How to Stop Housing Construction

Stuart Waldman
President, Valley Industry & Commerce Association

Housing. Affordable housing. Market-rate housing. Luxury housing.

I find myself talking about this topic way too often, but it’s because decision makers stress the need to address the housing crisis, yet they fail to approve policies that will attract developers to build more projects without breaking the bank. Instead, they approve policies that undermine those efforts.

Each regulation, fee and requirement forced upon developers becomes an added hurdle that stops a lot of projects from actually getting built. Building a home, especially in Los Angeles, is so difficult that it’s become comparable to the obstacle course you see on “American Ninja Warrior.” Many attempt to overcome the hurdles, but few succeed.

In 2017, the Los Angeles City Council approved a “linkage fee,” which charges developers of residential buildings between $8 and $15 per square foot, and charges commercial developers $3 to $5 per square foot for new projects. The fees are charged to developers to pay for affordable housing.
Developers want to build, but added fees are not exactly an incentive to build more. In fact, added fees are the reason many developers are choosing to do business elsewhere. When a project does not pencil out, the project will not get built – worsening the housing crisis.

I get it. We want affordable housing. Housing is expensive, but housing will not become more affordable if there are not enough homes to meet demand. We should be focusing on building all types of housing, right?

In the San Fernando Valley, Warner Center has a Specific Plan, which encourages the development of a mixed-use, live, work and play community. This means more homes and jobs in the Valley. Great!
Well, in an effort to stifle growth in the one area of Los Angeles where housing is actually being built, the Warner Center plan is now being targeted by a policy proposal that looks at ways to require the inclusion of “affordable” housing.

I don’t get it, and I don’t think they do either. The linkage fee is being charged to all developers in the city to address housing affordability. Yet Warner Center, which is subject to the linkage fee, is being targeted for an inclusionary housing policy without the linkage fee being fully implemented. Fees have yet to be expended to produce the intended affordable housing units. It has not been given time to work!

Let me tell you what will happen if the city were to add an inclusionary housing requirement to the Warner Center plan. Fewer projects will pencil out and developers will walk away.

The Warner Center, which is generating much-needed homes for the city, will see development stifled. Even if this new Warner Center specific inclusionary housing policy is in-lieu of the linkage fee, the cost of restricting units to an affordable level will have a much larger impact to the financial viability of new housing projects than a per square foot fee. As a result, less housing will be built, and the housing that is built will be more expensive for the average renter who does not qualify for affordable housing. There’s no winning is there?

In Warner Center, housing is getting built and developers are subject to the linkage fee. This is what the city wanted. Now they want more? Typical. If this new policy passes, it could very well be the straw that breaks the camel’s back for developers in Warner Center.

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