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Build It, Don’t Bond It: An L.A. Story


In the next few decades, the Los Angeles region will add the population of two cities roughly between the size of San Antonio, Texas or Chicago, Illinois. Today, the City of Los Angeles will begin a serious discussion about how to accommodate the housing needs of these millions. Unfortunately, the solutions being proposed do not rise to the level of the discussion.

Blogger and City Council President Eric Garcetti proposes a get-rich-quick solution to Los Angeles’ housing crisis – issue a billion dollars in bonds to leverage the private construction of affordable housing.

That would be a great idea if only the City of Los Angeles realized that it is politics are the root of the very the reason why housing construction needs to be subsidized!

Although building permits have increased 50% in the past five years, the construction industry cannot keep up with the demand for housing in Los Angeles: Only one new unit of housing is built for every two families coming to town. The magic hand of supply and demand has shown itself clearly with astronomical real estate prices in the region.

Developers would probably build two or three times the number of units they are building today – if only they could. Regulations on parking spaces required per unit, floor area ratios, and building heights have outlived their usefulness. They were put in place in an era of 1950’s suburban America. Today, Los Angeles is a modern American city.

It’s no longer the ‘50’s. Not even the fabled San Fernando Valley would qualify as “suburban” anymore.

As a result, just about any new development in Los Angeles requires a variance from the City’s antiquated code. To game the system, developers “over-propose” in order to get something that will pencil-out later after a “compromise” with nearby angry neighbors.

It wouldn’t be hard to fix these porblems. Reducing parking requirements, allowing “by-right” development and trading density bonuses for the construction of affordable housing units could reduce the cost of development in L.A. and increase housing stock in the City. And it would happen practically overnight and without spending a dime of taxpayer’s money.

Or, in keeping with the current proposal, the City could tax its property owners to pay for the cost of these burdensome regulations. Ironically, the developers who would benefit the most from changing the regulations are also those who stand to benefit most from the government handout that would be created by the approval of an affordable housing bond. So rather than face competition in a freer market, many of these developers are spending time cozying up to the L.A. City Council so as not to alienate a future patron should the measure pass muster at the ballot box.

Because, regardless of the availability of housing or the gridlock in the streets of sunny Southern California, the people are coming. Los Angeles will have to build its way out of its housing crisis, not bond its future away.

Share  Posted by Scott Olin Schmidt at 5:50 PM | Permalink

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