Why Building New Apartments Is Good for L.A.

Why Building New Apartments Is Good for L.A.
File photo by David Lor/Flickr

A core beef between two sides battling over the future of Los Angeles is represented by this question:

Does building new apartments, even if they're decidedly upscale, help alleviate our lack of middle- and low-income units?

Most of the academic experts we've spoken to in the past, including UCLA urban planning professor Paul Ong and senior researcher Jonathan Spader of Harvard's Joint Center for Housing Studies, argue that the creation of additional "market-rate" units in a city that desperately needs housing will ultimately help.

Fiscal conservative Jack Humphreville, a frequent critic of City Hall and a supporter of a proposed initiative to tamp down residential development in town, said in an email that our March piece on L.A.'s housing crisis contained "no mention of any actual facts" regarding the benefits of building more high-end units.

"If they could identify any area of L.A. where luxury housing somehow, sometime drove down housing prices, I am sure they would mention it," Humphreville wrote. "But they can't find any data or case studies, so they keep repeating the same empty claim."

Of course, ironically, it's the anti-development crowd, often castigated as NIMBYs (for the term "not in my backyard"), that has little evidence to support the claim that dense housing developments, even when they end up with L.A.'s exorbitant market-rate rents, are contributing to our housing crisis.

Our crisis is composed of two main elements: high rents and low vacancies. The website Apartment List says the market's median two-bedroom price is $2,610. Vacancy rates have been pegged at 4 percent or less.

One could scan the horizon, see construction cranes, and conclude that there's a correlation between the development of market-rate housing, which is about all that gets built in town these days, and L.A.'s ever-increasing rents.

"We're seeing people displaced and homeless pushed out," said former Mayor Richard Riordan, who backs a limit on development.

But even as a post–Great Recession economy fuels construction, housing development is not keeping pace with L.A.'s population growth.

Demographer Dowell Myers of USC's Sol Price School of Public Policy told us previously that the city grew by about 50,000 people last year while we added only about 12,000 housing units. That lack of development is compounded by time and the Great Recession. In 2014, Mayor Eric Garcetti said L.A. needed to build 100,000 new housing units by 2021.

L.A.'s lack of supply and big demand means higher prices and fewer available apartments.

Backers of an anti-development measure, the Neighborhood Integrity Initiative, say new units are often poisonous, market-rate units aimed at six-figure households.

The allegation is that new development displaces longer-term, lower-income residents. Organizers of the initiative have even argued that these units create homelessness. There are, of course, anecdotes about planned new structures that aim to replace those that offered affordable rents.

"Older apartments are being destroyed at a fast pace instead of being preserved, and the City Council has no plan for preserving the older and inexpensive rental housing that acts as the safety net for L.A.’s working class and middle class," the initiative said in a statement.

And, in those cases, of course development is bad for existing renters. 

There's also an argument that higher-end development attracts wealthy out-of-towners who then displace existing renters. There are supporters of the Neighborhood Integrity Initiative who back this idea.

Again, there are definitely anecdotes that higher-end renters come from out of town to work in places like Hollywood, but is there a direct cause and effect here and, if so, can it be proven?

Experts, in fact, say the opposite is the case: Where there are no new high-end developments, higher-income newcomers will compete for what's out there, namely more-affordable units, thus displacing locals.

We asked Humphreville to point us to any evidence supporting the idea that high-end developments were attracting unwanted newcomers who have the effect of raising our rents. He didn't. But he did have some commentary.

"The high-rise developments that we have seen in Hollywood, DTLA, Sherman Oaks and other parts of town are not affordable unless you are making $150,000 a year or more," he said in an email. "These developments are not family-friendly."

Los Angeles will continue to grow regardless. And units is units.

Academic experts on housing say we desperately need to build apartments to keep up with the city's projected 4 million–plus population.

The consensus is that even new housing concentrated in one neighborhood can help alleviate need across a region. 

"It starts with adding supply," Harvard's Jonathan Spader told us a few months ago. "It starts with making sure new units keep up with the population."

A February report by the bipartisan state Legislative Analyst's Office concludes that new units, even if they're market-rate, can alleviate the housing crisis.

"Encouraging additional private housing construction can help the many low–income Californians who do not receive assistance," a summary says. "Considerable evidence suggests that construction of market–rate housing reduces housing costs for low–income households and, consequently, helps to mitigate displacement in many cases."

Simply put, the LAO states, "A shortage of housing results in high and rising housing costs." 

The state analysts say that luxury developments will eventually age and their rents will eventually migrate away from the high end. And a lack of new apartments will actually force higher-income folks to compete for lower-income housing, they argue.

"New market–rate housing typically is targeted at higher–income households," the report says. "This seems to suggest that construction of new market–rate housing does not add to the supply of lower–end housing. Building new market–rate housing, however, indirectly increases the supply of housing available to low–income households in multiple ways."

That seems like "actual facts" to us.

If decrying new units in a city that desperately needs them is a sideshow, then what's the real aim of the anti-development crowd? To keep L.A. from growing? To stop the Manhattanization of our city? To dissuade starry-eyed hustlers and poor immigrants from coming here? To preserve the precious views of the elite?

In an age where three-quarters of low-income Angelenos spend half their pay on housing, do these issues seem like realistic priorities for a global megalopolis?

Why Building New Apartments Is Good for L.A.
California Legislative Analyst's Office

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