A few weeks ago I went to a town hall meeting with speakers from both sides of the measure. Being a real estate professional and native of Los Angeles I thought it would be responsible to hear both sides of the argument.
Los Angeles has a housing problem. But the problem is a basic economic reality, supply and demand. There are too many humans and an inadequate supply of housing units. Rents have been going up at a rate faster than property values.
Even though the income levels haven’t kept up with property values, that is secondary to the supply. Well priced listings for sale, or rent, still have multiple offers. Cramming multiple generations of families into a single unit, for economic reasons, is not uncommon.
The attached graphics showing the present San Fernando Valley active listing inventory, the year over year escalating Los Angeles rents, and the shortage of residential units being constructed in California, support the supply/demand imbalance going forward.
As in most political discussions, I’ve heard garbage from both sides. My following observations and responses to statements are quantifiable and are real estate only. I’m not going to get into the “create jobs” aspects of the debate…
They’re only building high end housing, not for the general population – 1) We need additional housing at all price range levels. If they rent/sell easily all the new units at high prices, it was obvious the quantity of potential tenants/buyers in that price range was plentiful to absorb the new units. 2) If they overbuild too many units in the high end, the rents or sales prices will drop to a market level that will move. New construction, especially at the high end, will bring in new property taxes, and building taxes, that the city/county needs. There are developments and previously passed measures targeting low end housing.
Developers are bribing politicians to modify zoning for their developments – 1) I’m not personally participating in the negotiations, so maybe there are “contributions” being made. Unfortunately that’s not unusual for politics, and sometimes it takes money to get the attention of the powers that be. It does not eliminate the necessity for more units being built. 2) The Master Plan for Los Angeles is obsolete, and has been for years. It will take a lot of time, political motivation, and local taxes to completely redraw the Master Plan and update zoning to meet today’s housing needs. The case-by-case higher density zoning is needed to meet housing needs, and to make the numbers make sense for new development to be constructed. That said, the Master Plan should be redrawn. We just can’t wait.
Developers are getting rich – Lets face it, developers will not build, and deal with the headaches of building in Los Angeles (another blog), without financial returns. Also it’s been proven numerous times the private sector can develop anything more efficiently than the government. We shouldn’t be as concerned about a business entity making money, as much as the unintended consequence of not resolving our housing affordability issue.
Los Angeles will look like Manhattan – Another economic reality, “Land appreciates, structures depreciate”. To make the housing units more affordable, and get required density, you have to go vertical. Land by the square foot is expensive in Los Angeles, especially in highly developed, heavy populated regions.
Adding more housing units in the populated areas with businesses will create more traffic – Traffic is a problem in Los Angeles. Lets be real, more traffic will be created if you push the population away from where the jobs are. Also one of the reasons businesses/jobs are being relocated away from Los Angeles is because of the lack of affordable housing.
I can get into destruction of existing older housing, rent control, etc. The system is not perfect, and there’s no perfect answer. We need housing at all economic levels. Affordable housing is relative. We need to stabilize housing prices for homes and apartments. Stopping development in any capacity will not resolve our housing problems. There are two potential answers… Build more units, or eliminate a large quantity of the local population to balance the supply/demand equation. Now there’s a thorny discussion.
I recommend No on S.
If you are in the Los Angeles area, have any questions or real estate sales or financing needs, feel free in contacting me.
Ron Henderson GRI, RECS, CIAS
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth