Fri, Mar

Can Los Angeles Recover From Corrupt Densification?

THE VIEW FROM HERE - No. The driving force behind Los Angeles excessive densification is Wall Street’s monetization of real estate based on the meme of the highest and best use.  That means whatever use of a piece of land makes the greatest income for the owner is incontrovertibly the best and most morally righteous use of the land.  Human beings will believe anything no matter how absurd as long as it is repeated enough. Beliefs regulate behavior and a society which lacks common set of beliefs cannot function. Perhaps, the wisest line from Monty Python is, “No one expects the Spanish Inquisition.” There comes a time when a belief system turns upon and devours itself.  When Los Angeles was open space, monetization of land for residential use was the best and highest use.  The reason is that it resulted in a significantly enhanced quality of life for the average person. 

When Los Angeles reached a particular density, the highest and best meme became a prescription for decline.  As is the case with much of life, there was no single moment when Los Angeles should have posted No Vacancy Signs at the city limits, but there are ratios between various factors which signal when an urban area is reaching its maximum density per square mile.  People being what they are, the public does not notice the problem until after they have significantly surpassed the maximum number of people per square mile. 

Excessive densification overburdens infrastructure including police, fire, paramedics, street repairs, etc.  The water and sewer systems become inadequate, but the city lacks the funds for infrastructure improvements. Although the LAPD was the first police department in the 1980's to devise psychological units due to handle the mentally ill, the city council would not fund more units or even provide better mental health training for the regular LAPD.  Instead, it relied on criminalization of mental illness and the construction of more prisons but not of more colleges.  Prisons are very expensive to build and make gazillions of dollars for developers.

Monetization of Rental Properties is Easy 

It’s easy to monetize the value of land according to how much rent it will bring the developer.  A single-family home will usually bring a one-time payment when a family purchases the home, at which point it ceases to generate income.  A 24-unit apartment house on the same size lot is worth a lot more to the developers because it will generate income for the new owner. 

When land was plentiful, single-family homes made sense to developers.  Not only was land cheap, but the demand was for detached homes and not for apartments.  After WW II, the Basin became devoted to high rises with the bedrooms miles away in the Valleys, and the original formula broke down.   Detached homes with yards became too expensive for most families, especially after the 1980's when the widespread and systematic transfer of wealth from the middle class to Wall Street took hold.  Like the hour hand of a clock, no one noticed the change until they looked back and realized that the hour hand was now on 6 and not on 2.  Time does not run backwards. The Basin had been densified and people were locked into long commutes. 

More and more money went to pay for the high office rents in DTLA and other high-rise centers like Century City.  Had offices been required to spread outwards where land prices were substantially lower, then businesses would have had lower rents and more money for salaries.  When families had more discretionary income, they could support other businesses of all sorts.  Quality of Life would be better as long commutes would not be necessary. 

Densification of DTLA, Bunker Hill, Century city, etc. and the locating of homes in distance valleys funneled wealth upwards to Wall Street.  The average person could not see the mechanism by which family income had been diverted to Wall Street.  If employees had been downstream farmers, they would immediately know when someone up-stream had diverted the water flow.  The average person, however, can trace back the reduction in family income to developer excessive densification in core areas.  There is no rational reason for all those offices in DTLA etc. to be physically near each other, except to make Wall Street wealthier. 

This pattern of densification based on the monetization of real estate under the meme of highest and best use resulted in the mass destruction of rent controlled apartments in order to construct fancy new high end projects. The function of a city government is to act as like a governor on an engine.  There are laws of physics, which the driver cannot see, that will destroy an engine when certain parameters are exceeded.  The city government is in the position to see the large picture, while the individual developer fixates on how much density he can stuff into every square inch to maximize his theoretical profit.  The developers easily evaded the known laws of topography, transit, infrastructure, and finance by purchasing the city council. In other words, they purchased and then disabled the “engine governor” from development. The developers instituted a brilliant, albeit criminal, system where any project would receive unanimous approval. All a developer had to do was be nice to the councilmember in whose district he wished to build. The Vote Trading System required each councilmember to vote Yes for each project which another councilmember placed on the city council agenda in return for all Yes votes for any project which he/she should place on the agenda. Penal Code, § 86 

The Results of Monetization of Real Estate 

The most obvious sign is the Homeless Crisis. Less obvious are middle class people who have been priced out of Los Angeles and who have moved away.  Since they are not here, defecating on our lawns, their absence does not bother us.  So many Angelenos have moved to Austin, Texas and similar places like Nashville that those cities are now experiencing densification and the unprecedented rise of housing costs and of their downtown sky lines. No one in Austin realizes that the desification is looting Austin of billions of dollars of wealth, which will turn on Austin the way densification is destroying Los Angeles. 

Although the exodus from Los Angeles was predicted and had already been documented for Hollywood by 2012, city hall corruption continued.  Had city hall halted destruction of rent controlled apartments in 2012 and not allowed any In-fill, especially in Hollywood, housing prices would have stabilized.  Angelenos would have had tens of thousands more dollars per family to generate a non-developer dependent economy.  But, that did not happen and will not happen. 

Because Wall Street no longer wants to finance projects which were destined for bankruptcy, the city agreed to borrow the funds from Wall Street and then give it to the developers who would then go bankrupt and not repay the city, but the city taxpayers would have to repay Wall Street. 

The next Level of Corruption Is in Sight – the Bailout of Los Angeles by Washington, D.C. 

Because it is unlikely voters will tolerate another direct bailout of Wall Street, the focus will be on the city because it has become the intermediary between corrupt developers and Wall Street.  The claim will be that the city can no longer fund the city police, fire department and paramedics, the libraries, repair the roads, fix broken water mains, etc.  Thus, Washington has to save the average people in Los Angeles, but they will never mention that non-stop developer corruption is the real cause of Los Angeles’ insolvency.  Just as no one in 2012 would admit that Los Angeles could ever lose population, no one will admit in 2023 that Los Angeles could go bankrupt.  No one expects the Spanish Inquisition.

(Richard Lee Abrams has been an attorney, a Realtor and community relations consultant as well as a CityWatch contributor.  You may email him at [email protected].  The opinions expressed by Mr. Abrams are not necessarily those of CityWatchLA.com.)

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