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The Gift that Keeps on Giving: Los Angeles Time Still Inflates Real Estate Bubbles

PLANNING WATCH-The Los Angeles Times has changed ownership several times in recent decades, but its support for speculative real estate bubbles has never wavered. 

This was on full display in its recent editorial, “L.A. can begin to solve its affordable housing crisis in 2021.” The article’s essence was that the update of LA’s Housing Element – a section of LA’s rickety General Plan -- should be used to increase the market value of private parcels through widespread up-zoning. In short, if real estate developers could build larger, taller, denser buildings on in-fill sites, the market values of these parcels will soar. Property owners can then either flip their property to pocket this windfall, or they can invest in expensive apartment buildings for long-term profits. Either way the LAT’s zoning deregulation proposal enriches them. 

The external appearance of the LAT’s proposal is quite different from this cloaked reality. The paper’s trickle-down claim is that increasing the zoning capacity of residential neighborhoods will, “cure homelessness, protect tenants at risk of displacement, reduce segregation, promote fair housing, enact equitable development, and address the shortage of affordable housing.” 

Only if this were true, and not just a ploy to keep the latest housing bubble afloat by helping real estate investors flip parcels and build expensive housing in such desirable Los Angeles neighborhoods, as Downtown LA (DTLA), Miracle Mile, Hollywood, and Warner Center.  

In fact, a careful look at the LAT’s zoning proposal, and similar proposals from developer Astro-turf lobbying groups and the faugressive charlatans reveals that that their up-zoning cure make the disease of over-priced housing and homelessness worse. In DTLA, Hollywood, and other hot Los Angeles neighborhoods, existing zoning is already generous. It allows virtually unlimited construction, most of it without height limits. The result of the LAT’s up-zoning proposal would be more expensive, auto-centric apartments rented to affluent tenants.  They might live a block from mass transit, but they would rarely take a bus or subway. Instead, they depend on cars for transportation, mostly their own. 

If City Hall adopts plans and ordinances to increase the zoning capacity of Los Angeles neighborhoods, it will not reverse these trends; instead it will produce three adverse outcomes that debunk the alleged benefits of up-zoning.  

  • The increased value of up-zoned parcels trickles-up to property owners. These unearned profits increase economic inequality in Los Angeles, as well as the cost of new housing located on suddenly more valuable parcels. Since increased economic inequality and housing costs also price-out current residents from their long-time neighborhoods, up-zoning plans and ordinances make the housing crisis worse. 
  • New, expensive apartments also pull up the rents in nearby apartment buildings. This is why LA’s rapidly gentrifying neighborhoods, like Boyle Heights, Highland Park, DTLA, and Hollywood, have experienced sharp rent increases in recent years. It does not take long for these landlords to figure out that new, expensive apartment buildings cast a giant financial shadow on nearby areas. They quickly follow suit with rent increases. 
  • Finally, new infill housing is older neighborhood is not built on raw land. It is built on the sites of older, rent stabilized housing that developers demolish – without remediating toxic lead paint and asbestos -- to create building pads for their new in-fill market-rate projects. This reduces the supply of rent stabilized housing and exempts new apartments from LA’s Rent Stabilization Ordinance (RSO). 

These consequences of up-zoning undermine the paper’s claim that early 20th century zoning practices are responsible for racial segregation a century later. While this argument might pass muster with low information voters, it is completely wrong for two reasons. 

First, LA’s zoning has been mostly constant during the post-WW II era, yet during this same period LA has experienced major changes in the settlement patterns of its Latino, Asian, African-American, and white residents. USC researchers have documented these changes from the 1940 to date.  In this period, legislation and legal decisions blocked racial covenants and red-lining. Fair Housing laws largely stopped discriminatory practices by banks, rental agents, realtors, and landlords. Anti-racist laws in employment reduced the close relationship between racial and economic inequality. This is further revealed by a second map on ethnic diversity in LA between 1990 to 2010, prepared by CSUN geography professors James Allen and Gene Turner. Despite fixed zoning laws, most Los Angeles area neighborhoods already had high levels of ethnic diversity by the dawn of the 21st century. 

Second, LA’s affordable housing crisis will not be remedied by allowing apartment complexes, four-plexes, and townhomes in single-family areas.   

  • Even if up-zoning results in more housing, it will be expensive, not affordable. Any developer who buys and demolishes an over-priced single-family house to replace it with a four-plex could not afford to rent out the new apartments at low-income rates. Old four-plexes, typically built in the 1920s, currently rent for about $4,000 per month, while new four-plexes rent for around $6,000 or more per month. Driven by the commandment to maximize profits, landlords would rent out the new four-plexes for a combined rent of $24,000 per month, compared to about $7,000 per month for the demolished house. It remains a mystery how these expensive four-plexes would cure LA’s housing crisis. No one living on the streets, in cars, or in a small, overcrowded apartments could afford to move into a new four-plex. 
  • By cramming more buildings and people into older neighborhoods, LA’s poorly-maintained infrastructure and public services would soon buckle. Los Angeles cannot build it way out of the housing crisis without generous public investment in infrastructure, services, and non-market affordable housing. A proposal to densify LA’s neighborhoods, while leaving the supportive built environment in disrepair, is so wacky that only those with great hubris would blithely publish such nonsense in a paper of record. 

The leopard cannot change its spots, and apparently the Los Angeles Times cannot change its devotion to speculative real estate bubbles.

 

(Dick Platkin is a former Los Angeles city planner who reports on local planning issues for CityWatch. He serves on the board of United Neighborhoods for Los Angeles (UN4LA) and co-chairs the new Greater Fairfax Residents Association. Previous Planning Watch columns are available at the CityWatchLA archives. Please send questions and corrections to rhplatkin@gmail.com.) Prepped for CityWatch by Linda Abrams.