How Did We Get Here Strong Job Market Expensive to Build in L.A. - PowerPoint PPT Presentation

How Did We Get Here • Strong Job Market • Expensive to Build in L.A. • Local Control over Zoning • CA’s Proposition 13 • The Global Market

Strong Job Market • L.A. is home to 5 million jobs, 900K have been added in the last decade and tens of thousands are created each month. • L.A.'s GDP grew by $74.7 billion in the last three years and is now $1 trillion. Driving growth is a broad and diverse mix of investments in the region's large-scale infrastructure projects and technology, media and entertainment, healthcare, real estate, aerospace, tourism and trade. This Photo by Unknown Author is licensed under CC BY-SA • New manufacturing jobs with middle-class wages are being created by the blue “ocean” economy, and the “blue sky” economy. L.A.'s space industry alone has created more than 6,000 jobs in the past decade, with an average wage of over $100,000. Entry-level electrical engineers are earning $75,000 to $80,000 and entry-level software engineers are making about $76,000. • Health-care jobs, which increased every month during the Great Recession, will increase by 600K new jobs in the next decade alone, as the number of Angelenos 75 years-old and older will increase by 250 percent by 2060. • A tight job market has forced companies to find ways – higher salaries, etc. - to retain and recruit skilled-workers. This trend plays a role in driving up rents and housing prices.

Its Expensive to Build Housing in L.A. • Limited land plus high demand means high land prices. • Construction labor and the cost of the raw materials have been rising over the last five years, and are higher in CA than other parts of the country. • Construction labor is about 20% more expensive in major CA cities than in the rest of the country. (CA LAO) • Building codes and environmentally-friendly design requirements in many CA cities require different types of raw building materials to be used, some of which can be pricier than elsewhere in the country. And nationwide, the cost of vital resources like lumber and concrete are on the rise. • L.A.’s Measure JJJ added fees and requirements on projects that require zone changes and/or general plan amendments. From 2016 to 2017 the number of units requested using a zone change or general plan amendment dropped by 78%.

Local Control over Zoning • In 1960, the City of L.A. alone was zoned to accommodate 10 million residents. The City’s population has increased by 157% to four million people, but community-based urban planning practices resulted in the city being presently zoned for only 4.3 million residents. • As a result one new housing unit was constructed for every 3.7 new residents. Seventy-five percent of the residential land area in the City is now dedicated to low-density single family housing, and this land houses only half the population. • Residents in these neighborhoods use their influence and resources - social, legal and political - to discourage state and local policymakers from changing zoning laws that would encourage the development of multi-residential housing units in their communities. • These actions have pushed the pressure for development, along with any negative impacts, to neighborhoods with fewer resources to resist, further exacerbating inequities, as well as increasing traffic congestion, generating greenhouse gases and reducing economic productivity.

Proposition 13 & CEQA • Proposition 13 locks in a homeowner's property tax to the year they bought their home — no matter how much their home increases in value. • Local governments became reliant on other revenue sources like big box retailers, car dealerships, as opposed to a multifamily apartment building. • New construction shoulders the burden of funding infrastructure, affordable housing, and other community benefits, while existing structures (and residents) face no such obligation. This has a restrictive impact on development, making projects with large profit margins the only ones feasible. • Most of the 48 CEQA suits currently underway in L.A. are against residential projects and four-fifths of all suits filed under it have sought to stop infill development in cities (i.e. - on land already zoned for building) even though this usually has a smaller environmental impact than building on green fields. This Photo by Unknown Author is licensed under CC BY-SA

Global Market & Private Investment Firms • As global wealth increases, housing is becoming a more global asset than a purely local one, especially in big cities across the globe. • In 2006 ~10% of CA single-family homes were purchased in all-cash transactions. A decade later, it’s nearly 25%. International buyers are more than twice as likely to pay in cash as domestic buyers. • Chinese buyers spend billions each years to purchase homes in the U.S. 40% of those purchases are in CA. Last year Asian buyers accounted for 71% of CA homes sold to foreign buyers. That dwarfs the next closest group of international buyers, Latin Americans at 14%. • Some real estate economists estimate that 5% to 10% of the state’s single-family housing stock could be owned by international buyers. • Private investment firms snapped up a ton of cheap homes during the foreclosure crisis—at one point more than one in three CA homes was being purchased with all-cash.

Whose Driving L.A.’s Economy? • A year ago Google occupied just 100,000 square feet of office space in LA – at the “binoculars building” in Venice. • It is now expanding that footprint with its 450,000 square foot “Spruce Goose” building in Playa Vista. • And in January of 2019, it announced that it will be adding 584,000 square feet of office space at the One Westside project come 2022. • Until recently Facebook had leased only 50,000 square feet in LA, but in January it also announced that it would be adding 260,000 square feet to its local footprint in Playa Vista. • Apple announced in December of 2018 that it would be opening an office with 1,000 employees in Culver City , in addition to the production studio it had previously planned there. This Photo by Unknown Author is licensed under CC BY

Employment Centers in L.A. Location 1997 2019 Types of Jobs Types of Jobs El Segundo Non-Center 70K professional, scientific and technical services, manufacturing software engineering, data processing, internet development, motion picture and video San Fernando Non-Center 53K production — has grown about 74 percent over the last decade. Santa Fe Springs Non-Center 42K Industrial Downey Non-Center 36K Retail Burbank/LA 2 Non-Center 30K Creative Rancho Cucamonga Non-Center 27K Industrial Chino Non-Center 23K Industrial Riverside SW Non-Center 21K Retail Camarillo Non-Center 18K High tech Moreno Valley Non-Center 14K Retail Downtown LA 280K 310K Knowledge Intensive Business and Production Services Knowledge Intensive Business and Production Services Beverly Hills/W Hollywood 113K 159K Knowledge Intensive Business and Production Services Creative Irvine/SNA Airport 125K 140K High tech High tech Glendale 52K 87K Retail Knowledge Intensive Business and Production Services Pasadena 58,916 83,518 Knowledge Intensive Business and Production Services Knowledge Intensive Business and Production Services Irvine/Lake Forest 28K 66K High tech High tech Torrance 52K 54K High tech Industrial Riverside 35K 37K Knowledge Intensive Business and Production Services Knowledge Intensive Business and Production Services City of Industry 18K 28K Industrial Retail Ventura 11K 25K Retail Retail Lancaster 16K 20K Retail Retail Thousand Oaks 12K 20K Retail Retail Simi Valley 15K 19K High tech Retail Covina 7K 18K Creative Retail Santa Clarita 10K 15K Retail Retail Palmdale 4K 12K Retail Retail San Bernardino 26K 6K Knowledge Intensive Business Services Creative South El Monte 24K Non-Center Industrial Industrial Hawthorne 12K Non-Center High tech High tech Burbank/LA 10K Non-Center Industrial Industrial Oxnard 27K Non-Center Retail Retail

Challenges Workforce: L.A. is creating too many service sector jobs at wages that don’t cover housing and living costs, and the middle- class is leaving L.A. Affordable Housing Units: More than 800K renter households qualify for affordable housing, but there are fewer than 300,000 units at rents that would be affordable. 24K students at 57 CA Community Colleges are housing insecure and 8K homeless. Old Housing Stock: More than 50% stock built before 1950. There are habitability problems with units and depressed property tax revenues. Rent: 52% of population rents and median rent has gone up 32% since 2000, while household income has actually dropped about 3%. Overall, residents earning 55K have to set aside nearly 47%of their income - the highest amount among all the nation's 35 metro areas - to afford rental payments. Homeless Housing: More than 31K city residents require housing and it takes too long (3 to 5 years) and costs too much (500K per unit) to complete. This Photo by Unknown Author is licensed under CC BY Local Government: Not enough resources to maintain general plans expose proposed projects and localities to successful legal attack when a neighborhood organization, environmental group or competing business is seeking to overturn a development decision. The higher costs and risks associated with the approval process prompts developers to build projects that will be least controversial and will contain the biggest profit margins.