Passage of Measure JJJ creates concern among developers

Voters in Los Angeles have approved a new measure that imposes new requirements on certain residential development projects. Measure JJJ applies to projects where builders are seeking zoning changes, such as constructing more units than allowed or in a location where building currently isn’t allowed.

Developers on these projects will be required to construct a specified number of below-market units as part of the development. The measure also requires hiring local workers at a union-scale wages.

Measure JJJ will raise costs for developers

The measure intends to create more affordable options for LA residents by setting aside up to 20 percent of the units in applicable new developments as subsidized housing. It also seeks to promote living-wage jobs.

Developers are concerned that the new requirements will raise their costs and perhaps prevent some projects from being built at all. Hiring local workers could increase costs anywhere from 8 to 20 percent. In addition, the new requirements could drive up the price of land, as developers seek property that doesn’t require zoning changes.

Unions and affordable housing advocates pushed for the measure, which voters approved by a large margin. Measure JJJ also gives incentives for developers to create housing near major transit lines. Brokers and developers warn, however, that Measure JJJ could lead to a negative effect on the local housing market.

One negative effect could be fewer small developments. Many larger developments already use union labor, even though that tends to be more expensive.

A well-meaning measure could have unintended consequences

Another key issue is the affect of the new measure on land values. Proponents of Measure JJJ argued that putting more restrictions on development would actually contribute to a decrease in land values.

This is by no means certain, however, and the opposite could easily occur. Many landowners are currently selling because prices are up. If the value drops, a significant percentage of them might wait to sell, with unpredictable effects on the market.

At the same time some investors are starting to pull back from the market, sensing a housing bubble. Though investment in prime real estate locations is still at an all-time high, it is unclear how long that can continue. Measure JJJ has added another level of uncertainty to that already uncertain picture

The possibility of litigation

It is also unclear how many project proposals that had already been submitted to the city will be exempt from the new rules. Some applications might be grandfathered in, but others might not be.

The possibility of court challenges to implementation of the rules on issues such as this is very real. If you are unsure about your situation, it makes sense to get knowledgeable legal counsel.

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