Six Big Lies Keeping the Real Estate Bubble Inflated (Part 2)

Last week’s SMa.r.t. article was from a guest columnist, Dick Platkin,  who is writing about the Big 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. The first three Big Lies were covered last week: 1) California supposedly needs 3.2 million new homes, 2) There isn’t enough capacity in the existing zoning to absorb natural growth and 3) Transit ridership will increase if density is raised near transit stops. The remaining three Big Lies are listed below. This article first appeared in City Watch LA a few weeks ago. 

By Dick Platkin

Planning Los Angeles.  If you follow the news regarding including 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 the 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 # 4.  Community groups opposed to up-zoning are motivated by financial self-interest, the basis of their “nimbyism.”  Anyone who is strictly motivated by financial self-interest, like those who smear the critics of speculative real estate projects with the “nimby” label, should understand that upzoning increases property values.  If this happens, the real estate bubble can continue to expand.

Any single-family neighborhood that is upzoned, for example by allowing four-plex apartment buildings to replace a house, will experience bidding wars and climbing prices.  The reason that most community groups oppose these real estate schemes, even though they could result in quick profits for residents who sell their homes, is concern over quality of life issues.  Residents prefer new buildings that match the character and scale of existing development and that do not exceed the capacity of public services and infrastructure. These criteria are expressly called out in LA’s General Plan, even though they are of little concern to real estate investors.  Their goal is to the ride wave of rising housing prices as long as possible, not local livability, which they denigrate as “nimbyism.”

Big Lie # 5.  Building more expensive market housing produces more low-income housing through filtering.  This zombie claim never dies, but whenever I ask CityWatch LA readers where filtering takes place in Los Angeles, no one provides me with an address or a neighborhood where once expensive housing has become affordable.  The reason is simple enough. Filtering doesn’t take place in Los Angeles. The supposed law of supply and demand does not apply to housing in Los Angeles because developers do NOT respond to high vacancy rates by slashing rents.  Instead, they increase on-site amenities or turn to short-term rentals. As for the bubble crowd’s prediction that a glut of expensive houses forces adjacent apartments to reduce rents, reality is exactly the opposite. New, expensive housing sends a loud signal to nearby owners of smaller, older apartment to raise the rents in their buildings.  This is why the median rent in Los Angeles has climbed to $2,849 per month.

Big Lie # 6.  Deregulating zoning, that is allowing developers to build bigger, taller, denser buildings without zoning waivers, is a blow against racism.  While the history of zoning includes racial exclusion, according to historian Mike Davis, in LA the decision to dedicate many Los Angeles neighborhoods to single-family houses originated with the Chandler family, former publishers and editors of the Los Angeles Times.  Nearly a century ago, their zoning rationale for single-family homes was that widespread homeownership would de-radicalize LA’s working class by turning it into property owners. At that time, most Los Angeles homeowners were white, unlike the present, when many neighborhoods, including those with single-family homes, are either diverse or predominantly ethnic minorities.  When the Supreme Court barred racially restrictive housing covenants in 1948, and when L.A. became a majority minority city in 1990, LA’s zoning laws soon reflected the city’s new demographic reality.

Now, the use of zoning laws to gentrify older neighborhoods, such as East Hollywood and South Los Angeles, is accelerating the eviction of minority residents, so new, wealthier, and whiter tenants can replace them.

There are other justifications for upzoning widely circulated at legislative committees, City Halls, academic conferences, corporate media sites, and by real estate groupies, so if you want any of them debunked, let me know.  The bigger the lies come, the harder they fall, despite the current real estate bubble.

End of Dick Platkin’s Article

As you can see from this second half of his 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 just give us a minimum code required fig leaf (of about 8%) of affordable units which only makes their pricier units are even more expensive.

“…bigger buildings are not being opposed by racist nimbyists but by those who want their neighborhoods to be within the existing scale and capacity of the local infrastructure,”

Santa Monica Architects for a Responsible Tomorrow

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 increase. It does not need up zoning.  Transit-oriented development does not increase public transit ridership as the new development around transit stations is only for rich tenants who will always drive cars. More bigger buildings are not being opposed by racist nimbyists but by those who want their neighborhoods to be within the existing scale and capacity of the local infrastructure and finally, building more high-end apartments will not make the existing housing stock cheaper. The “filtering” Platkin describes (where richer tenants move up to new units thereby opening more units for lower price tenants) does not work on the Westside to lower rental costs.  Santa Monica has the 6th highest vacancy rate (8.1%) of the 88 cities in Los Angeles County but still has one of the highest rents in the County.

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. It only benefits big developers at the expense of our City’s residents.

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.