Voters Overwhelmingly Approve ‘Build Better LA’ Initiative Resulting in New Affordable Housing and Local Hiring Requirements For Developers

by Sheppard Mullin Richter & Hampton LLP
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Voters this week approved Measure JJJ, otherwise known as the Build Better L.A. initiative (the “Initiative”), which establishes new labor and affordable-housing requirements for developers in Los Angeles seeking discretionary approvals for residential projects.  The Initiative was promoted by the L.A. County Federation of Labor, which cited the City’s inability to meet the increasing need for affordable housing as motivation for the Initiative.

Who Does it Apply to?

The Initiative applies to all residential housing projects with ten or more units needing a discretionary approval that is any of the following: (a) a general plan amendment, (b) a zone change or height district change that results in increased residential floor area, density, or height, or (c) authorization of residential use where previously not permitted.

What Does it do?

Residential housing projects that are subject to the Initiative will be required to provide on-site affordable housing units. The required number of restricted units to be set aside will depend on the requested entitlement and if the units are for-rent or for-sale units.  The percentage will range from as little as 5% of units set aside in a rental housing project to Extremely Low Income households, to as much as 40% of units set aside in a for-sale housing project to Moderate Income Households.

In place of providing affordable housing units on-site, the Initiative offers alternatives to compliance, including providing affordable housing units off-site, acquisition of “at-risk” affordable housing properties and converting the units into non-profit or other similar type of housing, or payment of an in‑lieu fee into the City’s new Affordable Housing Trust Fund. The in-lieu fee will be determined by a formula using an “Affordability Gap” multiplier as defined in the Initiative.  Additionally, projects that opt to provide off-site housing will be required to provide additional affordable units based on a formula that increases the number of required units based on the distance from the primary project.

Further, the Initiative requires that residential housing projects seeking discretionary approval be constructed by licensed contractors, with good faith effort to ensure that 30% of whom are permanent Los Angeles residents and at least 10% of whom are “transitional workers”—single parents, veterans, on public assistance, or chronically unemployed—whose primary place of residence is within a 5‑mile radius of the project.  Projects subject to the Initiative will be required to pay “prevailing wage”—an average of area wages based on a formula created by the state government—to all construction workers on the project.

In addition to the provisions summarized above, the Initiative mandates new review and processing requirements for eligible projects as well as other measures.  We are available to discuss the potential impact of the Initiative to your development objectives.

When Does it Go Into Effect?

The Initiative becomes effective upon the declaration of the City Council of the results of the election. This typically occurs within 10 days of the certification of the vote results. Thus, the Initiative can be expected to become effective by November 19, 2016.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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