Measure S: Neighborhood Catastrophe Initiative

BUILDING MORATORIUM WOULD COST L.A. ECONOMY $3.8 BILLION AND 24,000 JOBS IN FIRST TWO YEARS, REPORT SAYS

Housing ban would punish low-income renters and workers by driving up rents and further restricting LA's housing supply amid crisis-level shortage

LOS ANGELES -- Measure S, the building moratorium slated for the March 2017 city ballot, would worsen Los Angeles's affordability crisis, cost the city nearly $2 billion in lost economic activity, and rip a $70 million-plus hole in the City of Los Angeles budget each year, according to an economic impact report produced by Beacon Economics, the consulting firm founded by economist Christopher Thornberg, formerly of the UCLA Anderson Forecast.

"Measure S is a recipe for recession. It drains billions of dollars out of our economy, hikes rents for working Angelenos, and puts the squeeze on our parks, our schools and our city general fund," said Elise Buik, President & CEO of United Way of Greater Los Angeles. "Its direct effects would cost Angelenos jobs and worsen the homelessness crisis we just voted to address. Its ripple effects would make us a poorer city, and one that is more crowded and less fair."

Measure S would institute a moratorium on buildings that require zoning changes or General Plan Amendments. The report analyzed the proportion of local construction over the last ten years that required such amendments, finding that the combined impact on jobs would be a net loss of 12,000 per year, and a cost to the economy of $2 billion for every year that the moratorium continues. The report, which can be downloaded at http://goestoofar.com/report, considered not only the direct loss of construction jobs, but the indirect and induced losses as well.

"If you want your city to support a middle class, don't throw away construction jobs," said Ron Miller, Executive Secretary of the Los Angeles/Orange Counties Building & Construction Trades Council. "The career path that construction offers is the most reliable entry point to the middle class you can imagine. And members of our city's middle and working class will have a hard time finding homes in Los Angeles if Measure S bans us from building the housing our city needs."

As the report indicates, shutting down housing production amid a record-breaking housing crisis would be perverse in the extreme. "Placing a moratorium on projects that do not conform to the Neighborhood Integrity Initiative's guidelines is not conducive to supporting the growing population of Los Angeles," argues the report (p. 33). "Reducing residential construction would further accelerate increases in home prices and rents."

The elimination of jobs and reduction of economic activity would have vast repercussions for public spending as well, the report concludes. The loss of economic activity would shrink property and sales tax revenues, while the building moratorium would cause a direct loss in school development fees, Quimby (park) fees, and transient occupancy taxes. The total cost to the public would approach the equivalent of hiring 1,000 police officers or firefighters -- up to $700 million if the ban were to last ten years.

"I can't think of anything less responsible than voting to cut a $70 million hole in our city budget each year," said Gary Toebben, President & CEO of the Chamber of Commerce of Greater Los Angeles. "Do the backers of Measure S plan to make up that difference by raising our taxes across the board? Or simply by having smaller parks, poorer schools, and fewer police officers and firefighters?"

Critically, the report analyzes losses to the city's economy on a year-by-year basis, projecting out over ten years. Although Measure S claims to only institute a two-year building moratorium, observers have concluded that its language makes it likely to last for as long as ten years. After the initial two-year ban, the law continues to restrict development until community plan updates are in place, a process that in the city of Los Angeles often takes as long as ten years -- especially given the robust environment for lawsuits presented by the measure, and the complete lack of additional funding it proposes to help get those plans done.

"As a neighborhood council member, I'm proud to fight for development that makes sense for my community," said Michael Menjivar, Treasurer, North Hollywood North East Neighborhood Council. "You know what doesn't make sense for anyone's neighborhood? Pushing Los Angeles into a recession."

For more information on the No on S campaign, visit http://www.goestoofar.com.

MEASURE S'S ECONOMIC IMPACT BY THE NUMBERS

Measure S will cost Los Angeles:

  • Over 12,000 jobs each year
  • Over $640 million in wages for workers each year
  • Nearly $2 billion in lost economic output each year
  • $70 million in sales, property, transient occupancy and other fiscal revenues each year -- enough to hire over 1,000 new policemen or firefighters
  • $10.6 million loss to renters each year, increasing rents which will result in over $4.2 million in lost wages
  • Over $12 million each year for our local schools
  • $14 million each year for parks and recreational facilities generated through Quimby and Finn fees
  • $27 million in property tax revenue over the course of the two-year moratorium, and an additional $1.5 million each year in ongoing fiscal impacts.
  • Over $10 million in lost sales tax revenue each year from combined upfront and ongoing construction and business activity.

SELECTIONS FROM THE BEACON REPORT 

"If adopted, Measure S will have the effect of halting construction, stifling the economic activity and job creation as a result of that construction, cost Los Angeles millions in tax revenue and make an already dire housing situation much worse." - p.2

"These data show that a moratorium on projects requiring a General Plan amendment, zone change or adjustment to height restrictions would have far-reaching impacts on the L.A. economy. Thus, a two-year moratorium, as outlined under the measure, could affect over 24,000 jobs in Los Angeles, leading to a potential loss of $3.8 billion in economic activity and over $1.2 billion in lost wages. In essence, a two-year moratorium would put an important driver of economic activity in Los Angeles at risk." - p.4

"As it stands, Los Angeles does not have adequate housing to keep pace with its population. The housing shortage, in turn, makes lower-income people worse off.

"When groups such as backers of Measure S block developers from building housing, home prices and rental rates rise. There is only so much land available on the market for development. Removing developable land will drive up the price of existing land on the market, making it more expensive and less likely for affordable housing to be built." - p.5

"Today, home prices and rents in Los Angeles are among the highest in the nation. Primarily, this is because Los Angeles has one of the nation's tightest supplies of housing. Currently, the supply of homes for sale in Los Angeles County stands at 3.6 months, compared with more than 4.5 months nationally. At the same time, the vacancy rate for apartment units is among the lowest in the country, 3.5% compared with 4.5% for the nation [...] The growth of home prices in Los Angeles compared with California's other largest cities is unmatched. Over the last 15 years, home prices in Los Angeles have increased 400%." - p. 26

"Rising prices and rents are symptomatic of insufficient supply, a condition in Los Angeles that has persisted for decades but especially in the last five years. From 2010 to 2015, Los Angeles added over 200,000 households. Over that same period, fewer than 56,000 residential building permits were issued." - p. 26

"Placing a moratorium on projects that do not conform to Measure S's guidelines is not conducive to supporting the growing population of Los Angeles. Reducing residential construction would further accelerate increases in home prices and rents. [...] Although lower-income residents suffer the greatest burden from the measure, middle-class residents would also suffer from the cutback in residential developments as their rents become marginally unaffordable over time. To alleviate the housing affordability crisis that has struck low-income and middle-income households, more housing construction needs to take place. Measure S, however, would do just the opposite." - p.33