In Downtown Los Angeles, an inadvertent experiment has proven a lot of points about the causes and solution to the housing crisis. While the vacancy rate across the whole city of Los Angeles is a stubborn 4 percent, the vacancy rate in downtown has become a much more competitive 12 percent.
What happens at 12 percent vacancy? Apartment owners and building managers start to compete for tenants, offering perks like free parking or free rent for the first few weeks. Apartments are nicer, the buildings are newer or updated, and the downtown is experiencing a cultural revival with new bars, restaurants and retail.
Rents downtown are still very high. But it’s encouraging that landlords are competing for tenants. That suggests that maybe something resembling a healthy housing market is starting to emerge. It certainly stands in stark comparison to the crisis that is strangling the rest of Southern California.
There’s a pretty simple reason why the market is better downtown. For the last few years, thousands of new apartments have been built. Building in California is almost impossible because of the high costs of environmental review and the roadblocks that neighborhood opposition groups throw up at every step of the planning process.
But downtown Los Angeles is an example of what can happen when those factors are reduced: as infill development, the environmental process is a little easier, and residents aren’t as opposed to, well, pretty much everything.
One thing the downtown does not have is an exemption from the Costa-Hawkins Rental Housing Act, which limits cities and counties from placing onerous rent control measures on new residential units.
And yet a group of citizens has decided that repealing the Costa-Hawkins Act and allowing cities to place rent control on new developments is the logical step to solve California’s housing crisis. They’ve filed a proposed ballot initiative with the California Secretary of State, which is the first step to placing the repeal on voters’ ballots.
I understand the appeal of rent control. Who hasn’t been mad when the rents go up and you have to start looking for a new place?
But the people behind the initiative – including the AIDS Healthcare Foundation, which just can’t resist spending donors’ dollars on poorly-thought-out ballot measures with no relation to AIDS or health care – have fundamentally misunderstood the reasons for California’s housing crisis.
We simply do not have enough housing in places that people want to live. And we don’t have enough housing because supply is not keeping up with demand – developers are looking at the high cost of building, and the price they can sell or rent their properties, and deciding that it just doesn’t pencil out. Putting a thumb on the scale by keeping rents artificially low makes projects even less likely to pencil out, worsening the crisis.
Rent control also removes any incentive for landlords to update their units, leading to run-down, substandard housing with residents who are trapped because they can’t afford to move out of their rent-controlled unit. It creates two classes of housing: decrepit but affordable housing, and livable but even more expensive housing, as landlords try to recoup the costs of subsidizing their rent-controlled units.
Some NIMBYs have a theory that if rents go high enough, people will stop coming to Los Angeles and they can keep their neighborhoods the same as they have always been. That theory is shot down by the press release from the Costa-Hawkins repeal initiative backers. The spokesperson it quotes moved to Los Angeles a few years ago, has been forced to move four times by rent increases, and still is committed to living in Los Angeles. That’s great – we all benefit from motivated people living here and contributing to our economy. But it does undermine the theory that by strangling supply, we will reduce demand from people who want to move to Los Angeles.
I’m not saying that the San Fernando Valley needs to resemble the downtown L.A. skyline, packed with skyscrapers. But there are areas of the Valley which would be enhanced with more density, with mid-sized mixed-use developments instead of acres of surface parking lots and aging office buildings. Unfortunately, it’s almost impossible to build these sensible, sustainable homes.
The consequences of not building are already felt. In Los Angeles, over 40 percent of young people ages 18 to 35 are living with their parents. Those young people are delaying life events which we know help our economy and our society – marriage and children; homeownership and the accompanying social and financial investment in the community. What are some of the long-term effects? I don’t think they’re going to be positive for the Valley, which traditionally has families who volunteer in their communities and care about the future of their city.
The backers of the Costa-Hawkins repeal initiative have one thing right – the housing crisis is suffocating our city. But their solution will only make things worse. As business groups, we share their goals to make housing more affordable for our families and young people, so they can thrive and put down roots in Los Angeles. We’ll keep working to lower barriers to development so that the Valley can move toward a more healthy housing market.
Stuart Waldman is president of the Valley Industry and Commerce Association, a business advocacy organization based in Van Nuys that represents employers in the San Fernando Valley at the local, state and federal levels of government.