of the affordable housing and wage requirements, City Council can intervene and eliminate or reduce the affordable housing or local hire requirements, but the developer still needs to pay prevailing wage. It's the one thing that is non-negotiable. That doesn't smell right to me.

Right now, even without any affordable housing requirements on the books for these types of projects, City Council can and does negotiate with developers. Those negotiations are open-ended: they can request affordable housing, an investment in a local park or community center, whatever. Granted, Council doesn't always make those demands (though they often do), and their failure to do so consistently is why JJJ is here before us. But once JJJ is the law of the land, we won't have any options—there will be projects where the only community benefit is the prevailing wage, and no affordable housing is built at all. We don't get to choose which we value more, because Prop JJJ makes that decision for us.

Under existing circumstances, community benefits are negotiable so that we, the community, can decide what we value most—under Councilmember O'Farrell's proposal, affordable housing would be the priority. Under Prop JJJ, higher wages and union hiring preferences are the #1 priority above all else. Frankly, I don't think that's how most communities would rank their priorities if they fully understood what they were voting on.

 

Perverse Land Use Incentives

Another wonky problem with JJJ relates to future community plan updates.

We want community plans and zoning that reflect our goals as a community, and how we think it should grow—including how much housing we think we'll need to keep up with demand in the coming decades. JJJ provides a massive incentive for affordable housing developers and unions to advocate for community plan updates that don't adequately prepare for these changes, because the provisions of JJJ depend on site-specific, case-by-case zone and general plan amendment changes.

One of the biggest problems with planning in LA is that it seems so ad hoc, and we never seem to stick to the plans we have—largely because they're so out of date and they don't reflect our current needs. This initiative gives a very strong incentive to continue doing poor, ad hoc planning because that will become the primary means by which we create new affordable housing. We can do a lot better, and I think we'd be much better served taking all of the energy behind JJJ and redirecting it toward Measure HHH, forcing Council to adopt O'Farrell's proposal, and identifying other proposals that don't pit market-rate and affordable housing against each other, because we need both. 

 

A Call For Peace, Collaboration

As a result of my opposition to JJJ, some have made very negative assumptions about my overall support for and commitment to improving the affordability landscape. That's unfair, since any impartial judgment of my record would make it clear that affordability is something I take incredibly seriously—just read any of the dozens of articles I've written on the subject, from expanding rent stabilization, to reforming Proposition U and Prop 13, to restructuring housing allocations, to taxing home appreciation, to non-profit housing acquisition, to rethinking the state density bonus program. All of these ideas have the potential to significantly increase the supply of affordable housing without reducing overall housing development, and the core of my opposition to Prop JJJ is that it's rooted in a zero-sum approach that assumes one must come at the expense of the other. I know we can do better, and I see the momentum right now to actually achieve it.

So here's my thing: We can disagree on this issue without resorting to personal attacks or assumptions of ill motive. I believe it will be bad for affordability, others believe it will be good. I'm making my case here as clearly as I can so that people understand this isn't about opposition to affordable housing per se, but to this initiative in particular. Supporters of JJJ will make their own case, which they are welcome to do and I'm happy to debate their claims on friendly terms, with the understanding that we're all trying to do what we think is best for our city.


Summary of Arguments

  • Ballot box planning has a terrible track record of unintended consequences that are also irreversable. This initiative continues that tradition.
  • The affordable housing requirements in JJJ are welcome, but we can and should enact these at the City legislative level, so that we get the most affordable housing possible and can reform and amend the requirements as circumstances dictate.
  • The prevailing wage requirements will increase total costs for small projects by nearly 50 percent, which, for many, means they don't get built at all. We may get more affordable units out of large projects, but we'll get fewer market-rate and affordable units out of smaller ones. 
  • This also means that an even larger share of our new housing will be as part of "mega-developments," and "missing middle" housing will evaporate.
  • Less total development also means fewer jobs, not just for construction workers, but for all the people who design, plan, and provide supplies for new housing.
  • Higher wages aren't inherently problematic, but increasing wages from an already-livable rate of $20-30 per hour to a $100,000+/year rate of $50-60 per hour shouldn't be an electoral priority—especially when it comes at the cost of more expensive housing for the more than 1 million households already living in the city.
  • The affordability requirements in Prop JJJ are negotiable, and can be reduced to zero by City Council if project finances require it—but prevailing wages cannot be adjusted. This initiative prioritizes very high wages for union employees over affordable housing, which I don't think reflects our values.
  • JJJ is dependent on out-of-date community plans and zoning to create affordable housing. It thus creates perverse land use incentives which encourage the City to continue under-zoning our communities in ways that don't reflect our changing needs.
  • We have a number of options at our disposal for increasing the supply of both market-rate and affordable housing, and advocates should focus our efforts there rather than on zero-sum proposals that pit one housing type (or resident type) against another.