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THE VIEW FROM HERE - Wall Street steals Angelenos’ wealth in oodles of ways. A major device is densification which includes but is not limited to the destruction of wealth stored in old single-family homes - a concept which unknown to most of us.
Wall Street loots Los Angeles’ treasure trove of older single-family homes, but we don’t grasp what is happening. Other than our weather, Los Angeles’ greatest asset during the 20th Century was our endless miles of single-family homes. We fail to appreciate that once a home is built, its inherent wealth continues to give for centuries. Not only does a home become the primary means by which a family accumulates wealth, but it provides a context for our lives. But construction came with a cost.
Old growth trees were destroyed, and the air was polluted with processes of construction. The trees ceased to extract pollution from the air, and the problem became worse as the population grew and as our manufacture of greenhouse gases increased. During this time, all vehicles used leaded gasoline. Nonetheless, the migration to California created a fantastic resource not only for the immigrants but also for future generations -- a wise society would protect an asset such as hundreds of square miles of low-density single-family homes which had cost so much to create. The longer a house is used as a single-family home, the longer time period over which to amortize its cost including harm done to the environment. When we destroy a detached home, we kill off a gift from prior generations to us and to future generations.
Once single-family areas have been constructed, society has a huge stake in their preservation. Not only does society need centuries over which to amortize the costs of construction, but it is economic folly to end their ability to provide a high quality of life for hundreds of years. The premature replacement of R-1 areas with multi-unit construction consumes huge amounts of energy and raw materials while decreasing value. People have trouble conceptualizing this shift of wealth which lowers quality of life for Angelenos.
Densification Increases Prices While Decreasing Value
Similar to pick pockets who distract the mark’s attention as they lift his wallet, Wall Street distracts Angelenos by myths to conceal its theft. Contrary to people’s belief, destroying R-1 homes to construct apartments does not reduce housing costs. Density always increases the value of land, and also, always prematurely kills the wealth generating ability of older R-1 homes. Each purchase of a single-family home to construct apartments raises the sale prices of nearby homes but doesn’t add one cent of intrinsic value as a place to raise a family. Each time an R-1 home is destroyed for a multi-unit complex, there are fewer single-family homes which creates a paradoxical situation. Housing prices increase, but value of the R-1 area decreases.
People fail to recognize that if a single-family home on a 7,500 sq ft lot becomes a duplex under SB 9, the cost of the land and what is constructed increases, but the value per household decreases by at least 50%. A family’s lot become only 3,750 sq ft. If the lot becomes a four-plex, each family is reduced to 1,875 sq ft which means either no yard or no off-street parking. The more units per lot, the more money which Wall Street extracts, but the less value each family possesses.
As the Number of Units per Lot Increases, Ownership Plummets
LA has been converted from an ownership to a renter society. All four-plex renters on a former 7,500 sq ft single family lot are paying more for a lower for standard of living with no chance to build equity. The opportunity to build equity through homeownership is another form of wealth which Wall Street steals via densification. We could term it “renterification” of Angelenos.
Densification Steals Wealth from Other Landowners
Densification of core areas like the LA Basin always steals wealth from landowners in the peripheral areas, e.g., the Valleys. If developers had not been permitted to construct Bunker Hill with taxpayer dollars, much smaller office complexes would have been be constructed, with private capital, in the Valleys near to where people live. The wealth which is concentrated in Bunker Hill would have spread out among thousands of other landowners far from DTLA. Sprawl spreads wealth, while densification concentrates it in the hand of a few. Because LA has allowed the criminal enterprise which we call Los Angeles City Council to authorize Bunker Hill, and Century City, West LA, and all the other high-density office and residential projects in The Basin, it has used zoning to divert wealth from where it would naturally go.
Densification Steals Angelenos’ Wealth by Driving Out Employers
As a result of concentrating density in the Basin and allowing multi-unit apartments to replace R-1 homes, employers leave Los Angeles. Employers realize that the only source their employees have to pay their mortgages or rent is their salaries. The increased cost of housing raises the employers’ costs without increasing productivity, placing LA employers at a disadvantage as to their competitors in other areas. That is the main reason that Los Angeles has lost so many businesses in the last decade. April 1, 2023 Every Company Leaving California: 2020-2023, By Henry O'Loughlin. The US Census from 1990 through 2020 documented Angelenos’ out-migration. Hollywood, one of the world’s Mecca’s, went from 214,000 ppl in 1990 to 210,800 in 2000, to 198,228 in 2010, and then as predicted down to 195,700 in 2019. By 2020, Los Angeles’s population decline so that the State lost one Congressional seat.
Transfer of Housing Wealth from Angelenos to Wall Street is The Prime Cause of the Exodus
Rising housing prices not only shift LA from an ownership to renter society, but they also reduce Angelenos’ quality of life. What is the value of having a yard with fruit trees? What is the value of having your own washer and dryer, your own garage, extra storage space? What is the value of a lower mortgage? With more destruction of R-1 areas with bills like SB 9 and SB 10, Wall Street further inflates housing prices, slashes the value of housing for families, and drives away Millennials and our most productive businesses. Was Matt Damon’s movie Elysium science fiction or prophesy?
(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])
