Six Big Lies Keeping the Real Estate Bubble Inflated (Part 1)

Every so often SMart invites a guest columnist to write an article about local planning issues. This week and next we have invited Dick Platkin, a former planner for the City of Los Angeles, who is writing about the lies that the building and financial industries perpetuate in their quest for profits using the wedge of new State of California laws gutting local development controls. Since this year the State has been feverishly passing laws unleashing over development, (the City of Santa Monica is now supposed to build 5000 new units in the next 10 years) we felt this article was relevant to expose the lies used to sell this overdevelopment. While Dick’s article was written about Los Angeles identical issues apply in Santa Monica. Just substitute Santa Monica every time he mentions Los Angeles. This article first appeared in City Watch LA a few weeks ago. 

Planning Los Angeles.  If you follow the news regarding housing-related legislation bubbling up in Sacramento and at LA’s City Hall, you have been subjected to a series of big lies.  They all claim that quickly-permitted, larger, taller, denser apartment buildings will finally solve the housing crises ravaging Los Angeles and the rest of California.  For good measure, the lies sometimes fold in other alleged benefits, such as less traffic congestion, reduced Green House Gas emissions, and increased transit ridership.

Even though many CityWatchLA writers have exposed these lies, like zombies, they repeatedly rise from the grave, intent on keeping the current real estate bubble alive.  For this reason they need continuous debunking, as well as identifying who benefits from them.

Big Lie # 1.  California needs 3.2 million more homes, and up-zoning the entire state will end the housing shortage and, therefore, the state’s housing ‘crisis’.   As carefully refuted in CityWatchLA by Casey Maddren and myself, this is a lie for two reasons.  First, the 3.2 million figure comes from a McKinsey Global Institute consultant study that relied on New York and New Jersey housing data to draw conclusions about California.  Other studies show a smaller housing shortage, and if you look at such obvious measures as homelessness, out-migration, over-crowding, and rent-gouging, the figure is even lower.

Second, if up-zoning has any effect on housing production and costs, it will only produce expensive housing funded by private investors.  These investors do not plunk billions in under-performing capital into profitless low-income housing ventures. As for HUD programs to directly build and operate low-income housing, the Nixon, Reagan, and Clinton administrations eliminated them decades ago. The one remaining public housing option, California redevelopment agencies financial support for low income housing projects, ended in 2011.  This is when the State Legislature and Governor Jerry Brown dissolved California’s local redevelopment agencies.

Big Lie # 2.  Los Angeles does not have enough remaining zoning capacity to meet its housing needs.  The solution, therefore, is to up-zone the city’s residential neighborhoods, through State laws, like SB 330, and local ordinances, like “Transit Neighborhood Plans.”  Anyone who believes this tall-tale only needs to drive, walk, bike, or take the bus down any of LA’s endless, low-rise, mostly-treeless commercial corridors, like Van Nuys Boulevard in the San Fernando Valley, Pico Boulevard on the west side, Vermont Avenue south of DTLA, and Whittier Boulevard on the east side.  You will see miles of one and occasional two story buildings. These long, woefully under-utilized transit corridors could be redeveloped with three story, by-right apartment buildings. Through density bonuses, these corridors could be re-built with mixed-use or apartment-only buildings six or more stories tall.

This is why the most accurate study on LA’s unused zoning capacity, Chapter 7 of the General Plan Framework’s Draft Environmental Impact Report, reveals that LA’s zoning build-out population would be 7 million people, far above the capacity of the city’s infrastructure and public services.  Subsequent density bonus laws lift this zoning build-out figure to 9 million people, or more than double the city’s population. Despite LA’s current building boom, most of this unused zoning capacity remains untouched, far exceeding the latest population forecasts.

Big Lie # 3. Transit ridership will increase if the density of nearby housing is raised through zone changes.   This fix could work if the current housing boom were restricted to low-priced housing rented to transit-dependent low income tenants.  But, this is not the case. In Los Angeles new “transit oriented development” (TOD) decreases transit ridership because it is based on private real estate investment.  Since investors are strictly guided by profit maximization, and since the most profitable apartment houses are for the well-off, TOD is really car-oriented, transit-adjacent housing.  These well off tenants rarely ride a bus or subway, even when it is close by. They own cars and stick with them for most trips, the main reason LA’s bus and subway ridership continues to plummet.

As you can see from this first half of the article, these are familiar themes that apply directly to Santa Monica. Santa Monica does not need more housing, just more affordable housing that cannot be produced by private profit seeking developers. When these developers do build their high end apartments in our City they give us a code required fig leaf (of about 8%) of affordable units which only makes their pricier units even more expensive.

Our City already has plenty of capacity, like Los Angeles, in its existing zoning, particularly along the boulevards, to meet all its foreseeable future population housing demand. It does not need up zoning.  And finally,  transit oriented development has no impact on traffic congestion or increasing public transit ridership as the new development around transit stations is only for rich tenants who will always drive cars.

In short, up zoning entire Cities is bad public policy with no net benefit to the Cities forced by the State to endure its burdens. To be continued next week.

For Santa Monica Architects for a Responsible Tomorrow

Sam Tolkin, Architect; Dan Jansenson Building and Safety Commissioner, Architect; Mario Fonda-Bonardi, AIA, Planning Commissioner; Ron Goldman, FAIA;  Thane Roberts ,Architect; Bob. Taylor, AIA; Phil Brock, Arts Commissioner.