CommentsCORRUPTION WATCH-Mayor Garcetti’s declaration to make Los Angeles into Silicon Beach bears as little resemblance to reality as Trump’s declaration that he is “like a really stable genius.” Garcetti proclaims that LA will become a center of the STEM industry. (STEM = science, technology, engineering and mathematics.) In September 2017, CNBC showed a grinning Garcetti sitting in a self-driving car, as it heralded LA’s emergence with infusions of investment capital.
Three months later, on January 11, 2018, LA Business Journal reported that for the second year in a row, venture capital investment in LA has dropped – 8.6% in the last year.
Excessively High Housing Costs Drives Away STEM Start-ups
Before Mayor Eric Garcetti was born in 1971, Los Angeles was an aerospace center. With high paying jobs proliferating, housing prices were modest. In the 1990's, after the Soviet Union’s collapse, the LA area suffered the loss of aerospace jobs since that industry was dependent on Washington D.C.’s decisions. That STEM era was over
Then, LA was unable to capitalize on the computer industry. Under Mayor Riordan, LA turned increasingly to construction to stimulate its economy. Ironically, concentrating on building high-rises steered LA away from STEM jobs; LA’s reliance on fixed-rail mass transit construction to also stimulate the economy further reduced the city’s need to attract STEM employers. Garcetti’s war on single family homes drove up housing costs, making the city unattractive to STEM workers.
STEM Industries Seek to Avoid High Housing Costs
Housing costs in San Francisco and Los Angeles are more than high, they are exorbitantly excessive so that the emerging middle class of STEM workers are leaving Silicon Valley. As high housing costs drives Millennials out of Silicon Valley, they do not come to Los Angeles which has the same problem. No factor is more fundamental to a family than ownership of a detached home with a yard.
For Millennials, Equity is Goal #1
Millennials place building home equity as their goal #1. This applies to Family Millennials are who are starting families and to Young Millennials who know that within 5 to 10 years, that too will be their life course.
As of November 2017, 91% of Millennials said that they planned on buying a home but virtually none have accumulated the down payment. It can take between 20 and 30 years to save enough for a down payment in San Francisco or Los Angeles. Millennials who postpone buying property for 20 to 30 years to “build up equity” would be a dim-witted lot. One does not build equity by paying exorbitantly high rent for 20 years.
If they move to Nashville or Austin, they can save up a down payment within two or three years.
Family Millennials Shun Cramped High-Rise Apartments
Since it is impossible to build equity in an apartment, the Family Millennial’s demand for apartments is about zero. LA already has a glut of apartments but continues to build into that glut while actively destroying single family neighborhoods. In January 2018, another developer announced a $600 million mixed-use, 778 apartment complex at 1111 Sunset a few blocks north of DTLA – where traffic congestion is the worst in the world and the residents can build zero equity. (As explained elsewhere, this type of construction is merely a ruse to loot the city treasury.)
The Destructive Nature of Granny Flats
Granny Flats are another means to destroy housing desired by Family Millennials. Granny Flats allow developers to transform a single-family neighborhood into a patch-work of rental properties by constructing second houses across backyards. A developer can buy a home in a single-family area, build a second house and then rent out both houses. Then, he can buy more homes, turning each one into rental property. Anyone thinking of buying into the area knows that within five to ten years, the character of the neighborhood will change; it will be filled with mostly absentee landlords. This trend is financially enticing for speculators, but if you want a nice place to raise a family, it’s not so nice.
Senate Bill 827 Kills Any Hope of LA’s Becoming a STEM City
If Senate Bill 827 passes, then LA will have another law of mass residential destruction. Any property within ½ mile of a light rail line (or perhaps even a major bus route) can be developed into apartments overriding all contrary zoning requirements. The single-family homes will be priced at the higher Developer Value rather than at the lower Living Space value. After SB 827, buying a home in LA will be like buying a banana that is already rotting.
Corruption Drives Up the Cost of Housing
As we have seen, allowing developers to up zone any piece of property prices residential properties at the higher Developer Value. Thus, any Millennial who wants to buy a home in LA must to pay the Developer Value. Developers buy property with confidence that they can construct whatever they want without regard to zoning since LA City Council unanimously passes every project. Without the guaranteed unanimous approval, developers would not risk buying residential properties.
STEM Workers are Leaving High Cost Areas
The established Silicon Valley giants know that STEM workers are avoiding high cost areas like Los Angeles. Apple, which is headquartered in Cupertino, California (46 miles south of San Francisco), is advertising for one job in Los Angeles and one job in Santa Carita, but 78 job openings in Austin, Texas.
The median cost of a house in the city of Los Angeles is $650,200, but in Austin, the median price is $331,000. Apple knows that in the final analysis, it must cover its employees’ cost of living. Hence, STEM companies are shifting toward the nation’s low-cost areas.
Corruptionism Is Destroying Los Angeles’ Future
STEM employees do not want to pay the high Developer Value for a home. Nor do they want to buy a home where the single-family neighborhood will flip and become mostly rentals. When STEM workers research what parts of the country will provide a good life for their families, they do not move to a city where Quality of Life plays a zero role in planning. When they see that LA fell 13 positions in the Milken Best Cities list in just one year to number 61, they know something is drastically wrong. When they see that the City’s traffic congestion has become the worst in the entire world, they know something is seriously wrong. When they see that venture capital is growing sour on LA, they know to look elsewhere.
By making Los Angeles a financial black hole for Millennials, the Garcetti Administration is guaranteeing that we will never become a STEM center, nor will LA become the premier Pacific Rim city for the 21st Century.
(Richard Lee Abrams is a Los Angeles attorney and a CityWatch contributor. He can be reached at: [email protected]. Abrams views are his own and do not necessarily reflect the views of CityWatch.) Edited for CityWatch by Linda Abrams.
