Simon

Why does the "Costco Prison" exist, and why is it designed the way it is? As often is the case, the answer is regulatory arbitrage! Costco wanted to build a store in Central/South LA. The problem is, new massive big-box stores are hard to get approved in LA. They're subject to discretionary approvals, site plan review, and have to go through CEQA. Costco was facing years of public hearings, millions of dollars of consultant fees, and an uncertain outcome. However, mixed-use housing projects that meet certain criteria are automatically exempt from discretionary reviews by state law (AB 2011). So Costco did what any good Scooby-Doo villain would do. They put on a mask that says "I'm an apartment building, not a big-box store." (I'm really stretching with this metaphor). But now they faced some new problems. To get the full protection of state housing laws (HAA), mixed-use buildings must be at least 2/3 residential. The Costco itself is 185,000 square feet. So they needed at least 370,000 sq ft of residential. (They ended up with 471,000 sq ft of residential plus an additional 56,000 sq ft of amenity space) But for a project that big, to qualify for AB 2011, you need to not only pay prevailing wages, but use "skilled and trained" (aka union) labor. "luckily", union labor requirements only apply to on-site construction. So to lower the amount of on-site labor needed, Costco turned to pre-fab building modules. Pre-fab modules need to fit on trucks, which results in mostly small shotgun-style one-bedroom units. And that's how you end up with a Costco housing project that resembles a prison!