As a housing supplier, it is in my financial interest for the government to continue to block development of new housing at a scale commensurate with demand.
However, as an American who loves cities, in general, and Los Angeles, in particular, I am strongly in favor of loosening restrictions on development. More housing equals lower rents, which means more people can afford to live in cities, where their hours will be spend more productively, etc.
So it was with great pleasure that I read about Scott Weiner’s proposed state legislation to forbid municipalities from restricting development around mass transit.
This is the kind of revolutionary change required to address CA’s housing crisis. And it won’t cost the state anything.
Here are some pictures that drive me insane:
These are pictures, respectively, of the Vermont /Beverly, Soto/1st, and Vermont/Santa Monica Metro stops.
Why do they drive me insane?
As a city, we are spending billions of dollars to build out our currently-woefully-inadequate public transportation system to turn LA into a normal city.
The single most important factor determining whether people will use trains is how long it takes to get from door to door, inclusive of the walk on either end of the trip.
With that in mind, how insane is it to position your stations in the middle of huge, vacant lots?
Why wouldn’t you build super-dense apartment and/or office projects above the stations?
You would add tens of thousands of daily rides to the system, generate material rental income which could be reinvested in the system, and fill in these ridiculous tears in our urban fabric.
This is such an obvious win that planners at Metro ought to be running around with their hair on fire to make it happen.
In other, less angry news: Some very kind person sent me a bottle of Blue Label from K&L with no card on it. It’s delicious! Identify yourself and be thanked personally!
Repositioning an apartment building requires obtaining the consent of a huge number of people and institutions, from tenants to contractors to city inspectors and on and on.
This consent doesn’t necessarily have to be enthusiastic. But you still need it, because not getting it can screw up your project massively.
So, a big part of what we do is figuring out how to help people or institutions say “Yes”, when they could say “No”.
And a surprisingly large part of getting that consent is just simple human decency and compassion.
It’s about carefully thinking through what, exactly, you are asking someone, whether it is within their power to grant your request, and how painful consenting will be for them.
Then, it’s about crafting your offer in a way that anticipates and mitigates their issues and presenting your offer firmly but, always, respectfully.
Next, you have to actually listen to their response, because often they spot problems with your offer that you never considered… but they’ll only engage honestly with you if you’ve treated them respectfully.
Finally, you need to be willing to leave a little meat on the bone. By this, I mean that you should not try to absolutely kill the person against whom you’re negotiating. Once you get into a position where they’re prepared to accept terms you can live with, think VERY carefully before trying to push them again.
Want to give you some insight into why, exactly, its so hard for LA to add more housing.
Here’s a perfect example:
We own a big, R3 lot in an improving area, bordered by two alleys.
This ought to be a super easy lot to develop and, indeed, we are in the process of obtaining permits for a new building.
The pr0blem we have is a utility pole whose guy wire (basically, a cable holding the pole up) blocks access to our lot in a way that complicates the parking layout.
There are two solutions:
- Re-design the parking and the building to avoid the wire, resulting in a worse design and higher construction costs (because we need to use parking lifts); or
- Move the pole
Now, moving a pole ought to be pretty simple. It’s basically a few guys and a truck working for a few days. We’ve heard estimates that this ought to cost in the range of $30-50k. Really expensive, but not fatal to the deal.
The problem? Timing.
Because DWP is a state-owned monopoly with ZERO incentive to do much of anything, there is literally no way to know, with any certainty, whether moving the pole is feasible, how much it would cost, and how long it would take.
In case you haven’t figured it out from reading my blog, the one thing I absolutely can’t stand, it’s uncertainty… because I can’t sell “I don’t know” or “maybe” to my investors.
Bottom line: We may end up just the existing structures on the lot. It’s way less hassle… but the city loses a bunch of units it could have had.
If you follow macro-economic news, today was a big day.
In addition to raising short-term interest rates, the Federal Reserve bumped up its estimate for economic growth in 2018, from 2.1% to 2.5%.
The question for LA landlords is whether this increased growth rate will result in additional jobs / wage growth.
Why should landlords care?
Employment growth is the single most important factor driving rents. It’s pretty obvious why… more people with jobs means more people looking for apartments. More people looking for apartments means more demand, and more demand without additional supply means higher prices (eg rents).
Wage growth is probably the second most important factor. Over the past several years, rent growth in core LA has outpaced wage growth by a pretty large margin… like 5-8% vs. 2%. To the extent that wage growth accelerates, landlords ought to be able to keep pushing up rents, too.
We have a bunch of smaller projects going into lease-up in January / February. Will be interesting to see what effect the “animal spirits” loose in the economy have on our lease ups.