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Architect explains why large development in LA seems to be luxury development (reddit.com)
123 points by intull on July 9, 2017 | hide | past | web | favorite | 59 comments

It blows my mind that virtually every major city in the developed world is facing this same problem, yet nobody is doing anything about it.

It's a pretty simple problem with a pretty simple solution. The problem is that local city councils have restricted the freedom to build through excessive zoning laws and regulations in order to increase housing prices for their own private investment benefit.

The solution is to relinquish them of this self-interested tyrant-like overbearing power and set these policies on the national level - basically how Japan does it. The more localized the power, the more self-interest is going to favor a minority of private individuals at the expense of society.

A solution is to regulate it nationally. However, for the US I loathe that idea. I firmly believe communities have the right to regulate themselves in this way, which naturally produces wonderful diversity and character and autonomy and all that good stuff.

I like the option of looking at how/why entrenched landowners control those communities. If the city councils were more broadly representative, that might solve the problem.

If anything, New York City is the poster child for too-centralized regulation. Why are the codes not far more locally governed? Who knows.

You are right that this is part of what helps drive local diversity and character, but it's also one of the principal drivers of NIMBYism. It has tremendous impacts from high density zoning to proper infrastructure development and effects hundreds of millions of people in very real, very daily, negative ways.

These problems are greatly reduced in places with larger scale control of the zoning laws and in many of those places you also end up with lovely, highly diverse cities as well. Given good governance, neighborhoods and areas can be designated for various "character" initiatives as well and you end up with lovely places like Tokyo, Kyoto, Seoul and so on.

Not having this kind of larger scale vision is why it takes an hour to cross over a single river from West New York to Manhattan or from McLean, VA to Seneca, MD and 5-10 minutes to cross the river in Seoul from Gangnam to Geumho or between two points on the Sumida in Tokyo in 5-10 minutes.

This will not be a popular opinion, but whenever I see protection of privilege in the US these magical words are somehow involved:

    > have the right

While it might be ideal to have local control, cities such as my city of NYC respond to special interests -- in this case wealthy landlords. The local government serves wealthy landlords by making land artificially scarce and scarcity is reflected in higher prices. In microeconomics this is called "rent-seeking" which in this case is using politics to create profits far, far higher than costs. Thus Donald Trump and other wealthier landlords are getting huge sums of money from renters who are paying far, far more than they would in an efficient market. By responding to the campaign donations of wealthy landlords the local city councils have created a regressive tax and this is also a major form of inequality.

The local city councils respond to lobbying on the part of wealthy landlords by 1) zoning density restrictions, 2) overregulation and amount of red tape needed for approvals, and 3) overuse of historic landmark status.

Harvard Economist Edward Glaeser has written extensively about these problems. For example: Build Big Bill http://www.nydailynews.com/opinion/build-big-bill-article-1....

See also: 40 Percent of the Buildings in Manhattan Could Not Be Built Today https://www.nytimes.com/interactive/2016/05/19/upshot/forty-...

The solution is to use the one in used by Japan which is to have the federal government override the "rent-seeking" local city councils. The honest truth is that these city councils make renters and younger people pay far, far more for housing while giving Donald Trump and his fellow wealthy landlords far, far more money than their costs.

I wonder how this would practically work in somewhere like America, where the cities are so diverse. I have a hard time believing that the rules that are the best for a big city like LA and San Francisco are the same rules that would work for middle of nowhere Iowa.

I don't see why we can't just make some modifications to Japan's model. There may be a smaller population and land area, but how many cities of 13 million people with 43 million people in the metro area do we have?

I think the only problem with adopting Japan's model is we are so established with the current one.

There are just a few major metro areas in the US where much of the rent-seeking for wealthy landlords is much of a problem starting with SF, LA, SD, Boston, NYC, DC. Not all cities bow to the wishes of wealthy landlords by making land scarce through artificial political means with the resulting huge financial windfall for wealthy landlords at cost to renters and millennials trying to buy a home.

And the Japanese zoning model mitigates more than just the problem of exploitative rentiers buying and corrupting local government

Although I'm generally opposed to centralizing decision making, there seems to be proof that centralizing building restriction away from municipalities would help [1].

Restrictions on generating housing stock seems to be by far the biggest driver of income inequality and gentrification ("regulation accounts for 85% of the increase of house price dispersion from 1980 to 2009"). Not just gentrification within cities but the polarization of groups across a country.

[1] http://idea.uab.es/jmarket/2016-2017/ANDRII%20PARKHOMENKO/Pa...

"In markets with low regulation the supply of housing will accommodate most of the rise in demand and the prices will not change much. Every period elections are held to local governments. Residents vote for candidates, each with a proposed level of regulation, via probabilistic voting. The selected level of regulation will be determined by two competing sets of interests: those of renters and those of owners. Renters prefer less regulation because this decreases rents and house prices, thereby lowering the downpayment they need to pay in case they decide to buy. Owners prefer more regulation as it increases the value of their houses."

This paper's decision to assume regulation is a scalar value, and renters as being "obviously" against rent control and rules about building affordable housing stock renders the conclusion of correlation pretty dubious, let alone causation.

Property developers are largely the ones fighting for cutting building regulations, not renters. Including regulations against building a set number of affordable housing units.

Income and wealth inequality was primarily triggered by union busting, untaxing the rich and offshoring, not how many parking spaces you were obligated to build in Los Angeles.

Of course I forgot, capitalism is to blame for all our present day evils. I doubt you've read the whole thing before finding the snippet useful for bashing it.

Housing Stock regulation is indeed hard to compare, but compared to other regulations it is rather well suited.

>It blows my mind that virtually every major city in the developed world is facing this same problem, yet nobody is doing anything about it. It's a pretty simple problem with a pretty simple solution.

If it's a local problem with local solutions then why did it happen to more or less every major city in the developed world at the same time? Weird parking regulations are specific to Los Angeles.

It could be that wealth inequality is the primary cause of all of this but what do I know? I'm not the kind of person who would make a ton of cash if Los Angeles building regulations were slashed.

Ironically the architect actually indirectly points this proximate cause by pointing out that land prices have skyrocketed. He just didn't think to question why.

If land prices keep going up investors' incentive to treat apartments like bars of investment gold will keep going up too. If wealth inequality gets worse, more of that money will be stashed in land (luxury apartments), causing prices to rise. All of this will happen whether or not Los Angeles parking regulations are cut.

If California rolled back prop 13, on the other hand, that would help somewhat to de-goldify land and provide enough money to the state budget to build affordable housing the old fashioned way it has always been built: by the government.

Prop 13 doesn't apply to rentals.

Even if the incentives to build luxury apartments are gone, the codes still don't make other apartments all of a sudden economical. The parking garage beneath by west LA near UCLA rental is virtually empty because most people come here without cars. But they have to have it so...

But speculation is a problem, especially with Chinese investors who have already tapped out their own property tax-free markets. Just I don't think that is what is going on here.

Prop 13 untaxed land. Untaxed land combined wealth inequality, combined with a dearth of other investment opportunities after 2008, combined with very lax regulations of international capital flows led to property hoarding on an enormous scale.

Rich investors want to hoard the kind of properties they would want to live in. Hence luxury apartments and houses that take up way too much prime inner city land - not just in Los Angeles, but Singapore, Vancouver, London, Hong Kong and many, many more.

Hoarding obviously takes supply off the market and rents are obviously driven by supply, so rents have gone up.

>Even if the incentives to build luxury apartments are gone, the codes still don't make other apartments all of a sudden economical.

If land became a lax liability rather than an asset that gives you the license to tax others, the incentives to build high rises to put ordinary people in would be much stronger.

Of course, without doing something about wealth inequality all of that money would still flee into other asset classes. Bitcoin would probably do well :)

Why does everyone hate on prop13? It still allows taxes to go up, but only at the rate of inflation - it prevents normal people from being thrown out of their houses after 10 years due to tax adjustments

If it only applied to natural persons' primary residences, you might have a point, but a lot of the benefit goes to commercial landlords holding vast swathes of real estate and paying practically no taxes on it. A better solution would be to allow people to defer property taxes on their primary residence until they die at which point it is taken out of their estate. That would still prevent people from being kicked out of their homes, but would also stop letting huge windfalls from property speculation go un-taxed.

It's a regressive tax that shifts the tax burden away from rich old retirees to poorer younger workers who had the misfortune of being born later.

That is always how society works, those that existed before leverage the efforts of the young. 401k, social security, Medicare, etc

You'll benefit from this scenario at some point as well.

I don't find this situation comparable to those programs.

Boomers never paid any taxes on the extreme capital gains on their primary residences and I'm not holding my breath that prices will quintuple again in my lifetime. They got a huge something for nothing and the least they could do now is sell their houses at a huge profit and leave so workers with families can live closer to work.

> in order to increase housing prices for their own private investment benefit.

I think its more that most people just don't like change and want their neighborhoods to remain the same

If they really just wanted to increase their investments, up-zoning greatly increases the value of existing land in most cases.

What you've described is primarily an American problem, especially a Californian problem. As someone who spends a lot of time in Washington DC and The Netherlands it's not nearly as bad in either place. NIMBYism is particularly terrible in CA, but my experience in The Netherlands is that it doesn't cause near as many problems.

In The Netherlands you see that the stock of affordable public housing is rapidly dwindling in favor for expansive private upper class housing. The government introduced a more liberal market driven approach in the 90's but it still takes time for the real shock to arrive.

Waiting lists of 20 years or more are not unheard of. When I was younger and got on one of those lists it was "just" 10 years. So 10 years added in about 20 years I guess. Probably I would have waited for 15 years if I would've waited.

I find it pretty shocking personally to see a first world country still didn't fix it's housing shortage 70 years after WWII ended.

Perhaps providing housing shouldn't be about making money. That is the central conflict here.

Cities are starting to "unbundle" parking requirements from building requirements, SF is an example here.

From my European point of view, I find the whole hangup about the parking space regulations very interesting.

Here in Zurich, there are the same sort of complaints about parking for new buildings going up, however there is now a different trend: Because rent for the parking space is typically charged separately from the apartment's rent, some parking space simply can't be rented out because residents don't have cars.

In case you speak German and are interested in this sort of stuff, the regulations are available at https://www.stadt-zuerich.ch/content/dam/stzh/portal/Deutsch... .

It also shows a table on page 3 that explains how you actually are allowed and required to build less and less parking spaces the closer you get to the city center, so much so that if you look at the maps on pages 6 to 7, you can see that that grey area allows <= 10% of the parking of the white area.

Just to confirm the European viewpoint, it is pretty much normal in Italy, France and Spain to have similar requirements.

But they are "logical" and at least here in cities, beyond and besides the building codes, having more parking space can be a resource, i.e. unused/excess parking places are commonly rented as there is anyway great scarcity of them for the people leaving in historical buildings that of course at the time they were built had no such requirements.

Of course it is a cost since, just like it is in the US, in the words of the architect:

>But wait, there’s more! That parking space for each unit either has to be at ground level (which is the most valuable real estate on the whole project), or it has to be above or below ground.

we cannot make them float in the air ;).

And of course requirements are not the same in city centres as they are in the outskirts, where areas are larger and building density allowed is much lower.

I don't fully agree with the added cost for parking to be the main reason for high costs of the building, I find the culprit to be more "the market" and also (within limits) the higher standards (and expectations of the customers).

I heve seen dramatic increasings in the costs of plumbing (not only the plumbing in itself, but also the kind of stuff that is installed, "design" basins, taps, showers, etc.), and electricity (here it is BOTH pricey switches, plugs, etc, and greatly increased number of them), besides safety related items.

As a side note, and it depends of course on specific zones, having an underground parking under the building may actually help with seismic compliance and with getting rid of radon, so some of it is not only "added cost", the real cost issues come when the size of the parking is big enough to "trigger" stricter fire safety provisions.

The EXACT same thing happened/is happening here, all the part starting from:

> All that was manageable to an extent before the crash of 2008.

is entirely accurate on this side of the pond, and has been described perfectly.

Before or around 2008 you couldn't find reliable people/contractors because they were 100% busy (while you could find a lot of only half-professionals), now you cannot find them simply because they became almost extincted.

Having lived in both central Stockholm and central Madrid, I wholeheartedly support the requirements for parking spaces. People will own cars, and they need to be somewhere.

The regulation could be relaxed to allow separate garages or parking lots within a reasonable walking distance, but the books should be balanced.

In Stockholm some builders have argued that people might soon drive electric box carts or some other environmental camouflage for getting rid of the parking lots and cram in more expensive flats.

This spin was successful in one area but the sales prices were as high as usual and the savings where just added to the builders profit which is considerable to begin with.

I wholehearted disagree with regulations that require parking spaces. People are less likely to own cars if they knew they were paying extra to park them. Parking spaces should have prices, so we can use the market to distribute them in their scarcity. We call that: unbundled parking.[0]

As it is, paid parking is being tremendously undercut by free parking. People will go very far out of their way, roaming the streets for hours every week looking for a rare free parking spot, but there is almost no will to build a guaranteed spot in a paid parking structure.

This contributes to traffic, greenhouse gas emissions, wear on infrastructure, noxious gases emitted in residential neighborhoods, and poisonous relations between neighbors.

A related issue is that cars require a tremendous amount of space for what they provide, and there is no way we can afford to build enough spaces for all the cars that we think we can own because the parking is free. Even if the parking was adequate when new, it is not adequate anymore. And even when new, adequate parking was enormously expensive.[1]

My own neighborhood in San Francisco was built in the 1950s for single-family, single-earner households. Then women joined the workforce. Then children grew up needing cars. Then families doubled up in one house, or landlords turned the homes into rooming houses; and a house with a 1-car garage is now associated with 5 cars or more.

The price to sell is not directly connected to the cost to build.[2] Depending on the location, I think the no-parking micro-unit is actually more valuable to me than the suburban mansion, if it means I can reach everything I need by foot or bicycle and avoid paying all the fees and wasted time in traffic of car or bus.

I don’t care whether the developer makes a profit; except insofar as a developer should be paid for doing work that I think benefits society, and also as most of the income goes to the developer’s investors, that is, schoolteacher pension funds and such.

[0] http://www.thegreatermarin.org/blog/2015/8/8/unbundling-park...

[1] https://www.strongtowns.org/parking/

[2] https://artplusmarketing.com/market-rate-housing-isnt-a-bad-...

>This contributes to traffic, greenhouse gas emissions, wear on infrastructure, noxious gases emitted in residential neighborhoods, and poisonous relations between neighbors.

Which are exactly the problems that in a perfect world where ALL cars have their own spot to be parked at near home (and near office, etc.) would not exist, and that can be solved EITHER by making adequate parking spots OR getting rid of the cars.

I presume that if every home owner signs an affidavit where he/she promises he/she would NOT ever buy or use a car near the house, the parking area requirements could be lowered.

As you might know in Japan they do something slightly different: http://www.reinventingparking.org/2014/06/japans-proof-of-pa...

>>This contributes to traffic, greenhouse gas emissions, wear on infrastructure, noxious gases emitted in residential neighborhoods, and poisonous relations between neighbors.

>Which are exactly the problems that in a perfect world where ALL cars have their own spot to be parked at near home (and near office, etc.) would not exist, and that can be solved EITHER by making adequate parking spots OR getting rid of the cars.

The perfect world where every car has a parking spot without traffic, infrastructure, etc., CANNOT exist. We need to get rid of the cars.


My dad is in construction and I thought I'd chime in with another practical reason.

Once you're building at larger scales, the cost of materials between a luxury condo and a subluxury condo are different, but not astronomically so.

Developers will go to China, Mexico, etc. and source some really nice stuff very cheaply. Sure, there are exceptions, i.e., materials that are expensive no matter what, but once you figure out a way to use cheap labor, the actual building materials are cheap.

It's similar to luxury cars - the "luxury" part doesn't necessarily cost a lot more (but yes does cost a bit more) but it can be marked up a lot, lot more.

>It's similar to luxury cars - the "luxury" part doesn't necessarily cost a lot more (but yes does cost a bit more) but it can be marked up a lot, lot more.

This is also correct, but there is an additional twist to it.

Non-luxury may be not marketable (besides bringing less margin).

It is a curious market, I have seen more than one case of building companies that were put on their knees by the lack of buyers because they built "too basic" houses, believing that the relatively low price would have procured lots of willing buyers and this simply didn't happen, and they had to apply rebates over rebates, thus losing money in real terms to be able to sell them (if/when this actually happened).

Unrelated, but it drives me nuts to see high end or luxury property with commodity fixtures. It's surprisingly common.

This is an interesting point about college education:

Traditionally, contracting was the best paying "blue collar" job out there, and to a certain extent it still is. If you were smart, hardworking, but didn't go to college, you started hauling bricks on a construction site and then worked your way up to general contractor over the course of years. Lots of the best GCs out there did this. But, as less and less of super capable kids DON'T go to college, there are less super capable 18 yearolds hauling bricks and 10 years later, less super capable GCs.

As more and more kids are going to college, who will do these high-skill blue-collar jobs?

To me it appears the same group of kids is doing it, but now with college degrees. I have a friend who was a GC at 25, the main obstacle to his success was access to capital, which he achieved through a friend's father who was already in the business and looking for investment opportunities.

He spent a bunch of years working on his skills and doing his own work, but now just subcontracts all the labor (mostly to immigrants), deals with legal/zoning issues, and keeps the client happy.

I suspect the old system (start at the bottom, amass skills & capital until you're on top) won't work anymore, because the capital arrangement strongly favors people with a money connection over skills. But time will tell.

Probably the same super capable kids just starting 10 years later as - still super capable - adults, realizing that their college degree has brought them virtually zero advantage over everyone else in the labour market.

Well, it's not the same thing.

When you are 20 and you are given an opportunity of growing fast through learning from experience, you are willing to do anything including brick laying and if you are actually super-capable by the time you are 30 or 35 you have no matches (and not in just brick laying).

But this is because you moved by hand thousands of bricks, and tons of mortar, and lots of double shifts and working weekends, and you did that because it was an opportunity to grow AND you were a blank sheet to begin with.

When you get 30 you have some 5 years of college, if in US a huge student debt, and 5 years of failures in getting an adequate job, possibly a family, you simply won't be able to put in the energy and the time that you already spent.

In a nutshell if you start from the bootom at 30 in this field you need to be super-super-capable, and it is rare enough, because if you were really super-super-capable you would have alredy found another job, another field, etc. and be successful at it.

>because if you were really super-super-capable you would have alredy found another job, another field, etc. and be successful at it.

Job markets aren't efficient at matching supply to demand. Trying different opportunities takes a large amount of time. I can't hit up construction, IT, healthcare, physics, retail, banking, and academic industries in a week to find out if I'm cut out for at least one of them.

> I can't hit up construction, IT, healthcare, physics, retail, banking, and academic industries in a week to find out if I'm cut out for at least one of them.

Sure, but the hypothetical 30ish super-super-capable would have had roughly 5 years (not just one week) to find something better before starting brick laying, and this is the typical CATCH 22, if you are super-super-capable it doesn't take you 5 years to fail to find something.

This is what happens when the upper-middle and upper classes are the only groups seeing an increase in quality of life. People would still be going into these industries if they were seen as long-term careers. If wages don't increase above real inflation, people will move to different industries.

This is the direct result of outsourcing and illegal immigration gutting the middle class.

They're making plenty of money -- as the article says, "[The general contractors] have all the power and charge accordingly." I'd say it has more to do with people (including their parents and peers) seeing college as necessary and not considering a construction industry career at all.

Now that the labor pool has adjusted following the recession, of course they change what they charge. For decades, though, wages for those folks have been stagnant and quality of life limited, which is why their parents and peers pushed them to go into different fields. I guarantee that if wages had increased as much as the stock market had in that time, there wouldn't be such a limited pool of contractors at the moment.

> As more and more kids are going to college, who will do these high-skill blue-collar jobs?

The ones that can't get jobs in their college major.

Still plenty of people doing those jobs, but they tend to be immigrants.

LA, and most US cities, need to be more like Tokyo -- which has much better zoning/building regulations (as in, less onerous).

> Here is a startling fact: in 2014 there were 142,417 housing starts in the city of Tokyo (population 13.3m, no empty land), more than the 83,657 housing permits issued in the state of California (population 38.7m), or the 137,010 houses started in the entire country of England (population 54.3m).



The thing is, in Tokyo most housing projects are just replacing already existing houses. In California they are adding houses.

The parking minimums are destroying our cities. Nevertheless, even luxury developments lead to more affordable housing do to filtering: https://www.vox.com/cards/affordable-housing-explained/filte...

Short version: affordable housing is illegal to build.

A bunch of people sit around thinking "Wouldn't rooftop gardens be nice? Hey, let's make it a law that you have to build them on all new towers!". And then they are surprised that the housing costs more and excludes lower-middle class.

Here's the relevant regulation: http://netinfo.ladbs.org/ladbsec.nsf/d3450fd072c7344c882564e...

Note that historic buildings converted into residential are exempt from any parking requirement. Downtown LA is teeming with historic buildings that are, if not actually then practically, vacant. Many of the commercial building conversions I'm aware of in downtown are becoming luxury lofts; a minority have been or will be converted into SRO or otherwise "non-luxury" housing.

But that's all anecdotes. If anyone has data on historic building conversions since, say, 2000, in downtown LA, or knows how I could get data like that, it would scratch an itch I've had for a while now.

they only build luxury developments in dallas too.. it's not exactly rocket science as too why.. the land is expensive and they need a ROI.

they take care of parking with prefabricated 5 story garages.

Government policies and regulations working against what their benefactors originally planned for, where have i seen this before?

Yeah, it's a case of I got mine. Different side of the same I got mine RE coin (rent regulated units).

I'm confused. $165/sf is very inexpensive ($200k for the 800sf condo with parking). Even $200-300/sf is not bad.

He is saying in order to deal with cost overruns that can easily happen, you need to charge $300-$400/sqft

I mean, in NYC we're talking $1000/sq ft as being inexpensive. People are paying $2000/sq ft to live in flood zones.

Depends very strongly on where, exactly you are looking.


He's talking about LA not SF. Building anything in SF is even whackier then in LA.

I think he means square feet.

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