LABC Study: Major Reforms Needed to Meet L.A.’s Ambitious Housing Production Goals

May 11, 2023

Bottlenecks in the entitlement process are hampering Los Angeles’s ability to achieve its housing goals, according to a new study released today by the Los Angeles Business Council. The study recommends reforms that would sharply increase production as the city must produce five times more housing units by 2029 than were built last decade.

The report from UCLA and California State University, Northridge, examines how the long and complex housing development process has contributed to the city’s failure to keep pace with housing needs. California’s Regional Housing Needs Assessment (RHNA) estimates the city must add 456,643 units from 2021 to 2029 – a five-fold increase over the 83,865 units produced from 2010 to 2019. That means completing 57,000 units a year on average, compared to less than 9,000 units annually last decade. Los Angeles has approved even higher goals, requiring an average of 4,000 additional units a year per its Housing Element.

The researchers found that expanding policies for affordable housing, such as the Mayor’s Executive Directive No. 1, raising the Site Plan Review threshold to 200 units, and increasing the use of master planning, among other reforms, would significantly boost housing production.

“Unless housing production is accelerated significantly, the RHNA goals will certainly not be met,” said the study, Tackling the Housing Crisis: Streamlining to Increase Housing Production in Los Angeles, written by Dr. Edward Kung, Assistant Professor of Economics at CSUN, and Dr. Stuart Gabriel, Distinguished Professor of Finance and Director of the UCLA Ziman Center for Real Estate. More broadly, the affordability gap and housing shortage threaten the city’s long-term economic viability.

“This study clearly indicates that we need to streamline the approval process if we want to meet our housing goals,” said Council President Paul Krekorian. “We’re already moving in this direction. I’m pleased to say the Planning Commission has approved my motion to forgo Site Plan Review for affordable housing projects, and for many mixed-use and mixed-income projects with a substantial affordable housing component.”

The scholars analyzed every multi-family housing project that was permitted in Los Angeles from 2010 to November 2022, providing the first comprehensive detailed understanding of quantifiable bottlenecks in the approval and construction phases. Speeding up the rate at which the city permits new housing and reducing discretionary approvals would have accelerated the completion of thousands of units that were under construction, the study found. In addition, by injecting certainty into the development process, shorter approval times would have incentivized additional housing starts.

“The housing situation in Los Angeles requires all hands on deck,” Prof. Gabriel said. “This study provides a unique empirical basis for ongoing policy reform focused on increased transparency, efficiency, and certainty that will shorten approval times and materially address the egregious lack of affordable and market-rate housing.”

“We now have a mayor who is singularly focused on solving homelessness and housing affordability,” said Mary Leslie, President of the Los Angeles Business Council, whose LABC Institute released the study conducted by the UCLA Ziman Center. “We wanted to provide the mayor with real data that would validate and build upon her emergency order.”

On average, projects took 3.9 years to be permitted and built, of which 1.5 years were spent in the approval process, the study found.

Discretionary reviews during entitlement and permitting added a “significant amount of uncertainty” and had the greatest impact on lengthening total development time. The study found that – all other factors equal – projects requiring City Planning Commission (CPC) review added six months to the approval process, Site Plan Review added more than three months, and Environmental Impact Reports (EIRs) added 16 months.

Bottlenecks during construction added considerable time, too. The study found that getting an underground electricity connection from the L.A. Department of Water and Power added eight months to total development time, for instance.

“This study corroborates what we’ve heard from housing providers – that uncertainty and a lack of a clear set of rules to build housing in Los Angeles have hindered our ability to increase our housing stock. We need significant reform in order to meet our housing and affordability goals and truly tackle the City’s housing crisis,” said Councilmember Nithya Raman. “I am committed to working with our housing partners to develop solutions that reduce barriers and cost and I look forward to hearing the study at the City Council’s Housing & Homelessness Committee.”

By-right projects – those meeting all current zoning requirements – secured permits more than six months faster than average, reducing approval time to less than a year.

Using the data to simulate policy changes, Professors Kung and Gabriel found that reducing approval time by one-quarter would have increased 2010-2022 housing production by 14.1%, or 10,054 units, just by the “pull-forward effect” of accelerating projects that had already started. But shortening approval time would also incentivize new development. Together, the “pull-forward” and “incentive” effects would have added 18,049 units, 25.2% more than the baseline of 71,532 units, according to the study.

Similarly, the positive impact of new and pending reforms when applied to the 2010-2022 data underpin two of the study’s key recommendations to boost by-right housing approvals:

Make Executive Directive No. 1 permanent and extend its provisions to mixed-income housing. The policy eliminates Site Plan Review for 100% affordable housing projects and requires permitting to be completed within 60 days.
The current policy would have “pulled forward” to completion an additional 2,268 affordable units, a 25.1% gain.
Expanding the directive to mixed-income housing projects would have added 3,277 affordable units, up 36.3%, and 8,325 market-rate units, up 13.3%.
Update the Site Plan Review Ordinance to raise the threshold for all projects from 50 units to 200 units.
This policy would have added 2,098 affordable units (up 23.2%) and 4,986 market-rate units (up 8%).
“These are conservative estimates that focus only on the time factor of faster approvals,” Prof. Kung said. “Faster approvals would also reduce uncertainty and save costs, thus incentivizing developers to start new projects. If we factor that in, the numbers would be even larger.”

The study further recommends leveraging technology to track with a real-time picture a project’s progress through the entire City process; and prioritizing additional staff for these tasks.

“Why do all of our firemen, why do all of our policemen not live in Los Angeles and have to travel endlessly just to get to their jobs? Because there’s no affordable housing,” said Richard Ziman, Chairman of Rexford Industrial Realty, founder of the UCLA Ziman Center, and LABC Founding and Vice Chair, adding that the study offers a roadmap to reform. “This administration has the ability and the commitment to expedite every process to build affordable and moderate-income housing. We must solve this problem.”

“Los Angeles desperately needs investment in housing, and this study offers a roadmap,” said Josh Raper, Regional Manager at the Southwest Mountain States Regional Council of Carpenters. “We look forward to our members breaking ground on these projects, giving construction workers a pathway to the middle class, and building community wealth in an LA that’s affordable for everyone.”

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LABC Study: Major Reforms Needed to Meet L.A.’s Ambitious Housing Production Goals

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