Why I’m voting against Measure S and you should, too

If you’ve been driving around LA for the past few months, you’ve seen tons of “Yes on S” advertising.

Want to take a moment today to explain why I think Measure S is:

  1. Bad for the city; but
  2. Great for me

Before getting into the argument, let’s review what Measure S actually is. Among other things, it’s a two year moratorium on approval of any project that requires any kind of zone change. The idea is to stop big developers who donate money to politicians from making unfair profits building projects which exceed the standard zoning for their lots.

Sounds good, right?

Wrong. LA is chronically short on housing, due to the fact that roughly 50,000 people a year move here and our strict zoning code makes building sufficient housing for this influx of people almost impossible. The effect of our chronic under-building is that rents and sale prices climb much faster than inflation.

The only way to come closer to meeting the demand for new housing is to make it easier to build large apartment projects, particularly near mass transit (where the effect on traffic is muted). That’s because it’s far more efficient to add units in blocks of 100 or 500 than it is to do it in blocks of 10 (like we do).

But even the densest zoning we have (R4 and the rare R5) don’t let you build that densely, in part due to height and FAR limits conceived in an era when LA was basically a conglomeration of suburbs and not a true city.

In order to fit more housing on their lots, developers of very large projects generally go to the city planning department and, ultimately, the city council in order to get special spot zoning.

Measure S would restrict the planning department and city council from granting this spot zoning, making it way, way more difficult to get these large project built.

Fewer large projects -> slower rate of supply growth -> higher rents / prices. That’s bad for the city.

So, if Measure S is so bad for the city, how come it’s so good for me?

Well, I’m a housing supplier with a pretty large portfolio of units in desirable areas. To the extent that Measure S slows supply growth, I will continue to be able to raise rents at rates exceeding inflation. That’s great for me (and my investors!) because increasing rents take my projects from our target ~7% unlevered yields into the stratosphere.

But I’m going to vote against S, because my business is already good and I care deeply about the future affordability of our city for the vast majority of people. I hope you’ll join me.