Some misguided thinking about rents in Highland Park

Just read this interview with the president of the Highland Park Neighborhood Council and it’s making me kind of mad.

Before I get into “why”, I want to begin by acknowledging Ms. Alcaraz’s hard work on behalf of the whole neighborhood. Running a neighborhood council is no joke; it’s hard, important, often thankless work for no pay (I know, since I spent a little time on the Mid City Neighborhood Council).

But just because Ms. Alcaraz knows the neighborhood incredibly well, doesn’t mean she has the right analysis of what’s going on there with housing. Here’s what she said, in response to a question about what Highland Park can do to improve the housing affordability crisis there:

“I think it has to come from the bottom up. People need to be educated about their rights as tenants, so they can advocate for themselves when the landlord raises the rent by 50% in one year or threatens to evict them for a higher paying tenant. We know this is the primary issue facing our community. The Neighborhood Council created a committee specifically focused on advocating for fair and equal housing.”


Rapidly increasing rents in Highland Park are the direct result of two forces:

  1. The increased desirability of the neighborhood (principally due to new retail opening on Figueroa and York plus the opening / extension of the Gold Line); and
  2. The insane zoning that prevents developers from providing the additional housing that the market is demanding

Until the mid 1990s, Highland Park had a lot of land zoned for multifamily construction, so developers built a lot of relatively large apartment buildings.

Then people in the neighborhood decided that they had had enough of the constant construction. The neighborhood was downzoned, a Historic Preservation Overlay Zone (HPOZ) was created, and a Q condition was introduced on York limiting building height and, I believe, FAR. Now it’s incredibly challenging to find any land at all to build on (I know, because I’m building a small building there now and want to build many more).

Do you know what happens when increase demand hits stagnant supply? Price increases.

So, with all due respect to Alcaraz, the right response to the housing affordability crisis in Highland Park isn’t (just) tenants rights eduction. It’s fixing the zoning.

Some advice for aspiring developers

Had an interesting meeting yesterday with an MBA student who was in the class I spoke with earlier in the week.

He’s got a family business building / rehabbing buildings and is considering whether to go back to it with his MBA and try to grow it or take a more traditional job with a developer.

I’m obviously partial to entrepreneurs, but, in this instance, I advised going to work for someone else.


Well, for starters, he’s young. He can afford to spend a few years with a big developer getting experience entitling / building big projects without unduly shortening his runway when he does go out on his own.

Second, this is a pretty terrible time to start a real estate business. Prices are very high, construction labor is expensive, architects / engineers are busy with existing clients, the city is jammed up, finishes are expensive, etc. So it’s harder to make deals work than it is during a recession.

I’m not saying it’s impossible to do good deals now; it’s totally possible and we’re doing them. It’s just much harder than it is during a recession, with less room for error.

So, if you’re thinking of beginning your career, it may make sense to get experience on someone else’s dime for the next year or two, then go off on your own when the economy turns.

What’s my apartment building worth?

Every once in a while, I take a look at the Google Analytics for this site to try to get a sense for what people are searching for to end up here.

Turns out a ton of people are trying to figure out what their apartment buildings are worth.

This is the kind of question we’re always happy to help answer.

Why? Well, we do run a brokerage. And, while we are probably the only real estate brokerage in the world that discourages people from selling, we do, on occasion list and sell buildings in our areas.

And, more importantly, we’re always happy to discuss real estate with people who own buildings… you never know what kind of business opportunities will emerge.

So, if you have a building in LA and you want to know what it’s worth, get in touch with me: moses [at] adaptiverealty [dot] com.

Pondering single family home brokerage

As deals become harder to find in this cycle, we’re thinking about new ways to expand our business.

One of the options is to make a push into single family home brokerage.

Before you keel over, understand: I’m not advocating that people buy single family homes as investments. Except in very specific circumstances (like 2009-2011), they’re not.

But everyone needs a place to live and it’s perfectly reasonable to buy a house, so long as you understand that doing so is more of a consumption decision than an investment.

So, what would Adaptive bring to the table in the single family home world?

  1. We know our neighborhoods better than anyone;
  2. We’re experts at mitigating risk in real estate deals; and
  3. We’re experts at renovating older properties.

But, to build a serious SFR brokerage business, we would need to:

  1. Revamp our branding, which is currently a mess (you can probably tell from this blog that I am a verbal, rather than visual, person)
  2. Recruit / train relevant personnel

Not sure if the effort / investment involved is worth the hassle. Thoughts?

Giving a talk today

Today, am going to speak to Mott Smith’s real estate development class at USC.

The topic? Capital structures for real estate entrepreneurs… or, in other words, how to build a real estate business from scratch without starving.

Here’s the rough outline for my talk:

  • First: Do good deals
  • Why a small asset base is a problem
  • How you survive while you grow the asset base – vertical integration
    • Brokerage
    • Construction oversight
    • Management
  • Figuring out how to say “yes” to capital
  • Alternate capital structures:
    • Pref/promote/fees
    • Fee for service
    • “First dollar”
  • The importance of growing your fundraising network