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5/15/08
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We’d like to thank the viewers who sent back comments in response to our opening comments in the May 8th “The Real Estate Insider” email newsletter about two Los Angeles City Council rulings on a couple of important property rights issues. One of the rulings attempts to reign in what some refer to as "mansionization", by limiting the size of single-family home additions and redevelopment projects, while the other ruling restricts the conversion of the city's older residential hotels into modern, upscale loft-type projects. To read our commentary, just click here.
We’ve included three of the responses below, one of which was a copy of a letter a viewer had previously sent to Councilmember Jan Perry about one of these issues. Here are a couple of the comments:
"Down zoning" is an effective taking and is extremely similar to price controls, which, in the long run, clearly do not work as intended. If the City wants "affordable" housing, it could accomplish it in other, more direct and effective ways.
In response to your 5/8/08 release, I'd suggest a better approach to discouraging "mansionization" would be through a public hearings process. Neighborhood values do depend to some degree on consistency, so it is reasonable to offer protection where individual values might decline through external causes such as 1) the presence of a misfit, "eyesore" type expansion or 2) the few untouched homes on a block becoming out-of-place when the surrounding majority have been expanded.
But rather than a blanket approach, why not require public hearings at the homeowner's cost before granting a permit for an expansion above this 50% improved ratio, or whatever other guidelines they want? The additional expense and red tape would eliminate the bandwagon riders and reduce the number of applicants to those with only the strongest desire to expand, and at the same time, neighbors worried about devaluation would have the opportunity to protest.
Of course, this process would never be approved. All those hearings would take up City Council time. Time they could spend - not on serving their public, but on furthering their own personal agendas - deciding how to redistribute income, meddle with markets, and conduct countless other socialist experiments... but I repeat myself.
And here’s a copy of a letter that one downtown LA real estate expert sent to Councilmember Jan Perry prior to the rulings:
February 6, 2008
Jan Perry
Councilmember
City Council-District 9
City Hall
200 N. Spring St. – Ste. 420
Los Angeles, CA 90012
Dear Jan:
I am writing to you with some observations and suggestions regarding the moratorium on the conversion of select “residential hotels” into market rate housing. I understand this will come before City Council in March and I’d like to offer my testimony at that time, as well.
Included under the present moratorium, is a list of properties considered “residential hotels”, i.e. those that have traditionally served a very marginal population. These hotels accommodated certain types of “guests/ tenants” because they were located in undesirable areas and had no options but to target that market. Now these properties have the potential (but not without considerable capital investment) to address a new market.
The situation today is reminiscent of the pre-Prop 13 era where rising property values threatened longstanding elderly property owners with eviction due to their inability to pay rising property taxes on homes they had owned free and clear for many years.
Clearly, the City is concerned about a flood of people into a “homeless” state. I do appreciate the concern this moratorium reflects in that those on the edge of homelessness might be displaced, exacerbating an already fragile situation vis-a-vie homelessness. I view this predicament as comparable to the concerns that gave rise to Proposition 13 and, later, the rent control ordinances that were primarily inspired by a desire to prevent the displacement of those most vulnerable from rising rents.
However, it is not without merit to question why a property owner should be restricted by City mandate to a very low-income clientele even though the City does not subsidize those rentals rates. The reality is that property owners must constantly face the scrutiny of the Fire Department and LADBS to meet standards of safety and habitability. Property owners, across all market levels, must constantly invest in maintenance, capital improvements and compliance with changing codes and standards.
In my opinion, I believe the City should approach this in the same spirit as Prop 13 and Rent Control and try to prevent the immediate dislocation of long-term marginal tenants in the same way by setting forth the conditions of rent control; establishing tenancy criteria, relocation fees and the right to stay in place as long as they meet the terms of their contracts with the management. To subject an entire building to take on sub-market tenants in perpetuity is, I must say, absurd and, ultimately, disastrous. The owners will be forced to defer maintenance or go out of business. Even the “bottom-feeders” in the real estate world will not buy these properties and they will become a blight on their neighborhoods.
Certainly, we can come up with a better package of carrots rather than sticks to use the driving force of the market in support of a gradual redevelopment of our neighborhoods into a diverse spectrum of housing options meeting the needs of those with means as well as those without many options.
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